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NewsletterA Quarterly Update of Legal Developments in Korea

NEWS

UPDATES CORPORATE

Venture Holding Companies to Get a Boost under the Upcoming Competition Law Overhaul

ANTITRUST & COMPETITION

KFTC Publishes Proposed FTL Amendment Bill

KFTC Announces Action Plan to Eliminate Unfair Distributor Transactions

KFTC to Amend the Enforcement Decree of the Subcontracting Act

SECURITIES

National Assembly Passes Bill to Revive the Corporate Restructuring Promotion Act

FSC Announces Plans to Improve Short Sale Regulations

INSURANCE

FSC Chairman Choi Announces Policy Direction for Supervision of the Insurance Industry, Including Comprehensive Consumer Protection Plan

FSC Announces Reforms to Ease Regulations for Entering the Korean Insurance Industry

Article Prohibiting Financial Support for Operating Labor Unions Found Unconstitutional

Korean Supreme Court Sets Rules for “International Panels”

Financial Services Commission Announces “Plan for Expansion of Cloud Usage in the Financial Sector”

Kolmar Korea Acquires CJ Healthcare for KRW 1.3 Trillion

Samsung Life Insurance and Samsung Fire & Marine Insurance Sell Shares in Samsung Electronics Valued at KRW 1.3 Trillion

L’Oréal Acquires Korean Fashion and Beauty Brand Stylenanda from the Founder for KRW 600 Billion

Court Rules a Social Commerce Seller’s Delivery of Its Product to a Consumer May Not Be Considered Engaging in the Trucking Transport Business

Kim & Chang Successfully Defends Against KFTC’s Investigation on Several Music Companies for Alleged Copyright Infringement Collusion under the Fair Trade Law

Hanwha Life Insurance Issues the Largest Offshore Offering of Subordinated Capital Securities by a Korean Financial Institution since 2008 Financial Crisis

Supreme Court Rules in Favor of Taxpayer on Requirements for Tax Qualified Spin-off

For the First Time, the Supreme Court Rules that Interest Rates of Subordinated Borrowings Can Be Recognized as Market Interest Rates under the Corporate Income Tax Law

Singaporean Real Estate Asset Management Company, Ascendas Asset Management, Buys KY Heritage Hotel Dongdaemun, the First Four-star Hotel in Seoul

October 2018, Issue 3

SELECTED REPRESENTATIONS

Newsletter

TAX

Key Tax Law Changes Being Proposed for 2019

LABOR & EMPLOYMENT

Recent Legislative Amendments and Trends Regarding the Reduction of Work Hours

ENVIRONMENT

Korean Government Introduces Its 2030 Greenhouse Gas Emission Reduction Road Map

Ministry of Environment Proposes to Impose Charges on Nitrogen Oxide Emission

Amendment to the Environmental Health Act Stipulates Treble Damages for Harm Caused by Environmental Pollution

TECHNOLOGY, MEDIA & TELECOMMUNICATIONS

Korea Communications Commission Launches a Committee Aimed at Resolving Reverse Discrimination on the Internet

UPDATES (Continued) NEWS (Continued)

Only Law Firm in Korea to Be Recognized among Asia-Pacific Law Firms – Acritas “Asia Pacific Law Firm Brand Index 2018”

Top Tier Rankings in All Categories Surveyed – Benchmark Litigation Asia Pacific 2018

Beyond Blocks Summit Seoul 2018

The National Academy of Engineering of Korea’s IP Strategy Forum – “Trade Dispute and IP: Corporate Responses”

The Second Illegal Drug and Medical Device Rebate Prevention and Fair Trade Training Session

Lecture on Managing Legal Risks Associated with Anti-corruption at Legal Risk Management Seminar

AWARDS & RANKINGS

SEMINARS & ANNOUNCEMENTS

Partnering with Korean Women Lawyers Association and Korea Women’s HotLine to Support Child Sexual Abuse Victims

Hosting 2018 Hope Cup Welcome Event for Children from Developing Countries

PRO BONO

Kim & Chang Successfully Defends Korea’s State-ownedEntity in China CIETAC Arbitration Case

October 2018, Issue 3 l 3

Article Prohibiting Financial Support for Operating Labor Unions Found Unconstitutional

On May 31, 2018, the Constitutional Court of Korea held unconstitutional the section prohibiting the “provi[sion] [of] financial support for operations of labor unions” in Article 81-4 (the “Article”) of the Trade Union and Labor Relations Adjustment Act (“TULRAA”) (amended January 1, 2010). The amendment must be made by December 31, 2019, and the Article will continue to be effective until the amendment.

Background:

The Supreme Court had previously adopted a narrow stance on providing financial support for operating labor unions, stating that any periodical or fixed financial support that is not under the exceptions listed in the Article constitutes unfair labor practices.

The exceptions listed in the Article are: (i) contribution of funds by an employer for the welfare of workers or for the prevention and relief of economic misfortunes or other disasters; and (ii) contribution of funds by an employer to provide a minimum space for a labor union office (Supreme Court Decision 2011du13392, December 12, 2017).

Details of the Decision:

The Constitutional Court found that the Article’s prohibition on providing financial support for operating labor unions: (i) goes beyond the legislative purpose of securing the autonomy of labor unions (apart from the two exceptions listed in the Article) by uniformly prohibiting employers from providing financial support for operating labor unions; (ii) discourages the activities of labor unions or prevents labor unions and employers from discussing such financial support designed to create favorable and cooperative relationships; and (iii) such prohibition ultimately violates the intent of the

Three Fundamental Workers’ Rights to realize de facto labor and management autonomy, and thus invades the collective bargaining right of labor unions.

Nevertheless, the Constitutional Court recognized that if the decision to declare the Article’s prohibition on providing financial support for operating labor unions is deemed unconstitutional, effective immediately, then a legal vacuum could result, where there would be no legal grounds to regulate the provision of financial support for operating labor unions, and thus, potentially impede their autonomy. Therefore, the Constitutional Court held that the ruling to declare such provision in the Article as unconstitutional will not take effect immediately. This enables the Article to remain effective and valid until December 31, 2019, by which time, the Article must be amended.

Significance:

Due to the Constitutional Court’s ruling, providing financial support for operating labor unions will likely be a significant issue when conducting collective bargaining with labor unions, and consequently, employers’ burdens in this regard will likely increase.

In particular, in the case of workplaces with multiple unions, certain minority unions requested employers to provide the same treatment as the bargaining representative union concerning the support for union operations (e.g., operating expenses), but the employers refused such requests on the basis of the Article. Now, due to the Constitutional Court’s new ruling, it has become difficult for employers to make such arguments. As such, employers should take caution during collective bargaining as there is a risk that disputes regarding the violation of the duty of fair representation will increase.

LABOR & EMPLOYMENT

By Weon Jung Kim ([email protected]) and Do-Yoon Kim ([email protected])

Newsletter

Korean Supreme Court Sets Rules for “International Panels”

Under the Amendment to the Court Organization Act, which became effective June 13, 2018, certain courts handling IP cases have been given authority to establish

“International Panels,” or panels of judges reviewing cases in languages other than in Korean, as a way of making Korea a more conducive venue for foreign litigants to bring IP litigation.

To provide further details for implementing the Amendment, the Supreme Court promulgated its “Rules on the Establishment and Operation of International Panels,” which are now in effect. The rules provide some clarity on how these courts will operate the International Panels.

1. Establishment of the International Panels

International Panels have now been established within the Patent Court and the Seoul Central District Court, which handle most IPR disputes in Korea, and cases heard by International Panels will be referred to as “International Cases.” Additionally, there are four other District Courts that are statutorily designated as eligible venues for IPR disputes (i.e., Daejeon, Daegu, Busan and Gwangju District Courts). These courts may establish International Panels as needed based on the number of International Cases that are filed with each court.

2. Procedures for initiating an International Case

At any time before the first hearing is conducted, a formal request to allow a case to proceed as an International Case may be filed. A request for review as an International Case is granted only with the other party’s consent in writing, and only if: (i) at least one party is a foreign party; (ii) if a substantial amount of the evidence in the case is foreign or must be presented in a foreign language; or (iii) the case has some other substantial international connection.

Once a request is made and granted, the case will be assigned to an International Panel for the remainder of that court instance. However, it should be noted that permission to proceed as an International Case must be sought at each level of appeal (i.e., a district court International Case will not automatically continue as an International Case on appeal).

Even if International Case status is granted, if either party withdraws consent, or if holding a foreign language hearing would negatively impact the proceedings in a significant way, then the Court may cancel permission to proceed as an International Case. However, any cancellation of permission would not affect the results of any proceedings that have already taken place as an International Case.

3. Other procedural details for International Cases

Currently, English is the only foreign language which is required to be accommodated in International Cases, but a court may allow other foreign languages upon the parties’ request at its discretion. International Panels will continue to manage and direct the proceedings in Korean, while providing simultaneous interpretation at hearings for anything spoken by the judges or the parties. However, documents written in the permitted foreign languages may be submitted without accompanying Korean language translations, unlike in regular proceedings.

The Court will issue International Case decisions in Korean, and provide translations of the decisions to the parties. However, the Korean decision will be the legally effective document (i.e., for purposes of calculating appeal deadlines, or with respect to any translation errors that may occur in the translated version of the decision).

INTELLECTUAL PROPERTY

By Jay (Young-June) Yang ([email protected]), Duck Soon Chang ([email protected]) and Seung-Chan Eom ([email protected])


Significance / Impact:

The Supreme Court’s new rules provide some guidance regarding managing International Panels and Cases. However, a number of details remain to be clarified by the courts through handling actual International Cases.

The first International Case, a lawsuit filed by an Australian company seeking revocation of a patent rejection decision, is set to be conducted at the Patent Court, and is likely to be closely watched by Korean patent practitioners for further guidance on how International Cases will be handled by courts going forward. Kim & Chang is representing the Australian company in this case.

Newsletter

On July 16, 2018, the Financial Services Commission (“FSC”) announced its “Plan for Expansion of Cloud Usage in the Financial Sector” (the “Plan”).

Background:

Until now, to promote cloud usage in the financial sector, the Korean government has amended the Regulation on Supervision of Electronic Financial Transactions (“EFTR”) and, in 2016, prepared a guideline on the usage of cloud services in the financial sector. However, recently, the financial sector has been seeing an increasing need for additional regulation on the expansion of cloud usage, followed by an expanded linkage of the financial sector with new technologies, such as AI and Big Data. Accordingly, the FSC announced the Plan.

