Class Action/Mass Tort Actions in Korea

Plaintiffs in Korea, with rare exceptions, are unable to file class action lawsuits in Korean courts.  The, only, two exceptions are under the Securities-Related Class Action Act of Korea (derivative/shareholder suits) and certain limited product liability claims under the Consumer Act of Korea (Suits by designated consumer advocacy groups or organizations). 

However, because of a recent massive data leak by major Korean-based banks, numerous NGOs, some attorneys and legislators have, again, demanded the implementation of a US-style class action system. 

Two bills are pending at the National Assembly of Korea entitled The Class Action Act of Korea and Consumer Basic Lawsuit Act of Korea.  The Korean Class Action Act is modeled after Rule 23 of the Federal Rules of Civil Procedure.  

We don't see these bills coming to a vote anytime soon or the Korean Court System demanding the implementation of a class action law for consumers, because of Korean political realities and a perceived faltering Korean economy.

It is interesting to note that in limited number of cases, Korea has, seemingly, combined cases in a fashion similar to class action suits.  These cases involved damages by foreign companies/governments on Korean citizens (Agent Orange & Noise Damage at American Bombing Range cases).   

What do you think?
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

Hanwha Korea Loses Battle in New York Court over Forum Non Conveniens Issue

Hanwha Life Insurance, a Korean Insurance company, case against UBS AG was dismissed by a New York court.  We are, likely, to see the case filed in Korea or Hong Kong in the near future.  This, holding, if appealed, will, likely, be upheld. 

The lawsuit stems from Hanwha loss of US$ 30million in a complicated financial product.  The case is, also, weak on the merits, since, intern alia, Hanwha is a sophisticated investor or, at least, should be one.

The Manhattan Supreme Court (NY trial court) noted that:
"While this court is capable of applying Korean law, a Korean court is more familiar with such law and better suited to resolve the parties' disputes . . . (claims) arose almost entirely from events and transactions that took place outside of New York and mainly in Korea and Hong Kong."
Let's see if the case goes any farther in Hong Kong or Korea. 

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

Korea Contracts Don't Forget the Counter-party: Due Diligence before Executing an Agreement in Korea

We see numerous matters coming before us from parties in the States or Europe that are importing a product from a Korean company.  Of course, the products are either faulty or never come.

We, also, see cases where a Korean company is importing a product and the importing party ends up not being the party that the American or European company thought they were doing business with.

Also, often, companies in Korea are broken up into smaller companies.  The manufacturing arm may be one company, the sales arm one company and these companies are wholly owned by a holding company.  Of course, the agreement ends up being with the broke sales arm.

Thus, know the counter-party.  Due Diligence is required.  Due Diligence is not checking the firms website or simply matching up the name on the PO with the Wire Instructions.  A wire will, normally, clear even if the name is not correct.  Example:

Wire Instructions
Account Holder: Amazing Trading ABC Limited
                           Kim Bad Boy
Account #          112345678

The funds will, normally, clear even if the account is in the name of Bad Boy KIM.

Please do your due diligence on the party you are intending to contract with, prior, to even negotiating the agreement.  It will save you a good deal of stress and maybe even your job.

Many people in Korea do this due diligence service for a minimal fee.

Posts from The Korean Law Blog that may be of interest:
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal.

He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

So you Want to Start a Partnership/Joint Venture in Korea?

Business, in Korea, can be profitable and enjoyable.  However, business in Korea can, also, lead you to a jail cell and premature balding.

The key to success is to get the Korean joint venture structured by a professional from the start of the relationship with your joint venture partner(s).  Don't just download a joint venture agreement or partnership agreement from the internet.

We know you have "limited funds" (we all have limited funds -even multinationals and Donald Trump have limited funds) choosing to forgo having the deal structured by a professional and just downloading an agreement off the internet will, likely, lead to you having even less funds, less time and less hair.

Do not be what my father likes to call young kids these days - knuckleheads. I saw cases that ended up in the Prosecutor's Office (we even filed some) and cases that lead to deportation. The amount of money that it costs to have a professional draft these agreements, must, be considered part of the cost of doing business. The amount should be no major issue for most.

Hey, I recently did a deal where one of the partners exclaimed that your final invoice was less than the cost of his pizza oven. I love being compared to a pizza oven.  That agreement, normally, will last longer than that pizza oven.

While this law firm, typically, assists multinational companies we, also, enjoy assisting some of the more entrepreneurial SMEs.

However, be prepared for some time with me. We never just slap in front of you a form agreement and have you make some comments on it. This is a waste of time and a sign of a hack.

