法律简讯Kim & Chang Legal Newsletter (2020 Issue 4) This issue includes: Growing Importance of ESG for Corporations and Related Trends Partial Amendment to the Act on Reporting and Using Specified Financial Transaction Information and Its Enforcement Decree to Become Effective in March 2021 Korea Strengthens Criminal Remedies for Patent Infringement Overview of Key Terms and Implications of the Three Laws of Fair Economy and Class Action Act (I) KFTC Implements Amended Guidelines for Review of Unfair Support Developments on the Proposed Fair Online Platform Intermediary Transaction Act Following the End of Public Comment Period Commercial Building Lease Protection Act Amended to Protect Commercial Tenants Impacted by COVID-19 Labor Law Amendments Enforced in the Second Half of 2020 Recent Developments Regarding the Employee Status of Insurance Agents, Training/Coaching Managers and Branch Managers Introduction of Revised 2021 ICC Arbitration Rules US Department of Commerce’s Provisional CVD on PVLT Tires from Vietnam FSC, FSS and KRX Announce Comprehensive Plan for Eradicating Illegal/Inappropriate Conduct in Securities Market FSC Proposes Enforcement Decree to Financial Consumer Protection Act Greenhouse Gas Emission Permit Allocation Plan for Third Planning Period Finalized MOE Issues Administrative Notice on Repackaging Rules Legislative Trends in AI: National AI Ethical Standards and Amendment to Enforcement Decree of Framework Act on Intelligent Informatization Kim & Chang Legal Newsletter (2020 Issue 4)2020.12.23
法律简讯Growing Importance of ESG for Corporations and Related Trends As uncertainty in the global capital markets rises, shareholders are showing greater interest in environmental, social and governance (“ESG”) issues, in addition to standard financial factors such as revenue and operating income. In response to this trend, Korean regulatory and financial supervisory authorities are preparing and implementing various policies to create an investment climate that actively utilizes companies’ ESG information and carries out effective ESG-based investments. 1. National Pension Service’s ESG Evaluation System and Expansion of ESG Investments Beginning in 2021, the National Pension Service (the “NPS”) will apply ESG criteria when making decisions to invest in domestic stocks and bonds. Furthermore, it expects to increase its ESG investments up to 50% of its total assets by 2022. In accordance with this policy, the NPS has mandated a research agency to introduce a new evaluation system that integrates ESG criteria. Using the results of this research, the NPS will examine its current ESG evaluation system applicable to its holdings of domestic stocks and will establish a new process that includes additional factors and ESG indicators to optimize its ESG processes. The NPS will also establish an ESG-based evaluation model and indicators that will apply to domestic bonds. In the future, the NPS is expected to utilize ESG evaluation results to incorporate follow-up measures such as “negative screening” or exercise of shareholder rights, thereby seeking long-term profitability and stability. 2. Korea Exchange’s New Policy Expanding Disclosure of ESG Information and Facilitating ESG Investment In 2020, the Korea Exchange (the “KRX”) established a new “ESG team” to review companies’ ESG-related disclosures and to foster an environment conducive to ESG investment. Additionally, on October 27, 2020, the KRX joined the international “Taskforce on Climate-Related Financial Disclosures.” As the first Korean securities-related institution to join the Taskforce, the KRX intends to enforce its plan to expand requirements for ESG-related disclosures and facilitate socially responsible investments. Further, the KRX’s newly formed “ESG Advisory Committee,” comprised of eight outside experts in ESG-related fields, held its inaugural meeting on November 3, 2020. The ESG Advisory Committee will advise the KRX on policies and systems relevant to ESG-related investing. 3. FSC’s New Policy Expanding Disclosure of ESG Information At the Financial Policy Advisory’s meeting held on July 24, 2020, the Financial Services Commission (the “FSC”) announced that it will require companies to expand disclosure of ESG-related information, in line with socially responsible investment considerations. In particular, the FSC will gradually expand the scope of companies subject to mandatory disclosure of corporate governance reports. While only a limited number of KOSPI-listed companies (only companies with total assets of KRW 2 trillion or more) are currently subject to such disclosure requirements, all KOSPI-listed companies will be required to disclose their corporate governance reports by 2026. The FSC also intends to establish “Guidance for Disclosure of Environmental and Social Information” by the end of 2020. 4. Proposed Partial Amendment to Financial Investments Services and Capital Markets Act (the “FSCMA”) In line with the other policy changes at the KRX and the FSC, Korean legislators have introduced new laws or amendments to strengthen ESG-related public disclosures. Recently, lawmakers have introduced a partial amendment to the FSCMA, which would require listed companies to make additional disclosure of matters pertaining to corporate social responsibility in their business reports. Implications Regulatory authorities like the KRX and the FSC, which oversee public disclosure of listed companies, are actively planning to implement and enforce ESG-related disclosures policies and expand the scope of disclosure. Given the foregoing, we expect a greater number of corporations to be subject to these new disclosure requirements in the near future. As mentioned above, only a limited number of KOSPI-listed companies are currently subject to the FSC’s revised corporate governance reports. However, companies listed on other exchanges like the KOSDAQ and KONEX may be subject to further disclosure in the future. Furthermore, in light of the NPS’ announcement that it will begin to apply its ESG evaluation criteria and indicators when making investments in domestic shares and bonds starting in 2021, we expect domestic institutional investors and ultimately the general public to increase their interest in ESG-based investments and begin to expect disclosure of related information from companies. In light of the expanded requirements, listed companies should be prepared to make ESG-related disclosures. To this end, companies should establish their own ESG information management systems and create and/or strengthen internal ESG-related policies and regulations. Finally, companies should continue to closely monitor changes in ESG-related disclosure policies and regulations to ensure they remain in compliance.2020.12.23
