2/04/2009

KIKO Injunction Translated into English

English Translation of the Korean KIKO (currency option) injunction.

*NOTE: Not an official translation. The translation contains grammar errors and some errors in content. The translation was completed by my paralegal and not edited.

Seoul Central District Court
50 Civil Matters Department

DECISION
Case 2008Kahap3816
Provisional Disposition on Suspension of Option Contract Effect


TEXT
1. On conditions for (DELETED) Co.,Ltd to deposit \500 million and for (DELETED) Co.,Ltd to deposit \2 billion or to submit the trust contract document of Guarantee for payment set the respective amount as security deposit, as security for Respondent, Ga. For each currency option contract in Annex. List 1 between the Applicant (DELETED) Co.,Ltd and the Respondent and each currency option contract in the Annex. List 2 between the Applicant (DELETED) Co, .Ltd and the Respondent, the effect for the tranche expiring after November 3 2008 will be suspended until the ruling of the 2008Gahap108007 case of restitution and claim of unjust enrichment between the Applicants and the Respondent.
Na. The Respondent, on the tranches for which the effects are suspended, must not carry out disadvantageous disposition presupposing the tranches should remain effective, such as exercising call-options on the basis of each above currency option contract.
2. Other applications shall be dismissed.
3. The Applicants shall pay 1/2 of the lawsuit costs and the Respondent shall pay for the rest.

PURPOSE OF APPLICATION
1. Until the ruling of the 2008GaHap108007 case of restitution and claim of unjust enrichment between the Applicants and the Respondent, the effects of each currency option contract in Annex. List 1 between the Applicant (DELETED) Co.,Ltd and the Respondent, and each currency option contract in the Annex. List 2 between the Applicant (DELETED) Co.,Ltd and the Respondent shall be suspended.
2. The Respondent must not carry out disadvantageous disposition presupposing the tranches should remain effective such as exercising call-options based on each above currency option contract.

REASONING
1. Basic Facts
All the records and examination explain the following facts.
Ga. Status of the Parties
Applicant (DELETED) Co.,Ltd (“(DELETED)”, hereby) is a listed corporation which manufactures, sells and exports stationery and office equipments, having a total asset amount of \132.8 billion as of Dec. 31 2007 and a total annual sales of \191.9 billion. Another Applicant (DELETED) Co,.Ltd (“(DELETED)”, hereby) is a KOSDAQ-listed corporation which manufactures, sells and exports electronic devices, having a total asset amount of \188.6 billion as of Dec. 31 2007 and a total annual sales of \610.9 billion. In addition, the Respondent is a bank established in accordance of the Banking Act, having a total asset amount of \52.9722 trillion as of Dec. 31 2007 and total annual sales of \12.0485 trillion.
Na. Currency Option Contract between the Applicants and the Respondent
⑴ The Applicants have been utilizing the method of selling currency forwards in order to avoid (hedge) the potential hazard in Trade Receivables in Foreign Currency due to exchange fluctuation (decrease). Amidst the trend, since the KRW-USD exchange gradually decreased in 2006 and 2007, most profit from exports were lost due to selling trade receivables in foreign currency as future prices of the dollar became lower than spot prices. When this happened, Applicant (DELETED), around May 2006 and Applicant (DELETED) around June 2007 subscribed to the product “KIKO Currency Option’ with the advice from the Respondent.
⑵ Applicant (DELETED) concluded 14 KIKO currency option contracts with the Respondent from May 8 2006 to Jan 11 2008 (two of them are included in the Annex. List 1). Applicant (DELETED) concluded nine KIKO currency option contracts in the period between Jun 13 2007 and Jan 22 2008 (eight of them are included in the Annex. List 2. Each KIKO currency option contract in the Annex. List 1,2 will be “Contract of the Case”, hereby).

