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Oct 29, 2012

Release of an Arrested Ship in Korean Waters

We wrote an article about the Arrest of Vessels in Korean waters in a post last week.  The article is a useful guide for those considering arresting a ship in Korean waters.  The post may be found at: Arrest/Attachment of Vessels in Korean Waters: Maritime Liens for Creditors in Korea.

This post describes how you may obtain the release of a vessel arrested in Korea waters.  The Korean Courts have put in place an efficient post-arrest procedure that, often, quickly allows the release of an arrested ship.

Post-Arrest Procedures in Korea for Ships Arrested in Korean Waters
In the post-arrest procedures in Korea, the burden is on the arresting party to establish that the order of arrest, initially granted, should not be vacated.   These hearings are often a tool to persuade a judge that the arresting party should post a security or the security should be increased.  In all but the most exceptional of cases, shall a Korean court release an order of arrest. 

If a preliminary attachment was granted (not a maritime lien), the defendant may demand that the trial procedure promptly commence.  The Korean Courts, usually, will demand that the arresting party/plaintiff files its case on the merits within 14 days of the first post-arrest hearing.  If the arresting party/plaintiff fails to file its case within 14 days, the defendant should promptly request the court to hold a hearing to confirm that the arresting party/plaintiff has not complied with the court's demand.

Liability for Wrongful Arrest of Vessel in Korea
In the majority of cases of an order of arrest being invalidated by a Korean court, the arresting party will, also, be deemed to have acted negligently, since the burden of proof is placed on the arresting party to establish that he did not act negligently.  Korean courts are, however, often reluctant to reward the "full" damage amount.  I will deal with this issue in a future post entitled: Damages for the Negligent Arrest of Vessels in Korea.

If you ship has been arrested in Korean, it is advisable to get contact with a local attorney promptly.  While the action of arresting a ship may be done by a member of your staff in Korea with basic knowledge of the court procedure, the procedure to release an order of arrest and obtain damages should, always, be conducted with the assistance of an experienced attorney in Korea.  It is, always, recommended to hire a retired Korean judge that works alongside an international attorney in order to assist in guaranteeing that your case will get the full attention of the court.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Oct 26, 2012

Maritime Liens in Korea: How to Arrest a Ship at a Korean Port

The arrest of vessels in Korea is a common tool to satisfy judgements against debtors.  Korean courts allow the ex-parte arrest of ships.  The court, normally, does not request from the Korean counsel of the creditor/claimant evidence of how long the ship will remain in Korean waters, as is, sometimes, the case in other neighboring jurisdictions.

We find Korea to be a much easier destination for arresting vehicles than many other Asian nations, because of the efficiency focus of the Korean court system and the less than efficient other Asian jurisdictions.    Typically, the arrest action will take a few days to complete. 

The major ports in Korea that an arrest may executed at are: Busan ,Jinhae, Incheon, Gunsan, Masan, Mokpo, Pohang, Donghae, Ulsan, Yeosu, and Jeju

There are two different ways to arrest a vessel in Korean waters. 

1.  Preliminary Attachment
The Korean Civil Enforcement Act allows the arrest of a ship or attachment of an asset through a preliminary attachment.  The attachment, normally, requires the posting of a security.  The amount of the security is, normally 10% to 15% of the claimed amount.  Often the court allows the posting of the majority of the amount in the form of a bond.  Normally, the court will not grant a preliminary attachment if a maritime lien is available to the complainant.  Foreign parties, often, have a difficult time obtaining a bond in expedient fashion.  We have, even, failed to obtain bonds for some foreign creditors. 

2.  Maritime Lien
A creditor or claimant in Korea may exercise the right to arrest a vessel.   The Korean court, under Korea's Conflict of Laws Act, will look to the law of the nation of the vessel's flag.   Normally, the court in Korea will not grant a preliminary attachment if a maritime lien is available to the complainant.

A maritime lien, in Korea, is also available for time-chartered vessels, sister vessels and even when an arbitration clause exists.

The sheriff of the court, upon the disposition of the court, will arrest the vessel by serving on the ship master the notice of arrest and, also, attaching the order to the vessel.  It is, also, advisable to arrange with the sheriff to advise the port authorities to not allow the vessel to leave the port.

Upon arrest, in most cases in our experience, the owner of the vessel or charter party will provide a letter of undertaking from the the P & I club of the arresting party.  The arresting party is not required, under Korean law, to accept the letter of undertaking and many demand 100% of the claimed amount in cash before granting the release of the vessel.

