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 by an experienced and proactive attorney that has on-the-ground experience in Korea.  We see too many issues that could have been easily resolved by a carefully drafted agreement and a little due diligence. Issues to consider for your Korean Distribution Agreement: Will your distributor in Korea be your agent?  If the Korean distributor is an agent, generally, you will, only, be paying your agent in Korea a commission and you

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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 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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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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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 and proactive attorney that has on-the-ground experience in Korea. We see too many issues that could have been easily resolved by a carefully drafted agreement and a little due diligence. Issues to consider for your Korean Distribution Agreement: Will your distributor in Korea be your agent? If the distributor is an agent, generally, you will, only, be paying your agent a commission and you will be directly invoicing the client.

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Does Korea have Common Law Marriage?: Korean Common Law Marriage (De Facto Marriage) Basics

While the concept of a Korean Common Law Marriage (since Korea has no concept of a Common Law) does not exist, Korea has a similar law than the laws, in the States, often referred to as Common Law marriage.  FYI – few U.S. States recognize common law marriage. In Korea, the concept of Common Law Marriage is referred to as De Facto Marriage.  In Korea, all “legal marriages” are marriages that are registered at the local town office or recognized via marriage abroad (comity).  The De Facto Marriage is a limited exception to this “legal marriage” concept.  The following is a basic explanation of the major relevant aspects of Korea’s De Facto Marriage Law. Korean Common Law Marriage (De Facto Marriage in Korea) Situations A De Facto Marriage is recognized by a Korean Court, typically, in three different basic situations: The couple has publicized, announced or otherwise outwardly showed their

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Korean Criminal Law: Double Jeopardy in Courts in Korea

The double jeopardy protection afforded by the Korean Constitution in Article 13 is applied in a different manner than in, most, common law nations.  The application, in Korea, allows the prosecution to have three chances to obtain a guilty verdict. For example, in the United States, a defendant may not be tried for the same or similar offense, within a specific jurisdiction, when a “conclusion” is made in any court. Thus, if a jury or judge finds a defendant not guilty, the prosecution may not bring the same or similar charges against the defendant. However, if all jury members are unable to come to the same conclusion (thus, some vote guilty and some not guilty), the jury is deemed “hung” and the prosecution may request another trial. In Korea, the rules is, essentially the same, however, the application of the “conclusion” determination is different. A “conclusion” of the case is,

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Deportation after Criminal Conviction in Korea: Korea Immigration Law Basics

Korea’s Immigration Services has increased enforcement/deportation actions against foreigners convicted of crimes.  Upon exit from Korea, the Immigration Service has been instructing individuals to report to Immigration with the written judgment and confirmation that the fine (if any) was paid in full.  These records may be obtained from the Prosecutor’s Office. We advise reporting to Immigration, only, after an attorney reviews the matter and, potentially, writes a legal opinion to the Immigration Services of Korea.  If you live in the majority of the areas of Seoul, you should report to the Enforcement Unit on the 6th Floor of the Mokdong Immigration Office. When choosing to plead guilty to a crime, please be aware that the choice may subject you to deportation.  Immigration has, frequently, deported for fines over KRW 2million and crimes that lead to suspended jail sentences or a greater sentence.  If you attorney advises you to plead guilty

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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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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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Motor Vehicle Accidents/Negligence Cases in Korea

Regrettably, many Korean insurance companies, in Korea, are less than generous in offering settlements to unrepresented parties in injuries sustained by car, trucks, taxis and trucks.  The various Taxi Associations’ insurance coverages are, particularly, notorious. The Korean insurance companies utilize an internal calculation method that leads to a settlement compensation amount that, often, is laughable at best.  The claims adjusters, at Korean insurance companies, are great at getting victims of motor vehicle accidents and other accidents, in Korea, to settle matters. Often, the claim adjusters will meet the accident victims in the hospital and use psychological tactics to encourage the accident victim to settle the matter for an amount much less than what would be obtained via a court judgment or negotiation with a Korean attorney. For modest amounts of damages, an attorney in Korea may not be a cost that is justified, however, for any matter that has lead

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Korean Arbitration: An Introduction