Details:

The Plan mainly entails: (i) expansion of the scope of cloud usage in the sector; (ii) introduction of standards for cloud services; and (iii) reinforcement of monitoring and investigation on the use of cloud services. Notable aspects of the Plan include:

1. Expansion of the scope of cloud usage in the finance sector

Until now, financial institutions have not been able to use cloud services for their information processing systems, as the EFTR only allowed the use of a cloud for “non-significant information processing systems” that do not process personal credit information and/or unique identification information.

However, the FSC’s Plan is expected to ease the relevant regulations to enable the use of cloud services for even “significant information processing systems” that process personal credit information and unique identification information.

2. Introduction of standards for cloud services

In conjunction with the deregulation efforts, the FSC also announced that it will implement standards for the use and provision of cloud services to which cloud service providers will be obligated to conform in order to ensure data protection.

3. Reinforcement of monitoring and investigation on the use of cloud services

The FSC plans to reinforce the general reporting obligations of financial companies regarding the use of cloud services, and to amend the relevant laws to explicitly prescribe their statutory authority to directly supervise and investigate cloud service providers.

Significance:

The FSC is expected to improve all regulations relating to the use of cloud services in line with the Plan, and we anticipate these efforts to likely result in a more active use of cloud services in the financial sector.

Financial Services Commission Announces “Plan for Expansion of Cloud Usage in the Financial Sector”


By Dong-Shik Choi ([email protected]) and Wookil Kim ([email protected])


CORPORATE

Venture Holding Companies to Get a Boost under the Upcoming Competition Law Overhaul

UPDATES

On August 24, 2018, the Korea Fair Trade Commission (“KFTC”) announced a proposal for a comprehensive amendment to the Monopoly Regulation and Fair Trade Law (the “FTL,” and the proposal, the “Proposed Amendment” ) , which contemplates substantial relaxation of the holding requirements currently imposed on venture holding companies (“VHCs”) to encourage corporate investment into venture firms.

In the past, the use of VHCs as a vehicle of venture firm investment has been stymied due to stringent holding requirements, but the Proposed Amendment, if passed, is expected to vitalize such use.

Details:

Specifically, the Proposed Amendment eases VHCs’ holding requirements under the following three scenarios.

1. VHC as a holding company

A key advantage of a VHC under the existing FTL is that it is required to hold at least 20% of the shares in any of its subsidiaries (as opposed to “at least 40%” for ordinary holding companies). This advantage, however, was not often enjoyed due to the restriction on holding companies from holding more than 5% share in unaffil iated domestic companies (which also applies to VHCs). Under the Proposed Amendment, VHCs will no longer be subject to such 5% cap.

2. VHC as a first-tier subsidiary

The current FTL requires a VHC that is a subsidiary of a holding company to hold at least 40% shares in its subsidiaries (by virtue of a rule applicable to all

companies that are first-tier subsidiaries). However, under the Proposed Amendment, a first-tier subsidiary VHC will only be required to hold at least 20% shares in its subsidiaries.

3. VHC as a second-tier subsidiary

The current FTL prohibits a VHC that is a second-tier subsidiary to a holding company from holding shares in an affiliated entity, unless it holds 100% shares in such affiliate (by virtue of a rule applicable to all companies that are second-tier subsidiaries). The Proposed Amendment eases this requirement for second-tier subsidiary VHCs by requiring them to hold 50% or more of their subsidiary’s shares.

Other Aspects to Monitor:

The changes made in the Proposed Amendment was in large part discussed at the Third Ministerial Meeting on Innovative Growth hosted by the Korean government on August 2, 2018 (the “Ministerial Meeting”), which provided a good indication as to the government’s policy direction with respect to VHCs.

The following proposals, while discussed during the Ministerial Meeting, were not included in the Proposed Amendment (but they will likely be considered in future amendments of the FTL or in its Enforcement Decrees):

■ Reducing the minimum asset requirement applicable to VHCs from KRW 500 billion to KRW 30 billion;

■ Counting the shares of “R&D focused” small-to-medium-sized enterprises (“SMEs”) toward calculating the ratio of venture firms held by VHCs (the FTL currently requires the aggregate value of shares held in venture firm shares by a VHC to be 50% or more of the aggregate value of shares held in all of its subsidiaries);

By Jong Koo Park ([email protected]) and Seoyeon Lee ([email protected])

Newsletter

On August 24, 2018, the KFTC published an amendment bil l proposing a comprehensive overhaul of the Monopoly Regulation and Fair Trade Law (“FTL”). The KFTC held public forums to hear from interested parties and government agencies during the mandatory pre-announcement period (ended on October 4), and the KFTC plans to submit the final draft of the bill to the National Assembly in November.

Details:

While the proposed amendment bill, in principle, follows the Special Committee’s recommendations, the KFTC has excluded certain issues in need of further discussion, research, or consensus to be handled separately as long-

term projects. Not excluded is the issue of expanding and reinforcing civil and criminal enforcement measures (newly establishing private individuals’ right to seek injunction, introducing a system for the courts to order the submission of materials related to damages, and increasing the ceiling amount of fines by 100%) due to the close connection with the proposed amendments to the KFTC’s exclusive right to make criminal referrals.

The bill also seeks to bring more traditional fields of competition law, such as cartel enforcement and merger control, in line with global standards, along with even stricter procedural oversight over the KFTC’s discretionary authority.


By Sung Eyup Park ([email protected]) and Wooju Lee ([email protected])

KFTC Publishes Proposed FTL Amendment Bill

■ A two-year grace period from fulfilling the current requirement of holding 50% or more of the aggregate value of shares as stated above; and

■ Extending the grace period (from seven years to ten years) for the incorporation of venture companies (that became a subsidiary of a VHC) into “large business groups.”

For starters, a plan to adopt the proposal of reducing the minimum asset requirement applicable to VHCs as part of the amendment to the Enforcement Decree of

the FTL was specifically mentioned in the KFTC press release announcing the Proposed Amendment. We can expect other proposals listed above to appear in subsequent KFTC-issued press releases.

If passed, the Proposed Amendment may substantially improve and foster the VHC regime. It is advisable to continue to monitor the Proposed Amendment (and the Enforcement Decrees), and analyze the impact and opportunities they present to the business community.


(1) Guaranteeing the respondents’ right to defense and matters regarding due process

Statute of limitations ■ Shortening the statute of limitations from 12 to seven years, with the exception of cartel cases for which it shall remain unchanged (seven years from the end of the cartel or five years from the commencement of the KFTC investigation) in consideration of the long time it takes to process cartel cases.

(2) Reflecting suggestions from the Task Force for Improving the Law Enforcement System

Private individual’s right to seek injunction

■ Introducing a system whereby private individuals can directly seek injunctive relief from the courts against an ongoing unfair trade practice (excluding unfair assistance) without having to go through the KFTC when there is a substantial need for relief.

Court orders to submit materials for damage suits

■ Introducing a system whereby the courts can order the submission of materials to help victims verify the amount of damages incurred in damage suits regarding cartel conduct or unfair trade practices (excluding unfair assistance).

■ Enabling the courts to order the submission of materials, including trade secrets, when it is otherwise impossible to verify the amount of damages incurred, and thus raising the effectiveness of damage suits.

Maximum fine ■ Raising the ceiling amount of fines by 100% for all types of violations, as the current levels were deemed insufficient to deter violations.

1. Key issues and proposed changes

1) Enforcement procedure

2) Competition law

(1) Reducing KFTC’s exclusive authority to make criminal referrals

Partial repeal of KFTC’s exclusive right to make criminal referrals

■ Abolishing the KFTC’s exclusive right to make criminal referrals for hardcore cartels (which account for over 90% of all cartel cases), including price fixing and bid-rigging cartels that are serious violations of the law and cause major consumer damage; this will enable prosecutors to launch an investigation into a hardcore cartel case without the KFTC’s criminal referral.

(2) Proposing a new regulation on information exchange and reforming the merger review system

Information exchange

■ Allowing the legal presumption of agreement when there is apparent uniformity in the acts of competitors and the necessary information for such acts was exchanged.

■ Adding as a new type of prohibited practice an “act of exchanging information on prices, production volume, etc., that substantially restricts competition.”

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2. Implications

1) Enforcement procedure

As both an economic and regulatory agency, the KFTC has always been expected to display administrat ive expert ise and str ictness in carrying out its quasi-judiciary function. When the procedural rules are codified in the FTL, procedural fairness and transparency are expected to improve. Notably, the legislation of the respondents’ right to submit or to make a statement, and the right to counsel are expected to provide more substantive guarantees of companies’ defense rights.

2) Competition law

By amending the penal provisions that are not entirely consistent with the purpose of competition law enforcement, key changes we expect to see include abolishing the KFTC’s exclusive right to make criminal referrals for large-scale cartel cases, agreeing to work even more closely with the prosecutors on the operation of the leniency system, and implementing an even stricter criminal enforcement of competition law.

Also, the addition of information exchange as a type of prohibited practice is expected to expand the definition of collusion, making it more likely that an action can be suspected as cartel conduct.

3) Conglomerate regulation

(1) Stricter measures against expedient means of expanding control

Public interest corporations

■ Prohibiting public interest corporations from exercising their voting rights in their subsidiaries of the same conglomerate. However, when the subsidiary is a listed company, the public interest corporation may exercise its voting rights in that subsidiary within 15% of the total shares, including those held by its specially related persons and entities.

■ The prohibition will not take effect for the first two years following the amendment, during which a public interest corporation will be able to continue to exercise its voting rights for 30% of shares, and the percentage will be gradually lowered to 15% over the next three years.

(2) Stronger regulations against holding companies and misuse of company assets for private gain

Holding companies ■ Raising the mandatory percentage of a subsidiary or a sub-subsidiary’s shares owned by newly established or designated holding companies (including when an existing holding company incorporates a new subsidiary or sub-subsidiary) to restrain the expansion of excessive control through the holding company.

■ Raising the mandatory percentage of shares for listed and unlisted companies from the current 20% to 30%, and from the current 40% to 50%, respectively.

Misuse of company assets for private gain

■ Unifying the criteria for applying regulations against misuse of company assets for private gain to when the owner family owns at least 20% of shares of both listed and unlisted companies (from the current 30% for listed and 20% for unlisted companies).