Some basics that you lawyer, must, consider with considering your joint venture and articles prior to starting a joint venture in Korea.
  1. Duties, Responsibilities, Roles, Titles and Expectations of each Partner?; 
  2. Arbitration, Language and Forum for Dispute Resolution?; 
  3.  Management Structure?; 
  4. Valuation, Windup, Termination?; 
  5. Remedies for Breach?; 
  6.  Exit Strategy;
  7. Outside Investors;
  8. Due Diligence, Due Diligence, Due Diligence - Did I mention Due Diligence?; 
  9. Limit Powers of the Representative Director?; 
  10. Retain Power to Appoint and Remove the Representative Director?; 
  11. Expansion Plans;
  12. Retain Majority Control or include other Minority Protection Clauses?; 
  13. Investment of Proceeds. 
  14. Hire an Independent Accountant and Utilize a Neutral REAL Statutory Auditor?; 
  15. What are you Getting out of the Joint Venture?; 
  16. What are you Giving Up?; 
  17. What is the Purpose of the Joint Venture?; 
  18. Financing Options?;
  19. Chushik, Yuhan etc.?;
  20.  and The List Goes On 
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

The Sinking of a Ship in Korea Leads to Soul Searching by Tom Coyner

Media reports last week disclosed that Chairman Yoo Byung-eun was hiding behind a false wall on the second floor of his villa while the police conducted a “top to bottom search” of the place. Wearily, the public noted further bumbling in this seemingly never-ending episode. The ongoing, nagging question is why is this case so ongoing and nagging?

Obviously, much of this angst comes from thinly disguised nationwide insecurity. When I studied with Korean and other international students in Tokyo, I first encountered Korean insecurity in a much more extreme form than what is exhibited today. At the time, the Korean students really stood out as prickly and thin-skinned about anything regarding Korea. Others rarely discussed Korea with them. At the time, I suspected the problem was exaggerated by the economic and cultural gap between Japan and Korea. Daily, the disparities were shoved in the faces of Korea’s students. Today, those discrepancies have greatly diminished, as have many of the self-doubts of Korean students abroad. In the mid-’70s as a Peace Corps volunteer in Korea, I often found myself lectured on the importance of coming from a “good family.”

Often my lecturers were only slightly older than me from middleclass backgrounds. But I was quickly reminded that only a generation or so back, their families had been regarded in some way or another as elite. So they were “good families.” Having earlier studied in Japan while living with Japanese families, I naturally compared Korea with Japan. In Japan, whether you like it or not, socially you know exactly where you and your family stand at all times. To be fair, one may rise or fall in society, but there is generally little controversy about one’s social status at a given moment.

In Korea, I observed the country was undoubtedly the world’s most Confucian society. Social order and ranking were extremely important. Oldest sons’ - and particularly daughters’ - authority over their siblings was only slightly less than that of parents. Older sisters bossed around siblings, the mother controlled the older sister and the father commanded everyone. No serious challenges to authority, in or out of the home, were tolerated. It was how society once worked. Today, we still can see some of these forgotten patterns in less financially developed societies in Southeast Asia.

But those cultures and traditions face challenges from modernity and rapid economic development. Meanwhile, Korea has zoomed ahead in terms of wealth, but at what cost? Modern Korean history’s turmoil has repeatedly traumatized the nation. The net result is that Korean families try to find their place in a social order largely devoid of a common set of agreed upon standards, save for wealth. Since my return to Korea in 2000, I have watched the desperate struggles of individuals and their families trying to “keep up with the Kims.”

I first thought it was simply a matter of getting ahead, as in the United States. But I later discovered the fear runs much deeper. A South Korean family’s greatest anxiety is falling behind. And with whom they compare themselves is neither static nor absolute. As too often is the case with human nature, the elite only compare themselves with other families that are similarly well off. When wealth by itself is deemed to be inappropriate as a measure of social standing, it can be almost impossible to gauge one’s family standing given the lack of commonly acknowledged social yardsticks.

The good news is this kind of permeating insecurity has created a drive for success and accomplishment that is probably unmatched by families of other nations. But at virtually every level of society, this extreme social competition to catch up, keep abreast and possibly get ahead often results in subordinating quality and thoroughness to speed. Returning to current events, we may recall there have been traumatic and embarrassing episodes of a department store building imploding, a major bridge collapsing and gas mains exploding, but the Sewol ferry sinking has really been something else. Korean pride in the nation’s rapid meteoric accomplishments continues to be tarnished. At first, the nation seemed mainly traumatized by the large number of youths perishing.