I will draft a post entitled: Release of an Arrested Vessel in Korean Water and it will be posted in the next few days.
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Oct 23, 2012

License Agreements in Korea: 9 Musts Before Licensing in Korea

License Agreements in Korea are too often, simply, a spinning of license agreements used in the West.  Your foreign license agreement, in most cases, is not adequate for your needs in Korea. 

Our 9 Musts before Engaging in a License Arrangement in Korea

1.  Due Diligence
Say it three times and read my posts:  Doing Business in Korea:  Due Diligence, Agreements, Attorneys and Street Smarts

2.  Royalty Clause 
Include in your license agreement a royalty clause.  The clause should detail, at a minimum:
  •  Currency conversion rate or payment in the currency of your home nation
  •  Payment terms
  •  Accounting and audit particulars
  •  Tax treatment
3.   Inspection  
An inspection of the first batch of goods is a necessity and periodic inspections are recommended for most products.  Agents are available to conduct these inspections.

4.  Choice of Law
If the license is for a smaller value, often, it is best to simply utilize Korea as the choice of law.  It will save you expenses, since, hopefully, you will be having someone experienced in license agreements in Korea drafting your license agreements.

5.  Choice of Jurisdiction
Again, to save on costs, often, the best choice is to simply utilize the Seoul Central District court as the jurisdiction for the resolution of the dispute.

6.  Arbitration
We, always, recommend litigation in all cases where the costs justifies arbitration.  Often, arbitration will lead to greater legal feels than having a dispute resolved at a Korean court.  However, arbitration, as explained in numerous posts on this and other blogs is beneficial to both parties in most cases.  Our choice is, always, Hong Kong with NY as our second choice. 

7.  Protect your IP.  Say protect your IP three times and read my short post entitled:  Don't Just Trust Us: Trademarks in Korea.

8.  Listen to my Mother and Read her Advise at: Listen to My Mother: JVs in Korea.  Ok a license is not a joint venture, but the advice holds true.

9.  Language.  Have the governing language be English, but draft the license agreement in English and Korean.  Make sure that you don't have an argument in the future that the Korean licensee didn't understand the particulars of the agreement.

______ IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Oct 18, 2012

Foreign Corrupt Practice Act Basics for Korean-Based Companies

If you are working for a U.S. Company with an office in Korea or you are working for a company from most other developed and developing economies you may be subject to punishment under the laws of your home country related to the interactions of you or your employees with foreign government employees.  If you want to say out of the clink and avoid embarrassment to your company by actions of your employees in Korea, please read and understand the following.

Prior to engaging in any activity that may be construed as a "corrupt payment" under law, please consult with an attorney in order to decide whether the action may be construed as a "corrupt payment."  The terminology "corrupt payment" is the term utilized under the U.S. Foreign Corrupt Practice Act.  Other like terminology is used by other nations.  

Under the U.S. Foreign Corrupt Practice Act a Corrupt Payment is defined, inter alia, as giving anything of value with the intent to:
  1. Influence an act or decision of a foreign government official in the official capacity of the foreign official;
  2. Induce a foreign official to act or not to act in violation of his/her lawful duty;
  3. Induce a foreign official to improperly use his/her influence or power in the organization to impact any act or decision; and
  4. Obtain an "improper" advantage (catch-all). 
Please note that many "foreign officials" may include "quasi-government" officials.  The Korean government has many "independent" companies that are controlled, in fact, by the Korean government.
Acts in Korea that may be deemed a "corrupt payment" under law include:
  1. Compensating a government official travel expense if certain specific protocol is not met and the family of the government official travel expenses are, also, paid or the primary purpose of the trip is not "business," but "entertainment."
  2. Gifts that are over US$ 25 in value or are given frequently to the same individual.
  3. Meals over US$ 50 per person or that are frequently meals provided to the same individual.
  4. Providing employment to a family member of a government official
Actions by agents or third-party representatives may, also, be deemed a violation of law.
 _______ IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Oct 16, 2012

Do you Need a Joint Venture to Succeed in Korea?

One of the major parts of my law practice for international clients, in Korea, is the structuring of joint ventures and the resolution of joint venture disputes in court and through arbitration.  I find, in most of these cases, the non-Korean party is not in need of a joint venture with a a Korean party to succeed in Korea and the Korean party does not realize or has no intent in satisfying obligations under the joint venture agreements.  

Thus, many disputes are caused by the realization by the non-Korean party that he/she doesn't need the Korean party and the realization by the non-Korean party that the Korean party had no intent in following the joint venture agreement.  