Da. Structure of KIKO Currency Option Contract
⑴ Basic Form of Currency Option Contract
(Ga) Literally, KIKO currency option refers to ‘A currency option which combines Knock-Out Put-Option for the bank from companies and Knock-In Call-Option for companies from bank in the ratio of 1:2 to avoid hazard from the exchange rate fluctuation in export prices’. In other words, it is a currency option that eventually realizes Zero-Cost in that companies buys put-option from the bank to avoid exchange risk, and sells call-option instead of providing premiums to the bank.
(Na) However, since the Knock-Out condition is attached to company’s put-option and knock-in to bank’s call-option, the contract will be ineffective once the market exchange rate decreases below the bottom exchange rate. The reason knock-out or knock-in is attached to options is that their premium is cheaper than the standard options without such conditions. One can hedge currency risk spending less money by attaching such conditions to options when the exchange rate changes within a certain range.
(Da) Also, in most cases, the contract amount of the call-option for bank is as twice as high as put-option for company (called ‘leverage condition’). This is because one can change knock-out and knock-in exchange rate as advantageously as possible for companies as the leverage gets higher.
(Ra) The contract period is as long as one to three years, and mainly consists of groups of options that expire every month. Payment is made based on the market exchange rate on the expiration date for each tranche.
(Ma) Rights and Duties of Companies and Banks for Each Scenario
• When the market exchange rate moves within the top and the bottom range:
- Only the company put-option is created.
- When the market exchange rate at the time of expiration is lower than the event exchange rate: Companies sell the contract amount to the bank based on the exchange rate by exercising put-option ☞ Company achieves the goal of avoiding currency risk
- When the market exchange rate at the time of expiration is the same as or higher than the event exchange rate: Companies can sell the contract amount based on the market exchange rate without exercising put-option ☞ Companies can enjoy exchange gains
• When the market exchange rate falls below the bottom exchange rate at least once
during observation period (satisfies ‘knock-out’ condition)
- The Contract regarding the tranche becomes ineffective. ☞ Companies are exposed to currency risk
• When the market exchange rate rose above the top exchange rate at lease once without ever dropping below the bottom exchange rate during observation period (satisfies ‘knock-in’ condition) Both company put-option and bank call-option are created.
- When the market exchange rate is lower than the event exchange rate at the time of expiration: Companies sells the contract amount based on the event exchange rate by exercising put-option. ☞ Company achieves the goal of avoiding currency risk
- When the market exchange rate at the time of expiration is the same as or higher than the event exchange rate: Bank purchases twice as much of the contract amount based on the event exchange rate by exercising call-option ☞ Company is exposed to risk of limitless losses.

