Legal Infrastructure and Development: Dispute Resolution in South Korea

1. Legal Infrastructure and Development: Dispute Resolution in South Korea Lisa Blomgren Bingham, J.D. Keller-Runden Professor of Public Service Director, Indiana Conflict Resolution Institute Indiana University Bloomington, Indiana

2. Overview Disclaimers (many, many…) Definitions (private dispute resolution, legal infrastructure) Categorizing dispute systems by who controls their design Korea: some background Changing infrastructure: dispute resolution in the courts, labor relations, and the environment Implications for economic development: Reunification of North and South Korea

3. Definitions Legal infrastructure Substantive property, contract rights Economic freedom Civil rights, democracy Institutions for enforcing rights and resolving disputes, public AND PRIVATE Private dispute resolution: Resolution by those who are not judges, courts, or administrative agencies, even if court-annexed

4. Control over Dispute System Design Private ordering: The parties design it together (international commercial arbitration, labor relations, diamond dealers, cotton industry). Private ordering: One party designs it alone and imposes it on the other (adhesive or mandatory arbitration in US, designed unilaterally by employers and businesses, enforced under FAA, preemption) Public institution-building: Third parties design it for disputants (governments, courts, agencies, or NGOs like Court of Arbitration for Sport) Control over DSD affects rules and outcomes of system. More of a problem for arbitration than for mediation programs (Bingham 2004).

5. South Korea: Some Background The flowering of democracy in past decade Economic crisis 1997-1998 (500% leverage) Chaebol corporate structures: massive conglomerates closely held de facto if not de jure Top 30 control 41% of economy Legal infrastructure improvements in substantive law in response to crisis More transparency, accountability on corporate boards, but still problems South Korea rates lower than other industrial economies on international indices of corruption and bribery (Transparency International) Reunification desired: 2-10 years

6. Private Ordering: DSD by The Parties in Korea Limited use and experience with ADR Board of Commercial Arbitration 300 cases a year No courses in law or business schools on ADR No negotiation skills training; interest-based negotiation is a novelty. De facto limits on disputing through cultural traditions and chaebol interdependent conglomerate structures Contrast US: CPR Institute, Fortune 500 sign CPR Pledge Impulse comes from corporate counsel within companies to limit transaction costs

7. Private Ordering: One Party Dispute System Designs absent in Korea There appears to be no precedent for this No equivalent to the FAA permitting adhesive arbitration and enforcing awards Suppression of conflict within organizations Contrast US: Mandatory adhesive arbitration viewed as a means to manage risk and reduce exposure to jury awards Mediation viewed by a few enlightened firms as possible new high performance work system practice

8. Third Party Designs: Innovation in Korea’s Institutional Infrastructure Paradigm shift underway Courts, National Labor Relations Commission Public Policy and Environmental Disputes New substantive laws President is former union lawyer Government agencies gearing up to comply Institutional infrastructure is weak or absent Knowledge economy, beginning to benchmark

9. Courts Korean Supreme Court Task Force on Civil Justice Reform Overseeing move toward common law from civil code tradition through experiment with jury system Undertaking dispute system design for entire national court system to implement ADR

10. Current Institutional Structure in Korea’s Courts Civil code system Dramatic growth in caseload, increasing individualism with improvement in economy and democracy No tradition of independent mediation practice, limited use of arbitration Judges mediate their own cases; concerns about confidentiality and appropriateness of dual roles Concerns about efficiency of courts as dispute system

11. Court’s Questions Training and qualification of neutrals Are mediators court employees or outsiders? Who pays and how much? Are mediation and arbitration outcomes enforceable in the courts? How? What kind of ADR? What timing? Relation of courts to labor arbitration? What might court need to fund that parties will not pay for? Where is ADR held? What is relation of court to ADR? Rules on confidentiality?

12. Implications for Economy Legislative mandate for juries framed as ‘public participation’ in governance Caseload growth Implicitly, concerns about economic competitiveness Reducing transaction costs They wanted to know what evidence there is of benefits: The Galanter Vanishing Trial Study was persuasive.

13. Korean National Labor Relations Commission Convened first ever national conference Attended by 80 people from NLRC and all its regional offices Chairman is at level of a cabinet minister President has pursued legislation that will Permit government workers to form unions Permit contract and temporary workers to file complaints of discrimination with NLRC NLRC anticipates dramatic growth in caseload

14. Current Institutional Structure of NLRC National office and regional offices 11 percent rate of private sector unionism Increasingly adversarial labor relations Wall to wall units capable of shutting down entire industry in a strike Evaluative mediation style Descriptions sound more like advisory arbitration Proud of their settlement rates

15. NLRC’s Questions Benchmarking dispute system designs What is USPS system? (Bingham 2003) How does mediation work? What evidence is there of its outcomes? Models of training? Interest-based negotiation? Mediation training? Sources?

16. Implications for Economy Making substantive changes in legal infrastructure concerning individual worker job security Moving in direction of more flexible hiring and firing Political quid pro quo is discrimination law for temporary and contract workers Want to make it work efficiently - not have excessive transaction costs Building on existing institutions to enforce new rights

17. Public Policy and Environmental Conflict New substantive proposed law: Conflict Assessment OR Conflict Impact Assessment (which is unclear) Deliberative Polling (Fishkin) Mediation Agencies Korea Environmental Institute (assessment) Institute for dispute resolution skills training in government National law for every agency; will need capacity to mediate

18. Government’s Questions Commission on Sustainable Development funded KDI School & MIT to hold comparative conflict resolution studies conference Benchmarking comparative legal infrastructure for public conflict resolution Benchmarking practice infrastructure, how to develop a profession of mediation and dispute resolution Korea Environmental Institute: What is US practice in environmental conflict resolution?

19. Implications for Economy Having difficulty getting major public development projects done Buddhist nun on hunger strike stops major highway First ever environmental mediation of Han-tan River Dam project turns into binding arbitration and then one stakeholder group repudiates award. Project halted. Need projects to build hard infrastructure for economy: flood control, water quality, transportation of goods.

20. Implications continued Legislation touted as democracy-building, on same theme of public participation as jury system Object is to anticipate and either avert or resolve conflict in major development projects Transaction costs

21. The Future: Reunification Commentators are planning for it; some propose a hybrid of German reunification, Poland’s privatization, with limited elements from Russian and Czech privatization experiences North Korea will likely inherit South Korea’s legal infrastructure Corporate law reforms will aid transition With reunification could come another wave of disputing: claims for natural restitution of nationalized property by heirs in North or South

22. More on Reunification Restructuring North Korea’s state-owned businesses will require more flexibility in hiring and firing workers Could see new wave of North Korean unionism coming out of socialist history Will need major hard infrastructure development, transportation system, environmental restoration

23. Conclusion (Remember disclaimers) No data. In South Korea, legal infrastructure followed both economic growth and a period of economic crisis. South Korea is developing its legal and institutional infrastructure in anticipation of needs for future economic growth. The process is a dynamic complex system. Current econometric models are underspecified.