We find that a joint venture is, normally, only successful in a few situations.  The following are the major situations that we encounter that tend to make sense for both parties.
  1. The Korean party has instant access to a proven distribution network (retail outlets) or supply chain and the non-Korean has a product that easily fits into this supply chain.   Often this, however, is best addressed through a distribution/license agreement and, not, a joint venture agreement, but in some cases the joint venture makes sense.  Be careful, often a joint venture is not necessary and changed circumstances can kill the relationship.
  2. The industry is an industry closed to foreigners (few industries in Korea as closed to foreigners - ie. publishing) and the Korean party needs the expertise or money of the non-Korean party in order to succeed in the industry.  Be careful, needs often quickly change and, often, these industries are heavily regulated and, often, lead into a money pit that you will never dig anything out of.   Knowing the governor does not mean that you will receive government support.  Everyone in Korea has contacts, however, few are able to capitalize on these contacts, thus, don't be sold a can of hooks.
  3. The non-Korean party is broke and, thus, unable to commercialize an invention and the Korean party is in need of a new product line or has spare manufacturing capacity.   Be careful, the learning curve may not be as great as you think and this you may not be needed for too long.
  4. The industry is a niche industry with only a handful of players and the non-Korean can receive instant access to one of the main players through the joint venture and the Korean is able to gain access to the technology through the joint venture.  Typically, this is a joint venture between a Korean conglomerate (chaebol) and a multinational company.  Often these relationships are fleeting and lead us to many hours in arbitration.   
If you have money, have the expertise in doing business in Korea (or can hire experts), are not in a  regulated industry, carefully consider the market, have a local guide and are not in a need of joint venture because of the nature of the business - forgo the risk of a joint venture and hit road in Korea on your own. 

Other articles that may be of interest;
Sean Hayes may be contacted at:

Sean Hayes is co-chair of the Korea Practice Team for one of the leading international law firms. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea). IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Oct 15, 2012

Is Korea Still an Immature Democracy and Why does it Matter for your Business?

No matter which direction the electorate turns, the choices seem to be disintegrating with each passing day.

The presumptive first woman president, conservative Park Geun-hye, has watched her chances for election fall just short of going down in flames. First, there were the corruption scandals among her campaign organizers that did a brilliant job of reminding folks that Ms. Park comes along with all the sordid baggage of the conservative camp. Then her belated apology to the victims of her father’s excessive abuses of power as president, which came across as too late and too cynical as a means to prop up her sagging polls numbers. And now, there is the least-expected development - major infighting in her campaign, as a result of Ms. Park trying to widen her appeal to the anti-Park family Jeolla region.

During the recent holidays and at a relative’s wedding, I talked with my in-laws, who have generally supported the opposition camp even though they hail from arch-conservative Daegu. They are ardent Ahn Cheol-soo supporters. When I asked them about whether Ahn was truly qualified to serve as president given his absolute zero experience in government and politics, I was told that Ahn is very intelligent and that they expected him to surround himself with equally intelligent advisers.

Okay, I said, but can Ahn beat Park if Moon Jae-in is also running? Of course not, was the reply, but Moon will certainly join up with Ahn in order to beat Park; or in a worst case, Ahn will join forces with Moon.

I responded that both Ahn and Moon are exceptionally intelligent men, but no one has really tested their emotional intelligence. High IQs are often dwarfed by giant-sized egos. If this was a game of chicken to see who would succumb first and offer to join forces, we would have major blood on the highway. And so far, my dire forecast seems to be fulfilling itself.

The fundamental problem, however, may not be the individual psychologies of these leading candidates. The underlying problem is the relative immaturity of Korean democracy that lacks strong political platforms on which candidates stand and for which they volunteer to support. Instead, we have strong personalities that form cliques with lesser politicians. And surrounding these cliques are many hopeful hangers-on who have much to lose should their candidate bow out and support another candidate.

These low-profile power groups place huge amounts of pressure on their candidates that often preclude the politicians from being adequately flexible enough to do the right thing for overall good of the country, or to risk taking turns holding power, by chancing deals where this year’s dominate candidate will support the subordinate candidate during the next major election.

In some ways, one may say that the candidates are figureheads for large vested interest groups that may not actually be all that different on policies but fiercely competitive to gain power. Picture if you can, a three-team rugby match with scrums made up from three teams. The primary difference is one cannot easily see the whole team but only the team captains in these scrums.

