Korea's Competitive Advantage Shrinking: Korea's Education System to Blame? by Tom Coyner

The U.S. in particular has taken notice of Korea’s academic excellence. Korea's education system has been held up as a contrary example to what’s not quite right with America. That is, until recently when the Huffington Post, the New York Times, and other American media began publishing accounts by Koreans of the purgatory that had been previously passed off as merely childhood here.

One may suppose that the long-term future in terms of international competitiveness looks much more promising for South Korea than the U.S. But further examination suggests that may not be so.

The good news for South Korea is over 80% of its young have some kind of college education, with a high school dropout rate being virtually zero. In contrast, the U.S. high school dropout rate is over 25%, with some states exceeding 40%.

While Korea has one of the best-educated populations in the world, there are problems. For example, in the Times Higher Education World University Ranking, Seoul National University places 44th with only three other Asian universities rated higher. The other higher rated schools are primarily American plus a handful of European and other Western schools.

Korean students are almost automatically promoted each year to the next grade by basically showing up. But they must prepare for highly rigorous entrance examinations, particularly when entering a highly regarded university. Yet once admitted, the students are almost guaranteed to graduate.

American students must meet minimum achievement criteria or be held back a year until they can qualify for the next grade. One in four U.S. ninth graders do not graduate from high school on schedule.

Korean students essentially live and die according to their ability to pass standard education and university entrance tests, essentially made up of multiple-choice tests. The process promotes rote learning in which there is only one right answer to a given question. Korea’s Tiger Moms create a purgatory consisting of long hours in cram schools where students strive to master these tests.

To enter American universities, U.S. students must take Scholastic Aptitude Tests (SAT) that are primarily, but not entirely, multiple-choice tests. They also should be taking reasonably challenging coursework during their high school years. And to get into truly competitive universities, beyond having very high SAT scores and straight A high school grades, the applicants must prove substantial additional achievements in athletics, student government, community service, and/or artistic or musical accomplishments. And in some schools, such as Harvard, the entrance personal interview also plays a key role in determining who is or isn’t admitted.

While many American students don’t even graduate from high school, about 58% of the students go on to college. Most go to relatively inexpensive, local public schools. Entrance requirements are not demanding, but as with more prestigious universities, graduation is not guaranteed. Less that a third of college freshmen gain their bachelors degrees and only about 40% complete two years of college.

In Korea there is a common academic standard for excellence that will allow only the best to be admitted into a dozen schools’ better departments. Upon graduation, these blessed few have promising opportunities to be successful, as narrowly defined by Korean society. Success is nominally defined by making much money as a professional or a business executive in a chaebol company, or perhaps as a teacher at a prestigious school, which in turn allows for lucrative side income. Even pastors are not so well regarded unless they lead large and affluent congregations.

Today, most Korean families can send all of their children to college. But classroom seats at the top dozen universities among 370 higher education institutions has not matched this mushrooming supply of students. More and more students are graduating from less well-regarded schools and often without exceptional skills beyond test taking. At the same time, increased competition leads to academic qualifications inflation within the hiring process.

The American model is more complicated. There are high crime and poverty rates among the substantial high school dropout population. At the same time, due to increased competition to enter top universities, America’s elite pushes their children to excel in multiple fields, including academics. The middle majority consists of students that attend relatively mediocre universities. However, within this largest sector of universities, there is a very wide array of students in terms of academic and other abilities. Consequently, there are fewer stigmas with graduating from less than a top university. Furthermore, the American definition of success is much broader and more liberal than Korea's.

Many of these national differences may be traced to the disparities of potential wealth to educational achievement. America is a much wealthier society with a proportionately smaller population. It also has a culture that believes that failure is often regarded as a preliminary step to later success.

America’s education promotes greater creativity and flexibility, but at significant social costs, whereas almost all Koreans get a good but narrowly focused education. As a possible result, Korean companies currently appear to be stumbling in adopting to change in spite of highly intelligent and well educated, but often inflexible leadership.

Many Koreans recognize these shortcomings and call for education reform. But due to narrowly defined standards of success, Tiger Moms force their children into cram schools. And that’s just the beginning. In the end, Korea appears to be competing with less imaginative leadership when creativity is in greater demand globally than ever.

