Our Korean distributor stopped paying and is selling a copycat — we're a UK company with no Korean office. Do we sue in Korea, arbitrate, or write it off?

Arbitration in Seoul is not a home-court disadvantage for a foreign claimant, and for a USD 600,000 claim under a written agreement with delivery records, it is a route that tends to produce an award — and an award, unlike a Korean court judgment, is enforceable in the UK and most other countries under the New York Convention with minimal review. The copycat product is a separate problem with faster tools. And the question you asked last is the one to ask first: whether the distributor has assets is checkable from public records before you commit to anything.

What this is under Korean law

The unpaid invoices are a straightforward claim for the price of goods under the Civil Act and the Commercial Act (상법, sangbeop), with statutory commercial interest running from the due dates. The exclusive distribution agreement likely also contains non-compete, confidentiality and intellectual-property clauses; selling a competing product while the agreement is in force, using your materials, is a breach of those and a ground for termination and damages.

The copycat is also actionable outside the contract. Using your marketing materials with logos swapped is copyright infringement under the Copyright Act (저작권법, jeojakgwon-beop). Passing off a near-identical product in a way that confuses customers with your established goods falls under the Unfair Competition Prevention Act (부정경쟁방지법, bujeong gyeongjaeng bangji-beop), which does not require a registered mark. If your trademark is registered in Korea, trademark infringement is the strongest claim; if it is not, register it now, because the distributor may try to.

Arbitration in Seoul

The clause almost certainly refers to the Korean Commercial Arbitration Board (대한상사중재원, KCAB), and its international rules provide for proceedings in English, with tribunals that regularly include non-Korean arbitrators for international cases. The proceedings are confidential, faster than court, and the award is final with very limited grounds for challenge. For a foreign company, the practical advantages are three: no Korean-language pleadings, no multi-instance appeals, and worldwide enforceability. The disadvantage is cost, which is front-loaded, and the fact that an arbitral tribunal cannot itself freeze the respondent's assets — for that you go to a Korean court, which the Arbitration Act (중재법, jungjae-beop) permits alongside the arbitration.

Whether to arbitrate or litigate is not actually your choice if the clause is valid; a Korean court will dismiss a suit brought in breach of an arbitration agreement. The choice you do have is how to use the court for what arbitration cannot do.

The copycat, quickly

Copyright and unfair-competition claims are not necessarily covered by the arbitration clause, and even where they are, Korean courts grant preliminary injunctions (가처분, gacheobun) against infringing sales on an expedited basis. An injunction stopping the copycat and the use of your materials can be obtained in weeks; it does not wait for the arbitration. Evidence is the key: purchase the product, preserve the listings and materials with dates, and document the confusion.

Before you spend: what they have

Korean corporate and property registers are public. Counsel can, in days, confirm the distributor's registered capital, directors, registered office, any registered real property, and encumbrances on it. Financial statements are filed for companies above certain thresholds. The result tells you whether a provisional attachment (가압류, gaapnyu) on real property or receivables is available and worth obtaining before the distributor learns you are moving. Korean debtors facing a foreign claimant frequently assume nothing will happen; the attachment corrects that.

What a foreign company must provide

Corporate documents proving the company and its signatory — a certificate of incorporation and a board resolution or equivalent — notarized and apostilled in the UK; a power of attorney (위임장, wiimjang) to Korean counsel, likewise; the agreement, the delivery records and invoices, the payment history, and the correspondence. Korean translations of exhibits are prepared in Korea. Nobody from your company needs to travel for the attachment or injunction stage.

Practical insight

Foreign suppliers lose to Korean distributors in one recurring way: they spend months on demand letters, the distributor uses them to move receivables and stock, and by the time an award exists there is nothing to enforce against. The sequence that works is the reverse — assets first, injunction second, arbitration third. The second error is treating the copycat as part of the money dispute; it is a separate, faster case whose injunction changes the distributor's posture in the arbitration.

Send us the agreement and the distributor's registered name and we can report on their assets and the arbitration clause within the week — by text consultation or at +82-2-522-3959.

— MEGA X Law Firm Korea, Corporate Disputes Team