Sadly, most of the electorate would very much like to see a change from the current administration of corrupt conservatives who overly favor chaebol and seem incapable to adequately serve the rest of society - regardless of their actual intentions. At the same time, the so-called progressives are proving to be remarkably unreliable and possibly implausible.

But right now, the electoral choices look much less appealing than they did even a month ago. The only person who has proven to be universally popular in Korea these days is, of course, Psy. I joked with my in-laws that perhaps he should run for president. The more I quipped about this outrageous idea, the more practical it seemed, much to my surprise and dismay. But consider the following:

First, Psy does not have a cadre of hangers-on, expecting political spoils. Sure, some want to share in the current limelight. But Psy is not closely affiliated with any political camp.

Second, Psy has as much experience in governance as Ahn Chol-soo. The two men share rock star-like fame. But if only because fame is more recent, Psy seems to be handling his popularity better, recognizing that while his global recognition is well earned, his fame is also a bit of a fluke.

Third, across political lines and generations, Psy is someone that almost everyone in Korea is proud of.

Fourth, Psy has proven exceptional leadership around the world in motivating hundreds of thousands of people to do the horse dance.

Fifth, if elected, we could have one of the most amazing North-South summits. Kim Jong-un is about the same age, size and build as Psy - and has only a year or two more of political experience. What we could be witnessing would portend the future of a unified Korea. Eventually we may even see a “cool” walk-off on live television. We could see who has the better moves, postures and body language - with and without sun glasses.

While I’m not genuinely sincere about a Psy presidential candidacy, we need to also look at where are today. If the election were to be held today, we might expect low voter turnout with the conservatives retaining power as those who desire stability are more likely to turn out in greater numbers than the disheartened idealists who are looking for genuine change in governance.

But it is still a long, long while in political time until the December elections, so matters could very well turn upside down quite unexpectedly. Perhaps Psy entering the fray on one level or another is just what this election needs.

* The author is a Senior Adviser to IPG.  The article appeared in the Korea Joonang Daily on October 16, 2012.

Sean Hayes may be contacted at:

Sean Hayes is co-chair of the Korea Practice Team for one of the leading international law firms. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea). 
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Myanmar (Burma) Ban Lifted by the United States

During a landmark visit to the United States by President Thein Sein of Myanmar to the United Nations General Assembly, the United States Government this week announced it would lift the last remaining sanctions that have been imposed on Myanmar (Burma) which have mostly been in effect since 1990 which adds impetus to the rapid and sweeping progressive reform over the past year of a resource rich albeit impoverished country. 

The sanctions which have been gradually lifted this year covered visa and travel restrictions, restrictions on financial services, prohibitions of goods from Myanmar, prohibition of any local investment as well as limitation on any assistance by the United States Government.

This latest announcement follows a number of positive political steps in Myanmar which include the dissolution of the former State Peace and Development Council in March this year with power transferred to the new quasi-civilian Union Government.

In addition, other steps made by President Thein Sein of the Union Government has been the release of political prisoners and ceasefire talks with various ethnic-based militias along with amendment of the national laws which allowed opposition parties to participate in the parliamentary elections this year.

The complete lifting of the sanctions follows similar moves taken by the international community to equally roll back tough sanctions. 

In July, an economic announcement was made giving the green light for United States investment which enabled a US trade delegation to visit the country just a few days later.  Earlier this month, the Coca-Cola Company announced it had begun to ship drinks to businesses in Myanmar, and some reports say that it is projected to invest USD100 million over the next three years generating about 2,000 jobs for Myanmar citizens.

The latest political development underlines the remarkable pace and new direction taken for economic and political development in Myanmar and normalizing a commercial relationship giving opportunities for Myanmar nationals to export their goods into the United States.

According to the Myanmar Garment Association, the lifting of the import ban this week will especially assist garment exports to the United States - which had been the largest market before the ban was imposed back in 2003.  Apparently some 72% of garment exports in 2011 were exported mostly to Japan and South Korea totaling about USD558 million.

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

Oct 4, 2012

What can Korea Learn From Ireland? by Senior Advisor Tom Coyner

My recent essay, “Denuclearization – Korea’s Red Herring,” stirred much discussion. Most reaction was favorable, but there was also some heated controversy. I had a chance to engage at depth with two ambassadors to Korea. Both diplomats were quite familiar, of course, with North and South Korea.

I will try to fairly represent both ambassadors’ perspectives since one man was skeptical and the other was encouraging of my ideas. Readers may draw their own conclusions.

