Kim & Chang represented a private equity fund (and its international subsidiaries) based in Seoul, Korea as Claimants in a Korean Commercial Arbitration Board (“KCAB”) arbitration, to enforce an early redemption right of convertible bonds issued by a Hong Kong company (the “Company”) under a Convertible Bonds Subscription Agreement (the “Subscription Agreement”).  The arbitration was seated in Hong Kong, with Hong Kong law as the governing law, with approximately USD 7.9 million, plus interest, in dispute. 

The dispute arose when the Company failed to redeem the bonds pursuant to an early redemption provision in the Subscription Agreement, which provides for redemption if the Company failed to complete an Initial Public Offering (“IPO”) by a specified date.  The Company failed to complete an IPO by that date, and the Claimants exercised their early redemption right, which the Claimants subsequently sought to enforce through arbitration when the Company did not redeem the bonds. 

The Respondents, the Company and its chief executive officer, did not participate in the arbitration, or respond to any correspondence from the KCAB, Tribunal or Claimants since the filing of the Request for Arbitration.  In the course of the proceeding, we took steps to ensure procedural due process, as well as to satisfy applicable notice requirements in light of the Respondents’ non-responsiveness.  For example, we ensured the arbitral documents were delivered to the Respondents by courier, in addition to e-mail, and obtained signed-for proofs of delivery.  These efforts went beyond the notice requirements designated in the Subscription Agreement, the International Arbitration Rules of the KCAB and the Tribunal’s procedural order.

The Respondents’ non-participation also led our team, in submissions and in preparations for the hearing, to anticipate arguments that the Respondents might have raised had they participated in the arbitration and to address such arguments.  This was done to ensure that the Tribunal had the opportunity to consider all relevant aspects of the case, and could satisfy itself that a ruling in the Claimants’ favor was truly merited. 

Due to the COVID-19 pandemic, the hearing took place by video conference.  We, as the Claimants’ counsel, prepared the logistics of the virtual hearing.  We arranged the necessary screen, camera and audio equipment at the hearing room, in a manner which would preclude the possibility of unmonitored attorney/witness interactions.  In advance of the hearing, we conducted test runs with the Tribunal to ensure that all of the participants could use the video conference platform.  The hearing was conducted successfully by video conference in May 2020. 

The Tribunal issued an award in favor of the Claimants in September 2020.  Despite the Respondents’ non-participation arbitration, the Tribunal was satisfied that the Respondents were appropriately informed of the arbitration and that all relevant communications, documents and evidence were received by them, based on records of e-mail communications and courier receipts entered into evidence by us.  The Tribunal accepted the Claimants’ claim for the early redemption right in full, and awarded the Claimants the redemption amount of approximately USD 7.9 million, plus interest.  In addition, the Tribunal ordered the Respondents to pay most of Claimants’ costs, including the arbitration costs the Claimants paid to the KCAB, as well as the Claimants’ legal fees and costs associated with settlement negotiations with the Respondents that occurred prior to the arbitration.

After the award was issued, we worked closely with a Hong Kong counsel to enforce the KCAB award in Hong Kong.  In January 2021, the Hong Kong court formally recognized the KCAB award.  The Respondents subsequently filed a set-aside action in February 2021, claiming that the Respondents were not properly notified of the arbitration.  The Hong Kong court held a hearing in March 2021 and dismissed the Respondents’ application in full.  Specifically, the court declared that the Respondents were provided with a proper notice of the KCAB arbitration and the award was fully enforceable in Hong Kong.  The court also ordered the Respondents to pay the Claimants’ legal fees and costs associated with the set-aside action.  We worked closely with the Hong Kong counsel to draft and prepare affidavits, letters and supporting evidence that were filed in the Hong Kong court proceedings.  We are currently working with the Hong Kong counsel to enforce the KCAB award on the Respondents’ assets in Hong Kong, including shares and bank accounts.