But at virtually every twist and turn, incompetence, greed and corruption have continued to be exposed, right up to the identification of Yoo’s decomposed body a full month after it had been discovered, followed by the realization that police searching his villa failed to find him hiding behind a wall. One may say the entire ferry tragedy and its aftermath comprise a perfect storm of mishaps. And so it seemed at the beginning.

But with each passing week, the more appropriate analogy now seems to be Korea’s hurriedly built house of cards slowly tumbling, card by card, week by week. Korean families need to slow down. Individuals need to compete less and cooperate more for the common, long-term good.

by Tom Coyner.  Senior Advisor to IPG
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National Assembly of Korea Hopeless Gridlock Explained

The Korean National Assembly will, likely, never be able to pass any significant reform measures because of a recent amendment to law.

The Diplomat has an good article on the issue.  The article notes, in part, that:
 "A recent adjustment to the rules of South Korea’s National Assembly has made passing legislation a herculean effort.
The National Assembly Advancement Act requires three-fifths consent from lawmakers before a bill can be put up for a vote during a plenary session. The act was passed in 2012 with the intention of preventing any one political party from riding roughshod over the opposition with a simple majority. It went into effect last year.
The act also limits the power of the assembly speaker to bring a bill to a vote. Only under conditions of war, natural disaster, or with an agreement between the ruling and opposition parties can the speaker bring a bill to pass.
One could argue, quite convincingly, that the national assembly needed this sort of institutional reform. The assembly had become well known as a place for occasional brawls between ruling and opposition lawmakers. One extreme, but appropriate, example is opposition lawmaker Kim Sun-dong setting off a teargas grenade inside the assembly chamber in a futile effort to stop the ruling party from ratifying the Korea-U.S. Free Trade Agreement.
However, rather than promote cooperation, the act has created parliamentary gridlock."
The situation looks like it will be unable to resolved without legislative changes.

Has the National Assembly of Korea become a useless institution?

The full article may be found at: The Tyranny of the Minority in South Korea.

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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.

The Fog of Korea Politics & History by Tom Coyner

Korean politics often are bewildering to foreigners, who naturally compare what is observed here to what is happening in their homelands. The labels of “right” versus “left” and “conservative” versus “progressive” seem to be in conflict and, at times, even diametrically opposed.

Recently, I was reminded of this when discovering my college-educated wife’s ignorance of the so-called Autumn Rebellion, or Daegu Uprising, that took place in her hometown. I found my wife’s obliviousness to her hometown’s history a bit unsettling. The 1946 Daegu Uprising was part of the first Communist attempt to take over southern Korea in the American zone before the Korean War.

Three student demonstrators and 38 police died, according to official records. An additional 163 civil workers and 73 civilians died, according to one revisionist account. Regardless of the body count, the revolt involved thousands of people, with both sides engaging in bloody revenge and retribution. This uprising was one of the leftists’ larger, futile actions to establish a People’s Republic of Korea under Pak Hon-yong (1900-1955), a Korean independence and Communist activist.

One might think my Daegu wife would have some knowledge of the event. In fact, she has only a vague understanding. It was neither included in her studies nor mentioned at home during the fascist period. She first came across a reference to it in a novel she read while in college. For her generation of Korean “baby boomers,” she is quite typical - and for very good reason.

 If one stands back and looks at Korea in the 20th century, its political development competes for international recognition with the nation’s economic gains. From a feudal state to becoming a Japanese colony, and then suffering the Korean War followed by de facto dictatorship leading to a series of military governments and, ultimately, emerging as one of Asia’s most stable democracies - Korea has a remarkable track record. But imagine what it must have been like in 1946. If someone at that time was Korean with a 20th-century political awareness, one’s political understanding would have been largely - or entirely - the result of a Japanese education and experience.

And if one had never been outside Korea or Japan, one’s political sophistication would have been greatly impeded by Japanese censorship. With national liberation came an opening of information floodgates, at least in the southern half of the nation, as well as the return of exiled patriots. Some of these people were socialists and communists, while others were liberal and conservative capitalists. Soon, there was an open competition of political ideas and factions. The Soviets naturally supported the communists, while the Americans supported the capitalists.

In the South, the most notable opportunist was future president Park Chung Hee, the younger brother of one of the key leaders of the Daegu Uprising, Park Sang-hee. Like his older brother, the younger Park was a socialist if not an outright communist. After his bother was shot dead as leader of the Sunsan town extension of the Daegu rebellion, Park Chung Hee was arrested and jailed. Given his military training as a young officer in the Japanese Imperial Army prior to Liberation, the future president of Korea once again switched sides. Later, the daughter of his older brother married Kim Jong-pil, a major conspirator in Park’s 1961 military coup. Kim went on to found the notorious Korean Central Intelligence Agency (KCIA) and twice served as prime minister under Park.

