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 sign that the party will breach. The clause is of course, only triggered when a breach occurs. I, recently, had a client that was very worried about losing “goodwill.” Easy solution, blame the “lawyer.” For companies that are not engaged in active, continuous and substantial business in Korea, the chance of finding evidence of damage, after a breach, is remote – best. The reason stems from proof of market potential in

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Preparation for Korean Police & Prosecutor Interrogations & Witness/Defendant Questioning at Korean Courts

All good Korean attorneys prepare all clients for witness questioning & suspect interrogations in Korea.  Clients may be subpoenaed to appear in a Korean police office, Korean prosecutors office or to appear as a witness or a criminal defendant in a Korean Court and should be thoroughly prepared by their attorneys. We at IPG, hear of too many issues of lawyers, only, telling clients to “tell the truth and don’t worry.”  This is, obviously, not adequate witness or suspect preparation.  We see this from Korean law firms large and small.  Thus, the following list was prepared as a basic guide to necessaries prior to coming before a Korean Court, prosecutor or police investigator.  Please retain an attorney that has experience preparing clients for witness questionings and suspect interrogations – it is sad to note that few Korean attorneys have experience preparing even criminal defendants for court.   The reality is, however, that all

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Korean Governmental Regulations Stifle Innovations and the Role of Korean Law Firms

The Korea Joonang Daily has a good piece concerning the effect of over-regulation on Korean innovation. The article brings to my mind the important role Korean Law Firms should play in preserving economic and individual liberties (basic rights). The reality is without a strong push in the National Assembly (which seems hopeless) the, only option is the courts.  As many readers may know, I formerly worked for the Constitutional Court of Korea.  The Constitutional Court can be a useful tool in fighting the numerous useless, unnecessary, peculiar and often simply non-nonsensical Korean regulations. The answer to this issue, thus, may be to encourage the few proactive, unconflicted and experience Korean Law Firms with experience with complex contentious litigation to take these type cases to the Court.  Korean Law should grant the right to courts to award attorney fees to prevailing lawyers for a sum that is commensurate with the actual cost of

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Korean Commercial Liens versus Korean Civil Liens

Korea, in short, has two major types of liens – Commercial Liens and a Civil Liens.  For example, in a dispute between a contractor and a landowner or developer, a contractor make execute a Commercial Lien or Civil Lien.  A Commercial Lien is governed by the Korean Commercial Code while a Civil Lien is governed by the Korean Civil Code.  I shall for ease, utilize the contractor and landowner (developer) for example purposes only.  For explanation of Korea’s law on attachment please see: Preliminary Attachments in Korea Korean Civil Liens Korean Civil Liens are governed by the Korean Civil Code.  The code mandates that the contractor, to execute the lien, must be in possession of the subject property and the monetary claim must have a nexus to the subject property.  It is interesting to note that the subject property does not need to be owned by the debtor. Korean Commercial

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Provisional Attachments of Assets in Pending Litigation in Korea Courts

A party attempting to collect on a debt or potential liability based on breach of contract or torts in Korea may obtain a Provisional Attachment of an Asset. Another useful tool to expedite proceeding in a Korean civil matter is to Obtain a Payment Order from a Korean Court.  A provisional attachment is considered provisional, since the attachment is executed prior to the final judgement. The, facial, purpose of a provisional attachment is to secure assets necessary for enforcement in cases where a defendant may conceal or dispose of assets. However, a provisional attachment, often, encourages settlement. We advise most creditors attempting to enforce a debt or potential debt against a debtor is to obtain a provisional attachment if the debtor is a company or individual without significant tangible assets.  Companies with significant assets are likely to pay debts after a judgement and, normally, are not significantly harmed by the attachment.   Courts

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Korean Statute of Limitation in Civil Cases in Korea