By Tom Coyner.  Senior Adviser to IPG.  Tom has, recently, began a new business.  His new business is his lifetime love - photograph.   Tom may be contacted at: tom@softlandingkorea.com
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info@ipglegal.com

Korea's Real Name Transaction Act Strengthened: Korea's Banking Law Basics

The National Assembly of Korea, in May of 2014, passed an amendment to the Act Concerning Financial Transactions by Real Name and Confidentiality Protection ("Real Name Transactions Act").

The Real Name Transactions Act, prior to this amendment, only, imposed fines on employees of financial institutions that violated the law, but did not impose these fines on those that lend or borrow a name/identification details in order to engage in a transaction.

The new Real Name Transactions Act shall be enforced from the end of November of 2014.

Potential penalties for violation of this Act include imprisonment up to 5 years or a fine of up to KRW 50  million.  The administrative fines for employees of financial institutions is increased from KRW 5 million to KRW 30 milllion.

The Real Name Transactions Act, also, imposes an affirmative duty on the employees of financial institutions, in some cases, to explain the details of the law.

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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.

Abuse of Superior Bargaining Power Notification by the Korea Fair Trade Commission: Distributor Risks in Korea

The Korea Fair Trade, in May of 2014, published the Notification on Specific Types of Abuse of Superior Bargaining Position in Continuous Resale-type Transactions (the "Notification") according to Article 23 of the Korean Monopoly Regulation and Fair Trade Law of Korea. 

Please, promptly, review your specific situation with your counsel.  Your counsel should be capable and willing to become deeply aware of your business practices.  

Most attorneys, in Korea, are, only, vaguely aware of the power of the Korea Fair Trade Commission and their Notifications - thus a guiding hand is, often, necessary. 

We suggest a complete Compliance Audit, at least, every three years.  This audit, requires your attorney to stay up on the near constant updates in Employment, Environmental, Safety and Antitrust/Competition laws.

The Korea Fair Trade Commission Notification on Specific Types of Abuse of Superior Bargaining Position in Continuous Resale-type Transactions declares the following types of transactions, facially, Unfair Transactions:
  • Refusal to Provide Statements of Transactions
    • The refusal or avoidance to provide to a distributor/supplier records of transactions between the supplier and distributor
  • Unfair Treatment of a Distributor
    •  Unlateral modification of transaction terms
    •  Unfair payments, in event of termination, for the use of equipment provided by suppliers
    • Prohibition in agreements of claims for damages in the event of a termination of the business relationship
    • The unfair shifting of the cost of returns
    • The unfair shifting of the cost of defects
    • The prejudicial treatment of a distributor because of the filing of a complaint to the Fair Trade Commission
  • Unfair Forced Sale of Goods
    • Unilateral supply of unwanted goods
    • Unilateral supply of unordered/non-requested goods
    • Mandatory purchase requirements for certain types of goods that are near expiry, are not proven in the market, are unpopular or are obsolete
  • Unfair Forced Economic Benefits
    • Requiring distributors to donate money to a supplier's business
    • Requiring distributors to dispatch workers to the business of the supplier
    • Requiring promotional activities/labor costs to be borne by the distributor without the agreement of the distributor
  • Unfairly Forced Sales Targets 
    • Terminating a distributorship because of not meeting sales targets
    • Withholding commissions because of not meeting sales targets
  •  Unfair Interference with the Business of the Distributor
    • Forcing a distributor to participate in supplier mandated promotional events/activities
    • Requiring the disclosure of trade secrets
    • Requiring the appointment or removal of employees of the distributor
    • Unilaterally requiring the distributor to maintain certain business hours
    • Unilaterally requiring the distributor to maintain a certain sales territory
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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.

Law School Students Comparative Legal Writing Opportunity: American Society of Comparative Law


AMERICAN SOCIETY OF COMPARATIVE LAW 
YOUNGER COMPARATIVISTS COMMITTEE CONFERENCE 
ANNOUNCEMENT


The Younger Comparativists Committee of the American Society of Comparative Law is pleased to
invite submissions for its fourth annual conference, to be held on April 16-17, 2015, at Florida State University College of Law in Tallahassee, Florida.

The purpose of the conference is to highlight, develop, and promote the scholarship of new and younger comparativists.

Conference Subject-Matter and Eligibility
Submissions will be accepted on any subject in public or private comparative law from scholars who have been engaged as law teachers, lecturers, fellows, or in another academic capacity for no more than ten years as of June 30, 2015. We will also accept submissions from graduate students enrolled in masters or doctoral programs.

