Kim & Chang’s International Arbitration & Cross-Border Litigation Practice successfully represented an international serviced residence/hotel operator (the “Claimant”) against a developer of a serviced residence/hotel project (the “Respondent”) in Korea, in a KCAB international arbitration seated in Seoul, governed by Korean law.

After the Respondent developed the serviced residences, it entered into sale and leaseback agreements with the individual owners, under which the Respondent became the lessee of the units sold.  Then, the Respondent entered into a management agreement with the Claimant to entrust the management and operation of the serviced residences.  Under the management agreement, the Respondent shall not transfer its lease right to a third party without consent of the Claimant.  The dispute between the parties arose when the Respondent transferred its rights and obligations over the serviced residences to a newly established SPC without consent of the Claimant, in breach of the management agreement, and also failed to make payments against its payment obligation under the same agreement.  The Claimant terminated the management agreement pursuant to the provisions thereunder, but the Respondent disputed the validity and lawfulness of the termination.  

Our Representation

Based on our expertise in the hotel business industry, we reviewed the issues relating to hotel business structures and conducted extensive fact-finding on the negotiation history of the management agreement and the parties’ obligations thereunder.  We also carefully reviewed documents and materials related to the hotel operation costs and successfully pleaded our case before the arbitrator based on the principles of contract interpretation under Korean law.  As a result, we were able to obtain a favorable decision declaring that the management agreement was validly terminated and awarding the full amount of outstanding costs and damages claimed by the Claimant.  Also, the Tribunal ordered the Respondent to fully reimburse the Claimant for the arbitration costs and the legal fees.