Given all of that, it’s no wonder that Koreans of my wife’s generation were kept in the dark. During the dangerous chaos of the early years of post-liberation Korea, one can only imagine how extremely dangerous it must have been to maintain a consistent political position. No doubt there were such people, but I fear a good many were killed during the various repercussions that marked the era.

Those politicians who survived were, shall we say, “flexible.” Up until Kim Dae-jung became president in 1998, politicians who supported and were included within the government were labeled as “conservatives,” and those politicians who were barred from participation in the oligarchy labeled themselves as “progressives.” During the past 25 years, the conservatives have been known to lean toward collusion with the chaebols and deregulation. Progressives talk more about strengthening the social safety net while arguing for a more flexible stance on North Korea. But beyond the grandstanding, there is little principled party differentiation. Ultimately, party allegiance essentially comes down to personalities and supporting factions. Peeling back the Korean politicians’ patina, one finds the core values are based on opportunism with fancied monikers of political adherence. Many of Korea’s fragile modern political traditions were extinguished during the first two decades of the Republic.

When democracy finally surfaced in the late 1980s, Korean factions coalesced more around personalities and geographic regions than political principles. Consequently, on the surface, Korean politics seem bewildering and even contradictory. The conservatives tend to be more international in their perspectives, given their overseas business experience. The progressives tend to be more nativist, with their extremists at least tacitly supporting North Korea, which operates more like a racist mafia state than a Stalinist nation. In other words, the conventional political labels really don’t apply so neatly in Korea. But given Korea’s modern history, it is understandable why.

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By Tom Coyner

Employment Background Checks in Korea: Not so Different from China

My friends over at the China Law Blog posted an article quoting the Chinese Business Leadership blog that noted that noted that:
"We were placing a GM for a Western family owned factory. They are small and troubled.  We found 15 thoroughly qualified candidates for the position. We had candidates tell us they worked at a company 5 years when they only worked 1. We had candidates tell us they were super valuable,  and the company does not want to let them go. We were able to find out that they were fired a year before  while still in probation.
As the last of the group of 15 refused to come clean and give us an accurate resume, we shook our heads in dismay. We are excellent at interviews and interview 90 minutes as our goal is to know. Despite that, we were unable to uncover these issues before the background check.

We had one guy tell us he was the overall manager for a big project, and he could describe in great detail all he had done. Our China hiring background check uncovered that he was a common worker under a manager who led that project."
We regrettably find the same true in Korea.  Also, regrettably, often executive recruiters (head hunters), in Korea, are of little help in vetting candidates.  We recommend to no just, simply, hire a recruitment agency.  We find that many of these agencies (even the international ones) are motivated, primarily, by the placement of any individual.  We know of many horror stories.  Please take a look at the

We suggest retaining a person that does not have a financial interest in the placement of the individual to vet the anticipated employee.  The vetting should not, simply, come in the form of a background check, but be by someone with significant experience managing individuals in Korea.
As noted on numerous occasions on this blog - "at will" employment is, typically, impossible in Korea.

Vetting/Hiring an Employee in Korea:
  1. Thoroughly vet the anticipated hire.  You may be stuck with the person for a long time.  This does not, simply, mean having a call and having Korean staff meet the person.

    A Korean "old hat" is necessary in flagging major issues that, often, do not seem to be issues by those not, deeply, familiar with Korean employees and Korean employment realities;
  2. Don't trust "salary tables" - the tables are, normally, too high;
  3. Don't use foreign employment, distribution, agency, and consultant agreements.  Typically, these will lead to issues in Korea.  Issues may include ending up at the prosecutor's office or in court;
  4. Don't hire a headhunter when a headhunter is not necessary.  The best way to hire is through the grape vine and foreign "old hat" consultants and lawyers are the best at finding appropriate individuals through this grapevine. 

    If they fail - seek a headhunter.  Many headhunters in Korea are interested in making the placement -not making the proper placement, because of the, often, lack of appropriate compensation for not making a placement.  Additionally, foreign headhunters, often, are just outsourcing services to affiliated agencies with little oversight.
  5. Korea is not China or Japan.  Realities in Korea, are, often, not realities in China and Japan.
  6. Hire proactive counsel to draft employment agreements - not just counsel.
Other articles that may be of interest:
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.