Submission Instructions
To submit an entry, scholars should email an attachment in Microsoft Word or PDF containing an abstract of no more than 750 words no later than November 1, 2014, to the following address: ycc.conference.2015.abstracts@gmail.com. Abstracts should reflect original research that will not yet have been published, though may have been accepted for publication, by the time of the conference. Abstracts should also include the author’s name, title of the paper, institutional affiliation, contact information, as well as the author’s certification that she/he qualifies as a younger scholar. Graduate students should identify themselves as such.

Scholars may make only one submission. Both individual and co-authored submissions will be accepted. For co-authored submissions, both authors must qualify as eligible younger comparativists. The conference’s Program Committee will assign individual and co-authored submissions to thematic panels according to subject area. Proposals for fully formed panels will also be accepted.

Notification
Authors of the submissions selected for the conference will be notified no later than December 20, 2014. There is no cost to register for the conference but participants are responsible for securing their own funding for travel, lodging and other incidental expenses. A limited number of travel stipends may be awarded to those who demonstrate financial need. If you would like to be considered for a travel stipend, please make that request in your submission.

All scholars selected for the conference, other than graduate students who wish to be considered for the Colin B. Picker graduate student prize listed below (and who thus have an earlier deadline), must submit final papers by email to: ycc.conference.2015.papers@gmail.com no later than March 1, 2015.

Colin B. Picker Graduate Student Prize
The second annual Colin B. Picker prize will be awarded for the best paper submitted by a graduate student. To be considered for the award, in addition to submitting an abstract by the above deadline, graduate students whose abstracts are accepted for the conference must also submit their papers in their final form by January 31, 2015, to ycc.conference.2015.pickerpapers@gmail.com with the following subject line: “Submission for Graduate Student Prize.” Papers received after January 31, 2015, will not be considered for the award.

Phanor J. Eder J.D. Prize in Comparative Law
In conjunction with the Conference, the second annual Phanor J. Eder prize in comparative law will be awarded from among J.D. or LL.B. students who will have not yet completed their degree as of April 1, 2015. The author(s) of the winning paper will receive a modest stipend giving them partial funding to help defray the costs of attending the Conference and presenting the paper there. A separate call will be forthcoming with the details of the Phanor J. Eder competition. Final papers will be due on December 31, 2014, in order to be considered for the competition. Inquiries should be directed to Joshua Karton, Chair of the Affiliates Advisory Group of the YCC, at joshua.karton@queensu.ca.

Acknowledgements and Questions
The Younger Comparativists Committee gratefully acknowledges the support of the Florida State University College of Law. Please direct all inquiries to Professor David Landau, Chair of the Program Committee, by email at dlandau@law.fsu.edu or telephone

Fiduciary Duties of Directors/Representative & Controlling Shareholders of Korean Companies

Directors of companies, registered in Korea, many be held criminally and civilly liable for acts as a director (in limited cases even controlling shareholder).  Many acts that would not be deemed criminal in the West are, often, deemed criminal in Korea.  Additionally, matters that are considered in the West as mere "civil" matters, often, begin and end at the prosecutor's office.

A little due diligence, complying with corporate formalities, nuanced corporate governance practices and a little street smarts coupled with good liability insurance is a good start in succeeding in business in Korea. 
 
We have been on both sides of matters were directors (and even controlling shareholders) have been prohibited from departing Korea, jailed and fined.  In most cases, liability is unlimited and it is presumed that a director has complied with the decision of the Board of Directors if no dissent is noted in Board Minutes.

Article 399 of Korean Commercial Code notes:
(1) If a director has intentionally or negligently acted in violation of any Act or subordinate statute or of articles of incorporation or has neglected to perform his/her duties, he/she shall be jointly and severally liable for damage against the company.

(2) If any act under paragraph (1) has been done in accordance with a resolution of the board of directors, the directors who have assented to such resolution shall take the same liability.

(3) Directors who have participated in the resolution mentioned in paragraph (2) and whose dissenting opinion has not been entered in the minutes shall be presumed to have assented to such resolution
Ordinary Prudent/Reasonable Person Standard
The standard of care, in Korea, is similar to the West.  Article 382 of the Korea Commercial Act and Article 681 of the Civil Act of Korea notes that: "A person mandated the duty shall manage the affairs entrusted to him with the care of a good manager in accordance with the tenor of the mandate."

The Korea Supreme Court has interpreted this clause to mean that a fiduciary shall be held to an "ordinary prudent" person standard.