Korean Arbitration has come a long way since the ratification of the New York Convention in 1973. The Korean Commercial Arbitration Board (KCAB) went from a small organization handling a handful of cases to, now, and organization handling hundred of arbitration cases each year. The number of international arbitrations is, also, on the rise. This article shall give readers the backstory of how Korean arbitration as a dispute mechanism tool has developed over the years in Korea; review the key industries involved in arbitration; and provide a quick overview of the mainstay arbitration institution in Korea: the KCAB. 1973 – 2020: Arbitration in Korea Over the Years The Korea Arbitration Act was enacted into law in 1966. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, aka the “New York Arbitration Convention” or “New York Convention,” is the Magna Carta of international arbitration. The New Arbitration Convention was

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Challenging an Arbitrator at the Korean Commercial Arbitration Board

In our last post we discussed, at length, the benefits of arbitration in Korea over litigation in a Korean court. We shall be updating the reader of numerous issues related to arbitration over the next couple of weeks. The following posts concerns challenging of an arbitrator at the Korean Commercial Arbitration Board. Thus, what happens in a situation when you, as a party in a Korean arbitration, feel that the arbitrator is acting in a manner inconsistent with his or her duties as an arbitrator? At a minimum, all arbitrator should be “independent and impartial” and “capable” – the vast majority of arbitrators are independent, impartial and capable. However, issues can sometimes arise that require the challenging of the arbitrator – we suggest proceeding with caution and care – an unsuccessful challenge can, of course, prejudice your case. Impartiality/Independence of an Arbitrator in Korea Korean Law lays out the duties

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The Case for Arbitration over Litigation in Korea

Many of you are prospectively weighing the options of executing contracts with and without arbitration clauses in Korean contracts (aka setting yourself up for prospective litigation battles in Korean courts or resolving a dispute in Korea with the help of an arbitration panel). Thus, this article is intended to consider the option of arbitration over litigation in Korea. In most cases, IPG recommends arbitration over litigation for expat companies doing business in Korea and/or with Korean companies. While of course every case is unique, we at IPG have found great success over the years fighting for our clients amidst the backdrop of arbitration. Our Korean International Arbitration Team was, recently, ranked the top Dispute Resolution Firm in Korea. Benefits of Korean Arbitration over Litigation in Korean Courts Language: If you are not a native to Korea, there is a high chance that you do not speak the Korean language fluently

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Can a Foreign Company be Deemed a Domestic Company for Tax Purposes and Taxed on Worldwide Income?

If Korea deems a foreign incorporated company a Domestic Corporation, the company shall be taxed on its worldwide income.  The relevant law, this determination is made under, is the Corporate Tax Act of Korea (“CTA”).  In the typical case, the National Tax Service of Korea designates the foreign-incorporated company a Domestic Corporation and requests details on overseas earnings in order to impose taxes on overseas earnings.  Of course this leads, invariable, to your Korean tax lawyer challenging the determination to the Korean courts. Domestic Company Tax Residency Test in Korea The Korean Corporate Tax Act defines a Domestic Corporation as a corporation with: Headquarters within Korea; or  Actual Business Management Place in Korea.  Disputes, normally, concern the definition of Actual Business Management Place after an imposition of a tax on worldwide income (often based on funds being forwarded to the parent company by the Korean company – E.g. license fees) and

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Korean Tax Incentives for 2020: Korean Tax Law Updates

Because of increased tax liabilities of many companies in Korea and because of perceived deteriorating market conditions, the Korean government implemented programs that may assist some SMEs, and larger companies doing business in Korea. Numerous conditions apply for each of these incentive/abatement tax programs below. The following is, only, intended as a basic explanation of the programs that may be available to businesses operating in Korea. Tax Support for Investments in Korea Investments in facilities that “improve productivity” shall receive an increased tax credit for a period over two years. For large businesses, there shall be an increase from 1% to 2%; medium-sized businesses, from 3% to 5%; and small businesses, from 7% to 10%. Relaxed standards for family business inheritance tax deductions. After-care periods shall be reduced from ten years to seven years. For seven years, the business is required to maintain its present headcount or aggregate payroll. Expansion

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Korea’s Virtual Assets/Cryptocurrency Law

