Gate Gourmet Korea Co, Ltd and others v Asiana Airlines, Inc

• Jurisdiction: Singapore
• Judge: Simon Thorley IJ
• Judgment Date: 01 December 2023
• Neutral Citation: [2023] SGHC(I) 23
• Court: International Commercial Court (Singapore)
• Docket Number: Originating Application No 14 of 2023
• Hearing Date: 15 September 2023,10 November 2023
• Citation: [2023] SGHC(I) 23
• Year: 2023
• Plaintiff Counsel: Liew Wey-Ren Colin (Instructed), Kok Chee Yong Jared, Jodi Siah Be Koen (Rajah & Tann Singapore LLP)
• Defendant Counsel: Thio Shen Yi SC, Chua Han Yuan Kenneth (Cai Han Yuan), Tan Shi Ying, Crystal (TSMP Law Corporation)
• Published date: 07 December 2023

Simon Thorley IJ: Introduction

This is the latest round in the long running dispute between the parties surrounding four agreements relating to the provision of catering facilities to Asiana Airlines, Inc (“Asiana”), the respondent to these applications.

Background The Parties

Asiana is a Korean company engaged in the business of air travel and is part of the Kumho Asiana group of companies (the “Kumho Asiana Group”).

There are four applicants (the “Applicants”): the 1st Applicant, Gate Gourmet Korea Co Ltd (“GGK”), is a Korean company engaged in the business of providing catering and other services to the airline industry. It is a joint venture between the 2nd Applicant, Gate Gourmet Switzerland GMBH (“GGS”) and Asiana. GGK’s main customer is Asiana.¹ GGS is a Swiss company which provides in-flight catering and other airline handling services.² GGS and GGK are part of the Gate Gourmet group of companies of which the 3rd and 4th Applicants, Mr Christoph Schmitz (“Mr Schmitz”) and Mr Xavier Rossinyol Espel (“Mr Rossinyol”), are, respectively, the current and former Chief Executive Officers.

There are two applications before the court, the first, initially commenced in the General Division of the High Court (the “GDHC”), HC/OA 656/2023 (“OA 656”), on 28 June 2023 and subsequently transferred to this court as SIC/OA 14/2023 (“SIC 14”), seeks declaratory and anti-suit relief in relation to two civil suits commenced in the Courts of South Korea by Asiana against one or more of the Applicants. The second was a summons filed by the Applicants again in the GDHC (HC/SUM 1931/2023) seeking interim anti-suit relief pending judgment in OA 656, which has also been transferred to the SICC. The parties have however come to an agreement as to how to hold the ring pending delivery of this judgment and I need therefore say no more about this summons.

The first of the Korean cases is Case No. 2022 Gahap 51122 brought before the Incheon District Court (“Korean CA Proceedings”) against GGK³ and the second is Case No. 2022 Gahap 109880 brought before the Seoul Southern District Court (“Korean Compensation Proceedings”) against GGS, Mr Schmitz and Mr Rossinyol (collectively, the “Directors”).⁴

The Four Agreements

The four agreements governing the relationship between the parties as referred to above were entered into to replace agreements in existence between Asiana and its previous catering supplier. The four agreements are: a Joint Venture Agreement dated 30 December 2016 (the “JVA”) between GGS (signed by Mr Schmitz and Mr Rossinyol on its behalf) and Asiana; a Catering Agreement dated 30 December 2016 between GGK and Asiana (the “CA”); a Bonds with Warrants Subscription Agreement dated 10 March 2017 (the “BWA”) between Gategroup Financial Services SarL (“GGFS”) and Kumho & Company Inc (“Kumho & Co”) (GGS’s and Asiana’s respective affiliate companies); and a Management Services Agreement dated 10 March 2017 between GGS and GGK.

There is also (apparently) a side letter dated 30 December 2016 linking the JVA and CA to the BWA on the basis that if the BWA was terminated prior to a given date, Asiana, GGS and/or GGK would be entitled to terminate the JVA and the CA.⁵

All of these agreements were governed by Korean law and contained arbitration agreements in substantially the same form. In the CA and the JVA the clauses were in the following forms: Clause 28 of the CA:⁶ (the “CA Arbitration Agreement”)

This Agreement including its Annexes shall be governed by and construed in accordance with the laws of Korea.

Any disputes shall be escalated according to Annex 1 prior to taking any legal action; however, preliminary injunctions or similar instruments remain reserved.

All disputes arising out of or in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce in force on the date on which the Notice of Arbitration is submitted. The number of arbitrators shall be three. The seat of the arbitration shall be Singapore.

[emphasis added]

Clause 34.2 of the JVA:⁷ (the “JVA Arbitration Agreement”)

All disputes, controversies or claims arising out of or in connection with this Agreement shall be referred to and finally settled under the Rules of Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with those Rules. The seat of the arbitration shall be Singapore. The language of the arbitration shall be English.

