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North Korea: Witness to Transformation

Arbitration

by | June 26th, 2012 | 06:02 am
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Dispute settlement in North Korea is notoriously weak as we have documented in a series of papers based on surveys of Chinese and South Korean market participants (here, here, and here).  However, the North Koreans have sent people abroad for legal training and specifically training in commercial dispute arbitration. A group in Sweden says that it has trained roughly 50 North Koreans as arbiters.

The problem is that past sponsors of such training programs have been unable to document the impact of their activities.  A common story is that these individuals are trained and then dropped back into an unsupportive institutional setting and sometimes literally disappear. Although it would be very difficult to do so, it would be really useful to do some ex post evaluation to examine the conditions and characteristics that would maximize the likelihood of such programs achieving their goals.

I am reminded of all this by a piece in GoodFriends which claims that since 15 April, “a series of instructions regarding the economy has been issued, one after the other, under the name of Kim Jong-un, the First Secretary. Since the end of last year, the North Korean authorities have been modifying its economic legal principles including labor laws regarding foreign invested companies. Accordingly, they have consulted international practices in managing economic trade areas and agreed to conform to the International Arbitration Commission’s rules regarding disputes.” Anecdotal reports have emerged of arbitration being used though I am unaware of any accounting of details (such as were the parties North Korean or foreign and who won) much less any systematic compilation of the corpus of such cases.

In the case of trade, the GoodFriends reports goes on to quote an unnamed Party official that “In order to eliminate the circumstances in which trade fails because the principal is not repaid in time with respect to trade between international traders, we are attempting to amend the rules and regulations of trade. We plan to establish a professional body to handle the situation in the event of trade disputes and conduct an integrated management within it.”  If this were successful it could represent an important step in putting the economy on a more regular footing.  In our own work we have found that foreigners are reliant on personal connections to resolve disputes—there is little trust in or reliance on conventional institutions of dispute settlement.

In the meantime, we leave you with this Arbiters mash-up: