Korea’s Fairness in Subcontracting Transactions Act Amendments of July 2021

The Korean National Assembly passed a bill in July of 2021 that amends the Fairness in Subcontracting Transactions Act (“Subcontracting Act”). The Act makes major changes with regard to discovery in litigation and aims to protect the intellectual property/confidential data/technical data (“Technical Data”) of subcontractors from poaching by prime contractors. For another article on Korea’s Subcontracting Act please see: Fair Transactions in Subcontracting Act of Korea: So Buyer Beware or Simply Avoid the Risk and Buy the Seller. 2021 Amendments

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International Arbitrations in Korea under the IBA Rules

Procedural Arbitration rules are key to the efficient and effective adjudication of arbitration disputes in Korea and, also, worldwide.  These arbitration rules govern and set out the framework for the arbitration process. Evidence gathering and presentation are important aspects of the above procedure, and yet, institutional and ad hoc rules that provide arbitration guidelines on other matters such as the appointment of arbitrators and the nature of award and costs are, usually, silent on this point. Advantages of such a

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Adhesion Contract in South Korea: Regulating Unfair Terms and Conditions

Adhesion Contract is a contract drafted by a party with stronger bargaining power and signed by a party with lesser bargaining power. The party that has weaker bargaining power does not have the capacity to negotiate the terms and conditions of the contract and they just adhere completely to what the party with the upper hand has to offer. In South Korea, in order to avoid such unfair one-way contract and prevent business persons from imposing unfair terms and conditions

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Calculation of Korean Hourly Wage Rate under the Minimum Wage Act of Korea

Korea’s minimum wage as per the Korean Minimum Wage Act in 2019 is determined by the Minister of Employment & Labor as KRW 8,350 per hour. The latest decisions of the Supreme Court developed a calculation standard/method for determining an hourly wage rate that is not in line with the opinion of the Ministry of Employment & Labor. In many such cases, a Ministry, simply, pushes to amend the law. This matter is important, since the standard hourly wage rate

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Korea Due Diligence for Joint Ventures, Licensing, OEMs and Buying a Korean Company

Intending to execute a joint venture agreement with a Korean company? Buying a Korean company? Licensing technology to a Korean company? OEM with a Korean supplier? Selling to a Korean company?Before going to bed with a Korean company (or individual) do a little due diligence.  The motivation for this article is an article by my friends over at the China Law Blog. Due diligence in Korea is not much different than due diligence in China.  However, don’t forget what is

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Starting a Manufacturing Business in South Korea: Top 14 Things to Know Before you Start a Business in Korea

Korea, in most cases, is a much better choice for the manufacturing of chemical, petroleum, construction equipment, complex crafted metals, specialty steel, automotive parts, semi-conductor, medical and pharmaceutical equipment and goods than China and most nations in Asia, because of Korea’s skilled work force, government incentives and increasingly transparent business practices. In many cases, manufacturing in Korea will not, in the end, be more costly than manufacturing in China, because of the increased efficiency of Korean workers and the, often,

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How Foreign Importers Entering Korea May Prosper from the Korean Middle Class in Korea being Screwed by Inflation: Screwflation

This is an older article we posted nearly eight years ago.  However, we fear the same is occurring today. Inflation may be a serious issue for Korea in the next couple of years.  The Korea Times has reported that stagnant wages and food inflation is leading to “Screwflation” in Korea.  This phenomenon is a potential opportunity for importers with an eagerness to directly access the market.  The term Screwflation was coined by Wall Street guru Doug Kass.  Kass explains the

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Liquidated Damages v. Penalties in Korean contracts

As a NY attorney, it’s a bit strange for me to read a Korean contract and see how the word “penalty” is used.  In the United States (as well as other common law jurisdictions), when a contract contains a “penalty,” the clause is, often, invalidated. Korea, however, allows some “penalties” in contracts. Cutting to the chase, this is merely an issue of confusing and overlapping terminology.  But since its confusing, it is worth explaining. To start with, a bit of

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Jurisdiction and Choice of Law Issues in Agency Agreements

In drafting and negotiating a Korean commercial agency agreement between a principal located in one country and an agent located in another country, proper consideration needs to be given to the choice of law regarding the governing law and jurisdiction of such an agreement. Jurisdiction determines which country’s courts will hear any proceedings that may be brought in relation to the agreement, whilst governing law is the law that shall be applied by the courts hearing any such proceedings that

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Termination of Commercial Agent/Distribution Agreements in Korea: Korea’s Agent Compensation Rule

In many cases of termination of a distribution/agent agreement in Korea compensation must be paid to the commission agent.  In many cases, the same rules are applied to distributors.  The law on the termination of Commission Agent-type agreement is governed, mainly, by the Commercial Act of Korea and its enforcement decrees.  Korea law does not facially differentiate between termination and expiration of agent/distribution agreements. The following explanation is, only, a brief overview of Korea’s Distribution/ Agency Law relating to termination of