■ Also applying such regulations to the subsidiaries of companies in which the owner family holds more than 50% of the shares.

(3) Public disclosure of foreign subsidiaries

Foreign subsidiaries ■ Obligating the owner of a conglomerate to make public disclosures relating to the share ownership and cross-shareholding status of foreign subsidiaries having direct and indirect investment in Korean subsidiaries, and to the list of foreign subsidiaries of which at least 20% of the shares are held by the owner family.


KFTC Announces Action Plan to Eliminate Unfair Distributor Transactions

On May 24, 2018, the KFTC announced an action plan, seeking to eliminate unfair distributor transactions (the

“Action Plan”).

Background:

From August to December 2017, the KFTC surveyed approx imate ly 4 ,800 companies and 150,000 distributors (of which approximately 5,900 distributors submitted a response) to better understand the wide range of distributorship models and arrangements in preparing the Action Plan. Based on the survey results, the KFTC determined that distributor transactions present an inherently heightened risk of unfair trade practices by suppliers, because most distributors are small-to-medium sized enterprises with limited resources.

With the Action Plan, the KFTC aims to empower distributors by enabling them to better protect and further their own rights. Further, the Action Plan reflects the KFTC’s active enforcement stance on investigating and penalizing unfair distributor transactions, and promoting best practices based on model distribution agreements prepared by the KFTC.

Details:

Specifically, the KFTC highlighted the following five focus areas to achieve the objectives of the Action Plan:

1. Strengthened detection efforts

The KFTC plans to launch and operate a whistleblowing program, and conduct an annual industry survey to better detect and investigate suppliers’ violations of fair trade practice against their distributors.

2. Strengthened sanctions and scope of violations expanded

The KFTC plans to promulgate new decrees to facilitate stricter scrutiny of violations, and to expand the scope of restricted activities to include: bundling bestselling products and newly launched products; significant decrease of or delay in delivery of products or services; leveraging termination of distribution agreement to impose unfair terms and forcing costs; and demanding the distributors to expand stores or improve the store environment without justifiable reasons.

Thus, it is advisable that companies look into their practices and assess whether any information exchange could be considered as an act of collusion.

3) Conglomerate regulation

Conglomerates should also review and prepare for the amendments regarding public disclosure relating to foreign subsidiaries, stricter regulation

of public interest corporations, higher mandatory percentage of subsidiary shares to be owned by holding companies, and greater number of companies being subjected to the regulation of misuse of company assets for private gain.

Newsletter

KFTC to Amend the Enforcement Decree of the Subcontracting Act

The KFTC announced its plans to amend the Enforcement Decree of the Fair Transactions in Subcontracting Act (the

“Subcontracting Act”), and from July 26 to August 27, 2018, sought public comments.

The proposed amendment will allow the KFTC to request a limitation on the eligibility of a company to participate in public bidding, even if the company was charged only once for unfair determination or decrease in subcontracting fees, or for divulging or misusing subcontractor’s technology.

Key Provisions of the Proposed Amendment & Considerations:

1. Penalty points system strengthened to allow for request to limit public-bidding eligibility

Currently, under the Subcontracting Act, the KFTC must request the relevant agencies to restrict a corporation with more than five penalty points from participating in public bidding or to take other appropriate measures.

3. Encouragement to improve industry practice

The KFTC plans to prepare and promote the use of model distribution agreements tailored for various industries, which will include a unilateral right on the part of distributors to renew the distribution agreement for a minimum of three consecutive years, an allocation of costs and expenses between suppliers and distributors (e.g., supplier will be required to bear at least 50% of all promotional costs and expenses), and a prior notice requirement to notify distributors of any new distributor in their neighborhood.

4. Strengthened distributor negotiation leverage

The KFTC plans to propose a legislation to legalize formation of a union or a similar association among distributors, and to prohibit false or misleading information by suppliers.

5. Expanded and strengthened remedies

The KFTC plans to propose an amendment to the Fair Agency Transactions Act to: (i) allow distributors

to bypass the KFTC and petition the court to stop unfair transactions; (ii) expand the scope of punitive damages to impose punitive damages for malicious retaliatory actions by suppliers; and; (iii) to expand the scope and authority of document production orders (beyond those provided under the Korean Civil Code) to force production of trade secrets where relevant to establishing a damage amount (and if the relevant documents are not produced, the distributor’s allegations will be deemed to be true).

Significance:

The KFTC has recently expressed its intent to more actively investigate and to take enforcement actions against supplier companies that do not adopt the terms and conditions of the model distribution agreements (and accordingly, increased attention to model distribution agreements would be warranted).

Given the KFTC’s keen interest in supplier-distributor relationships and this latest development in announcing the Action Plan, companies with a third-party distributor network are advised to review, assess and address their compliance status regarding distributor arrangements.


The proposed amendment raises the penalty points imposed on unfair determination/decrease of subcontracting fees and divulgence/misuse of subcontractor technology from 3.0 to 5.1, and thus introduces a “one-strike-out” system, requiring the KFTC to submit a request for limiting eligibility for public bidding for corporations with only one charge.

Moreover, the proposed amendment increases the penalty points for fines assessed due to retaliation from 2.5 to 2.6, and thus introduces a “two-strike-out” system, requiring the KFTC to submit a request for limiting public-bidding eligibility for corporations with two fines within three years. Special attention is necessary as a “one-strike-out” system is already in place for a retaliation charge, requiring the KFTC to submit a request for limiting public-bidding eligibility for corporations with one charge for retaliation.

2. New penalty standards for obstruction of written investigation

Under the amended Subcontracting Act promulgated in April 2018, preventing a submission of materials or requesting a false submission of materials in relation to a written investigation constitutes a violation of the Subcontracting Act.

Accordingly, the proposed amendment to the enforcement decree introduces a new penalty standard for obstruction of written investigation, whereby the penalty increases, based on the number of penalties imposed during the preceding three years. The maximum penalty is KRW 50 million for corporations and KRW 5 million for individuals.

■ Corporations: (First violation) KRW 10 million, (second violation) KRW 25 million, (three or more violations) KRW 50 million

■ Individuals: (First violation) KRW 1 million, (second violation) KRW 2.5 million, (three or more violations) KRW 5 million

3. Retention period for technology data extended

The amended Subcontracting Act promulgated in April extended the investigation period from three years after the transaction to seven years after the

transaction for divulgence or misuse of technology data.

Accordingly, the proposed amendment to the enforcement decree increases the retention period for technology data from three years to seven years, if a company requests technology data from its subcontractor.

Thus, companies are advised to take special care in retaining documents in subcontractor transactions.

4. New items to include when requesting technology data

The proposed amendment requires the contractor, when requesting technology data from a subcontractor,to include period of use, date of return or disposal, and method of return or disposal in writing.

Thus, the companies are advised to review the written items in their technology data requests.

5. Eligibility for exemption from the obligation to guarantee payment of construction subcontractor fees reduced

The proposed amendment deletes the provision exempting a company, which received an excellent credit rating from a credit rating company, from the obligation to guarantee payment of construction subcontractor fees.

Construction companies are advised to pay special attention, since the exemption only applies to companies whose cost of the construction project does not exceed KRW 10 million, or when the subcontractor fee is paid directly or through an electronic system.

6. The ceiling for base penalty increased

The proposed amendment increases the base penalty from KRW 500 million to KRW 1 billion for divulgence and misuse of technology data, retaliation, non-issuance of subcontract in writing, and in other instances where the violation amount is difficult to define.

Newsletter

Overall Significance / Impact:

The proposed amendment contains major provisions for government subcontractor transactions and prescribes heavy sanctions for violations. Thus, companies engaging in government subcontractor transactions are advised to carefully review the applicable provisions.

Particularly for technology theft, stricter enforcement action is expected given the government-wide measures, and in practice the KFTC has increased the frequency of inspections. As such, companies are advised to perform internal checks for risks of violation with the new provisions in mind.

SECURITIES

National Assembly Passes Bill to Revive the Corporate Restructuring Promotion Act

By Sun Hun Song ([email protected]), Tae Han Yoon ([email protected]), and Sungjin Kim ([email protected])

On September 20, 2018, the National Assembly passed a bill to revive the Corporate Restructuring Promotion Act (the “New CRPA”), which is expected to be promulgated and take effect in October, and remain effective until the fifth anniversary of its enforcement date, expiring around October 2023.

Background:

The Corporate Restructuring Promotion Act (“CRPA”), which was most recently enacted in 2016, contained a sunset clause, and the CRPA expired as of June 30, 2018.

The terms of the New CRPA are substantially similar to the terms that were in the recently expired CRPA. Under the New CRPA, financial creditors may commence management proceedings against a debtor company without the involvement of the court to restructure the debtor company’s financial claims in an effort to revive the debtor company. As the New CRPA does not restrict the type of debtor companies that may become

subject to the law, all companies may be eligible for restructuring under the CRPA, and any foreign creditors and general creditors who hold “financial claims” will be subject to restructuring under these proceedings.

Significance:

However, unlike the expired CRPA, which exempted financial claims that arose before the enforcement of the law from restructuring under the CRPA, the New CRPA does not provide for any such exemption. Accordingly, creditors who have long-term financial instruments that were not subject to the previous CRPA may also become subject to the New CRPA.

Also, the New CRPA provides for an indemnity clause under which the creditor financial institutions and their officers and employees actively managing the corporate restructuring of the debtor company under the New CRPA shall be exempt from liability, unless they fall under certain exceptions.


FSC Announces Plans to Improve Short Sale Regulations

On May 29, 2018, the FSC announced its plan to improve short sale regulations.

In light of the recent events, such as the incident involving non-existing shares that were sold by a “fat finger,” or naked shares that were sold into the market, Korea has been seeing an increase in the number of proponents advocating for the ban on short selling. Despite the rising public distrust against short selling, since short selling is a globally accepted practice and promotes market efficiency, the FSC has decided to strengthen regulation and oversight over short selling rather than banning it altogether.

Details:

The FSC’s proposed plans include the following:

■ Increase accessibility of retail investors to short sales. ■ Impose confirmation obligations to securities

companies, and have them confirm that the relevant stock has actually been borrowed.

■ Strengthen verification functions related to short sales by linking them with the stock trades/balances monitoring system, which wil l be developed separately.

■ Strengthen detection of short sale violations by developing a market surveillance system.