⑵ Modified KIKO Currency Option

(Ga) Divides the contract period into two parts, making part A more advantageous than the basic form, but making part B more advantageous for banks instead.
(Na) Type 1 (Each contract in Annex. List 1. 1,2 & List 2. 3,4,5)
l Part A: Same as the basic form. But, It is more advantageous for companies compared to the basic form in terms of contract conditions, in that event price of company’ put-option is increased (‘turbo’ condition) or even if the company’s put-option is terminated as knock-out conditions are met, money is compensated to a certain extent. (‘enhanced’ condition)
Part B: Only banks have call-option of low event exchange rate. But, when the market exchange rate falls below the bottom exchange rate even once during the observation rate, all contracts on the related tranche and those after become ineffective. (‘Anytime’ knock-out condition)
(Da) Type 2 (Contract in Annex. List 2 1,2)
l Part A: Same as the basic form. But, it is more advantageous for companies compared to the basic form in terms of contract conditions, in that event price of companies’ put-option is increased or even if the company’s put-option is terminated as knock-out conditions are met, money is compensated to a certain extent.
Part B: A simple structure of selling currency forwards. But, part B becomes effective only when the market exchange rate at the time of expiration of part A is the same as or below the event exchange rate. (Knock-in condition)
(Ra) Type 3 (Contract in Annex. List 2 6,7,8)
l Part A: Only companies get put-option. And, it is more advantageous for companies compared to the basic form in terms of contract conditions, in that event price of company’ put-option is increased or even if the company’s put-option is terminated as knock-out conditions are met, money is compensated to a certain extent.
Part B: Only banks have call-option of low event exchange rate. But, when the market exchange rate falls below the bottom exchange rate even once during the observation rate, all contracts on the related tranche and those after become ineffective.
Ra. Surge of KRW-USD exchange rate after the Contract of the Case is Concluded (See Annex. ‘KRW-USD exchange rate fluctuation during the last 3 years’)
The KRW-USD exchange rate which moved upwards or downwards between the range of \900~940 from June 2007 to the beginning of March 2008, began to increase from the mid-March 2008, reached \1,021 on Mar 18 2008 and continued to go up to \1,050 in the mid-May 2008. Changing somewhat steadily for some time, the exchange rate sharply increased to \1,100 in Sep 2008, \1,200, \1,300 and \1,400 in October. Since the rate reached a record high of \1,509 on Nov 24 2008, it is currently moving up and down within the range of \1,200 and \1,400.
Ma. Applicants’ Losses Due to the Surging KRW-USD Exchange Rate
As the Respondent Bank exercised call-option for the Contract of the Case, Applicants had an obligation to sell the dollar which is as twice as the contract amount based on the event exchange rate that is significantly lower than the market exchange rate. As a result, the Applicants are facing great losses up to the present. (Applicants will face negative losses for which they cannot enjoy exchange gains if they have dollars as spots twice as much as the contract amount. Otherwise, since they have to buy the dollars based on the market exchange rate and sell them to the Respondent Bank based on the event price that is much lower, the applicants will face losses equivalent to the margin.
⑴ Applicant (DELETED): Total net losses of \2.8208 billion
⑵ Applicant (DELETED): Total net losses of \27.33940 billion

2. Judgment
Ga. Preservation Rights
⑴ Invalidity of the Contract of the Case
(Ga) Violation of Regulation of Standardized Contracts Act
1) Whether it falls under Standardized Contracts
‘Standardized Contracts’ refers to the contents of a contract prepared in advance by one of the contract parties to conclude a contract with one or more other parties regardless of its name, form or scope. (Regulation of Standardized Contracts Act)
According to the purpose of all the records and examination, the specific contents of the Contract conditions such as knock-in exchange rate, knock-out exchange rate and leverage signify the fact that came to a decision from individual negotiations between the Applicants and the Respondent. Therefore, it is difficult to say that the Contract of the Case is categorized as standardized contracts. However, all the basic form and the modified form of the Contract can be considered as having been prepared in a specific type for finalizing contracts. So, in this sense, it can be seen as a standardized contract.

2) Whether the Contract is Invalid because of its Unfairness
Ga) If there are provisions in the Contract that are disadvantageous towards companies, difficult for companies to anticipate considering the circumstances like the transaction type of the contract and that limit the basic rights so much that the contract purpose cannot be achieved, the related provisions are considered to be unfair (Regulation of Standardized Contracts Act Article 6, Clause 2) and, such unfair provisions violating the principle of good faith are ineffective. (Regulation of Standardized Contracts Act Article 6 Clause 1)
Na) Whether the Contract is unjust towards Applicants
Losses due to plummeting exchange rate are limited for the Respondent Bank, (since ‘Knock-out’ condition is attached) whereas losses for the Applicants can expand to an infinite level, the contract amount when the Respondent Bank exercises call-option is as twice as much as that when the Applicants exercise put-option. And, for some modified KIKO currency option contracts, part B in the latter part of the contract period requires the Respondent Bank to have low-priced call-option while the Applicants are not at all acknowledged with any rights. So, considering these elements, the structure itself can be considered to be disadvantageous on the Applicants.