The period of the Korean statute of limitation varies based on the type of wrong/breach, type of parties to the case and details of the matter.  The list below is a non-exclusive list of the major Korean Statute of Limitations. The following is an overview of the major periods of the statute of limitations in Korea.  Statute of Limitation law is considered a part of the substantive law and not mere procedural law in Korea.  The following is a list of the major Korean statute of limitations.  The list is not exhaustive.   10-Year Statute of Limitation in Korea Contractual Claims not involving “commercial activities”; and Contractual Claims not involving “commercial” litigants. 5-Year Statute of Limitation in Korea Contractual Claims involving “commercial activities”; and Contractual Claims involving “commercial” litigants. Three-Year Statute of Limitation in Korea Insurance claims; Tort claims; Salary claims; and Rent claims; One-Year Statute of Limitation in Korea Hotel

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English-speaking Korean lawyers and International Lawyers at International Law Firm in Korea discussing issues of Korean Law

IPG Legal is a leading client-focused international law firm with offices in Korea that is, often, selected over the ubiquitous Korean Law Firms when success is essential and success depends on nuanced street-smart advice, proactive  and unconflicted representation. Our attorneys are, intentionally. different from the crowd.  From our retired judge partners to our junior associates, we are all trained with an intense focus on client success, lawyer proactivity, and to understand the nexus between your commercial and legal needs. Our attorneys shall never push to you useless memos, non-nuanced legal advice or get you into litigation without an honest assessment of the merits and shortcomings of the matter. We are  – intentionally different from the crowd.  Globally Experienced – Locally Connected.  We are IPG.  Korean Legal Practices Korean Antitrust, Competition & FTC Arbitration, Int’l & Domestic Korean Civil Litigation Korean Criminal Defense Korean Corporate Law & Compliance Korean Employment, Labor &

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Liquidated Damages vs. Penalty Damages: Korean Contract Law Basics

Liquidated Damages v. Penalty Damages in Korea In Korea, liquidated damage clauses in South Korean contracts may be invalidated if the liquidated damage amount is deemed, by a Korean court of law, as “unduly excessive.” (Civil Act Art. 398(2)). Article 398 of the Civil Act may be found below.  Korean Liquidated damages law is governed by the Civil Act of Korea and related Korean Law. However, if an agreement, in Korea, notes a “penalty,” the amount of the “penalty is presumed to be determined in advance of the damages” (Civil Act Art. 398(4)) and is presumed valid.  Of course, the difference between “liquidated” and “penalty” damages, thus, would seem critical.  However, presently, in Korea, form is prevailing, in most cases, over substance. Liquidated damages, according to Korean courts, are damages where the parties contract with the intent to compensate the non-breaching party for the actual damages caused.  While, a penalty

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English-Speaking Arbitration Attorneys in Korea

International arbitration between Korean companies and American, Australian, British, Chinese, Indian, German and other nation companies is on the increase.  Regrettably, few Korean attorneys are capable of handling international arbitration cases in the English language, because of the lack of experience in complex international arbitration and the lack of adequate English language skills.  The reality is Korea has few English-speaking arbitration attorneys capable of handling complex international arbitration matters, thus, many firms have turned to foreign attorneys to fill this glaring gap.   Sean Hayes is the author of the he Korean Law Blog .  English-speaking Korean attorneys contribute to this blog.  Sean Hayes, his retired Korean judge partner, a senior associate and other international attorneys for IPG are engaged in international arbitration at the Korean Commercial Arbitration Board and other international arbitration board for multinational companies for cases against Korean companies.   Clients engaged us for construction, manufacturing, joint venture and

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Korean Government Official Prosecuted in U.S. for Violation of Korean Law? Application of Korean Law in U.S. Courts

Is it really true?  A foreign government official may be prosecuted in the United States for the violation of a non-U.S. law – Yes/No – not exactly. A Korean working for a Korean government research center was, recently, found guilt of U.S. federal money laundering in a U.S. Federal Court.  The individual was convicted of utilizing the banking system of the United States to store and transfer illegal obtained funds.  The funds were deemed illegally obtained under Korean Law.  So yes, the interpretation of Korean Law was necessary. According to a Press Release by the Central District of California’s U.S. Attorney’s Office: “A former director of South Korea’s Earthquake Research Center at the Korea Institute of Geoscience and Mineral Resources (KIGAM) has been found guilty of using a Southern California bank account to launder bribes he received from two seismological companies, including one based in Pasadena. Heon-Cheol Chi, 59, of