This standard allows the court, (and prosecutors), to delve into the actual knowledge of the individual and the knowledge that a ordinary prudent person should have. 

Not being a director of a company does not relieve one of this potential criminal and civil liability.
Controlling shareholders have, also, been held criminally and civilly liable if the party acts as a de facto director.

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.

U.S. Court Refuses to Enforce Taiwan Arbitral Award: Lesson for Drafting Arbitration Clauses in Korea

My friends over at the publication The International Law Office directed me to an interesting case involving the enforcement of arbitral awards that brings light to the fact that, in most cases, arbitration should not be held in a nation that is not a signatory to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Award ("New Convention").

U.S. Court Reuses to Enforce Taiwan Arbitral Award
In Clientron Corp. v. Devon IT, Inc. a U.S. Federal Court in Pennsylvanian refused to enforce a US$ 6.5 million award rendered at the Chinese Arbitration Association in Taiwan.  A Taiwanese Court accepted the award for enforcement in Taiwan. 

The U.S. Court in Clientron refused to enforce the judgment under the New York Convention and Pennsylvania's version of the U.S. Uniform Foreign Money Judgment Recognition Act based on the argument noted below.

Likely, Korean courts would come to the same conclusion.

I bet Clientron (Plaintiff) Board is less than happy with the attorneys that drafted the arbitration clause (if attorneys even drafted the agreement).  Please don't just cut and paste these things from arbitration center websites - consider the issues or get someone capable of considering the issues.   

Not Enforceable Under the New York Convention
The court opined that U.S. courts are obliged to enforce only "awards made in the territory of another Contracting State."  The Clientron Court held that Taiwan is not a contracting party under Chapter 2 of the Federal Arbitration Act and, thus, a U.S. Court is not obliged to recognize and enforce the arbitral award.

Not Enforceable under U.S. or Pennsylvania's Uniform Foreign Money Judgment Recognition Act
U.S. or Pennsylvania's Uniform Foreign Money Judgment Recognition Act, only, are the basis of the enforcement of foreign "judgments" from "government units."  An arbitral award is not considered a "judgment" under these acts and, additionally, the arbitration center is not a "government unit."

However, a Taiwanese Court  rendered a "judgment" recognizing and enforcing the arbitral award, thus, arguably a judgment from a government unit was made.

The Clientron Court  noted, however, that the Taiwenese Court proceeding should have been resolved outside of court as agreed in their agreement, thus, no "judgment" was being rendered within the meaning of the acts. 

Additionally, certain products were "outside" the scope of the supply and purchase agreement between the parties.

Word to the Wise
Think this stuff through guys and gals or you can easily be the scorn of your company or your client.
Amazing that any party with the possibility of the need to enforce a judgment outside of Taiwan would hold arbitration in Taiwan. 

The ILO can be found at: The International Law Office.

Other article that may be of interest to the reader:
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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.

Corruption and the Sinking Korean Ship by Tom Coyner

Will this sordid saga ever end? The entire nation - and much of the world - has been focused on Korea’s corrupt maritime industry and its sleazy connections throughout society. What mesmerizes everyone is that yet another scandal is revealed almost daily, and another part of society is exposed. More people - both of high and humble stations in life - are discovered to be, at best, incompetent or, at worst, criminal.

 As a result, a palpable sense of depression can be widely felt. There is also a kind of denial. The terms “rescue,” “survivors” and other euphemisms are routinely brandished when it clearly would be more accurate to use “recovery,” “victims,” etc. To say that these word choices reflect our tender feelings toward families of the school children is inadequate.

There also is a real dread at facing up to the actual problems of society. Even more worrisome are the traditional knee-jerk reactions following this and past tragedies. Government officials, politicians and business leaders express sorrow, outrage and determination to put remedial changes into effect. And then the nation goes back to business as usual until the next riveting horror. Often, Korea seems to set its domestic priorities by the current tragedy. Having first come to Korea as a Peace Corps Volunteer and later worked in industrial safety in California, it struck me in the face of all of this grief that the nation has the capacity to break out of this vicious cycle of neglect and corruption if it is willing to try something new.

There is precedent in other success stories such as the New Village Movement and KOICA. I suggest establishing a Safety Corps, working alongside a national safety ministry, that would be comprised of both young college graduates and recently retired managers and executives. The “Anjeon Bongsa-dan” is entirely feasible given that South Korea is the only recipient nation of the U.S. Peace Corps to later establish its own overseas service volunteer organization, KOICA. Like KOICA, the Safety Corps would be open to qualified citizen volunteers and act as a national service alternative to military service for young men.