法律简讯Amendments to the Trade Union and Labor Relations Adjustment Act and the Labor Standards Act Passed by the National Assembly On December 9, 2020, a total of ten amendments to Korea’s labor laws passed the plenary session of the National Assembly. We provide below a summary of the major changes to the Trade Union and Labor Relations Adjustment Act (the “Labor Union Act”) and the Labor Standards Act, which have recently garnered much interest. 1. Major Amendments to Labor Union Act The Labor Union Act was amended to ratify fundamental conventions of the International Labor Organization relating to Freedom of Association. In this amendment, the proviso to sub-paragraph 4 (Ra) of Article 2 of the Labor Union Act, which was widely interpreted as the basis for restricting laid-off workers and others who are not employees of the company from joining enterprise (company-based) unions, was deleted, allowing laid-off workers and others to join not only industrial, occupational and regional unions, but also enterprise (company-based) unions. However, officers and representatives of each enterprise union are required to be elected from among the members engaged in the business or working as employees (i.e., employee union members). Also, members who are not employees of the business or engaged in the business (i.e., non-employee union members) are allowed to engage in labor union activities only to the extent that they do not interfere with efficient operation of the business. In addition, in determining the number of members for the purpose of voting for or against industrial action, only employee-members of the enterprise union are included. In addition, the regulation prohibiting compensation for full-time union officers was deleted. However, while referring to those who are paid by the employer and are engaged in labor union activities as “time-off employees,” salary compensation can only be made within the time-off limit, and any violation thereof will be subject to punishment as an unfair labor practice. On the other hand, the government’s proposed provision requiring that non-employee union members comply with the procedures agreed between labor and management or with internal rules of the business when entering or using the business facility was deleted from the final version of the amendment passed by the National Assembly. Similarly, the explicit provision of prohibiting any dispute in the form of occupying all or part of the production and other facilities essential to the business that was originally included in the government's proposal was also removed from the final amendment. 2. Major Amendments to the Labor Standards Act The National Assembly also passed an amendment to the Labor Standards Act, which calls for expanding the reference period of flexible working hours from the current three months to a maximum of six months. Under this amendment, the flexible working hours system with a reference period of more than three months and less than six months was introduced, and the obligation to provide 11 consecutive hours of rest period between working days and to report wage preservation measures to the Minister of Employment and Labor were imposed. In addition, for the reference period of three to six months, the amendment eased the requirement to predetermine the work schedule for each working day, which was widely viewed as limiting the use of the flexible working hours system. For new products or new technology R&D work, the adjustment period of selective working hours, which is limited to one month, has now been extended up to a maximum of three months. However, the employer must now provide 11 consecutive hours of rest period in between working days and overtime allowance of at least 50% of ordinary wage if the average weekly working hours exceed 40 hours every month during the specified adjustment period. [Korean version]2020.12.16
法律简讯National Assembly Passes Bill To Overhaul Korean Antitrust Law On December 9, 2020, the National Assembly passed a bill to completely amend the Monopoly Regulation and Fair Trade Law (the "FTL"). The Korea Fair Trade Commission (the "KFTC") originally submitted the amendment bill to the National Assembly on August 31, 2020. The bill that was eventually passed by the National Assembly is very close to the original bill, but with two major changes: (i) retention of the KFTC's exclusive right to file a criminal complaint in hardcore cartel cases and (ii) permission for holding companies to own corporate venture capital companies ("CVC"). Other than these two changes, the final bill passed by the National Assembly is largely similar to the KFTC's original bill. For more details on the changes to Korea's antitrust law to be brought by the amendment, please refer to our previous newsletter. 1. Details of Changes from Original Bill (1) Retention of the KFTC's Exclusive Right to File a Criminal Complaint in Hardcore Cartel Cases Under the previous FTL, the Prosecutors' Office could bring an indictment in FTL cases only if the KFTC had filed a criminal complaint with the Prosecutors' Office. The Prosecutors' Office did have a right to request the KFTC to file a criminal complaint, and the KFTC was obliged to comply with such request, but in any case, the Prosecutors' Office still needed the KFTC's criminal complaint to proceed with an indictment. The KFTC's original amendment bill sought to abolish its own exclusive right to file criminal complaints in hardcore cartel cases, such as price fixing and bid-rigging cases, so that the Prosecutors' Office would have been able to bring independent indictments in those cases even without the KFTC's criminal complaint. In the course of reviewing the amendment bill, the abolition of the KFTC's