[emphasis added]

There is no need for the purposes of this application to enter into the precise details of the four agreements and the interrelationship between them. It is sufficient to record that under the JVA, GGS owned 60% of the share capital of GGK with Asiana holding the remaining 40%. For these shares, GGS would contribute KRW 80 billion by way of capital and Asiana KRW 53.33 billion.⁸ Under the CA, GGK was to provide airline catering and handling services to Asiana for a period of 30 years on an exclusive basis commencing on 1 July 2018. In return for the exclusivity, GGK agreed to pay Asiana the same sum, KRW 53.33 billion, as Asiana was due to pay for its share in GGK. In this respect therefore there was a set-off.⁹

By the BWA, Kumho & Co and GGFS agreed that GGFS would invest in zero interest bonds with warrants issued by Kumho & Co in the aggregate principal amount of KRW 160 billion with a maturity date of up to 20 years.¹⁰

The agreements were negotiated on behalf of the Kumho Asiana Group by, amongst others, Mr Park Sam-Koo (“Chairman Park”) who was at the time Chairman of the Kumho Asiana Group and co-CEO of Asiana. He also held key positions in other companies of the group and was a significant shareholder in the Kumho Asiana Group. On behalf of the Gate Gourmet group, Mr Schmitz and Mr Rossinyol were amongst the negotiators. The precise involvement of those three individuals in the negotiations is in dispute but it is not disputed that each played a part.

Procedural History The Initial Dispute

The pricing mechanism for the catering services that GGK was to provide pursuant to the CA was set out in Annex 1.4. The parties were unable to agree on the correct interpretation of that Annex and the matter was referred to arbitration on 17 June 2019 under Clause 28 by GGK seeking an order that Asiana pay all outstanding invoices and for a declaration that the pricing mechanism was binding and did not require any further agreement.

Asiana counterclaimed for a declaration that that GGK was bound to negotiate and agree with Asiana on an adjusted price mechanism and for an order that GGK repay excess payments based on that adjusted price mechanism.

By its award dated 18 February 2021 (the “Final Award”) the arbitral tribunal (the “Tribunal”) upheld GGK’s claims and dismissed Asiana’s counterclaim. On 11 June 2021, Asiana commenced SIC/OS 11/2021 (“OS 11”) in the Singapore International Commercial Court (“SICC”) to set aside the Final Award. OS 11 was dismissed by a Judgment dated 27 May 2022 (Asiana Airlines, Inc v Gate Gourmet Korea Co, Ltd and others [2022] SGHC(I) 8) (“the SICC Judgment”) and the subsequent appeal from OS 11 to the Court of Appeal (CA/CAS 5/2022) was dismissed on 14 November 2022.

For present purposes it is important to note that during the course of the arbitration: Asiana did not challenge the jurisdiction of the Tribunal. Asiana did not contend that the CA was invalid. Indeed, their counterclaim was based on the assertion that the CA was valid. More specifically, Asiana did not contend that the CA Arbitration Agreement in clause 28 was invalid. Again, this would have been inconsistent with their filing a counterclaim in the arbitration.¹¹ Asiana asserted that the CA was a self-standing agreement and was not, as GGK had contended, part of a package with the BWA.¹² Asiana denied that Chairman Park was materially involved in the negotiation of the joint venture.¹³

On the application to set aside before the SICC Asiana contended that the Tribunal had acted in breach of natural justice in that it had failed to consider its argument that if the CA and the BWA were part of a “package deal” as GGK had asserted,¹⁴ the CA might be null and void pursuant to Article 107 and also possibly Article 103 of the Korean Civil Code on the basis of the “abuse of power representation”.¹⁵

This argument was considered and rejected by the SICC for the reasons given in [94] to [100] of its judgment.

The Enforcement Proceedings

Following the Tribunal’s Award, on 20 May 2021 GGK commenced proceedings in the Seoul Southern District Court (Case No. 2021 Kagi 1285) seeking leave to enforce the Final Award in Korea (“The Enforcement Proceedings”). These proceedings were suspended pending the final outcome of the challenges to the Final Award in the Singapore courts. No date has been fixed for a further hearing.

Chairman Park

On 26 May 2021 Chairman Park was indicted by the Korean Public Prosecutor for, inter alia, violating the Act on the Aggravated Punishment of Specific Economic Crimes in relation to alleged crimes of embezzlement and breach of trust.¹⁶

The Respondent drew my attention to part of that indictment which reads as follows:¹⁷

“Defendant Park Sam-Koo, the Representative Director of Asiana Airlines, and Defendant Kim Ho-Gyun, the financial officer of Asiana Airlines, had to discharge the fiduciary duty of care in managing the company’s material assets by taking into consideration the interests of the corporation, shareholders, and creditors; and, with respect to transacting material assets such as the exclusive catering business license of Asiana Airlines, the value of the relevant asset must be adequately assessed and traded at a fair price in accordance with the actual value. In particular, with respect to a transaction that implicates conflict-of-interest, like the transfer of the...