However, as shown before, that options’ values are the same does not refer to the amount of the profit but that the expected profit of companies and banks that takes into account the probable range of the exchange rate fluctuation. In the Contract of the Case, the exchange rate section from which the Applicants can earn profit is already limited but its realization probability is fairly high. In contrast, the exchange rate section from which the Respondent can get benefit is theoretically infinite but its realization probability is quite low, which leads to an assumption that the expected profit of both the Applicants and the Respondent are the same. Therefore, it is difficult to conclude that the structure itself is disadvantageous towards the Applicants by just looking at the elements above.

Da) Whether the Contract is Difficult to Anticipate or Limits the Basic Rights of the Applicants
By the structure of the Contract, when the market exchange rate falls below the bottom exchange rate as knock-out condition is attached to the put-option, the Applicants are directly exposed to currency risk. In some modified KIKO currency option contracts, since the Applicants are not acknowledged with selling exchange forwards or put-option, they cannot at all achieve the goal of avoiding currency risk. Such a contract condition can be deemed as difficult to anticipate or limiting Applicants’ rights basically in the perspective of the goal of avoiding currency risk.
But, according to the records, the contract conditions as above seems to have been understood or known by the Applicants, and furthermore, for accepting such conditions stated above, the Applicants have changed other contract conditions favorable to them. So, it is hard to say that the Contract conditions above are unfair and violating the principle of good faith.

3) Contract Period & Knock-In - Whether the Event Provision is Ineffective Since it is Against the Regulation of Standardized Contracts Act Article 9 Item 5
Ga) In a contract with the purpose of creating continual claims, provisions may give disadvantage by making the period unjustifiably short or long, or by making it possible to implicitly prolong or renew the period are ineffective. (Regulation of Standardized Contracts Act Article 9 Item 5)
Na) Whether the Contract Period is Unjustifiably Long-term
The fluctuation of the exchange rate normally expands as the option’s expiration date prolongs, so as the contract period prolongs, the market exchange rate touches the bottom and the top exchange rate, leading to extinction of company’s put-option (Knock-out) and the possibility that the bank’s call-option will come into effect increases. Therefore, under the contract structure that company’s knock-out put-option and the bank’s knock-in call-option are combined in the ratio of 1:2, it may seem disadvantageous to make the contract period as 1~3 years. But, as shown before, since the contract seems to have been formed as the total value of company’s put-option and that of bank’s call-option are the same for the whole contract period, it is hard to conclude the Applicants might be unreasonably disadvantaged just from the fact the period itself is set to 1~3 years.
Da) Whether the Knock-In Event Provision is an Unreasonable Automatic Renewal Provision
Knock-in event provision, that is, one making part B effective as the contract is automatically renewed only when the market exchange rate at the time of expiration is higher or the same as the exercise exchange rate in part A of modified KIKO currency option contract. This is a situation where the contract is automatically been renewed even when companies would want the contract to be terminated as the exchange rate increases, so it may seem renewed forcefully against the company’s will. But, according to the purpose of the records and examinations, this issue seems to have been understood or recognized by the Applicant (DELETED) when finalizing the contract, and furthermore, (DELETED) seems to have changed Contract conditions as advantageous like event exchange rate for accepting the above provision. Therefore, it is difficult to conclude the Applicant (DELETED) was disadvantaged from the fact above.

4) Conclusion
Therefore, it is hard to say that the structure of the Contract is invalid due to violation of Regulation of Standardized Contracts Act.
(Na) Whether it violates the Civil Act Article 104
As shown before, since the Contract of the Case seems to have been formed as the total value of company’s put-option and that of bank’s call-option are the same, it is difficult to conclude the Contract of the Case is invalid due to violation of the Civil Act Article 104.

