LITIGATIONS BETWEEN FOREIGN INVESTORS AND KOREAN ENTITIES

Korea has grown into one of the most attractive destinations for foreign direct investment (FDI) in Asia. With a stable legal system, transparent judicial processes, and active international trade relations, it is no surprise that foreign investors are increasingly choosing Korea as a base for their operations. However, with investment comes the potential for disputes. In this article, we will explore litigations between foreign investors and Korean entities, focusing on real-life court cases and the overall protection that the Korean legal system offers.

1. Understanding Litigations Between Foreign Investors and Korean Entities

Litigations between foreign investors and Korean entities usually arise from breaches of contract, intellectual property disputes, regulatory misunderstandings, or unfair treatment by business partners. These disputes are typically addressed in Korean courts, where foreign investors are granted the same legal standing as local parties.

Korea has committed itself to creating a fair and impartial judicial environment, especially in matters concerning international investors. The transparency of court proceedings and the increasing use of English in documentation are contributing factors that improve investor confidence.

2. Legal Protections for Foreign Investors in Korea

Foreign investors involved in litigations with Korean entities are protected under multiple legal frameworks:

• Korean Commercial Act and Civil Code: These provide general legal provisions for commercial disputes.
• Foreign Investment Promotion Act (FIPA): Offers enhanced protections and incentives to foreign investors.
• Bilateral Investment Treaties (BITs): Korea has signed numerous BITs ensuring non-discriminatory treatment of foreign investors.

These protections ensure that in the event of litigations between foreign investors and Korean entities, the investor’s rights are upheld based on the principles of fairness and equality.

3. Case Study 1: Breach of Contract in 2019

One of the notable litigations between a foreign investor and a Korean entity occurred in 2019. In this case, a European investor sued a Korean company for breaching the terms of a service agreement. The High Court of Korea ruled in favor of the foreign investor after evaluating the contractual obligations and finding a clear breach by the Korean party.

The court ordered the Korean entity to compensate the investor for damages, reaffirming that the legal system does not tolerate breaches of contract—regardless of the nationality of the investor. This case highlighted the importance of written agreements and judicial neutrality in Korea.

4. Case Study 2: Trademark Infringement in 2020

In 2020, another significant litigation between a foreign investor and a Korean entity took place in the Intellectual Property Court. A U.S.-based investor filed a lawsuit against a Korean manufacturer for unauthorized use of their trademark on locally distributed goods.

The court ruled in favor of the foreign investor, recognizing the infringement and ordering the Korean company to cease the use of the trademark and compensate for damages. This litigation showed that foreign investors’ intellectual property rights are respected and protected by the Korean legal system, encouraging more FDI in innovation-driven sectors.

5. Why the Korean Legal System Encourages FDI

One of the main reasons why foreign direct investment in Korea continues to grow is the country’s commitment to judicial fairness. Litigations between foreign investors and Korean entities are not viewed with bias. Instead, they are evaluated based on facts, legal principles, and due process.

Furthermore, courts have shown increasing efficiency in handling international disputes, aided by:

• Online filing systems (e.g., iros.go.kr)
• Availability of expert interpreters
• Recognized use of international legal precedents in relevant cases

All these factors ensure that foreign investors can rely on Korea’s legal system in case of disputes with local entities.

6. How to Prepare for Potential Litigations in Korea

While the Korean legal system is fair, foreign investors should take proactive measures to avoid unnecessary litigations with Korean entities:

• Draft clear and detailed contracts, preferably bilingual (Korean-English)
• Register intellectual property before entering the market
• Maintain detailed communication and documentation with Korean partners
• Engage local legal counsel for regulatory and business guidance

Being well-prepared can significantly reduce the risk and cost of potential legal disputes.

7. Dispute Resolution Alternatives in Korea

Not all litigations between foreign investors and Korean entities go to court. Korea promotes alternative dispute resolution (ADR) mechanisms such as arbitration and mediation:

• The Korean Commercial Arbitration Board (KCAB) offers a platform for resolving business disputes quickly and confidentially.
• Mediation is encouraged in civil matters and often leads to faster, amicable settlements.

Foreign investors often prefer ADR for its cost-effectiveness and procedural flexibility.

8. Final Thoughts: Building Confidence Through Legal Clarity

As seen in the recent litigations between foreign investors and Korean entities, Korea’s courts have consistently demonstrated impartiality and legal clarity. The favorable rulings in favor of foreign investors not only reinforce trust in the Korean legal system but also contribute to Korea’s global investment appeal.

Foreign investors can move forward with confidence, knowing that if disputes arise, they will be heard fairly and judged justly.

In conclusion, litigations between foreign investors and Korean entities are handled with increasing professionalism and transparency. With continued reforms and a judiciary supportive of fair international business practices, Korea remains a legally secure and attractive destination for foreign capital.

9. About NYLA – Korean Legal Office 

■ NYLA – Your Trusted Legal Partner in Korea

At NYLA, we understand that the success of foreign businesses in Korea requires not only a solid business strategy but also reliable legal support. With a team of experienced Korean attorneys and legal professionals, NYLA provides tailored legal services for companies, investors, and individuals operating or planning to establish a presence in Korea.

We support our clients throughout the entire business journey with comprehensive services, including:

• Legal consultation on company establishment, taxation, and immigration;
• Advice on commercial real estate, franchising, and product distribution;
• Support in human resources, marketing, and business strategy.

In addition to legal advisory, NYLA also represents clients in civil litigation cases related to business, labor, marriage, family, and inheritance to ensure their rights and interests are fully protected.

■ Contact NYLA

If you’re a foreign business or individual looking for a reliable legal partner in Korea, NYLA is here to help. We are committed to delivering effective, practical, and personalized legal solutions for every client.

With a proven track record of assisting hundreds of international clients, our team is equipped to help you navigate complex legal challenges—whether it’s commercial disputes, contract issues, or foreign investment guidance.

Don’t let legal matters hold you back. Let NYLA be your trusted guide in the Korean market.

■ Get in touch with NYLA for expert legal support

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