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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. Overview. Disclaimers (many, many…)
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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
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
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
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).
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
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
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
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
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
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
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?
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.
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
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
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?
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
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
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?
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.
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
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
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
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.