Today, many young men with superior educations are exempt from military service while working for the minimum wage in strategic sectors. Many of these jobs are not genuinely strategic, but it does make sense to try to better employ the men than have them carry rifles for as long as two years. Even more beneficial may be for these same bright young men to circulate in industry with female counterparts and experienced business and engineering elders, studying and educating the rest of society on industrial and other forms of safety, while being paid minimum compensation. The current problem is not so much too many regulations or too few, but under-enforcement and implementation of safety programs, as well as an inadequate understanding of the real benefits of safety training.
When I was responsible for industrial safety at a manufacturing plant, I discovered that safety is part and parcel of quality.

And like quality in products and services, properly-implemented safety measures more than pay for themselves in reduced injuries and improved operational efficiencies. The suggested primary mission of the Safety Corps would be to study and educate volunteers assigned to industry organizations on mandated safety programs and procedures. Most operations are “too busy” to adequately become acquainted with many safety regulations and too many do not carry out adequate safety training of employees. The Safety Corps would assume this responsibility to inspect and train organizations on all relevant forms of safety.

The corps would combine the idealism of young people with the tempered experience of recently-retired professionals. In doing so, the corps would repeatedly visit troubled operations. Should unsafe operators be unwilling to take adequate remedial action, it would be the corps’ civic and moral responsibility to report such transgressions to the Prosecutor’s Office. Nonetheless, the corps’ primary and overwhelming duty would be training - not inspection.

Also, by being a neutral organization between bureaucracies and industry, it could serve as a sounding board for noting contradictory and inappropriate regulations. The benefits of the Safety Corps would be immediate: concretely establishing safety as a real and ongoing national concern.

The corps would offer meaningful internships for many unemployed university graduates. Young volunteers would eventually move on in their careers into government and private industry with real-world exposure to the challenges of running safe and efficient operations.

Recently-retired managers also would be able to contribute their wisdom and practical experience to the rest of society while being reenergized by working closely with youth. The expected push-back from industry would be that it couldn’t afford intervention by a Safety Corps.

But by now, the rebuttal should be obvious. When the de facto industry standards consist of shortcuts and corruption, it takes just one major accident to deliver an entire industry a serious body blow. In other words, while the short-term benefits may not always be apparent, it is clear that present behaviors need to come to an end. A positive, ongoing intervention by a volunteer Safety Corps could be part of the overall solution.

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by Tom Coyner. Senior Commercial Advisor for IPG & President of Softlanding Korea

Collecting a Debt in Korea: Payment Orders are your Friends

We receive many emails concerning our collection services and this answer is an answer that I give for most collections matters involving debts with debtors that appear solvent.

1. Obtain a Payment Order & Send a Demand Letter (지급명령) 
A Payment Order Complaint is filed to the court and this complaint, if accepted by the court, is served on the debtor-defendant.  If the complaint is not answered in 14 days by the defendant the case is finalized and this finalized judgment can be executed.  If you are savvy, speak Korean and have some understanding of law, a payment order can be filed without an attorney.  However, for any substantial debt, of course, hire an attorney. 

In many cases it is advisable to ascertain the response of the defendant and put a little fear into the defendant without engaging in a court procedure by sending a Demand Letter.  We find this to be the case when a plaintiff intends to continue business with the defendant or we have an indication that the defendant is in bankruptcy rehabilitation proceedings. 

2. Execute the Finalized Judgment
The execution procedure is filed to a court and, in many cases, it is advisable to retain the services of an asset check company.   Korean courts allow the seizure of most types of assets. 

3.  Consider Filing a Criminal Complaint
If the matter is, obviously, an indication of fraud your attorney should consider filing a criminal complaint.  The reality is that those that are involved in a fraud are not likely to have discoverable assets.  A good attorney can get a prosecutor, in many cases, to shake money out of a defendant.

We find, in most cases, it is not advisable to even send a demand letter, since this, often is simply delaying the inevitable - Payment Order.  If the Payment Order is contested by the defendant, the case will proceed to a normal trial procedure.  

Other articles that may be of interest to the reader:
Debt Collection in Korea: Foreign Creditor vs. Korean Company
Number of Debtors in Korea on the Rise
Garnishing Wages in Korea
Debt Collection Agencies in 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.