■ Establish a team dedicated to investigating violations of short sale regulations.

■ Submit an amendment proposal to the National Assembly by the end of the year to adopt stricter criminal sanctions, and impose heavier administrative fines for violations of short sale regulations.

Significance:

Securities companies will need to enhance their internal control systems and review their current transactions in light of the new regulatory regime. In particular, since the regulators have signaled their intention to investigate whether short sale orders and executions comply with the regulations, and impose heavier sanctions for any violations for releasing distrust, companies engaging in short sale transactions should thoroughly review their short sale procedures.

Newsletter

INSURANCE

By Jae-hong Ahn ([email protected]), Hyun Wook Shin ([email protected]) and Il-Suk Lee ([email protected])

FSC Chairman Choi Announces Policy Direction for Supervision of the Insurance Industry, Including Comprehensive Consumer Protection Plan

On May 9, 2018, Jong-Gu Choi, Chairman of the FSC, held a press conference and announced the FSC’s policy direction for supervision of the insurance industry, including improvements to protect consumers and enhance their benefits.

Details of the Announcement:

The FSC plans to expand its organization related to financial consumers to strengthen consumer protection in the financial sector, and to manage and coordinate existing financial policies and businesses from a consumer protection point of view.

To this end, the FSC aims to prepare a comprehensive consumer protection plan by actively searching for consumer protection policies which can tangibly affect people’s daily lives, even before the enactment of the Financial Consumer Protection Act. In connection with the “financial consumer protection status evaluation system” included in the Financial Consumer Protection Act, the FSC announced that it is considering plans to impose penalties or partially suspend a company’s business if its financial consumer protection evaluation is poor, rather than to merely announce the evaluation results.

The FSC intends to focus on improving consumer protection in the insurance sector first, re-examining each stage of the sales process from a consumer protection point of view, from advertising to solicitation to contract execution to payment of insurance premium to payment of insurance proceeds.

Examples Provided by the FSC:

1. Advertising stage: Improve insurance advertisements televised through home shopping channels, etc.

■ Make the form and contents of the insurance advertisements more practical, so that consumers can more eas i ly understand which terms and conditions might be advantageous and/or disadvantageous by simply watching the insurance advertisement.

2. Solicitation stage: Reorganize solicitation channels, including insurance solicitors and insurance agencies

■ Improve the system and commission scheme related to solicitation to prevent poor follow-up management of insurance contracts due to high turnover or frequent retirement of insurance solicitors, and to ensure compliance with laws and regulations at the solicitation stage.

3. Contracting stage: Ensure understandability of the insurance application form, product description, and general terms and conditions

■ Change all terminology used in application forms, product descriptions, and general terms and conditions that are difficult for consumers to understand into easy terminology, and if necessary, enhance consumers’ understanding by using diagrams, examples, and illustrations.

4. Pay-in/pay-out stage: Prepare plans to minimize disputes over payment of insurance proceeds

■ Determine the major causes of disputes and complaints related to insurance, such as refusal to


pay insurance proceeds, reduced payment, and delay in payment, and take steps to resolve these issues.

■ Consider imposing sanction (up to suspension of sales) for insurance products whose terms are

unclear or for insurance products that fail to reflect the contents of the general terms and conditions, especially concerning payment and reasons for refusal of payment of insurance proceeds.

FSC Announces Reforms to Ease Regulations for Entering the Korean Insurance Industry

On May 2, 2018, the FSC announced the “Reformed Regulations on Entry into Financial Businesses” (the

“Reformed Regulations”). The Reformed Regulations were the product of several task force meetings held over the past seven months by the FSC with representatives from various business sectors, including the insurance sector. Focused on making it easier to establish specialty insurance companies, the task force conducted an assessment of the competitive landscape of the overall insurance sector.

Key Reform Measures:

First, the Insurance Business Act will be amended to relax the requirements for establishing low risk short-term micro-insurance companies. Currently, the minimum capital requirement for comprehensive insurance companies is KRW 30 billion; however, this threshold will be significantly lowered in cases where insurance tenors and annual premiums fall below specified levels.

Second, the Enforcement Decree of the Insurance Business Act will be amended to better align relevant regulations and to facilitate business operations of online insurance companies. To do so, the FSC will ease regulations that are not suitable for online operations. For example, to simplify the procedures for online purchases of insurance, the provision of terms and conditions of policy through Internet links will be allowed.

Further, the sale of simple micro-insurance (i.e., insurance relating to the daily life of an individual or a household)

on online shopping malls will be allowed, invigorating online sales channels. The FSC is also considering relaxing the KRW 20 billion capital requirement for online insurance companies.

Third, the FSC plans to take administrative measures to facilitate the establishment of specialty insurance companies, particularly in industries, such as reinsurance and pensions, where there is market demand and profitability can be ensured.

Financial Industry Competition Evaluation Committee:

In addition, the FSC revealed its plan to set up a

“Financial Industry Competition Evaluation Committee” comprised of nine non-government experts to reflect diversity of opinion in its policies regarding entry into the financial industry. The FSC has also declared that it would strengthen the transparency of the FSC’s license authorization procedures. The Committee held its first meeting on July 2, 2018, and proclaimed that the financial regulator will commence implementing the Reformed Regulations within the third quarter of 2018.

Significance:

In light of the above, we highly recommend that insurers closely monitor the development and implementation of the Reformed Regulations along with the implications of the changing landscape of market competitiveness.

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TAX

Key Tax Law Changes Being Proposed for 2019

The Ministry of Economy and Finance and the Ministry of the Interior and Safety announced revised tax bills on July 30, 2018 and October 10, 2018, respectively. The proposed amendments are expected to change in the process of discussions that will be held during the regular session of the National Assembly, and are mostly proposed to be effective for tax years beginning on or after January 1, 2019, i.e., after the amendments are finalized through the resolution of the National Assembly plenary session in December 2018.

Key Amendments:

Some of the significant amendments that may affect your business or may be of interest to you are highlighted below.

1. Corporate income tax

1) Income tax incentives for foreign direct investment abolished [Articles 121-2 and 121-5 of the Special Tax Treatment Control Law]

Tax exemption on corporate tax and income tax is abolished to reflect the OECD standards regarding international tax and to achieve equitable taxation between domestic and foreign investments. Customs duty, acquisition tax, and property tax exemption will continue to be available, while provisions relating to acquisition tax and property tax exemption will be transferred to the Local Tax Incentive Limitation Law.

The revised regulations will be applied to tax exemption applications made on or after January 1, 2019. Tax exemption applications made on or before December 31, 2018 will continue to be eligible for tax incentives under the current provisions.

By Woo Hyun Baik ([email protected]), Christopher Sung ([email protected]) and Sung Sik Kim ([email protected])

2) Provision on priority of income classification under a tax treaty abolished [Article 28 of the International Tax Coordination Law]

The provision on priority of income classification under a tax treaty is abolished.

Under the current law, a tax treaty has priority over domestic tax law concerning classification of Korean source income of a non-resident individual or foreign corporation. In this regard, the Supreme Court has recently determined that if the withholding tax rate is applied to interest income under the tax treaty, but the taxation is considered as dividend income under the domestic tax laws, the interest exemption regulation under the domestic tax laws should not apply (Supreme Court Decision 2015Du2710, February 28, 2018). With the proposed change, classification of Korean source income under domestic tax law will be valid regardless of the tax treaty, and conversely, classification of income under a tax treaty will not necessarily determine its character under domestic tax law.

The purpose of the amendment is not only to resolve the limitation of taxation under the domestic tax laws based on the income classification in the tax treaty (as the decision of the Supreme Court indicates), but also to secure Korea’s broader taxation rights in case of conflict between the domestic tax laws and the tax treaty.

3) New Dividend Received Deduction (“DRD”) rate for a holding company [Article 18-2 of the Corporate Income Tax Law]

The purpose of this amendment is to encourage increased use of holding company structures,


and as such, promote greater transparency and corporate governance. This will be applicable for dividends received on or after January 1, 2019.

2. Value-added tax (“VAT”)

1) Expanded scope of deemed sale treatment for goods supplied for non-VAT-able business purposes [Article 10 (1) of the Value-Added Tax Law]

Exported goods acquired at zero-rate VAT is added to the list of goods subject to the deemed sale treatment when the goods are used for purposes other than the taxpayer’s VAT-able business. The purpose of this amendment is to prevent abuse of VAT exemption or credit. This amendment will be applicable to goods that are used or consumed on or after January 1, 2019.

2) Reduction of VAT penalties [Article 60 (2), (5) of the Value-Added Tax Law]

To streamline the VAT penalties system, the penalties for negligent transmission of electronic VAT invoice is reduced, and the final due date for delayed transmission is extended for goods or services supplied on or after January 1, 2019.

Please note the change in penalty for the non-submission of credit card sales slips: 1% → 0.5% of the supply value.

For negligent transmission of electronic VAT invoice, the penalties are:

■ (Delayed transmission) 0.5% → 0.3% of the supply value: If the VAT invoice is transmitted no later than the final VAT return filing due date of the respective taxable period (the 25th day of the month following the taxable period in which the supply was made).

■ (Non-transmission) 1% → 0.5% of the supply value: If the VAT invoice is not transmitted until after the final VAT return filing due date of the respective taxable period (the 25th day of the month following the taxable period in which the supply was made).

3) New criminal penalty provisions for non-compliant VAT-exempt invoices [Article 10 (1), (2) of the Tax Evaders Punishment Act]

To encourage transparency of VAT-exempt transactions, the taxpayer may be subject to imprisonment of no more than one year or a fine of no more than 20% of the supply value under the following circumstances:

■ Non-issuance or false issuance of invoice; ■ Non-receipt or false receipt of invoice; or ■ False submission of aggregated invoice, etc.

3. Local tax

1) Various exemptions on mergers, spin-offs, etc. revised [Article 57-2 of the Local Tax Incentive Limitation Law]

To continuously support corporate structuralimprovement(e .g. , merger) and enhance effectiveness of exemptions, the following changes to the exemption rate, eligible transactions, and exemption period are anticipated:

Ownership in subsidiaryDRD Rate

Listed Non-listed

Greater than 40%

Greater than 80%

100%

30∼40% 50∼80% 90%

20∼30% 40∼50% 80%

Below 20% Below 40% 30%

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■ Exemption for qualified mergers: 50% of acquisition tax (limited to acquisition of business properties).(*)60% exemption on a merger between SMEs or a merger with a technological innovation business enterprise.