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Korean Product Liability Act Amended to Include Punitive Damages & a Relaxed Burden of Proof

The Amended Product Liability Act of Korea was published in April of 2017.  This Korean Product Liability Act shall be promulgated in April of 2018.   The major amendments to the Act are: Allows Judges to Award Punitive Damages; and  Lowers the Burden of Proof. Punitive Damages in Product Liability Cases in Korea The present Korean Product Liability Law limits damage to the actual damages incurred, thus, not allowing a judge to award punitive damages. This reality has led to few product liability cases being prosecuted by consumers, because of the conservative calculation of “actual damages” in Korea and, thus, a belief suing, in Korea, large manufacturers leads to nothing but a legal bill and a small damage award. The Amended Korea Product Liability Law, however, allows a judge to grant punitive damages if: (a) the manufacturer of the product in question had knowledge of the defect; (b) the manufacture

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Getting a Divorce in Korea: Hire an English-Speaking Korean Divorce Lawyer?

The following Korean divorce information is provided by the Seoul Global Center.  Non-Koreans are capable of obtaining a divorce in Korea even if no party to the divorce is a Korean national.  In most cases you will be required to hire a proactive English-speaking Korean Divorce Lawyer. However, in many divorce cases, no divorce attorney in Korea will be needed.  However, in most cases involving non-Koreans, it is advisable to seek assistance from a divorce lawyer in Korea, because of the need, often, for among other things, a detailed marital separation agreement prior to divorce, language issues and the inability of the parties to resolve all matters in an amicable manner. I n all but the most contentious of divorce actions, the legal fees will not be a great burden. The following is a clip of the advice noted by the Seoul Global Center on the Seoul Global Center Blog. 

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Establishing Business with Korea via an Agent: Korean Agency Law Basics

For some companies wishing to establish business with Korea, the use of a commercial agency relationship may be an ideal way to establish your business presence in Korea. An agent relationship is often ideal when a company seeks to sell its products in Korea, but wishes to first evaluate and familiarize itself with the Korean market prior to establishing a distributorship relationship or establishing a legal presence in Korea via a subsidiary. In Korea, there is no one piece of enacted legislation dedicated solely to agency law.  Rather, provisions pertaining to agency are found interspersed in various pieces of legislation, mostly within the Korean Commercial Code (“KCC”) (also known as the Korean Commercial Act) and Civil Act (often referred to as the Civil Code). The Korean Commercial Code sets out certain provisions that apply to the relationship between a commercial agent and principal. The KCC defines a “commercial agent” as

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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 are commencing a relationship, thus, with an immediate potential for failure. Thus, many disputes are caused by the realization by the non-Korean party that he/she doesn’t need the Korean party and the realization by the non-Korean party that the Korean party had no intent, at signing, in following the joint venture agreement.   Do You Need a Korean Joint Venture to Succeed in Korea? We find that a joint venture is,

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Non-Registered Company Director (Executive Director/Senior Managerial Worker) in Korea deemed Employee under Korean Labor & Employment Law

Article 27 of the Labor Standards Act of Korea stipulates that all “employees” must be notified in writing of the reason for dismissal.  In most cases, 30-days notice or 30-days pay in lieu of notification is required.  Employees may, also, only, be terminated for “fault attributable to the employee” or “urgent managerial necessity.”  The burden is on the employer to prove “justifiable grounds for termination.”  All good proactive employment lawyers in Korea have detailed programs in place that assist in justifying termination.  However,  sadly, it is very difficult to find good proactive employment lawyers in Korea. Directors are, typically, not deemed “employees” under Korean Law.  However, exceptions exist.  We wrote an article on these exceptions at: Factors in Determining if a Worker is an “Employee” under the Korean Labor Standards Act of Korea. A recent cases filed against TongYang by an unregistered “director” sheds light on the risks associated with terminating

