Corruption in Korea: What is the Crux of the Problem? by Tom Coyner

Whenever I read a news item regarding Korean corruption, I have mixed feelings. Usually the article is based on the latest finding by a well-meaning NGO that focuses on corrupting influence of big business on government without adequately addressing the root causes or even the breadth of corruption. Korean corruption doesn’t limit itself to envelopes and car trunks of cash being paid by business people to government officers. *The following article is a re-posting of an article by Tom Coyner.  The article first appeared on this law blog in 2012.  The issues remain the same and we thought this was an excellent time to repost this excellent article on an important issue for those doing business in Korea.  So one may ask oneself, “Can Korea end its many forms of corruption?” That is the essential question, and the obvious answer is “no.” I don’t mean that as a cynical observation.

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Building Systems Before JVs in Korea to Build Trust between Partners

A blog referred to me by the China Law Blog has a wonderful post on Developing Trust in China by Building Trustworthy Systems/Processes.  The same advice given in this blog post is relevant to work done in Korea, Southeast Asia, China and even the West.  We believe that the verification of the developing and implementation of these system is, often, necessary before building a joint venture relationship with a Korean company. The value of building systems is not to be underestimated in Korea.  Koreans, in most respects, are wonderful at performing tasks that are well dictated and explained. While in the West, we often appreciate more autonomy and, often, don’t strive when systems are too rigid. In the East, many strive on ordered guidance. My law firm often works with business consultants to assist client in implementing systems that reward following these systems/processes. These “systems” are, often, incorporated by reference

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Contract Drafting in South Korea

The following post considers some of the basics of contract drafting in South Korea. The following post is meant to be, only, a basic explanation of the basics of a good Korean contract based on a few observations. This post is not meant to be an exhaustive explanation of this issue, books have been written on contract drafting and we will not be drafting a book with this post. The main purpose of drafting a contract is to avoid a dispute. This article and a great Korean-experienced lawyer with an understanding of business in Korea and your industry should assist you in avoiding a legal dispute in Korea. Basics Considerations Before Signing a Contract in Korea Contract Clarity.  We see all too often, Korean contracts that lend themselves to unnecessary ambiguity. In some cases, ambiguity may be a benefit to our clients doing business in Korea, but in other cases, ambiguity

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Using Korea as a Test Bed for Asian Expansion: Look to Facebook

I have advised, on many occasions, clients to look to Korea for their Asian expansion prior to entering more expensive and difficult Asian markets.  Hey Facebook seems to agree in an article entitled: Facebook uses Korea as Test Bed. This is a repost of article from nearly five years ago.  China is becoming even more difficult and much of SE Asia is not becoming anymore transparent – Korea is an excellent place to test the Asian waters. The Korea Herald has an interesting article that quotes the president of Facebook Korea as noting that:  “Facebook sees Korea as an important country due to its high mobile usage and the presence of global companies like Samsung and Hyundai,” he said. “This makes Korea an important test bed to Facebook (insofar as it is) wishing to be a mobile-first company.” We, strongly, recommend that all companies consider Korea as a useful “test

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Sean Hayes ranked a Top 100 Lawyer for his work in South Korea by Asia Business Law Journal.

IPG is proud to announce that Sean Hayes is awarded the honor of being one of the Top 100 lawyers working in South Korea by the Asia Business Law Journal. Sean is, also, ranked a top attorney in numerous other leading rankings. A client noted to the journal that Attorney Sean Hayes is: “proactive, kind and focused on our industry and really got to know our business.” Thanks to the clients that recognize our hard work and thanks to our lawyer and paralegal team at IPG for making me look better than I really am. I am nothing without you. The Asia Business Law Journal is a leading legal journal dedicated to legal practitioners working in Asia. Sean HayesIPG LegalTel: 82 70 7847 9050Email: [email protected] Key practice areas: Franchisors; defence companies; chemical companies; industrials; and startups ExperienceCon. Court of Korea, Research OfficerKookmin Univ., Law ProfessorSeoul National University, Adj. professorKorea Times, Columnist

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Minority Squeeze-outs in Companies in Korea

The amended Korea Commercial Code of 2012 allows majority shareholders with 95% of the shares of a company in Korea, to purchase the shares of the minority for “fair value.”  Thus, allowing a statutory means under Korean Law to squeeze-out a minority shareholder. Fair value may be determined by the court if the parties are unable to reach an agreement within 30 days of a request by the majority shareholder to purchase the shares of the minority. We advise that you place a mechanism within your shareholder agreement (if possible) noting the manner of determining fair market value. ___ Sean Hayes may be contacted at: [email protected] 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

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“Probationary Periods” in Korean Employment Contracts for Newly-Hired Workers

