Arbitration Agreement's Binding Effect on Non-Signatory

중재합의의 제3자에 대한 효력

Arbitration is contractual by nature. One cannot be required to submit to arbitration any dispute which he has not agreed to so submit. As commercial transactions become increasingly complex, involving multiple parties and numerous contracts for a single transaction, however, limiting the parties who are subject to arbitration to only those who have signed a contract containing an arbitration clause would frustrate the purpose of such arbitration clause and might lead to injustice among the relevant parties. Therefore, U.S. courts have recognized a number of theories under which non-signatories may be bound to the arbitration agreement of others: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercing/alter ego; and (5) estoppel. Incorporation by reference and veil-piercing theories have already been recognized by Korean courts. Agency theory and estoppel theory are not recognizable under Korean law. However, the same or similar result may be achieved by applying the third party beneficiary theory or assumption by third party theory. Although a couple of Supreme Court cases appear to be at odds with the assumption theory, on the basis of the recent amendments to the Arbitration Act, such court precedents can be and should be reversed.