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Director Liability Insurance in Korea: Follow the Oxy Reckitt Beckiser

A great lawyer is hard to find – a lawyer is too hard to lose. The best lawyers, in Korea, often don’t work for the ubiquitous/”leading” law firms, because of Korean realities.  This is known by many Koreans and it is why Koreans shop around for the best lawyer for the specific case. Too often, we see foreign defendants in criminal cases that choose to maintain the same “corporate” firm for criminal matters.  This is not always the best move and we can see in many of the most noteworthy cases that this is not, always, the rule.  Realize that you are hiring a lawyer – not a law firm. Also, realize that a proactive, non-conflicted, aggressive and respected lawyer is essential for all criminal defense matters.  These lawyers are hard to find in Korea, especially when we consider that these lawyers, typically, need to be very senior retired judges

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Enforcement of Sales Promotions by Franchisors under Korean Franchise Law

Can an international franchisor force a local Korean franchise to cut the prices of a product via a sales event? This issue was addressed by the Korean Supreme Court in 2003Du7484.  In this Supreme Court of Korea case, a franchisor, among other things, mandated via the franchise agreement for a franchisee to hold sales events.  The franchise agreement did not specify the specific details of the sales events. The franchisor elected to utilize the clause in the franchise agreement to force the franchisee to initiate a sales event – the franchisee refused and, thus, the commencement of the dispute. The Supreme Court opined that: “A franchise business means a continuous business relationship in which a franchisor allows franchisees to use its own trademarks, service marks, trade names, signs, or any other business marks in selling goods (including raw materials and auxiliary materials) or services in conformity with certain quality standards

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Waivers of Liability in Korea: Civil Liability Basics

Waivers of liability, in Korea, are often deemed invalid by courts when the actions of the business is considered negligent by the Korean court.  Thus, the signing of a waiver does not, often, preclude the ability to sue or be sued. However, it is still advisable for a company operating in a business that is inherently dangerous to have liability waivers in contracts with their customers (e.g. scuba, paragliding, and skiing). In most cases, the courts will deem the waiver to be limited to injuries caused, directly and soley, by the actions of the injured plaintiff. Thus, for example, if you are skiing and you hit a tree that you claim was negligently placed too near to the exit of a ski lift, you likely, will lose the case, since the injury was caused by your actions of skiing into the lift.  This assumes that the lift or tree was

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Legal & Accounting Assistance for Startups in Korea

My law firm is, regrettably, not known for assisting SMEs and startups, because of our representation of your lawyers working with some well known multi-national companies. However, we do have a number of forward-thinking startups and SMEs that we assist in Korea and in China.  We love working with these companies, since we love being an active part in developing systems within businesses that allows growth with less of the compliance risks. We, also, love being a part of the business of companies.  Many of our attorneys and business professionals have experience with managing companies and assisting companies to find new opportunities and we love to see this experience help our clients succeed. For example, we work with: A 50 employee American online advertising agency; A startup British cyber-security company; A startup American mobile technology company; A startup Chinese entertainment company; A 15 employee American-owned grocery store; A 5 employee

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The Law of Self-Defense in Korea: Criminal Law Basics in Korea

The affirmative defense of self-defense is available in Korea.  A court, in Korea, that rules that an act was perpetrated in self-defense must dismiss or mitigate the punishment of the defendant. Typical Korean Court Criminal Act Article 21 (Self-Defense)(1) An act which is performed in order to prevent impending and unjust infringement of one’s own or another person’s legal interest shall not be punishable if there are reasonable grounds for that act. (2) When a preventive act has exceed normal limits, the punishment may be mitigated or remitted according to the extenuating circumstances. (3) In the case of the preceding paragraph, an act performed through fear, surprise, excitement, or confusion in the night or under other extraordinary circumstances shall not be punishable.  Regrettably to many, Korea interprets the preceding Article 21 of Korea’s Criminal Act very narrowly.  There is, only, one reported cases in the past 25 plus years where

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