Terminated by Your Korean Principal: The Compensation Claim That Ends in Six Months

The email is usually short. Termination effective in sixty days, thank you for the years of cooperation. What it does not say is that the customer base you built stays with the Korean company, and that a provision of the Korean Commercial Act addressing exactly that situation stops being available six months later.

Foreign suppliers, agents and distributors who work with Korean counterparties tend to discover Article 92-2 too late — often after head office approvals, translation of the contract file and a first round of correspondence have already consumed most of the window. This article explains what the provision does, who it reaches, and why the forum clause in the contract decides whether any of it is in play.

What Article 92-2 actually gives

The Korean Commercial Act (상법, Act No. 20991, in force 23 July 2026) defines a commercial agent in Article 87 as a person who, without being a commercial employee, continuously acts as agent for, or brokers, transactions belonging to the business of a particular merchant.

Article 92-2(1) then provides that where the agent’s activity has won the principal new customers or markedly increased business transactions, and the principal continues to derive benefit from that after the contract ends, the agent may claim reasonable compensation from the principal. The provision carries an express exception: it does not apply where the contract ended for reasons attributable to the agent.

Two boundaries follow immediately.

A ceiling. Under Article 92-2(2) the compensation may not exceed the average annual remuneration over the five years before termination; where the contract ran for less than five years, the average over that shorter period applies.

A deadline. Under Article 92-2(3) the claim is extinguished once six months have passed from the day the contract ended. Article 64 sets a five-year period for claims arising from commercial activity, but only where the Commercial Act does not provide otherwise — and here it does.

There is also an obligation running the other way. Article 92-3 requires the agent to keep the principal’s business secrets even after the contract has ended, which matters if the plan after termination involves continuing to work the same customer list. That is a separate exposure, and it is discussed further in our note on trade secret protection in Korea.

Six months, when your home jurisdiction gave you a year

Companies that have handled an agency termination in Europe often arrive with a different clock in mind. Under EU Directive 86/653/EEC on self-employed commercial agents, Article 17(5) provides that the agent loses the entitlement to indemnity or compensation if, within one year following termination, the agent has not notified the principal of an intention to pursue it. National implementations of that Directive vary, and any question about them should be put to a lawyer in the jurisdiction concerned.

The Korean provision is built differently in two respects. The period is six months rather than twelve, and Article 92-2(3) is written as the claim itself being extinguished rather than as a notification step. Whether anything short of that has an effect on the running of the period is not something to assume in a cross-border file; it is the kind of question that has to be answered on the specific facts before any timetable is built around it.

In practice the six months are consumed by ordinary things. Locating the executed contract and its amendments. Obtaining a certified Korean translation. Getting a decision from a board that meets monthly. Corresponding with the Korean party in the hope that the relationship can be salvaged. None of that is unreasonable, and all of it takes time the provision does not give.

A contract called “agency” — a decision that turned on something else

The account below is reconstructed from a published Supreme Court of Korea decision. Identifying details of the parties are omitted, and it is used to illustrate the legal reasoning only. It does not relate to any matter handled by this office.

A Korean distribution company signed what the parties titled a “mega dealership agreement” with the Korean sales entity of a multinational consumer goods group. Under it the supplier sold products to the company at a discount from a reference price. The company paid for the goods, bore every risk and cost attaching to them after delivery, set its own resale prices, and sold on to its own customers in its own name and for its own account.

Years later the agreement ended. The company argued that the customers it had cultivated were still generating profit for the supplier while it received nothing further, and claimed compensation under Article 92-2.

The Supreme Court answered in two stages. First, the company was not a commercial agent under Article 87. Signing a contract described as a dealership agreement with a manufacturer or supplier does not by itself make a party a commercial agent; the content of the contract has to be examined in substance. Here the company bought the goods outright, carried the risk, set the price and sold in its own name — structurally different from acting as agent for, or brokering, the principal’s transactions. The Court added that economic dependence on the supplier did not change that conclusion.

Second, the Court explained the purpose of Article 92-2 — the agent builds or markedly increases a customer base, the principal keeps benefiting from it after termination while the agent no longer benefits at all, and equity supports a compensation right — and set out the circumstances in which the provision may be applied by analogy to a party that buys and resells in its own name and for its own account. On the facts there was no evidence establishing those circumstances, and the appeal was dismissed (Supreme Court Decision of 14 February 2013, Case No. 2011Da28342; on the substance-over-label point see also Supreme Court Decision of 5 February 1999, Case No. 97Da26593).

Which side of the line is your contract on

Contracts drafted in English for the Korean market use “agent”, “agency”, “dealer” and “distributor” loosely, and the Korean translation annexed to them is often looser still. The label is where the analysis starts, not where it ends.

The three requirements for applying Article 92-2 by analogy

In the same decision the Supreme Court identified the requirements that must all be satisfied before Article 92-2 can be applied by analogy to a party that buys from a manufacturer or supplier and resells in its own name and for its own account.

All three must be present. In the case above the Court found no material establishing that the company had been incorporated into the supplier’s sales organisation, and none establishing a contractual duty to transfer customer relationships, so the analogy failed. Application by analogy is the exception rather than the ordinary case, and two contracts bearing the same title can produce opposite results depending on how their terms read and how the relationship was actually run.

Before any of this matters: where the dispute is decided

Everything above assumes Korean law governs and that a Korean forum is available. In a cross-border contract neither is automatic, and this is where foreign parties most often lose the six months without realising it.