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Distribution Agreements in Korea: Crawl before you Walk

Prior to going into any relationship with a distributor/agent in Korea, please read my post entitled: Finding a Korean Distributor: The Top 10 Things to Know Before Going to Bed with a Distributor in Korea. Please read that post in combination with this post, prior to engaging a distributor in Korea. We see too many Korean distribution and agency agreements that are mere spun U.S. or European agreements.  Please have your Korean distribution agreement and all agreements you have in Korea drafted

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Liquidated (Penalty) Damages Necessary in Most Korean NDA and Non-Compete Agreements

For any company engaged in negotiations, agreements, pre-M & A due diligence, OEM outsourcing or other activities with a Korean business or individuals that may lead to you disclosing your companies intellectual property, know-how or other proprietary information, always include in your no-competition, non-use, non-circumvention and non-compete agreements a liquidated damages (Penalty Damages) clause.  Without a Penalty Damages Clause – good luck in proving damages when a breach occurs. If the other party refuses to sign the clause, this is good

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Entering into a Joint Venture/Partnership in South Korea?

One of the major parts of my law practice for international clients, in Korea, is the structuring of joint ventures and the resolution of joint venture disputes in court and through arbitration.  I find, in most of these cases, the non-Korean party is not in need of a joint venture with a a Korean party to succeed in Korea and the Korean party does not realize or has no intent in satisfying obligations under the joint venture agreements.  The parties

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Distribution Agreement in Korea: Factors to Always Keep in Mind

Prior to going into any relationship with a distributor/agent in Korea, please read my post entitled: Finding a Korean Distributor: The Top 10 Things to Know Before Going to Bed with a Distributor in Korea. Please read that post in combination with this post, prior to engaging a distributor. We see too many distribution agreements that are mere spun U.S. distribution or agent agreements. Please have your distribution agreement and all agreements you have in Korea drafted by an experienced

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U.S. Franchise Law: Covenants Against Competition in Franchise Agreements

I just got my hands on the ABA’s book entitled Covenants Against Competition in Franchise Agreements edited by Michael R. Gray and Natalma M. McKnew. We work with a number of Korean and Chinese franchisors and I found the book an excellent tool for the tailoring of our franchise agreements to the specific States.  The book, also, has decent chapters for Mexico and Canada. The book aforementioned along with the Franchise Law Compliance Manual and the FTC Franchise Rule are

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Definition of “Ordinary Wage” in Korea: Korean Employment & Labor Law Basics

The courts of the Republic of Korea, for years, has struggled to find a consistent interpretation of an “Ordinary Wage.”  The definition of Ordinary Wage, under Korean Law, was clarified by the Korean Supreme Court in two decisions handed down on December 18, 2013.  The calculation of Ordinary Wages is important, since it is utilized to calculate statutory entitlements, and thus has an impact on the aggregate amount of contributions necessary to be paid to employees. For example, according to

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Minimum Wage Raised in Korea for 2020: Employment Law Updates

South Korea has chosen to raise the minimum wage by 2.9% for 2020 to KRW 8,590 (c. USD 7.11).  The Minimum Wage Commission of Korea set the wage at a lower than expected increase because of deteriorating economic conditions in Korea. President Moon’s plan to raise the minimum wage to KRW 10,000 per hour shall fall short, because of, among other things, a slower than expected growth rate and regional geopolitical issues facing Korea.  We shall keep the reader updated

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Korea Amends the Act on the Employment, etc. of Foreign Workers in 2019: Employment Law Updates

Amendment to the Act of the Employment, etc. of Foreign Workers in Korea (hereinafter as “Amendment to the Act of the Employment of Foreign Workers” of Korea) was proposed by the Korean Environment and Labor Committee in December 2018. The focus of the Amendment of the Employment of Foreign Workers is on the improvement of the living conditions of foreign workers at dormitories provided by their companies. Major Changes Due to the Amendment and the Struggles on the Way Addition

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Terminate/Layoff an Employee in Korea: Terminating an Employee in Korea

The Korean Labor Standards Act mandates that employees under “contract” or “regular employees” may only be terminated for “justifiable reason attributable” to the employee or “urgent managerial necessity” after the completion of the employee’s probationary period. Both Korean employment law standards are, often, difficult for an employer to meet without the professional structuring of HR policies and procedures and a nuanced approach to termination of employees in Korea. We strongly recommend, prior to even considering firing or laying off Korean

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Succeeding in Business in Korea

Since 1977, I have observed the rise and fall of many foreign companies in South Korea. I have witnessed the trials and tribulations as a bank employee, a high-tech salesman, a country manager and as a business consultant of foreign and Korean companies doing business in Korea . Bluntly speaking, while some foreign ventures have had some unlucky breaks, those companies that have succeeded in the Korean market have done so for good reasons.  And those who have failed have done

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