■ Exemption for qualified spin-offs/in-kind contributions: 50% of acquisition tax.

■ Sunset period: December 31, 2021.

Exemptions for qualified asset exchange and comprehensive transfer of assets will be ceased, and this proposed amendment is applicable to tax liabilities arising on or after January 1, 2019.

2) Refund request procedure of withheld local income tax for income recipient and income payer (i.e., withholding agent) introduced [Article 50 of the Local Tax Basic Law]

Unlike the national tax laws, current local tax laws do not have provisions setting forth refund request procedures of the withheld local income tax for income recipient and income payer; they are left with litigation as the only option to appeal excessive collection of local income tax. This proposed amendment attempts to resolve the lack of relevant legislation and to reinforce taxpayer’s rights. If enacted, this amendment would be applicable to taxable years commencing on or after January 1, 2019.

The Amendment to the Labor Standards Act , promulgated on March 20, 2018 (the “Work Hours Reduction Act”), reduces maximum work hours per week (including holidays) from 68 hours to 52 hours. In addition, the Act on the Guarantee of Workers’ Retirement Benefits, and the Enforcement Decree of the Act, were also amended (the “Amendment”). The Amendment established: (i) a requirement for employers to prevent a decrease in workers’ retirement benefits due to the implementation of the Work Hours Reduction Act; and (ii) a reduction of statutory severance payment due to decreased work hours under the Work Hours Reduction Act as a basis for interim statutory severance payment.

Key Aspects of the Amendment:

1. Employers now required to prevent decreases in employees’ retirement benefits

If employees’ wages decrease due to reduced work hours under the Work Hours Reduction Act, employers that have set up defined benefit retirement systems or statutory severance pay systems should notify employees in advance that their retirement benefits may decrease. In addition, employers should consult with the employee representative regarding implementing or converting to defined contribution retirement pension systems,

LABOR & EMPLOYMENT

By Weon Jung Kim ([email protected]) and Do-Yoon Kim ([email protected])

Recent Legislative Amendments and Trends Regarding the Reduction of Work Hours


and/or creating different standards for calculating retirement benefits. A requirement of the same nature was imposed on employers with respect to wage peak systems, reduction in wages, and decrease in prescribed work hours, among others.

The Amendment imposes a requirement of the same nature, and also establishes a fine of up to KRW 5 million for employers that violate the requirement described above.

2. Expanded the basis for interim statutory severance payment

As noted above, the reduction of statutory severance payment due to decreased work hours pursuant to the Work Hours Reduction Act has been added as a basis for interim statutory severance payment.


The Amendment will be enforced at each workplace depending on when the Work Hours Reduction Act applies to that workplace (based on the number of employees in the workplace).

Meanwhile, via a June 20, 2018 press release, the Ministry of Employment and Labor (“MOEL”) announced that it plans to provide a grace period of up to six months for violations of the new work hour limitations, which has become law as of July 1, 2018 (for workplaces with 300 or more workers and public institutions).

The MOEL also announced that “during any judicial process, in addition to investigating the facts regarding any violations of the law, [it] plan[s] to investigate employers’ actions related to compliance with relevant work hour requirements.” This announcement appears to indicate the intent of MOEL to temporarily focus on providing guidance rather than implementing punishment during the six-month period.

In accordance with this policy, it will be necessary to observe how the MOEL will process alleged violations of work hour restrictions through its guidance and the judicial process. This policy does not defer the effective date of the Work Hours Reduction Act itself, and as only a temporary grace period will likely be implemented, employers should use this time to review its practices and minimize the risk of violations before the grace period expires.

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ENVIRONMENT

By Yoon Jeong Lee ([email protected]) and Hyeongjun Hwang ([email protected])

Korean Government Introduces Its 2030 Greenhouse Gas Emission Reduction Road Map

On July 24, 2018, the Korean government announced its finalized plans and efforts to increase regulatory enforcement relating to greenhouse gas (“GHG”) emission.

1. 2030 GHG Reduction Road Map and GHG reduction target increase

According to the 2030 GHG Reduction Road Map amendment announced on July 24, 2018, the Korean Government has increased its GHG reduction target by 2030 to 32.5% reduction from the 2030 business-as-usual (“BAU”) levels (up from the original target of 25.7%). In particular, the reduction target for the industry sector (including steel, machinery, automobile, display, semiconductor, mining) has significantly increased from 11.7% to 20.5%.

2. Emission Permit Allocation Plan for the Second Planning Period (2018-2020) announced

On July 31, 2018, reflecting the contents of the amendment to the 2030 GHG Reduction Road Map, the Ministry of Environment released the GHG Emission Permit Allocation Plan for the Second Planning Period (2018-2020).

Major changes from the First Planning Period include:

■ For 26 business types, 3% of the total allocated emission permits must be purchased through the auction process (but depending on factors such as trade intensity and production cost frequency, certain business types may trade emission permits for free).

■ With the expanded scope of the benchmark method, which utilizes the history of activity data, the complexity of the regulation is expected to increase.

The emission permits for the Second Planning Period will be allocated under the following schedule:

■ By August 2018: Application for allocation by existing facilities.

■ By October 2018: Notification of allocated emission permits to existing facilities.

■ By November 2018: Appeal of emission permits allocated to existing facilities.

■ By December 2018: Finalization of emission permits allocated to existing facilities.

If a business entity becomes eligible for allocation due to an establishment or expansion of facilities, emission permits will be allocated to the facilities once an application for allocation is submitted during the Second Planning Period. However, it should be noted that such allocation to the newly established or extended facilities will be limited by the cap on the total allocation amount.

3. Heightened enforcement expected

The reduction target during the Second Planning Period does not appear to be a substantial increase from that of the First Planning Period. However, with the ultimate reduction target by 2030 fixed, the government is likely to implement stricter standards and heightened enforcement during and after the Third Planning Period (2021-2025). This is especially likely given that the reduction has not been as successful as the government initially expected, and the government did not particularly strengthen its enforcement during the Second Planning Period.


Significance / Recommendation:

Because the costs of implementing the enforcement of GHG reduction are expected to substantially increase in 2021, businesses should obtain the most favorable allocation for the Second Planning Period, as such

allocation would be used as a basis for the allocation for the Third Planning Period. Under these circumstances, it would be necessary for businesses to actively respond to the emission permit allocation for the Second Planning Period and allocations thereafter (e.g., establishing a dedicated team for emission permits).

Ministry of Environment Proposes to Impose Charges on Nitrogen Oxide Emission

The Ministry of Environment (“ME”) recently issued a public notice of a proposed amendment (“Amendment”) to the lower regulations of the Clean Air Conservation Act. Specifically, the Amendment proposes to impose charges on nitrogen oxides (“NOx”) produced in the workplace, in addition to previously regulated air pollutants (such as sulfur dioxides and dusts).

This amendment was prompted due to the continuous rise of NOx in the atmosphere, which has become a matter of great concern after NOx was found to be one of the main causes of fine dust formation.

According to the Amendment, basic emission charges will be imposed on the emission of NOx even in case the emission limit is met. The amount of the charges will be set according to the concentration and amount of the emission. If the emission amount exceeds the emission limit, additional charges will be imposed.

The new emission charges will be imposed in phases. In the initial phase (until year 2020), the NOx emission charge will be imposed on workplaces whose bi-annual average emission concentration exceeds 70% of the emission limit. The reference percentage will be lowered to 50% in 2021 and to 30% in 2022.

The specific amount of the emission charge is determined by several factors, including unit price, charge coefficient by concentration, regional charge coefficient, and annual charges calculation index. The unit price for NOx has been set at KRW 2,130/kg, which is considerably greater than those for dust (KRW 770/kg) and sulfur oxides (KRW 500/kg).

By setting the unit price for NOx higher than the pollutant disposal cost (KRW 1,921/kg), the ME intends to prompt businesses to install and operate air pollution control facilities. For other coefficients, the ME said it will use the same values assigned to sulfur oxides and dust. Considering that NOx constitutes the highest portion of air pollutants (approximately 67%) that are emitted by businesses and that most of businesses in Korea emit NOx, it appears that the Amendment will have a significant impact on the industry.

Significance / Recommendation:

Accordingly, places of business which emit NOx should be aware that once the Amendment takes effect, they will likely be subject to the new emission charges even if they comply with the emission standards. Further, since photochemical reactions of NOx in the atmosphere can increase fine dust levels as well as ozone levels, regulations on NOx emission are expected to continuously strengthen.

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Amendment to the Environmental Health Act Stipulates Treble Damages for Harm Caused by Environmental Pollution

The amendment to the Environmental Health Act (“EHA”), which introduces treble damages (or triple the amount of actual damages) for environmental harm caused by business-related hazardous environmental factors, was recently promulgated and will take effect on June 13, 2019.

Taking into account the difficulty for the public to perceive risks associated with products made from hazardous chemicals, the original bill intended to increase the damages amount by more than ten-fold, based on the responsible company’s intent, recognition of the potential harm, and the hazardous nature of the environmental factors. However, after considering fairness with other laws, among others, the National Assembly instead decided to set the amount to treble damages.

Details of the Proposed Changes:

Although the EHA already has regulations that impose liability for environmental harm caused by business-related hazardous environmental factors, the new amendment will increase the responsible party’s liability for indemnification up to three-fold. Also, according to the amendment, both the cause for immunity and the statute of limitations will become subject to the Product Liability Act.

These changes are measures to clarify the scope of immunity and to increase the liability responsibility of relevant companies. Thus, for harm arising from issues associated with substance accumulation in the human body or from symptoms occurring after a certain period of latency, the indemnification period will be ten years from the date the harm occurs.

Additionally, it should be noted that the amendment to the EHA can also be applied together with the Act on Liability for Environmental Damage and Relief Thereof (“Environmental Damage and Relief Act”). The Environmental Damage and Relief Act establishes the total strict liability limit for damages from environmental pollution, and also estimates the causal relation between damages and the occurrence of the environmental harm. In contrast, the amendment to the EHA lacks such estimation of causal relation and involves increasing the indemnification amount to treble damages.

Therefore, it will be important for companies to distinguish the different laws on which the damages claim is based and respond appropriately.