Governing law. Under the Act on Private International Law (국제사법) Article 45(1), a contract is governed by the law expressly or impliedly chosen by the parties. Absent a choice, Article 46(1) applies the law of the country most closely connected with the contract, and Article 46(2) presumes that where a party is to render performance in the course of business activity, the law of the country where that party’s place of business is located is the most closely connected. Whether Article 92-2 of the Commercial Act enters the discussion at all follows from that.

Court jurisdiction. Article 8(1) permits the parties to agree on international jurisdiction over disputes arising from a defined legal relationship; Article 8(2) requires the agreement to be in writing, including electronic declarations of intention such as email; and Article 8(3) presumes an agreed jurisdiction to be exclusive. Conversely, where the parties have exclusively chosen a foreign court, a suit on that dispute brought before a Korean court is in principle dismissed under Article 8(5), subject to the exceptions the provision lists.

Arbitration. Supply and distribution contracts frequently carry an arbitration clause, and the effect differs from a jurisdiction clause. Under the Arbitration Act (중재법, Act No. 21065, in force 1 October 2025) Article 9(1), where an action is brought on a dispute covered by an arbitration agreement and the defendant raises the existence of that agreement as a defence, the court must dismiss the action — unless the agreement does not exist, is void, has lost effect, or is incapable of being performed. Article 9(2) requires that defence to be raised no later than the first argument on the merits, and Article 9(3) allows the arbitral tribunal to commence or continue proceedings and make an award even while the court action is pending. An award made abroad is then recognised and enforced in Korea under Article 39, through the New York Convention where it applies; that route is set out in our article on enforcing a foreign arbitral award in Korea.

The common combination in contracts with Korean suppliers — Korean law, exclusive jurisdiction of a Seoul court — puts the dispute squarely in the Korean system. For the general framework of bringing a civil claim there, see our guide to filing a civil lawsuit in Korea as a foreign party and our overview page on litigation in Korea for foreign companies. Where a foreign court judgment already exists on the same relationship, recognition is a separate exercise, described in our article on enforcing a foreign court judgment in Korea. Where the question is instead how to continue in the Korean market without an intermediary, that is a different exercise again, outlined on our page on foreign direct investment and company formation in Korea.

What should also be said plainly

The decision discussed above ended in dismissal of the appeal. The party claiming compensation did not win. Length of service and the effort of building the customer base, standing alone, have not been treated as sufficient.

The six-month period is short, and cross-border matters are slow at exactly the stages that consume it — retrieving the contract file, translation, notarisation and legalisation, internal approvals. The available margin is routinely smaller than parties expect when they first raise the question.

The obligations run both ways. Article 92-3 keeps the confidentiality duty alive after termination, so a plan that involves continuing to serve the same customers with the same materials can create a second dispute alongside the first.

Litigation is also not the only route, and not always the better one. Whether a claim is worth pursuing, and in what form, depends on the contract wording, how the relationship actually operated, what the counterparty holds in Korea, and how much of the period remains. Those are matters for individual assessment, and outcomes turn on the evidence and the facts.

Frequently asked questions

Our contract with the Korean company is titled an agency agreement. Can we claim compensation under Commercial Act Article 92-2?

Not automatically. Under Supreme Court Decision of 5 February 1999, Case No. 97Da26593 and Supreme Court Decision of 14 February 2013, Case No. 2011Da28342, concluding a contract described as a dealership or agency agreement with a manufacturer or supplier does not by itself make a party a commercial agent under Commercial Act Article 87; the content of the contract is examined in substance. A party that buys and resells in its own name and for its own account is in principle not a commercial agent, and Article 92-2 can then apply only by analogy, and only where integration into the sales organisation, a contractual duty to transfer customer relationships, and an equivalent need for protection are all present.

How long is the deadline for a commercial agent compensation claim in Korea?

Under Commercial Act Article 92-2(3) the compensation claim is extinguished once six months have passed from the day the contract ended. Article 64 provides a five-year period for claims arising from commercial activity, but only where the Commercial Act does not provide otherwise, and Article 92-2(3) does provide otherwise. Article 92-2(2) separately caps the compensation at the average annual remuneration over the five years before termination, or over the shorter period if the contract ran for less than five years.

Our contract has an arbitration clause. Can we still sue in a Korean court?

Under Arbitration Act Article 9(1), where an action is brought on a dispute covered by an arbitration agreement and the defendant raises that agreement as a defence, the court must dismiss the action, unless the agreement does not exist, is void, has lost effect, or is incapable of being performed. Article 9(2) requires that defence to be raised by the first argument on the merits, and Article 9(3) allows the arbitral tribunal to proceed and make an award even while the court action is pending. An arbitral award made abroad is recognised and enforced in Korea under Article 39.

The contract says it is governed by Korean law with exclusive jurisdiction in Seoul. What does that mean for us?

Under Act on Private International Law Article 45(1) a contract is governed by the law the parties chose, so a choice of Korean law brings Commercial Act Article 92-2 into scope. On jurisdiction, Article 8(1) permits an agreement on international jurisdiction, Article 8(2) requires it to be in writing including electronic declarations such as email, and Article 8(3) presumes the agreed jurisdiction to be exclusive. Where instead a foreign court has been exclusively chosen, a Korean court will in principle dismiss an action on that dispute under Article 8(5), subject to the exceptions listed there. Absent any choice of law, Article 46 applies the law of the country most closely connected with the contract.