exclusive right to file criminal complaints was supported by those who thought that given the severity of anti-competitive effect created by hardcore cartels, the Prosecutors' Office should be empowered to utilize its law enforcement power to the fullest extent against the participants. On the other hand, others believed that this abolition should be reconsidered because it could lead to too many third parties filing complaints with the Prosecutors' Office for alleged cartels and too many cases of companies being investigated by both the KFTC and the Prosecutors' Office. In the end, the legislators decided that the KFTC should retain its exclusive right to file criminal complaints even in hardcore cartel cases, and no change was made to the FTL in relation to the KFTC's exclusive right through the amendment. (2) Permission for Holding Companies to Own CVCs The question of whether ordinary holding companies (i.e., non-financial holding companies) should be able to own CVCs was not addressed in the KFTC's original amendment bill, but there were other legislator-sponsored FTL amendment bills dealing with this issue. During the National Assembly's review process, these pending bills were consolidated, and the amended FTL will allow non-financial holding companies to own up to 100% of CVCs. To avoid the possibility that the CVCs owned by non-financial holding companies may be misused to further the concentration of economic power or undue transfer of wealth, the CVCs will be subjected to certain restrictions on its investment activities, scope of permitted businesses, and fund management reporting requirement. 2. Effective Date of Amendment The amended FTL will become effective one year after the promulgation by the President, with certain limited exceptions. Although it is not yet known when the President will officially promulgate the amended FTL, we expect the amended FTL will take effect in January 2022. [Korean version]2020.12.10
法律简讯New Regulations Concerning Cloud Computing: Expected Impact on Cloud Computing Service Providers On November 27, 2020, a proposed amendment (the “Proposed Amendment”) to the Electronic Financial Transactions Act (the “EFTA”) was submitted to the National Assembly, which includes new regulations concerning cloud computing services. The Proposed Amendment is based on the “Comprehensive Reform Plan for Digital Finance” recently announced by the Financial Services Commission (the “FSC”), and is expected to be approved in the plenary session of the National Assembly. Under the Proposed Amendment, cloud service providers (including foreign cloud service providers that offer cloud computing service to Korean financial institutions) may become subject to direct supervision and regulation of the Korean financial regulators, as described below. The current version of the Proposed Amendment introduces the concept of “major outsourcing companies,” which refers to outsourcing companies whose services have a material impact on the stability and reliability of electronic financial transactions. The Proposed Amendment simply provides that the Presidential Decree of the EFTA would specify which types of service providers would be considered as “major outsourcing companies,” and does not make it clear whether cloud service providers would be deemed as major outsourcing companies. However, as the Comprehensive Reform Plan for Digital Finance, the basis on which the Proposed Amendment was prepared, mentions the need to strengthen the supervision and regulation of third party risks arising from the increase in IT outsourcing by financial institutions, it is expected that cloud service providers would be deemed as major outsourcing companies and thus would be subject to the following regulations. 1. Direct Supervision and Regulation of Major Outsourcing Companies The Proposed Amendment allows financial regulators to directly supervise and examine major outsourcing companies if deemed necessary to protect consumers and to maintain sound market order. More specifically, under the Proposed Amendment, financial regulators would be able to (i) request information related to the services provided under the relevant outsourcing contracts; (ii) investigate matters relating to the outsourced services; (iii) request submission of statements and books and records in relation to the investigation, and interviews with the relevant personnel; and (iv) conduct any other matters prescribed by the Presidential Decree of the EFTA. Currently, the financial regulators indirectly supervise cloud service providers and other ancillary electronic financial service providers through the financial institutions that are subject to direct supervision and regulation of the financial regulators. The Proposed Amendment would allow the financial regulators to directly supervise major outsourcing companies such as cloud service providers. 2. Corrective Orders as a Result of Supervision and Examination The Proposed Amendment allows financial regulators to issue corrective orders to major outsourcing companies to take measures necessary to protect consumers and maintain sound market order, based on their supervision and examination activities. Also, the Proposed Amendment allows financial regulators to take additional measures such as notifying the relevant financial institutions of such failure by the major outsourcing companies, or preventing the major outsourcing company from executing a new contract for six months from the termination of an existing outsourcing contract. The Proposed Amendment would allow the financial regulators to directly order and compel major outsourcing companies such as cloud service providers to take necessary measures based on direct supervision and examination of cloud service providers. As the Proposed Amendment may have a significant impact on the cloud service industry, we recommend you closely follow further updates as they become available. Meanwhile, you may consider taking necessary steps in advance so that if cloud service providers indeed become subject to direct supervision and regulation of Korean financial regulators, you would be in a position to deal with any potential supervision and examination.2020.12.04
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