The EHA amendment will come into force on June 13, 2019. However, the issue of whether treble damages will apply for harm that occurred prior to the enforcement date has not been specified in the regulation, and thus, there may be legal disputes over such ambiguity in the future.


Korea Communications Commission Launches a Committee Aimed at Resolving Reverse Discrimination on the Internet

On February 23, 2018, the Korea Communications Commission (“KCC”) formed the Internet Coexistence and Development Committee (the “Committee”), aimed at resolving the so-called “reverse discrimination” against local Internet Service Providers (“ISPs”) and redressing the “uneven playing field” on the Internet. In consultation with the Committee, the KCC is expected to take legislative measures to improve the regulatory regime governing the information and communications technology (“ICT”) industry.

Background:

In Korea, traditional telecommunications companies with their own networks used to lead the ICT market. In recent years, however, the influence of the so-called value-added telecommunications service providers (“VSPs”), particularly foreign service providers, which provide their services through the Internet on the ICT market, have been steadily growing. Given the increased prominence of VSPs, the National Assembly, media, and industry participants have been continuously raising the issue of “reverse discrimination” and arguing for strengthening the VSPs’ social responsibilities.

The Committee and Its Agenda:

To address these issues, the KCC plans to improve relevant regulations through consultation with the Committee, which has been reported to consist of a total of 48 experts and members from various fields and organizations, including: (i) five members from consumer and civil organization;, (ii) 18 members with media, management, economics and legal expertise; (iii) 12 members from domestic and foreign Internet companies (e.g., Naver, Kakao, Google and Facebook), (iv) two members from professional research agencies;

(v) seven members from related organizations; and (vi) three members from government agencies.

In order to effectively lead discussions, the KCC is divided into two subcommittees. Their main agenda items are:

■ First Subcommittee: Focus on “resolving the reverse discrimination issue” and “improving Korea’s regulatory regime,” and seeks to, among others: (i) strengthen the government authorities’ enforcement power over foreign companies doing business in Korea by introducing, among others, a domestic agent system and a temporary suspension order; and (ii) improve the legal regime governing telecommunications companies by adopting measures to prohibit VSPs’ unfair trade practices and acts that undermine user interests.

■ Second Subcommittee: Focus on the “development of an Internet ecosystem” and “measures for user protection,” and seeks to formulate, among others: (i) policies related to net neutrality and zero rating; and (ii) measures to elicit mutually beneficial coexistence and cooperation between domestic and foreign entities and among large and small-and-medium sized content providers (e.g., measures to address unfair or discriminatory network usage fees).


Since the Committee’s first meeting on February 23, 2018, experts from various fields and interest groups have discussed the above-listed issues on multiple occasions.

Based on the results of such discussions, the Committee plans to present a policy proposal to the KCC within this year. Such policy proposal will likely have a considerable impact on the regulatory regime governing the ICT market in Korea.


By Dong-Shik Choi ([email protected]) and Wookil Kim ([email protected])

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SELECTED REPRESENTATIONS

CORPORATE

Kolmar Korea Acquires CJ Healthcare for KRW 1.3 Trillion

Samsung Life Insurance and Samsung Fire & Marine Insurance Sell Shares in Samsung Electronics Valued at KRW 1.3 Trillion

L’Oréal Acquires Korean Fashion and Beauty Brand Stylenanda from the Founder for KRW 600 Billion

On April 18, 2018, a consortium of Kolmar Korea Co., Ltd. (“Kolmar Korea”) and an asset management company acquired 100% of the shares issued by CJ Healthcare Corp. (“CJ Healthcare”) from CJ CheilJedang Corporation. The deal was valued at approximately KRW 1.3 trillion (USD 1.1 billion). Combining its contract manufacturing operations (“CMO”) with CJ Healthcare’s prescription medicine and health & beauty operations, Kolmar Korea became a full-fledged pharmaceutical company.

As the representative of the consortium and strategic investor, Kolmar Korea needed a comprehensive and in-depth due diligence of the issues specific to the pharmaceutical manufacture and supply industries and the associated legal, financial and tax matters. Financing a deal of its size required using a SPV and an assessment of the risks associated with the complex acquisition, payment, and tax structures.

Kim & Chang successfully advised Kolmar Korea in conducting such due diligence, and in formulating the transaction structure, negotiating the transaction documents, and making the necessary regulatory and tax filings.

On May 31, 2018, Samsung Life Insurance Co., Ltd. and Samsung Fire & Marine Insurance Co., Ltd. (the

“Sellers”), both shareholders of Samsung Electronics Co., Ltd. (“Samsung Electronics”), sold 0.42% of Samsung Electronics shares at a transaction value of approximately

L’Oréal, a global cosmetics group, purchased 100% of the shares of Nanda Co., Ltd. (“Nanda”), known for its blockbuster cosmetic and fashion brand, Stylenanda, from its founder at approximately KRW 600 billion (USD 540 million). L’Oréal pursued Nanda to gain a competitive edge in the color cosmetic makeup sector and to strengthen its business in the Chinese market.

A key negotiation point of the sales price was the “earn-out” provision under which a portion of Nanda’s sales would be paid to its founder for the years following the closing. The post-closing role of the founder as the Chief Creative Officer (“CCO”), and the means by which the sales price was to be shared with the non-shareholding, co-founding executives required a close review and delicate negotiation among the parties involved.

Kim & Chang successfully advised the founder of Nanda to find optimal earn-out conditions and an ideal role as a CCO, which were all aimed at maximizing Nanda’s future corporate value. We also assisted the founder in devising a creative scheme to fairly compensate Nanda’s non-shareholding executives, who had played significant roles in the company’s success.

KRW 1.3 trillion (USD 1.1 billion) through after-hours block trading.

The transaction was an effort by the Sel lers to preemptively eliminate the risk of violating the Act on the Structural Improvement of the Financial Industry, as the Sellers are deemed “financial companies” within Samsung Group, a conglomerate with both financial companies and industrial companies under its umbrella.

Based on its extensive experience and expertise, Kim & Chang provided timely advice to the Sellers in all aspects of the transaction.


LITIGATION

Court Rules a Social Commerce Seller’s Delivery of Its Product to a Consumer May Not Be Considered Engaging in the Trucking Transport Business

In a recent lawsuit filed by parcel delivery businesses (the

“Plaintiffs”) against a person engaged in selling products using social commerce, a subset of e-commerce transaction, (the “Seller”) for damages, the Seoul High Court (the “Court”) reaffirmed the judgment rendered by the first trial court dismissing all the Plaintiffs’ claim, and finally dismissed their appeals in their entirety.

Background:

The Seller purchased products, kept them in a logistics center from a supplier (the “Outsourcing Company”), and sold the products to consumers directly using its own trucks for delivery.

Under Article 2, Subparagraph 3 of the Trucking Transport Business Act (the “Act”), “trucking transport business” means “business involving transportation of cargo by trucks to fulfill requests from third persons for consideration.” Article 3, Paragraph 1 of the Act also provides that “any person who intends to engage in a trucking transport business shall obtain permission from the Minister of Land, Infrastructure and Transport (“MOLIT”), as prescribed by Ordinance of the MOLIT.”

In this case, the issue was whether or not the Seller’s direct act of delivering the products to a consumer is acknowledged as fulfilling requests from third persons, and accordingly, constitutes the Seller’s engagement in the trucking transport business.

The Plaintiffs claimed:

■ The Seller’s direct act of delivering the products to a consumer (the “Delivery”) and returning them back to its logistics center upon a consumer’s request for return thereof (the “Return”) is acknowledged as “fulfilling requests from third persons,” and constitutes the Seller’s engagement in the trucking transport business;

■ Even if it was assumed that this was not an engagement in the trucking transport business, as

the principal selling the products to the consumer is the Outsourcing Company, the Seller is to deliver the products at the Outsourcing Company’s request; and

■ In addition, the Delivery and the Return is an act of providing the Seller’s passenger truck for the parcel delivery service for consideration.

Our Representation & Significance:

Kim & Chang successfully defended the Seller to obtain a favorable Court decision for the Seller. We assessed and reviewed the Seller’s business model and analyzed Korean legal principles in this context. Having fully understood the business model, we asserted before the Court that: (i) the Seller’s acts of delivery and return had been made by necessity, and therefore, did not constitute a truck transport business for the parcel delivery service under the Act; and (ii) the purpose of the Seller’s execution of a product purchase agreement with the Outsourcing Company was to sell the products to consumers by purchasing them from the Outsourcing Company and not to disguise the underlying transaction structure.

The Plaintiffs’ withdrawal of an appeal on July 30, 2018 made the Court’s judgment final and conclusive. This judgment is significant as it confirmed the Seller’s new business model, which may significantly change the future of e-commerce and transportation, is not in violation of the relevant laws and regulations.


Kim & Chang Successfully Defends Against KFTC’s Investigation on Several Music Companies for Alleged Copyright Infringement Collusion under the Fair Trade Law

On May 31, 2018, the KFTC closed its investigation, in which it alleged that seven music production and distribution companies (the “Music Companies”) interfered with a new music app developer’s (the

“Claimant”) business by collectively restricting the

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operators of app stores from selling certain new music apps through their app stores (the “Unfair Collaborative Action”).

Details:

The Claimant alleged that the Music Companies interfered with the Claimant’s business in violation of the FTL by restricting the operators of app stores from selling certain apps and releasing relevant press releases. Further, the Claimant claimed that the Music Companies interfered with the Claimant’s business, because they were concerned that their profits might be reduced due to the release of new music apps. In particular, the Claimant framed the act as an abuse of power, an issue that has recently been subject to wide discussions in Korea.

The KFTC closed the investigation after two years, determining that the Music Companies did not engage in the Unfair Collaborative Action. The KFTC reasoned that: (i) the Claimant infringed the Music Companies’ copyrights by using the music of the Music Companies without entering into proper contracts with the Music Companies; and (ii) there was a need for the Music Companies to act in concert to respond to the copyright infringement by the Claimant.

Therefore, the KFTC rejected the Claimant’s argument that the Music Companies interfered with their business.

Our Representation:

Kim & Chang represented some of the seven Music Companies in defending the KFTC investigation.

Aside from arguing that the Claimant infringed the Music Companies ’ copyrights, Kim & Chang also successfully persuaded the KFTC that: (i) authorities in other jurisdictions, such as the US or EU, have determined that the copyright holders’ collective acts to protect themselves from copyright infringements were based on reasonable business judgment; (ii) based on review of various media reports and treatises, collective response against copyright infringement during the

“golden time” is crucial; and (iii) collective response prevents unnecessary costs that may be incurred from similar individual actions.