For those who may not know, cryptocurrencies/virtual assets (the best known of them, at the moment, is Bitcoin), are digital representations of value that can be digitally traded or transferred. When holders are using these currencies the transaction, in short, the use is via Blockchains (in short, a decentralized databases). South Korea has been at the forefront of the global cryptocurrency boom and its spread has permeated through all levels of society. Statistics from 2017 show that more than one third of employees in Korea were active investors in various cryptocurrencies. The Seoul City government even launched their own currency called “S-coin” in November of 2019. However, despite all the hype surrounding cryptocurrencies in Korea, the market was almost completely unregulated leaving open the possibility for unchecked money laundering, the purchase of illegal goods and frauds. perpetrated on the population. That all changed on March 6, 2020 when the Korean National

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Amendment to the Korean Immigration Act Supports Foreign Children in Cases of Child Abuse

In early April 2019 the Chair of the Legislation and Judiciary Committee proposed an Amendment to the Immigration Act of Korea , with the facial purpose of implement more supportive regulations to assist foreign children that are victims of child abuse. Please note, unlike in the United States and some other Western countries, being born in Korea does not, automatically, grant you the right to Korean citizenship. The Amendment shall be effective upon promulgation. For an article on deportation from Korean please see: Korean Immigration Deportation, Departure/Exit Orders. For an article on challenging a decision of Immigration please see: Challenging a Korean Immigration Order at the Administrative Court of Korea. Major Provisions of the Amendment to the Korean Immigration Act To lessen the burden caused by a complex and lengthy Korean Immigration process, the Legislation & Judicial Committee decided to propose this Amendment to Korea’s Immigration Act. The salient parts

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Employment Support for Disabled Soldiers in the Line of Duty as per the Amended Korean Act on the Management of Civilian Personnel in the Military Service 2019

The bill on the Amendment to the Korean Act on the Management of Civilian Personnel in the Military Service (hereinafter as “Amendment to the Act on Civilian Personnel in the Military Service” or “Act”) was passed by the Korean National Assembly on March 28, 2019. The Act is intended to improve the financial and work-related recovery of Korean military soldiers, which are disabled by an injury during military service. History and Legal Background to the Amendment to the Act on Civilian Personnel in the Military Service of Korea The main trigger for the amendment was an accident in 2016, where a young man lost his leg due to a land mine near the Korean Demilitarized Zone. The man was injured during his mandatory military service. Compensation for Disabled Military Personnel The Korean Military Pension Act provides, inter alia, a retirement pension, a severance pay and a pension for wounds (compare

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Fleeing Korea while under Police/Prosecutor Investigation: International Hold in Korea

From changes a couple of years ago in the computer system and policy of the Korean Immigration Services, even if the Korean prosecution/police have not requested that an accused be placed on an International Hold, some records of police investigations, indictments and proposed fines and sentences by the prosecution/police are being reported to the Korean Immigration Service at airports and ports of departure. An International Hold, in Korea, is an official procedure that flags passports and fingerprints & prevents one, under this International Hold, from departing Korea prior to the lifting of the International Hold. Even if you are not under an official International Hold, Korea Immigration may refuse your departure or entry into Korea based on information from data being shared between the Police, Prosecution, National Tax Service and other Korean government agencies.  Please note that the Korea Immigration is a branch of the Ministry of Justice. The Ministry

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IPG’s Sean Hayes Received the Highest Lawyer Rating from AVVO for his Work on International Legal Issues

IPG is proud to announce that Sean Hayes received the highest rating from AVVO. Avvo is an American attorney rating site and information portal. AVVO is one of the largest and most respected attorney rating sites in the United States. Sean, frequently, receives top ratings from legal rating services for his international law work. His law firm was, recently, rated South Korea’s Top Dispute Resolution Law Firm of the Year. Sean Hayes is a member of the NY Bar. Sean Hayes The articles in this blog are brought to you by Sean Hayes, retired judges, senior Korean attorneys and other attorneys/professionals at IPG and from associated law firms and consulting companies. IPG Legal is often chosen by clients when non-conflicted and aggressive representation is essential for success. Sean is the first non-Korean to work for the Korean Court System and one the first non-Koreans to be a regular member of a Korean law faculty. Sean was, recently,

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