"Need for Expertise in Commercial Trials"...Will Korea See Its Own Version of the Delaware Commercial Court?

Proposal to Establish a Commercial Court Presented at the Governance Forum Seminar

There has been a call for the establishment of a specialized "commercial court" in Korea that would handle corporate governance-related disputes, similar to the Delaware Court of Chancery in the US. Critics point out that, under the current system in which judges rotate every two to four years, it is difficult for judges to develop expertise. They argue that a commercial court would allow for the long-term tenure of specialized judges and the consistent handling of cases, from injunctions to substantive lawsuits.

On September 29, Judge Kim Jaenam of the Incheon District Court spoke at a seminar on "Fiduciary Duty of Shareholders and the Introduction of a Specialized Commercial Court," hosted by the Korea Corporate Governance Forum at the Korea Institute of Financial Investment Education in Yeouido. Judge Kim stated, "Given the need for specialization in commercial cases, the rapidly changing global trends, and the importance of such matters for national competitiveness, it is necessary to establish a specialized court separate from general civil courts." Currently, there are four specialized courts in Korea: the Family Court, the Administrative Court, the Rehabilitation Court, and the Patent Court.

Judge Kim explained the characteristics of commercial cases that require specialization, noting, "To properly handle commercial cases, an understanding of other disciplines and practical fields such as economics, business administration, accounting, and finance is necessary." He added, "Commercial cases linked to corporate decision-making involve a variety of stakeholders—majority shareholders, minority shareholders, management, employees, creditors—each with their own interests to balance." He further commented, "Management and financial systems relating to commercial cases are the fastest-changing areas in response to shifts in the business environment and the development of the financial industry. The laws and institutions governing commercial matters are continually evolving with these changes."

However, despite the need for such specialization, Judge Kim pointed out that the current system inevitably undermines expertise. "In Korea, judges are assigned on a rotating basis, dividing the country into three regions—Seoul, the metropolitan area, and provincial areas—and judges are transferred between regions or between courts within a region every two to four years," he stated. "Even judges working at the same court may be assigned to new work responsibilities, requiring them to handle different types of trials." While this system is intended to enhance the fairness of trials and promote equitable personnel management in the judiciary, he argued that it ultimately impedes the accumulation of expertise.

Judge Kim drew an analogy to medicine, likening the situation to having doctors rotate their specialties every two to three years and treat multiple specialties simultaneously. He asked rhetorically, "Would you trust such a doctor to perform a critical cancer operation?"

Furthermore, Judge Kim revealed that even in courts with specialized corporate panels, the proportion of corporate cases handled by these panels is not high. As of February 29, 2020, according to Judge Kim, the proportion of cases handled by the specialized corporate panel at the Seoul Central District Court was only 32–44%. He added, "In order to provide the public with specialized commercial trials, some adjustments are needed within the personnel system, as long as these changes do not disrupt the overall system."

Internationally, specialized courts that handle corporate law and securities law cases include the Delaware Court of Chancery in the US, the Enterprise Chamber in the Netherlands, and the Tel Aviv Economic Department in Israel. Although the Delaware Court of Chancery is not exclusively a commercial court, it has accumulated judicial expertise and developed consistent case law through its long-standing focus on corporate governance disputes. Judges there serve twelve-year terms without rotation.

In his presentation, Judge Kim also cited Israel as an example. He highlighted that in 2010, a specialized panel composed of three judges with expertise in economic disputes was established within the Tel Aviv District Court, with the panel handling only such cases. As a result, the median duration of lawsuits dropped significantly, from 1,601 days to 634 days. He emphasized, "The establishment of the specialized panel increased the overall efficiency of the court," adding, "The proportion of cases dismissed at an early stage and the number of early settlements both increased."

Judge Kim argued, "To improve corporate governance and resolve the Korea Discount by enforcing fiduciary duties and other norms codified in law, it is extremely important to establish a specialized commercial court capable of delivering expert adjudication."

Specifically, he suggested, "It would be preferable to create a standalone specialized commercial court, rather than merely forming specialized panels within the general courts." He elaborated, "Such a structure would make it easier to assign professional judges, facilitate staff specialization, and allow the unified organizational strength of a dedicated institution to be channeled into improving specialized adjudications."

He also stated, "Judges should be appointed to the specialized commercial court with expertise as the top priority, and should be able to serve there for as long a period as possible." Additionally, he recommended that, whenever possible, a single panel should handle all related proceedings in a given dispute, from injunctions to substantive rulings. He further suggested the appointment of accounting professionals to the court staff and said that, in principle, the decisions and provisional order rulings of the specialized commercial court should be made public. He explained that this would ensure that all market participants could study and critique judicial actions, addressing concerns that specialized judges might display pro-business bias.

On the same day, Professor Song Ockryul of Seoul National University School of Law, also a presenter, identified the judicial appointment system as the core issue, rather than the mere establishment of a specialized court. Professor Song remarked, "If specialized courts or panels are staffed with judges lacking expertise, this misses the essence of judicial specialization," and added, "Even if we create commercial courts, as long as judges continue to rotate, it will be difficult to improve the quality of specialized adjudication." He explained that, instead of founding new specialized courts, strengthening the existing dedicated panels could yield a similar effect, provided that judges are able to accumulate expertise in their respective fields.

This content was produced with the assistance of AI translation services.