SECURITIES

Hanwha Life Insurance Issues the Largest Offshore Offering of Subordinated Capital Securities by a Korean Financial Institution since the 2008 Financial Crisis

On April 17, 2018, Hanwha Life Insurance Co., Ltd. (“Hanwha Life”) issued USD 1 billion subordinated capital securities at an annual interest rate of 4.7%.

This issuance was the largest offshore offering of subordinated capital securities by a domestic financial institution in Korea since the financial crisis in 2008. Through the issuance, Hanwha Life is expected to improve its Risk-Based Capital (“RBC”) ratio, and strengthen its financial stability by preparing for the adoption of the IFRS 17 and K-ICS, which is expected to be implemented in 2021.

Our Representation:

Kim & Chang’s team advised Hanwha Life on all aspects of this transaction. In addition to reviewing the relevant documentation on the issuance and compliance of the capital requirements under the insurance laws, our team also provided advice on the terms and conditions of the distribution of interest/dividends and early repayment that are internationally used. We also actively engaged with the regulators to address legal issues arising from the issuance process.


TAX

Supreme Court Rules in Favor of Taxpayer on Requirements for Tax Qualified Spin-off

In a landmark decision rendered on June 28, 20181, the Supreme Court affirmed the lower court’s decision, in favor of taxpayers regarding the requirements for tax-qualified spin-off under the Corporate Income Tax Law (“CITL”).

Background:

In 2008, a large Korean chemical company transferred its chemical business unit, which was located in its factory in the City of Incheon, to a newly established company (“NewCo”) in a vertical spin-off, while its remaining business continued to operate within the legacy company (“OldCo”).

The taxpayers, NewCo and OldCo, claimed tax benefits under the Korean tax laws based on the belief that the vertical spin-off met the conditions to be treated as a qualified spin-off. However, the local city government (“Incheon City”) assessed acquisition tax and capital registration tax on NewCo, arguing that the conditions for a qualified spin-off were not satisfied. Following the assessments, the National Tax Service assessed corporate income tax and VAT.

NewCo and OldCo subsequently appealed both the local tax assessment and the national tax assessment.

The Trial Court, High Court, and Supreme Court all decided in favor of the taxpayers, confirming that the transaction met the conditions for a qualified spin-off, as follows:

1. The “independent business requirement” is met if the spun-off business is able to operate independently after the spin-off. This requirement is satisfied even in cases where:

■ Only one business place is spun off from a business unit that has other business places (e.g., where a company operating two factories chooses to spin off only one);

■ Certain employees engaged in manufacturing, purchasing, or other functions remain at OldCo due to the nature and operations of the business; or

■ The NewCo relies heavily on OldCo for the sale of products and purchase of raw materials.

2. The “comprehensive asset/liability transfer requirement” is met if the assets and liabilities relating to the business spin-off are comprehensively transferred to NewCo. This requirement is satisfied even if certain common assets and liabilities that are difficult to separate remain at OldCo. The court ruled that the

“comprehensive asset/liability transfer requirement” would still be deemed as met where the OldCo obtained a bank loan secured by the land immediately before the spin-off while only a portion of the loan proceeds were transferred to NewCo. This enabled the OldCo to have sufficient cash for its operations (including but not limited to the payment of corporate income tax and redemption of corporate bonds).

3. The “fixed asset usage requirement” is met if NewCo (i) uses 50% or more of the spin-off fixed assets in its business operations; and (ii) does not dispose of the transferred assets within a certain period.

The first requirement can be satisfied even if the fixed assets are not directly used by the employees of NewCo. The court ruled that assets should be viewed as being used by NewCo for purposes of the usage requirement, even if the fixed assets are used by employees of OldCo, to which the manufacturing function is outsourced.

The second requirement can be satisfied even if the fixed assets are held by a trust company as security for debt transferred to NewCo, in which case the assets held in trust are not deemed as having been disposed of.

4. OldCo is required to solely receive NewCo shares as consideration for the spin-off. The court ruled that where OldCo receives a loan prior to the spin-off that is secured by the spun-off land, the fact that some of the loan proceeds remained at OldCo will not negatively affect the above requirement.

1 Supreme Court Decision 2016Du40986, June 28, 2018, and Supreme Court Decision 2016Nu45219, June 28, 2018.

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For the First Time, the Supreme Court Rules that Interest Rates of Subordinated Borrowings Can Be Recognized as Market Interest Rates under the Corporate Income Tax Law

On July 20, 2018, the Supreme Court ruled for the first time that it is difficult to disregard the interest rate of subordinated borrowings as the market interest rate in a case where the reasonableness of the subordinated borrowing interest rate due to the refinancing of private investment projects was challenged by the Korean tax authorities.

Background:

In private investment projects, losses are incurred until the initial capital investment is recovered. However, entering the stabilization phase of the business will

Significance:

The case received substantial attention from the media, since it represented the largest tax assessment by the tax authority on any single issue (approx. KRW 500 billion). The guidance provided in the decision is expected to be widely referred to by corporations seeking greater clarity on whether they are eligible for tax benefits provided for qualified spin-offs under the CITL.

Our Representation:

Kim & Chang’s tax litigation team newly developed the related jurisprudence on behalf of the plaintiff, the taxpayers. After a long period of facing many legal counsels appointed by the Korean tax authorities throughout multiple trials, we eventually succeeded in bringing about a favorable ruling for our client.

result in relatively stable profits from the facility fee revenues without any significant additional costs.

From the time when the construction of facilities is completed to the point when operations are commenced, generally, the financing structure of the project changes to utilize subordinated borrowings rather than the equity investment.

The interest rate on the subordinated borrowings of these private investors has ranged from 12% to 60%. Therefore, the reasonableness of the respective interest expense deduction has been raised as a tax issue.

Details:

The tax authorities have not respected the interest expense rate on subordinated borrowings borrowed by many private investors such as Cheonan Nonsan Expressway Co., Ltd. (the plaintiff of the Supreme Court case), Soojungsan Tunnel, and New Airport Hiway.

In our case, Korean tax authorities argued that the fair market value of interest rates is either: (i) the interest rate of overdrawn accounts prescribed by the Enforcement Decree of the Corporate Income Tax Law; or (ii) the interest rate calculated by adding some risk premium to the interest rate of a senior debt. Based on this argument, the Korean tax authorities denied the interest expense paid by private investors exceeding the interest expense calculated by either of these methods prescribed in the tax law.

The Daejeon High Court, which is the trial court of the Cheonan Nonsan Expressway case, rejected the interest rate determined by the plaintiff in reference to its subordinated borrowings, which was set at 16% per annum. The court determined that the interest rate calculated by adding some risk premium to the interest rate of a senior debt should be the market interest rate. In contrast, the Supreme Court concluded that the interest rate on the subordinated borrowings referenced by the defendant should not be considered unreasonable or abnormal under Article 52 (2) of the Corporate Income Tax Law, and that such interest rate should be accepted as the market interest rate for tax purposes.


As a result, the Supreme Court dismissed the High Court’s decision and remanded the case to the High Court (Supreme Court Decision 2015Du39842, June 20, 2018).

Since then, in a similar case where Soojungsan Investment Co., Ltd was the plaintiff, the Supreme Court ruled that it is not unreasonable to have the interest rate at issue determined at 20% per annum, the fixed interest rate of subordinated borrowings, and ultimately dismissed the defendant’s (i.e., the tax authorities) appeal (Supreme Court Decision 2016Du32848, July 24, 2018).

Significance:

This case, which has been often reported in the media, has great significance as a precedent for similar cases going forward. This is because the court: (i) judged whether the “denial of unfair transaction provision” should apply to a transaction where related parties are involved in the transaction regulated by the government policy; (ii) determined that the interest rate for the borrowings between related parties can be regarded as the market interest rate; and (iii) implied that it would be possible not to apply the “denial of unfair transaction provision” in a case where related party interest rate is determined based on sufficient economic reasons.

Our Representation:

Once again, Kim & Chang ’s tax l it igation team developed the jurisprudence on the issues relevant to this case by representing a number of private investment companies from the trial stage to the litigation stage. Over the course of the intense legal dispute that lasted over five years, we won the first and second trials, and finally won the Supreme Court case on July 20, 2018.

REAL ESTATE

Singaporean Real Estate Asset Management Company, Ascendas Asset Management, Buys KY Heritage Hotel Dongdaemun, the First Four-star Hotel in Seoul

In May 2018, Ascendas Korea Hospitality No. 1 Professional Investors Private Real Estate Investment LLC (the “Fund”), a private qualified investor fund operated by Ascendas Asset Management Co., Ltd. (“Ascendas”), in its capacity as the Fund’s asset management company, acquired KY Heritage Hotel Dongdaemun2 (the “Hotel”), a tourist hotel located in the center of Seoul, from KY Development Co., Ltd. (the “Seller”) for a total of KRW 73 billion (collectively, the “Transaction”).

Details:

The Hotel was the first hotel in Korea to be certified and rated as a four-star hotel following the change of the hotel rating system from a domestic rating system to an international “star” rating system at the end of 2014. Also, with the recent increase in the number of sales and purchases of domestic hotels, this transaction of the Hotel located nearby Dongdaemun History and Culture Park Station, a popular tourist spot, has received a lot of attention as one of the most important hotel transactions in Korea.

The Hotel was operated directly by the Seller, but along with the acquisition of the Hotel, the Fund established a new business model by executing a master lease and operation agreement with Sotetsu International Co., Ltd. (the “Tenant”), a Korean subsidiary of a Japanese company, the Sotetsu Group. The new business model will collect a stable stream of rental income during the 20-year lease term without interfering with the operation of the Hotel.

2 The Hotel is comprised of three underground floors and 21 floors above ground.

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INTERNATIONAL ARBITRATION & CROSS-BORDER LITIGATION

Kim & Chang Successfully Defends Korea’s State-owned Entity in China CIETAC Arbitration Case

Kim & Chang’s International Arbitration & Cross-Border Litigation Practice (“Arbitration Team”) successfully defended Korea’s state-owned entity in an arbitration in China conducted under the Rules of the China Internat ional Economic and Trade Arbi t rat ion Commission (“CIETAC”).

