The Seoul SIAC-KICA Seminar on “Doing Business in Southeast Asia: Pointers, Perspectives and Potential Pitfalls”

By Sue Hyun Lim (Partner, Bae, Kim & Lee LLC) and Jinho Park (Legal Counsel, GS Caltex)

The SIAC-KICA Southeast Asia seminar on 13 April 2017 was very well attended and was complimented by many participants as an opportunity to learn and appreciate the complexity and differences of the legal environment in Southeast Asia. The high attendance rate (of over 150 attendees) for the seminar was evidence of the enthusiasm among the in-house counsel community in Korea. With the increasing business investments by Korean companies in places like Vietnam and Indonesia, there is an increased demand for more learning opportunities about the legal and business environment in Southeast Asia. The seminar provided an excellent opportunity to do so.

Dr EY Park opened the first session on contract issues with an interesting remark that Korean companies have adapted to the traditional Western approach which would consider the written contract as the end of a negotiation, and are often surprised at the uncertainty faced despite the existence of a written contract when dealing with some of their Southeast Asian counterparts.

The two high-profile speakers of the session, Mr. Eric Yang and Mr. Zunu Lee, were respectively heads of the Southeast Asia practice groups at Bae, Kim and Lee and Yoon & Yang, and had both resided in Vietnam and Indonesia respectively for many years, during which time they had assisted Korean companies with their legal matters in jurisdictions such as Vietnam, Cambodia, Indonesia, Malaysia, etc.

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Left to Right: Dr Eun Young Park, Mr Eric Eunyong Yang
and Mr Zunu Lee

Members of the audience

Mr. Yang opened his presentation stressing the importance of an in-depth understanding of the local legal systems. A very interesting and perhaps more important observation by Mr. Yang was that there was a strong culture of protecting the rights of minority shareholders in certain Southeast Asian countries. That, is, even if the local joint venture partner is a minority shareholder and the Korean investor had the majority of shares, there would be cultural expectations that the playing field would be leveled through other legal protections. Mr. Yang emphasized the importance of being cognizant and respectful of local business cultures, yet at the same time being prepared to protect one’s legal rights by knowing these cultural expectations in advance.

Mr. Zunu Lee shared his experience in Indonesia. He shared very valuable tips on local substantive law requirements that affected contract drafting. In particular, the participants were actively taking notes when Mr. Lee explained that liquidated damages clauses were not allowed under Indonesian law and only damages that could be proven could be claimed. Another useful tip shared was on the legal requirement in Indonesia that all contracts had to be in the Indonesian language to be effective, and could not be executed in English only. He also shared a cautionary tale on the issue of "who to talk to" when doing business in certain developing countries in Southeast Asia. In particular, in countries with socialist traditions, it might be particularly difficult to determine the right person with the appropriate authority to approach to obtain government approvals.

The second session titled, “Effective Dispute Resolution with Southeast Asian Parties”, was moderated by Mr. Jun Hee Kim, General Counsel of Hyundai Heavy Industries Co., Ltd. The two speakers, were Mr. David Kim of Lee & Ko and Mr. Hyung Keun Lee of Yulchon LLC.

The first topic of “whether to arbitrate or litigate” highlighted the commercial realities of the contract negotiation process. That is, the decision to arbitrate is often reached as a compromise measure, as neither party would agree to litigate in each other’s national courts.

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Left to Right: Mr Hyung Keun Lee, Mr Jun Hee Kim and David Kim

Prof Hi-Taek Shin

The second topic was on the “seat of arbitration”, an issue that was often overlooked. As it governs the procedural law of the arbitration, both speakers emphasized the importance of avoiding unfamiliar seats. Instead, popular jurisdictions like Singapore, Hong Kong, Paris, and London were recommended. It was useful to note that not all jurisdictions were similar to Korea and Singapore in enforcing non-awards like interim orders, and that confidentiality of the arbitration could not be taken for granted to apply in many jurisdictions.

The third and fourth topics, “governing law and local institutions” and “counsels and arbitrators”, were highlights of the session where both speakers shared their invaluable insights. The frequent changes to arbitration laws in some countries were highlighted, and the speakers proceeded to explain the complex process of interpreting ambiguous standards such as “best efforts” and “consequential damages”, the applicability of the parol evidence rule and the vague distinction between procedural and substantive laws. While many Southeast Asia countries have established arbitration centers, the participants were reminded that their rules have not been as rigorously tested as that of SIAC.

The fifth and sixth topics were on “award enforcement” and “investment arbitration”. In light of the difficulties in enforcing the award in certain countries, speakers commented that it might be wise to settle for a lesser sum if parties were able to amicably resolve their disputes.
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