Arbitration is defined as a process in which private disputes are resolved swiftly and privately through arbitrator(s) to whom the parties agree to refer their disputes avoiding rather prolonged court procedures. An issue arises as to whether an elective or optional arbitration clause, i.e., a clause gives the parties choices to resolve the matter via either court proceedings or arbitration proceedings, will be regarded as valid and honored as such by Korean courts.

At first, Korea has seen a larger number of lower trial court precedents adopting the view that a ‘waiver of the right to trial’ was necessary. However, some lower court precedents have embraced the view that optional arbitration clauses may be also valid.

Eventually, the Korean Supreme Court (the “Court”) declared a somewhat peculiar ruling (August 22, 2003 declared, 2003Da318). According to the Court, optional arbitration clauses, in general, were possibly to be viewed as valid in light of totality of the relevant facts. The Court ruled further that if an elective clause, which allows the disputes to be resolved either through litigation or arbitration, allows one party to request the arbitration proceedings and the other party takes part in the proceedings without any objection, then the elective clause is considered valid as such, and that if a party objects to arbitration as the method of dispute resolution under the elective clause, such a clause will not be considered valid.

The above opinion, as well as subsequent lower trial court opinions following the ruling, has since created much debate due to the fact that, in spite of recognizing the possible validity of the selective arbitration clause, the opinion refrains from fully endorsing selective clauses by effectively stating that, depending on the specific language of the applicable provision, the elective clause may be invalidated.

In view of the above court rulings, unfortunately, uncertainty still remains in determining whether such an elective arbitration clause will be upheld as valid and binding on the parties. Therefore, where parties have agreed to resolve disputes via arbitration proceedings that are to be implemented or executed in Korea, the parties should bear in mind that the provision should be clear and unambiguous as to whether such resolution is to be via arbitration only, eliminating the alternatives of court proceedings.