(2) Whether the Contract should be Revoked
(Ga) Summary of Assertion by the Applicants to Revoke the Contract due to Fraud or Mistake
The Contract of the Case is, in fact, not suitable for avoiding currency risk (Applicants are exposed to currency risk when the market exchange rate falls below the bottom exchange rate as a knock-out condition is attached to their put-option. And, in the case of some modified KIKO currency option contract, selling exchange forwards or put-option is not acknowledged for the Applicants in part B of the latter part of the contract period, so such goal cannot be achieved.) and, in contrary, it has a risk of unlimited losses when the foreign exchange rate increases. The fact is, the contract is for the speculative benefit of the bank not for avoiding Applicants’ currency risk. Nevertheless, the Respondent Bank explained about the product as if it were beneficial for avoiding currency risk but neglectfully explained on the unsuitability of hedging currency risk and high risk, making the Applicants to sign the Contract. Therefore, it is true that the Applicants signed the contract due to bank’s fraud or their mistake, so the Contract of the Case shall be revoked upon delivery of this application.

(Na) Judgment
According to all the records and examination, the Applicants knew, at the moment of concluding the Contract, that the knock-out condition is attached to their put-option, that they do not have any rights on the part B of some modified KIKO currency option contracts. More, it is found that they adjusted other contract conditions including the event exchange rate. Therefore, even if the Contract of the Case seems not suitable for avoiding currency risk which is the main purpose of the Contract, it is difficult to say that the Applicants’ signing the contract is due to the bank’s fraud or their mistake.

Also, as shown before, instead of paying premium to the Bank when purchasing put-option from the Respondent Bank in order to hedge currency risk, the Applicants sold knock-in call-option that is as twice as much as the premium. This makes it clear that the Applicants knew that they could see damages as they are obligated to sell twice as many dollars as the Contract amount to the bank based on the event exchange rate, (Applicant (DELETED) already has an experience of such damages from other KIKO currency option contracts before this) and it is difficult to say that the Applicants signed the Contract due to the Bank’s fraud or their mistake.

Meanwhile, according to the purposes of all the records and examination, the Applicants seem to have anticipated that the KRW-USD exchange rate would show a stable fluctuation in a certain range during the contract period, but did not foresee there would be great damages if the exchange rate sharply increases. However, by looking at just the records submitted by the Applicants, the Respondent bank does not seem to have purposely caused such result or made the Applicants sign the Contract by hiding what the Respondent may have anticipated. According to the purposes shown from all the records and examination, the Applicants seem to have anticipated the KRW-USD exchange rate would show a stable fluctuation within a certain range. Therefore, conclusion of the Contract is not from fraud of the Bank as above. Mistake of the Applicants and the Respondent Bank on anticipation of exchange rate fluctuation will be dealt later with termination upon the principle of good faith.

