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Russian Court’s Judgment Recognized for Enforcement in Korea

May 2019 - Litigation & Dispute Resolution. Legal Developments by Lee & Ko .

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Recently, based on the premise that requirements for “mutual guarantee” or “reciprocity” in relation to the recognition and enforcement of foreign judgments can be allowed between Russia and Korea, a District Court of Korea rendered its decision which allowed a judgment concluded by a Russian court to be enforceable in Korea (see Changwon District Court, Decision 2018Gahap51099 held on January 17, 2019).

1. Facts

A. Judgment of the Russian court

A Russian company (the “Plaintiff”) filed a lawsuit against a Korean company (the “Defendant”) for the refund of the advance payment in US dollars made by the Plaintiff to the Defendant, and the Russian court found in favor of the Plaintiff (the “Russian court’s judgment”).

B. Plaintiff’s complaint and the essence of Defendant’s claims

The Plaintiff then filed a complaint against the Defendant in Korea seeking the enforcement of the Russian court’s judgment from the Korean court. In response, the Defendant argued that (i) to recognize the Russian court’s judgment would be contrary to good morals or public policy in Korea because the Russian court had committed a fault in its judgment by arbitrarily converting the claim amount into the Russian ruble rather than the US dollar, thereby violating the basic principles of the adversarial system and compensation for damages, and (ii) the requirements for the mutual guarantee or reciprocity in relation to the recognition and enforcement of foreign judgments had not been satisfied, as no treaty had been entered between Korea and Russia and there were no court precedents where a Russian court had expressly recognized a judgment rendered by a Korean court.

2. The attitude of the Supreme Court precedents on reciprocity and Lee & Ko’s main arguments

With respect to the requirements for the mutual guarantee or reciprocity in relation to the recognition and enforcement of foreign judgments, the Supreme Court of Korea held that, since (i) demanding such requirements of a foreign country be entirely the same as those requirements under Korean law or even more generous is likely to narrow the scope of recognition (which is incompatible with the today’s reality of frequent international exchange) and (ii) such outcome would lead to unreasonable consequences of foreign countries refusing to recognize a judgment rendered by a Korean court, it is reasonable to assume that such requirements for reciprocity has been satisfied so long as (x) the respective requirements for the mutual guarantee or reciprocity between Korea and a foreign country are not significantly unbalanced, (y) the requirements set by a foreign country are not too onerous as a whole (compared to those under the laws of Korea) and, essentially, there is no material difference in terms of recognizing the final judgment.

Moreover, the Supreme Court of Korea further concluded that it is sufficient to compare and recognize the requirements for such mutual guarantee or reciprocity by laws, ordinances and customs of foreign countries, and it is not necessary for Korea to have entered into a separate treaty with the foreign country at issue. Even if there were no court precedents recognizing a judgment rendered by a Korean court in the foreign country at issue, it would be sufficient in cases where a judgment by a Korean court is expected to be recognized in the foreign country.

On the other hand, in relation to the meaning of “sound morals or the other social order” stipulated in the Civil Procedure Act (which corresponds to “good customs and other social order” in Article 10 of the Act on Private International Law), the general opinion is that, in view of the need for international compatibility, it should be interpreted more narrowly than the “good morals and other social order” stipulated in the Civil Act.

Based on the foregoing, Lee & Ko made arguments that (1) while emphasizing the point that the Russian courts are required to calculate the amount in foreign currency in Russian rubles pursuant to Russian legislation when rendering a decision, (a) it is not against good morals or public policy to be protected by the law and order of Korea by the mere fact that an outcome of the Russian court judgment, having lawfully rendered in accordance with the Russian legislation, is somewhat different from the outcome of a judgment rendered under Korean law, and (b) the question of whether the verdict will be rendered in foreign currency or the currency of the country to which the judgment has been rendered is basically an issue that each country could decide as a matter of public policy, and therefore it is difficult to argue that such an issue is connected to the basic moral principle or social order of a country, and (2) the requirements for the recognition of foreign judgments under the Russia Commercial Procedural Code are not too onerous as a whole than the ones under Korean law, there are practically no differences in terms of material aspects, and there is a strong possibility that Russia will actually recognize and enforce a judgment rendered by a Korean court since it has been markedly shifting its position along with a recent trend where the Russian court has been acknowledging and enforcing judgments of another country even in the absence of a mutual legal assistance treaty between that country.

3. Progress and holding of this case

The District Court of Korea rejected all of the Defendant’s arguments and rendered a decision in favor of the Plaintiff by issuing an order for the enforcement of the Russian court’s judgment by citing all of Lee & Ko’s arguments.

4. Significance and implications of this case

For a long time, Russia has not recognized and enforced a decision of a country that has not entered into a separate treaty with Russia. As a result, countries such as Germany and Japan have been known as having a tendency not to recognize and enforce a judgment concluded by a Russian court. Prior to this case, there was no court precedent in Korea where a Russian court’s judgment of was recognized and enforced on the assumption that requirements for mutual guarantee or reciprocity could be expressly allowed between Russia and Korea. However, this case confirmed that such requirements for mutual guarantee or reciprocity in relation to the recognition and enforcement of judgments can be allowed between Russia and Korea, and it is now more certain regarding the possibility of recognizing and enforcing a Russian court’s judgement in Korea.

Acting on behalf of the Plaintiff, Lee & Ko was able to make a meaningful precedent by vehemently arguing that the mutual guarantee or reciprocity exists between Russia and Korea. Lee & Ko’s International Litigation Team has significant experience and expertise in representing leading international companies before Korean courts.

For more comprehensive information about the Lee & Ko International Litigation Team, please contact the lawyers below.

If you have any questions regarding this article, please contact below:

Kyung Hoon LEE (kyunghoon.lee@leeko.com)

Jiwoong LIM (jiwoong.lim@leeko.com)

Jae Hwan KIM (jaehwan.kim@leeko.com)

Yong-Jae CHANG (yongjae.chang@leeko.com)

For more information, please visit our website: wwww.leeko.com