Consumer Agency Will Adjudicate Korea’s First-Ever Class Arbitration Claim

A group of Korean customers has filed a class arbitration claim, and the plaintiffs will be awarded damages for the first time in Korean history.

The Korea Consumer Agency (“KCA”) confirmed yesterday that it would convene its arbitration board today and decide to adjudicate a class arbitration claim filed by new apartment owners who have complained of defective sash installations.

The class arbitration claim is similar to a U.S. class action lawsuit in nature. When 50 or more customers sustain the same damage arising out of a defective product, they can file a “class claim,” requesting the local government or the KCA to adjudicate their case. The relevant law was enacted this March.

This particular case involves 62 apartment residents/owners in an apartment complex in N. Choongcheong Province. The plaintiffs have alleged that, despite a promise, their sash builder failed to install buttress beams inside the sash frames.

One KCA source tipped the Dong-a Ilbo that it would be very unlikely for the board to dismiss the claim.

After finding facts, the board proposes a compensation plan. The defendant company may appeal from the decision. Then, either party can initiate a lawsuit in a court of law.

Once the board decides to adjudicate the case, just like in a class action lawsuit in the United States, the board runs ads in the newspapers and posts a notice on its homepage, recruiting customers who have sustained the same damage but have not participated in the proceedings.

Even if a damaged customer fails to participate in the arbitration procedure, the KCA board recommends that the defendant company provide a remedy to the “third-party” customer. Therefore, the amount of damages and the number of customers entitled thereto may snowball.

Facing an imminent class arbitration class, corporations are put on alert and making preparations for any possible disastrous claim

Since the enactment of the relevant law, the KCA has been inundated with phone calls from customers asking for information on the arbitration procedure.

The KCA predicts a variety of similar claims affecting a wide range of industries. It says that insurance, cable and telecommunications companies may suffer. They have a huge pool of customers, and their defective service or product is easy to prove.

It also expects claims to be filed against restaurants and travel agencies during the vacation season.

jarrett@donga.com