(3) Termination of the Contract of the Case – Principle of Good Faith
(Ga) Termination of Continuous Contract due to Change of Circumstances
The other party can terminate the Contract on the basis of the principle of good faith if, the parties could not anticipate the change of situation when circumstance that has been the basis of the Contract changed after the Contract was concluded and for which the Party was not responsible for the change; and if, in this case, binding power is acknowledged resulting in violation of the principle of good faith, and furthermore, if it is impossible to change the content of the Contract based on the change in situation or that cannot be expected from the other party. (See Supreme Court Decision 2007.3.29 2004Da31302) This theory even applies to the case where common and fundamental thought of the parties that was the basis of the Contract was found wrong ex post facto.
(Na) About this Case
From all the records and examination, making the Applicants to fulfill the obligations related to the Contract is substantially against the principle of good faith. Therefore, the Contract of the Case is lawfully terminated upon delivery of a copy of this application, which manifests intention of termination. (Delivered to the Respondent Bank on Nov. 3)
① The Contract of the Case has a structure categorized as a continuous contract for which payment is made based on the market exchange rate at the time of expiration for every tranche expiring every month during the contract period of 1~3 years. (but, since the total values of the Applicants’ put-option and the Respondent Bank’s call-option are the same considering the whole contract period, not every tranche, option premiums may need to be calculated on termination of contract)
② That ‘Implied volatility for KRW-USD’ was the key variant in deciding the values of each option the Applicants and the Respondent have upon concluding the Contract is an objective circumstance being the basis of the Contract. Also, as shown before, both the Applicants and the Respondent Bank signed the Contract with an anticipation that the exchange rate will go up and down within a certain range, so it is the common and fundamental perception of the Parties, which was the basic element of the Contract.
③ However, the KRW-USD exchange rate surged and its implied volatility also has sharply increased after the Contract of the Case was concluded (KRW-USD exchange rate: 3.6~5.4 at the time of contract conclusion, 10.025 on Mar 18 2008, 10295 on Sep 1, 15.8325 on Sep 16 2008, 20.7475 on Oct 6 2008, 25.7575 on Oct 7 2008, 31.3725 on Oct 16 2008, 37.86 on Oct 28 2008), such a significant change of circumstances would not have been anticipated by the Applicants or the Respondent considering the trend of the KRW-USD exchange rate for the previous 3~4 years before the contract was concluded, and prediction reports from renowned financial or research institutions.
④ As above, with the increasing KRW-USD exchange rate, the Applicants have faced great damages and more losses are expected unless the exchange rate does not sharply fall in the future during the remaining period of the Contract, the amount is estimated to exceed the figure predicted or could be predicted by the Applicants. Also, there is an imbalance between profit and losses of the Applicants and the Respondent Bank from the Contract of the Case.
⑤ According to the Contract of the Case, Contract conditions including the event price specified upon concluding the Contract is settled to remain for the contract period of 1~3 years, and there is no measure to help adjust to the situation where the Applicants’ losses increase more than expected with the increasing KRW-USD exchange rate or where the contract condition based on the implied volatility is no longer reasonable as the implied volatility of the KRW-USD exchange rate surged.
⑥ Generally, banks should not recommend OTC derivatives to those not capable enough to take such risks when they are considered inadequate based on the type of occupation, financial status, level of financial transactions, purpose of transaction, level of understanding the product, risk management ability and product type. Furthermore, the banks have a duty to fully explain important facts to clients like the transaction structure, risk entailing the transaction, major influential element on losses. Considering the Applicants’ experience in transaction of OTC derivatives and qualifications of bank officials, the Applicants did not have the capability in managing risks on OTC derivatives. Since the Contract not only has a complex and eccentric structure, but also implies limitless losses, the Respondent Bank should have complied with the suitability and duty to explain. But, the Respondent Bank seems to have not met the obligation and as a result, the Applicants face a great deal of damages regarding the fulfillment of the Contract.

i) Violation of the Suitability Principle
The Respondent Bank should check in advance whether the content of the Contract is suitable for the Applicants’ purpose of avoiding currency risk and whether the Applicants would not be exposed to excessive risk compared to their financial structure, operation structure or risk management ability, and if not, the Bank should not have recommended the product or have changed the content to make it suitable for the Applicants.

However, since the Applicants are exposed to unlimited losses, the Contract conditions are not suitable for them considering the transaction purposes, financial structure, operation status and risk management ability. The Respondent Bank had a duty to recommend other conditions (for example, limiting the Applicants’ total amount of losses, compensating a reasonable amount when the exchange rate rises above a certain level and allow the Applicants to terminate the Contract, or that limit the Applicant’s losses upon conclusion of the Contact) but did not fulfill it.

