K&P Law Firm provided advice on and drafted an agreement in which a Singaporean company and a Korean company set up a joint venture in a third country and the Korean company exports goods to the joint venture.
We will explain a few important issues below.
Application of the United Nations Convention on Contracts for the International Sale of Goods
To date, many countries have joined the United Nations Convention on the International Sale of Goods, and Korea and Singapore are also members of this convention. The third country in which the joint venture will be established ratified the convention.
Click below to check the contents of the agreement
https://www.law.go.kr/LSW/trtyMInfoP.do?trtySeq=2146
Click below for a list of countries that have signed the Convention
https://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=X-10&chapter=10&clang=_en
treaties.un.org
The Convention is automatically applied to the sale of goods between companies in the ratification countries unless the parties clearly specified the intention that they will not apply the Convention to the case (it does not apply to the sale of goods for personal use, family use, and household use). However, there are many controversies about how to deal with matters not explicitly stipulated in the convention. The precedents have not been accumulated enough on the above convention yet.
Since it is difficult for lawyers or parties to predict what decision the court or arbitration court will make if there is no provision in the agreement or the Convention on the matter in question, in practice, the application of the Convention is excluded and the governing law is often separately agreed.
In this case, Singapore law will be the governing laws, and both parties have decided to apply Singapore laws to legal issues. The parties explicitly express the intention that they will not apply the Convention to the case.
Penalty issue
'Liquidated Damages' means that the parties agree in advance on the amount of compensation for the damages to be paid by the debtor in case of default. 'Penalty' means that the creditor separates from compensation for damages when the debtor does not fulfill the contract.
In the case of 'Liquidated Damages', the court may reduce it pursuant to Article 398, Paragraph 2 of the Civil Act of the Republic of Korea. However, the 'penalty for breach of contract' cannot be reduced by the court, and if there is a circumstance that the penalty for breach of contract is too excessive against good morals and other social order, all or part of it is nullified according to Article 103 of the Civil Act.
Since Singapore follows the common law system, the penalty clause is invalid. Therefore, provisions related to penalties have been changed to liquidated damages.
Trial vs. Arbitration
In the case of a trial in a foreign court, several conditions, such as mutual guarantees, are required in accordance with Article 217 of the Civil Procedure Act of the Republic of Korea in order to enforce the judgment in Korea.
| Article 217 (Recognition of Foreign Country Judgments) (1) A final and conclusive judgment rendered by a foreign court or a judgment acknowledged to have the same force (hereinafter referred to as "final judgment, etc.") shall be recognized, if all of the following requirements are met: 1. That the international jurisdiction of such foreign court is recognized under the principle of international jurisdiction pursuant to the statutes or treaties of the Republic of Korea; 2. That a defeated defendant is served, by a lawful method, a written complaint or document corresponding thereto, and notification of date or written order allowing him or her sufficient time to defend (excluding cases of service by public notice or similar), or that he or she responds to the lawsuit even without having been served such documents; 3. That the approval of such final judgment, etc. does not undermine sound morals or other social order of the Republic of Korea in light of the contents of such final judgment, etc. and judicial procedures; 4. That mutual guarantee exists, or the requirements for recognition of final judgment, etc. in the Republic of Korea and the foreign country to which the foreign country court belongs are not far off balance and have no actual difference between each other in important points. (2) A court shall ex officio investigate whether the requirements under paragraph (1) are satisfied. |
Mutual guarantee means that in order for a Korean court to approve a judgment of a court in State A, the court in State A must also be recognized as approving the judgment of a Korean court. Since questions arise as to whether the court judgment will be approved in Korea or in Singapore, we recommended arbitration.
Korea is a signatory to the 'Convention on the Recognition and Enforcement of Foreign Arbitral Awards'. International arbitral awards rendered in signatory countries can be enforced in Korea unless special circumstances exist.
Click below for the text of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards
https://www.law.go.kr/LSW/trtyInfoP.do?mode=4&trtySeq=2417&chrClsCd=010202
www.law.go.kr
States Parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, click below
https://www.newyorkconvention.org/countries
