President Lee Proposes Major Changes to South Korean Prosecution and Budget Drafting Systems

On September 7, 2025, the President Lee Administration announced a plan to overhaul two of the country’s most powerful state functions: prosecution and budget drafting. The proposals, facially, seek to: (i) dismantle the existing prosecution service by splitting investigation and indictment into separate bodies, and (ii) remove budget-drafting authority from the Ministry of Economy and Finance (MOEF) to a newly created independent budget agency.

The Lee administration frames this reform as a combination of decentralization and modernization. The Lee Administration claims that this plan is better suited to address new national priorities such as artificial intelligence, climate change, and social welfare. Critics, however, warn of risks to prosecutorial independence and fiscal responsibility.

The reforms require the approval of the Korean National Assembly, and if passed, are expected to take effect in 2026.

The proposed reforms strike at the core of Korea’s legal and constitutional framework. For example:

• For governance: The plan reconfigures one of the most powerful oversight institutions in Korea (the prosecution) and alters a fundamental executive function (budget drafting).
• For business and compliance: Companies under investigation may navigate two separate agencies, with one investigating and the other indicting. Foreign investors should also expect transitional uncertainty in regulatory enforcement.
• For fiscal policy: Removing MOEF from budget preparation may weaken Korea’s ability to maintain fiscal discipline amid record projected budgets exceeding KR₩738 trillion for 2026.

We will update the reader when more information becomes available.

President Lee’s Prosecution & Budget Drafting Plan

1. Split the Prosecution’s Powers

• The existing prosecutors’ headquarters would be abolished.
• Authority would be divided between:
  • A new indictment-only Prosecution Service under the Ministry of Justice, and
  • A Serious Crimes Investigation Agency reporting to the Ministry of the Interior & Safety.
• This structure formalizes the argument over the separation of investigations and indictments, a debate that has been ongoing in Korean criminal procedure for more than a decade.

2. Create an Independent Budget Authority

• The MOEF would lose its longstanding authority to draft the budget.
• A new Independent Budget Authority would be tasked with preparing the national budget and submitting it to the National Assembly.
• Advocates argue this could depoliticize fiscal planning; critics caution it risks diluting accountability and may encourage higher debt.

How We Got Here: The Reform Arc

2019–2022 reforms. Korea previously rebalanced powers between the police and prosecutors, creating new entities such as the National Office of Investigation and the Corruption Investigation Office for High-Ranking Officials (CIO). These reforms reduced prosecutorial power, but generated complaints about fragmentation and inefficiency. The current proposal aims for a clearer division of authority.

2025 politics. With the Democratic Party of Korea back in control and a reformist president, legislation to abolish or radically restructure the prosecutors’ organization was introduced as early as June 2025. Key appointments in the Justice Ministry during that period signaled the administration’s intent to move forward decisively and without regard for systems that had been accepted for decades.

Statutes and Constitutional Challenges

1. Statutory Amendments.
To implement the reforms, amendments will likely be required to the:

• Prosecutors’ Office Act of Korea
• Criminal Procedure Act of Korea
• Government Organization Act of Korea
• National Finance Act of Korea

These laws will need to be revised to reallocate investigative authority, codify the indictment-only prosecution service, and reassign budgetary functions.

2. Separation of Powers & Institutional Independence.
Legal commentators warn that:

• Placing investigative powers under the Korean Interior Ministry risks centralizing authority and reducing checks on police-style investigations.
• An indictment-only prosecution service under the Ministry of Justice could become more vulnerable to executive influence if appointment and tenure safeguards are not robust.
• Editorials also flag concerns about supplementary investigation orders and possible conflicts of jurisdiction between agencies.

3. Constitutional Review
If enacted, the reforms are almost certain to be challenged before the Constitutional Court of Korea. Expected claims include:

• Competence disputes between agencies.
• Due process challenges related to divided authority.
• Allegations of unconstitutional encroachment on prosecutorial independence.
  Temporary injunctions may be sought, potentially delaying implementation until the constitutional review is complete.

What to Watch

• The National Assembly debates and bill text, including definitions of “serious crimes” and appointment procedures for the new agencies.
• Constitutional Court challenges, which may reshape or limit the reforms.
• The first budget cycle was prepared by the Independent Budget Authority, and its impact on fiscal transparency.
• Transitional disruptions in investigations, including how international cooperation under MLATs is handled during the restructuring.

IPG Legal’s Perspective

These reforms, if enacted, would mark a watershed moment in Korean legal and political history. They carry profound implications for corporate compliance, white-collar investigations, regulatory enforcement, and fiscal governance.

At IPG Legal, our attorneys have decades of experience advising clients on Korean constitutional law, criminal procedure, and regulatory risk. We are uniquely positioned to assist businesses, investors, and individuals in preparing for these institutional changes, whether by updating compliance programs, managing ongoing investigations, or monitoring fiscal and regulatory shifts.

For more information, please contact IPG Legal for tailored advice.

by Sean Hayes
Sean Hayes 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 a Top Attorney by AsiaLaw, and IPG Legal is consistently ranked Top Dispute Resolution Law Firm for our litigation services.

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