Korean companies should consider negotiating stipulations to create “probationary periods” at the start of employment to train and assess newly-hired Korean workers. Often companies wish to evaluate workers over a set period of time after concluding a labor contract to assess the worker’s abilities and intelligence, and to allow the worker time to gain familiarity with the work.  This period of employment is called a “probationary period.” The practice is relatively unregulated by the government. The Labor Standards Act of Korea provides, among other things, minimum standards for conditions of employment, prohibits discrimination and the use of force or violence against workers.  But, it provides little guidance on regulating “probationary periods.”  The only guidance the Labor Standards Act provides can be found within Article 35, which states that employers do not need to provide 30 day notice of dismissal to workers under a “probationary period” and within Article 77, which

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Korean Medical Malpractice Law and the Medical Malpractice Arbitration System: Suing a doctor in Korea

So you want to sue your Korean doctor in a Korean court?  IPG has handled numerous medical malpractice matters for plaintiffs and defendants of medical malpractice cases in Korea in Korean courts and we were, prior, to having knowledge of the composition of the new Korean Medical Dispute Mediation and Arbitration Agency – were very pessimistic about its usefulness for plaintiffs. When we first heard about the enactment of the new Korean Medical Malpractice Law we were skeptical if the system would be useful for plaintiffs, since, often, the court and prosecutors are able to assert more pressure on doctors than this type commission and we were worried that this agency would be dominated by doctors. However, after a discussion with one of the standing commissioners of the Korean Medical Dispute Mediation and Arbitration Agency, who we know well and who we worked with in the past, we have come to

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What can Korea Learn From Ireland? by Senior Advisor Tom Coyner

My recent essay, “Denuclearization – Korea’s Red Herring,” stirred much discussion. Most reaction was favorable, but there was also some heated controversy. I had a chance to engage at depth with two ambassadors to Korea. Both diplomats were quite familiar, of course, with North and South Korea. This article is a reposting of an article from 2012, but seems pertinent for, also, today. I will try to fairly represent both ambassadors’ perspectives since one man was skeptical and the other was encouraging of my ideas. Readers may draw their own conclusions. The first ambassador is from Eastern Europe. He began his career under a socialist government and is therefore in a privileged position of viewing North Korea both from the perspective of a once sympathetic ally and from what may now be assumed to be a more balanced vantage point. This ambassador’s argument was that my recommended shift in diplomacy

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Antitrust/Competition Consent Orders in Korea

in 2011, the Korean National Assembly passed, along with the Korea-U.S. FTA and related bills, a law that  allows the Fair Trade Commission of Korea (KFTC) to accept consent orders.  A consent order is similar, in many respects, to a nolo contendere plea. The consent order process has allowed the KFTC to punish without the admission of guilt to the company. This has lead to a decrease, in recent years, of a burden on the KFTC, more efficient enforcement proceedings, and has sped up many M & A deals – while allowing companies doing business in Korea to more adequately gauge the risk of a certain actions by the company. The disposition is similar, in a criminal matter, to a nolo contendere (no contest).  In short, the accused accepts the proposed punishment, however, doesn’t admit guilt. Thus, the company may save a little face and time, while the government is

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Korean Merger Control and the Korean FTC

The Monopoly Regulation & Fair Trade Act of Korea (Fair Trade Act of Korea) is the main regulation governing mergers and acquisitions in Korea.  In the majority of cases, reporting and approval is not required for a target company with a yearly turnover of less than KRW 20 billion. The specific jurisdictional thresholds shall be addressed in a followup article.  This article is intended to, simply, provide a list of the main Merger Control issues .  A more substantive article shall follow. The following types of transactions are required to be reported and approved, in most cases, by the Fair Trade Commission of Korea (“KFTC”). Purchase of 15% of the shares of a listed domestic company; Purchase of 20% of the shares of a non-listed company; Establishment of a joint venture or increasing shareholdings to meet the thresholds in 1 or 2 above; Merger with a company; or Purchase of

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English-Speaking Criminal Defense Team Lead by Retired Korean Presiding Judge

IPG’s Criminal Defense Team is lead by a leading Korean criminal defense attorney – retired Judge SJ Kook.  Hiring a proactive, connected and respected lawyer in Korea is essential in all criminal matters in Korea. Judge Kook, to date, has earned, for clients, over 60 not guilty verdicts.  He works on may Korean criminal matters with Sean Hayes, a retired prosecutor and internationally-experienced Korean attorneys. Judge Kook is a graduate of Seoul National University and Columbia Law School.  He retired as a presiding judge.  For more info on IPG please see: www.ipglegal.com IPG’s Representative Criminal Defense Cases: Not guilty verdicts for two employees of a major American defense company in a criminal prosecution concerning Korean defense contracts. Not guilty verdict for an American military officer charged with a violent crime. Not guilty verdict for an employee of an American defense contractor charged with a violent crime. Obtained a suspended jail sentence

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Korea’s Improper Solicitation & Graft Act?: Scope of Application