The first ambassador is from Eastern Europe. He began his career under a socialist government and is therefore in a privileged position of viewing North Korea both from the perspective of a once sympathetic ally and from what may now be assumed to be a more balanced vantage point. This ambassador’s argument was that my recommended shift in diplomacy attacks the political ideology of North Korea. In any country, he maintained, “that is the last to go.” In other words, my approach would have to be a nonstarter.

And, in general terms, I’m sure he is right. But negotiators have been tiptoeing around Pyongyang’s refusal to accept the legitimacy of South Korea for some 60 years – roughly the time covered by two complete generations. The obvious question is: given the glacial pace of change in the North, shall we allow for three or four generations to pass before the matter is properly addressed? Meanwhile, be it a red herring or not, the North Korean nuclear program will continue to develop “defensive” weapons capable of wrecking global mayhem should matters get desperately out of hand.

Today’s enlightened perspective, held by many, is to recognize that North Korea is changing. The theory goes that constant exposures to the outside reality are needed to eventually cause internal reform. That approach comes across as entirely sensible. But, this same strategy has been tried for multiple decades, and the results have been and continue to be remarkably uninspiring. It is like different nations and organizations have been building bonfires in front, around and on top of a glacier. These fire builders are quick to point out the minor indentations that have melted away. Yet, when these efforts are viewed in their totality, one is likely to ask, “So what?”

Back in the 1960s, ’70s and ’80s, there was merit to the current approach. But, the current strategy, to put it kindly, is getting rather long in the tooth. At the same time, there has been little creativity other than to do the same strategy over and over again.

And, I would guess by now, the North Koreans may have caught on to what the West is really up to. The Germans recently closed their Pyongyang branch of the Goethe-Institut upon realizing that the North Korean authorities were intimidating its citizens from entering those facilities.

Some diplomats may declare: “Small sparks of light are better than none in the darkness!” Perhaps so, but I can’t help wondering who is actually fooling who when one party is controlling the entire game.

Before I move on to the second ambassador, I need to relate that other readers noted that the South has never made any public move to formally recognize the North. But, since the end of the military governments, particularly from the time of Kim Dae-jung, there has been open discussion in South Korea about a federation of two governments on the peninsula, which I assume would require mutual recognition. In earlier times, such discussion would have landed advocates in jail. Today, such ideas are openly aired. All of this suggests much greater flexibility on the part of the South Korea’s government.

I had a long discussion over lunch with another EU ambassador. It turns out he spent several years contributing to the successful Northern Ireland peace accord. While I was aware that the accord took several years of negotiations, I was surprised at how long it took to be fully implemented – almost a decade in fact. In other words, peace building is obviously a very difficult and tedious process, but only when an agreement is signed does the real work begin.

The diplomat cautioned about applying lessons from one conflict to another, but said that there were clear lessons learned from the Northern Ireland peace process. In essence, the Northern Ireland peace process was based on multiple, related negotiation tracks done in full concert with each other. All issues were put on the table and addressed. There were negotiations between Catholics and Protestants; Northern Ireland and the Republic of Ireland; and the U.K. and the Republic of Ireland. The U.S. played a critical broker role as a friend to all parties. In any event, no one negotiation tracks could have ever been truly successful without the successful conclusions of the other two.

In all three tracks, the cornerstones were mutual respect and prolonged meetings leading to personal friendships and empathy, all of which led to mutual acceptance and understanding. But, without achieving these qualities, ancillary issues could not be effectively addressed.

If we may learn from the Irish example, what could be possible?

First, there needs to be an open discussion, such as in forums jointly sponsored by South Korea, the EU and the U.S. to discuss whether a similar approach may work with the North. Rather than focus on resulting issues such as human rights and nuclear proliferation at six-party talks, perhaps multitrack negotiations could be more effective. Confidence building measures would be needed, not least a verifiable freeze on the North Korean nuclear weapons program.

Specifically, there may be the following negotiations: South-North cooperation, which would include humanitarian and commercial matters, bilateral relations, which would address diplomatic and military matters, and Korean foreign relations, which would result in a comprehensive peace treaty involving all parties, including the U.S., the UN, the South and the North. But, it would need to be clear that all three negotiations would have to show substantial progress.

Upon the development and agreement among South Korea and its allies to something similar to the above, this approach would be brought to the UN for further discussion and introduction to North Korea.

To conclude with the obvious, we know what has not been working. Perhaps the powers that be could do better by emulating something that has proven to be successful.

The article appeared in the Korean Joonang Daily and can be found at:  What Can Korea Learn From Ireland?
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, the Philippines, Myanmar, Vietnam and the U.S.