Background / Significance:

The case involved a dispute that arose between a Korean investor and its Chinese joint venture partner when the parties decided to sell their joint venture company to a third party. The parties’ dispute centered around the allocation of the joint venture company’s existing loans and liabilities prior to the sale.

This was a significant case, because it was one of the few CIETEC arbitration cases where a Korean entity was successful in defending against the claims brought by a Chinese entity, where the governing law was Chinese law, and where the tribunal was comprised entirely of Chinese nationals.

Our Representation:

Kim & Chang’s Arbitration Team successfully defended the Korean joint venture partner by working effectively with a Chinese co-counsel, in particular, on the appointment of the party-appointed arbitrator, and by closely coordinating with Korea’s state-owned entity regarding all aspects.

1. Appointment of co-counsel

Because the arbitration was governed by the laws of China, and the arbitration was conducted under the CIETAC Rules, appointing a Chinese co-counsel with the relevant experience and expertise from the outset was key. Our Arbitration Team was able to utilize

Our Representation:

Kim & Chang, with its extensive experience in hotel transactions, advised on all aspects of the Transaction including conducting due diligence, and providing comprehensive advice on a series of asset sale and purchase processes ranging from: (i) the negotiation and execution of various agreements such as a memorandum of understanding and a sale and purchase agreement; to (ii) the establishment of and funding for the Fund by Ascendas in its capacity as the asset management company of the Fund; and (iii) the successful completion of the Transaction.

Further, despite the fact that there were conflicting interests among the Seller (a Korean company), the Tenant (with its Japanese investor) and the Fund (with its Singaporean investor) as a result of the simultaneous execution of the transactional documents (i.e., the sale and purchase agreement and the master lease and operation agreement), our attorneys provided legal advice on preparation, negotiations, and signing of the agreements among all parties, resulting in satisfactory outcomes for all parties and successful conclusion of the multinational transactions.

Additionally, we were able to successfully obtain a business combination clearance from the KFTC in a timely manner by clearly explaining that, although the Transaction involves a transfer of a fixed business asset, it does not give rise to any anti-competitive concerns in the non-residential real estate market or the hotel lease market in Seoul or in Korea.


its wide-ranging experience and global network accumulated from working with various leading law firms around the world to make the recommendation on appointing a Chinese co-counsel with the appropriate background and experience for the case as well as an established expertise in international arbitration.

2. Appointment of the CIETAC arbitrator

The tribunal consisted of three arbitrators, with each party appointing one arbitrator and the chair arbitrator being appointed by CIETAC.

From the early stages of the arbitration, our Arbitration Team, in close discussions with its Chinese co-counsel, was able to assess the scope and pool of potential arbitrators from which the opposing party would select its party-appointed arbitrator. Based on close collaboration, we were able to effectively strategize in appointing someone with a good understanding of the commercial aspects of the international transactions of this case as the client’s party-appointed arbitrator.

Also, for the appointment of the chair arbitrator, our Arbitration Team specifically emphasized the fact that the respondent in the case was a foreign company, and formally requested CIETAC to appoint someone who had experience in international disputes between commercial entities and could hear the case in a neutral manner. As a result, CIETAC chose a chair reflecting our request, and the parties were able to present their case before a tribunal well equipped to hear the case.

3. Coordination between the Chinese co-counsel and Korean client

As lead counsel, Kim & Chang’s Arbitration Team consisted of both Chinese and Korean attorneys, who seamlessly and effectively worked together with our Chinese co-counsel and our Korean client.

As a result of these efforts, the tribunal dismissed all of the Chinese entity’s claims and ordered the Chinese entity to bear all arbitration costs, such as administrative fees and arbitrator fees.

FIRM NEWS

AWARDS & RANKINGS

Only Law Firm in Korea to Be Recognized among Asia-Pacific Law Firms – Acritas “Asia Pacific Law Firm Brand Index 2018”

Top Tier Rankings in All Categories Surveyed – Benchmark Litigation Asia Pacific 2018

According to the “Asia Pacific Law Firm Brand Index” published by Acritas, an international legal market research organization based in the UK, Kim & Chang placed sixth among law firms in the Asia-Pacific region.

About Asia Pacific Law Firm Brand Index 2018: Acritas annually publishes the “Asia Pacific Law Firm Brand Index” as a guide to brand power of law firms in the Asia-Pacific. This year’s index relied on 441 interviews conducted in 11 countries to determine the 10 highest ranking law firms based on criteria such as brand awareness, favorability, as well as domestic and multi-jurisdictional top-level deals and litigation.

In the 2018 edition of Benchmark Litigation Asia-Pacific, a review of dispute resolution and litigation practices in the Asia-Pacific, Kim & Chang ranked “Tier 1” (top tier) in all four categories.

Also, eleven of our firm’s attorneys were chosen as “Dispute Resolution Stars” and “Future Stars” in their respective practice areas.

The following are the details of our wins:

Firm Rankings (“Tier 1” in all four categories surveyed): ■ Commercial and Transactions ■ Construction ■ Intellectual Property ■ International Arbitration

Newsletter

Beyond Blocks Summit Seoul 2018

Kim & Chang attorney Samuel Yim participated in the Beyond Blocks Summit Seoul, held at the Shilla Hotel on July 17-18, 2018. He spoke on the panel titled

“Government and ICO – Balance Between Regulation and Innovation.”

Emphasizing the need to al ign legislations and regulations in preparation for the era of blockchain, Mr. Yim suggested that “in order to embrace cryptocurrency, we need to renew existing laws and newly establish securities laws, banking laws, marketable securities laws, and their subordinate laws.” He also noted that “we

Dispute Resolution Stars ■ Byung-Chol (B.C.) Yoon (International Arbitration) ■ Duck Soon Chang (Intellectual Property) ■ Eun Young Park (International Arbitration) ■ Hye Kwang Lee (Commercial and Transactions) ■ Jay (Young-June) Yang (Intellectual Property) ■ Jin Yeong Chung (Commercial and Transactions) ■ Jung Keol Suh (Commercial and Transactions) ■ Sang-Wook Han (Intellectual Property) ■ Yong Sang Kim (Commercial and Transactions)

Future Stars ■ Hye Sung Kim (Commercial and Transactions,

International Arbitration) ■ Sejong Youn (International Arbitration)

About Benchmark Litigation Asia-Pacific: Benchmark Litigation Asia-Pacific, published by the global legal media group Euromoney, selects and announces the most distinguished dispute resolution and litigation firms and attorneys based on law firm submissions, interviews and independent research. The results are based on surveys of law firms in nine major countries across the Asia Pacific.

The Second Illegal Drug and Medical Device Rebate Prevention and Fair Trade Training Session

On July 23, 2018, Kim & Chang attorneys, Sung Tae Kim and Inje Kang lectured at the Second Illegal Drug and Medical Device Rebate Prevention and Fair Trade Training Session.

Mr. Kim and Mr. Kang spoke on “Regulatory Trends and Legal Disputes Concerning Drug and Medical Device Rebates” and “Writing Expense Reports on Economic Profits,” respectively.

The National Academy of Engineering of Korea’s IP Strategy Forum – “Trade Dispute and IP: Corporate Responses”

On June 26, 2018, Seong-Soo Park, a Kim & Chang attorney in the Intellectual Property Practice, spoke at the Second IP Strategy Forum hosted by the National Academy of Engineering of Korea.

Held under the theme of “Trade Dispute and IP: Corporate Responses,” this forum examined the recent trend of increased trade pressure on IP, with the aim of finding ways to strengthen IP competitiveness and to establish an IP dispute response system.

may see increased stability in relevant laws [within the next] five years.”

The summit was the main event of Korea Blockchain Week 2018. More than 2,000 leading blockchain experts and developers, investors, and opinion leaders attended the event.

SEMINARS & ANNOUNCEMENTS


Lecture on Managing Legal Risks Associated with Anti-corruption at Legal Risk Management Seminar

On July 13, 2018, four Kim & Chang attorneys – Han-Cheol Kang, Inje Kang, Hyok-Chan Kwon, and Gyu Won Choi – presented at the Thomson Reuters/LAWnB Legal Risk Management Seminar.

During the session on “Managing Legal Risks Associated with Anti-corruption,” our attorneys discussed countermeasures against corporate legal risks related to anti-corruption as well as the latest legal trends and major cases.

The seminar was hosted by Thomson Reuters/LAWnB, and was attended by corporate legal representatives.

Hosted by Korea Human Resources Development Institute for Health & Welfare, this training session was designed to encourage the establishment of CP regulations and guidelines to prevent drug and medical device rebates, and to emphasize the role of internal and external supervision of pharmaceutical companies regarding compulsory expense reports on economic profits.

In partnership with Korea Women’s HotLine and Korean Women Lawyers Association, Kim & Chang Committee for Social Contribution is providing pro bono services for female victims of violence.

PRO BONO

Partnering with Korean Women Lawyers Association and Korea Women’s HotLine to Support Child Sexual Abuse Victims

Recently, as part of this effort, Kim & Chang Committee for Social Contribution has been supporting child sexual abuse victims in civil claims for compensation. Specifically, our attorneys conducted a comparative research on the statute of limitations for compensation claims by analyzing various materials, including special provisions for statute of limitations on child sexual abuse crimes in California, Virginia, and New York. The research was shared with the Korea Women’s HotLine and a private practitioner working pro bono on the lawsuit.

On September 13, 2018, Kim & Chang Committee for Social Contribution held a welcoming event for children participating in the 2018 Hope Cup, a soccer event and a goodwill competition hosting children from developing countries.

Members of K&C Friends, Kim & Chang’s volunteer program, invited 120 children participating in this year’s Hope Cup to a tour of Seoul’s historic palace, where the children engaged in cultural experiences, such as wearing traditional Korean clothing (“hanbok”), and to a welcome dinner in the evening.

Hope Cup is hosted by Korea Food for the Hungry International, a partner organization with Kim & Chang Committee for Social Contribution. Often dubbed the “World Cup for disadvantaged children,” Hope Cup brings together 120 children from ten countries to South Korea for a friendly soccer tournament. This year, children from South Korea, Madagascar, Mexico, Mongolia, Bolivia, Cameroon, Cambodia, Cote d’Ivoire, Kyrgyzstan, and Thailand participated in the event.

Hosting 2018 Hope Cup Welcome Event for Children from Developing Countries


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© Kim & Chang 2018.

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