A way to increase K-SURE’s export insurance recoveries through arbitration by subrogation

Abstract

Purpose The purpose of this paper is to utilize the concept of arbitration by subrogation as a means to increase recoveries of indemnities paid out to exporters or any financial institutions by K-SURE, an export credit agency of Korea, against possible non-payment or breach of obligations from the buyer or the buyer’s country. It looks into the possibility of K-SURE and KCAB reactivating its 2004 MOU to give more jurisdictional protection to K-SURE’s indemnities recovery transactions. Design/methodology/approach This paper first introduces a brief elucidation about export insurance provided by K-SURE and the necessity of arbitration in the export insurance, and a summary of a subrogation arbitration case referred to the KCAB by K-SURE in 2005. Cognizant of the 2004 MOU between K-SURE and KCAB, as well as the foreign and domestic developments in arbitration, the paper then analyzes legal principles of subrogation by insurer, as well as domestic and overseas precedents on the matters of assignment of claim and arbitration by subrogation. Findings While it appears that there is still no universally recognized authority nor established court precedents applying arbitration by subrogation, the authors discovered that similar to Korea, most of leading courts in the world have consistently held that the assignee can request and be requested for arbitration pursuant to the arbitration agreement contained in the assigned contract. The paper concludes that the K-SURE now can be admitted as a party having proper standing in the arbitration proceedings so long as the specific claim right under the contract which includes the arbitration agreement is assigned to the K-SURE. Originality/value This paper suggests a possible plan to increase recoveries in export insurance. The outcome of the research is expected to enhance the arbitration system on the back of increasing numbers of arbitration related to export insurance, to improve the balance sheet of K-SURE and ultimately, to help the Korean economy by collecting export insurance recoveries which will lead to saving Korean people’s tax.