On this notion, the Respondent Bank asserts that the Applicants would not have accepted such conditions as above even if they will be disadvantaged anyhow including that the put-option event exchange rate will go down . However, if the Respondent Bank had fulfilled the duty of explanation which will be dealt later, it cannot be considered that there was no possibility at all that the Applicants would not have accepted the conditions taking risks of plummeting event exchange prices. Therefore, the Respondent Bank’s claim is not acknowledged.

ii) Violation of Duty to Explain
As shown above, since the Contract of the Case has a structure for which the Applicants would have damages when the exchange rate surges, it seems that the Respondent Bank has a duty to explain clearly and sufficiently about the risks implied in the Contract when the Respondent recommended it. (Simply notifying the risks in general and abstract is not enough considering the scope of the potential risks, and further, the Bank must have checked if the Applicants would still go on with signing the Contract after telling them what will happen in the worst case in detail clearly to make them fully understand.) Also, the Respondent Bank has a duty not to disturb the Applicants’ decision-making or risk cognition act by providing conclusive judgment on the future KRW-USD exchange rate that is directly related to the risk.

However, on recommending to sign the Contract, the Respondent Bank notified the Applicants the risks only in general and abstract (even though it was written that the Applicants had the duty to sell twice the price of the contract amount when the knock-in condition was satisfied in red in the contract proposal, product description, this also is deemed as general notification), the Respondent did not clearly and sufficiently explained what kind of situation the Applicants would face when KRW-USD exchange rate rises as present (According to Exhibit So-eul 23. 12, the Respondent notified the Applicants on the profits and losses with the estimation of fluctuation about ±6~70 KRW). Also, the Respondent emphasized only that the exchange rate will gradually go down and did not sufficiently explain on the possibility of its increase.

(4) Conclusion
Therefore, the Contract of the Case is lawfully terminated upon delivery of the Application copy manifesting the Applicants’ will to terminate the Contract, the tranche which expires after termination is considered to be ineffective. So, the Respondent Bank has a duty not to implement call-option based on the Contract regarding the ineffective tranche or carry out any disadvantageous disposition presuming the Contract of the part remains effective.
Na. The Need of Preservation
Considering the circumstances indicated in all the records and examination, in particular, up-to-date transaction losses of the Applicants or the amount of future appraisal losses and aggravation in the financial structure operation status (as of 1st to 3rd quarter of 2008, Applicant (DELETED) had an amount of derivative transaction losses of KRW 5.8 billion, losses of derivative appraisal of KRW14.7 billion that resulted in KRW -7.1 billion net profit of current period. For (DELETED)’s case derivative transaction losses amounted to KRW 9.8 billion, losses of derivative appraisal KRW 101.7 billion leading to KRW -64.1 billion), falling creditability in the market and illiquidity, necessity of temporarily put a halt in the part that became ineffective by the Applicants’ manifesting opinions to terminate the Contract is persuasively shown. ((DELETED) is a case of ‘over-hedge’ since the total amount of contract amount for various KIKO currency option contracts exceeds the amount of available dollars, but since the Respondent bank had a duty to check its status of ‘over-hedge’ of the other party in accordance with the suitability principle, only (DELETED) cannot be denied the need for preservation.)

On this issue, the Respondent Bank asserts that it would face great damages since it carried out a counter transaction like Back To Bank regarding the dollar it gets to achieve due to the Contract between the third party like other financial institutions in order not to exceed the foreign currency limit a bank can reserve, but it still fulfill obligations in regard to the counter transaction without being able to exercise the rights when the Contract of the Case becomes ineffective as above. However, full explanation on the above counter transaction is not sufficient, and the damages the Respondent will face are not as serious as that of the Applicants when the Contract is continuously be in effect. (Net profit related to derivatives for the Respondent is \448.7 billion as of 1st to 3rd quarter, risen fivefold from \95 billion in the same period last year). Therefore, the Respondent Bank’s claim is not acknowledged.

Also, the Respondent Bank asserts that the Fast Track Program of the government will be futile when the provisional disposition is accepted. But, the effectiveness of the program is questionable according to all the records and examination, and since the above program is created on the premise that the KIKO currency option contract is carried out as stated. Therefore, the necessity for preservation cannot be denied considering the circumstances above.

3. CONCLUSION
This Application is accepted in that it has a reasonable ground and other applications are dismissed with no reasonable grounds.

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SeanHayes@ipglegal.com