The Scope of Application of the Improper Solicitation and Graft Act of Korea (“Graft Act”) was a hotly contested issue that led to Korean court challenges.  The Constitutional Court of Korea has upheld the Graft Act of Korea.  More details, including a list of articles on the Graft Law of Korea, may be found at: Improper Solicitation & Graft Act of Korea. The Scope of Application is defined in Article 2 & Article 11 of the Bribery Act.  The Act applies to both Korean and foreign nationals.  The Act applies to foreign nationals, only, for prohibited acts within Korea and to Koreans for prohibited acts universe wide. Summary of the Scope of Application of the Graft Act of Korea Article 1(a) Institutions Highest Government Organs (National Assembly, Ordinary Courts, Constitutional Court) Other Government Organs (election commissions, Board of Audit and Inspection, Human Rights Commission) Central Government Administrative Agencies Local Governments

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The Signs of a Great Criminal Lawyer in Korea | English-Speaking Criminal Defense Attorney in Seoul

There are few great English-fluent criminal defense lawyers working in Korea, because of the nature of the Korean criminal justice system and other Korean realities.  It is even more difficult to find competent English-speaking criminal defense attorneys outside of Seoul. In Korea, in all cases, where you are accused of a crime and you fear that you may be sentenced to time in a Korean jail, may be deported from Korea or the Korean conviction may harm your future – hire, quickly, an experienced and proactive defense attorney in Korea with experience in Korean criminal law prior to any interrogations by the Korean police or prosecution. As I mentioned in a post entitled English-Speaking Criminal Defense Lawyers in Korea: Who to Hire – Who Not to Hire. “Sadly, few lawyers, in Korea, are useful for criminal matters, since few lawyers are proactive when it comes to matters concerning the Korean

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Fiduciary Duties of Korean 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 can be held criminally liable).  Many acts (or inactions) 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 Korean 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

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Korean Compliance Checklist for your Business in Korea

The following Korean Compliance Checklist is intended to provide, only, a basic overview of the necessaries for keeping the law and shareholders off your back.  We, highly, recommend having a compliance audit preformed – if you have not completed a compliance audit of your Korean business in the past or recently.   1.  Do you Have a Registered Company/Business? Operating in Korea is not as simple as just leasing an office.  All businesses whether in the form of a corporation or sole proprietorship in Korea are required to register as business with the tax office and local government offices.  For some businesses the approval of a government agency shall be required.  Other articles on Korean corporate forms may be found at: Establishing a Company in Korea: Under Revised Corporate Code Limited Liability Companies Under the Revised Korean Commercial Code 2.  Do you Have Employment Agreements, Employment Rules, License Agreements, Joint

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Success in Life & Business in Korea by Senior Adviser to IPG

The most important lesson I learned from the Peace Corps was an inner sense of humility.  By my naturally contrarian nature, I have mixed feelings about having once been a Peace Corps volunteer in Korea. For example, I try to focus on being an international business development consultant, but every so often when a newspaper or magazine discovers I served in Korea during the 1970s as a Peace Corps volunteer, too often the reporter wishes to focus on my past rather than what I’m doing 30 or more years later. Frankly speaking, I want to use the reporter as much as the reporter wishes to use me. The reporter often wants a human interest story, and I want some free publicity for my business. Usually, what is printed does nothing for my business. But free publicity is still free publicity, so I play along. But all of this ends up

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Is your Korean Employee a Dispatched Worker and Thus a De Facto “Employee” under the Korean Labor Standards Act?

In 2015, the Korean Supreme Court detailed standards in determining if a Subcontracted Worker in Korea is actually a Dispatched Worker and, thus, a de facto employee of your Korean Company.  The designation has implications for retirement benefits, employment security and the payment of benefits. Dispatched Workers vs. Subcontracted Workers Companies employ, in Korea, often workers via manpower supply companies and via subcontracting agreements.  These employees are not retained directly by the Company, but are retained via a manpower company (“Dispatched Worker”) or a subcontracting agreement (“Subcontracted Worker”). The difference in these two type of relationships lies in the control over the workers – not in the mere nature of the retention according to the Korean Courts.  If the Company has a sufficient degree of control over the worker, in the eyes of the specific Korean court, the worker is deemed a Dispatched Worker and, thus, an employee of the

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Consequences of a Business Transfer in Korea: Employee Transfer?

In Korea, there is no statutory provision for the protection of employees in the event of a business transfer. Therefore, it has been left to the Korean courts to decide whether, and in what circumstances, employee transfer may occur as part of a business transfer.  The following is a basic explanation of the law of business transfer in Korea as it relates to the relationship between an employer and an employee. The Korean courts have generally held that, in the event of a business transfer, unless the employee objects, the employment relationship between the employee and employer (transferor) will automatically transfer to the transferee (without any need for the specific consent of the employee) – inclusive of the terms and conditions of the employment relationship existing at the time of closing of the business transfer, unless otherwise agreed to.  However, while it is a fairly well-established principle, this right to

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