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KFTC Announces Amendments on Case Handling Procedure and Consent Decree Guidelines The Korea Fair Trade Commission (the "KFTC") issued a press release on April 5, 2021, announcing amendments to the Rules on Consent Decree Operation and Procedures (the "Consent Decree Guideline”) and Rules on the KFTC's Hearing Operation and Case Handling Procedure (the "Case Handling Guideline") (together, the "Guidelines"). The above Guidelines had been issued as a follow-up to ensure the seamless enforcement of the amended Monopoly Regulation and Fair Trade Law ("FTL") that was passed on May 19, 2020. The Guidelines will take effect on the same day as the amended FTL. The amendments to the Case Handling Guideline include (i) a deadline for completing KFTC-initiated cases; (ii) rights of respondents to demand access and copies to data not disclosed in the Examiner's Report; (iii) requirement to provide notice on the result of the KFTC's investigation to the respondent; and (iv) limitation on investigative activities during the hearing stage of the KFTC's investigation, as detailed in our previous newsletter. A summary of the amended Consent Decree Guideline is as follows: Designation of a trustee to monitor compliance with consent decree and explanation of the types of tasks that can be entrusted to the trustee The current Consent Decree Guideline does not contain any guideline for trustees, but the amended Consent Decree Guideline will require the preliminarily agreed consent decree proposal to include the name of a trustee. In addition, the amended Consent Decree Guideline will require the KFTC to notify the trustee of the approval of the consent decree and includes other provisions relating to the designation of a trustee and details of a trustee's monitoring activities. Authority to cancel or stop the trustee's unfair actions The amended Consent Decree Guideline will clarify that the KFTC has the authority to oversee and supervise the trustee's monitoring activities, and if a trustee's action is deemed illegal or unfair, the KFTC may cancel or stop the trustee's action. Provision of necessary materials to conduct monitoring activities and notification of violation of consent decree to the KFTC The amended Consent Decree Guideline will allow the KFTC to provide necessary materials and resources to the trustee to conduct its monitoring, while restricting the working-level trustee employees to only use the materials obtained from the KFTC for the monitoring purpose. In addition, the KFTC may file a criminal complaint against the trustee employee who uses such materials for purposes other than monitoring the compliance with the consent decree. The trustee will be required to report quarterly to the KFTC in writing on the compliance status, and if the respondent is not in compliance with the consent decree, the trustee must immediately notify the KFTC of the violation. The amended Consent Decree Guideline aims to lessen the burden on the KFTC by outsourcing the compliance monitoring activities to the Korea Fair Trade Mediation Agency and the Korea Consumer Agency and ensures a more effective monitoring of the consent decree compliance, which may take several years. However, additional details will be needed in actually conducting the monitoring activities, and thus, companies should continue to follow up on the actual monitoring processes to be adopted by the Korea Fair Trade Mediation Agency and the Korea Consumer Agency. [Korean version] .content_view .view_area ul li:before { top: 13px; }
2021.04.13

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EU Grants Adequacy Decision to Korea On March 30, 2021, Chairperson of the Personal Information Protection Commission (the "PIPC") of the Republic of Korea and the Commissioner for Justice of European Commission (the "EC") issued a joint press statement declaring that Korea is an adequate jurisdiction and ensures a similar level of protection to EU for personal data. During the past four years, Korea and EU have been conducting an in-depth review of the relevant laws and regulations, including the Personal Information Protection Act of Korea and duties of the relevant government agencies. Immediately after the joint press statement, the EC will start its decision-making procedure to adopt the adequacy finding in the coming months and plans to adopt the adequacy decision on Korea in the second half of this year. The adoption of an adequacy decision will involve: (i) disclosure of the EC's initial finding (current stage), (ii) an opinion from the European Data Protection Board, (iii) an approval from a committee, composed of the representatives of EU Member States, and (iv) the adoption of the adequacy decision by the EC via resolution. As a result of the adequacy decision, personal data can flow from EU to Korea without any further safeguards, such as standard contractual clauses or binding corporate rules, being necessary. However, as this adequacy decision relates to the transfer of personal data from EU, any company that directly collects personal data from the EU residents as a data controller still needs to comply with the obligations under the GDPR for its collection of personal data. In other words, if the company is collecting and processing personal data of EU residents, it is necessary for such companies to review the legal basis for processing personal data under the GDPR and take applicable security measures. The adequacy finding will cover both commercial operators and the public sector. However, the transfer of personal credit information supervised by the Financial Services Commission of Korea is excluded from the adequacy decision as the scope of the adequacy decision is limited to those areas regulated by the PIPC. The adequacy decision will be re-examined every four years by the EC, and the decision may be challenged as to the scope of the application. Therefore, organizations operating in the EU and Korea should continue to monitor new developments even after the adoption process has been completed. [Korean version]
2021.04.06

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Korea Greenlights Green PPAs and Opens Door for More Aggressive RPS On March 24, 2021 Korea’s National Assembly passed an amendment to the Electric Utility Act proposed by National Assemblyman Sung-Hwan Kim that will enable companies to enter into power purchase agreements (“PPAs”) for electricity generated from renewable energy projects (the “Direct PPA Amendment”). The Direct PPA Amendment is expected to be officially promulgated soon, and will be effective following a six-month promulgation period, meaning that Korea’s first large-scale corporate PPAs for renewable electricity may be executed as early as the fall of 2021. At the same time, the National Assembly passed an amendment to the Act on the Promotion of the Development, Use and Diffusion of New and Renewable Energy (the “Renewable Energy Act”) that sets the stage for more aggressive governmental support for renewable power production by increasing the existing 10% cap on Korea’s Renewable Portfolio Standard (“RPS”) obligation to 25% (the “RPS Amendment”). Taken together, the Direct PPA Amendment and the RPS Amendment portend continued growth in Korea’s renewable energy sector through 2021 and beyond. Direct PPA Amendment Prior to the effectiveness of the Direct PPA Amendment, the Electric Utility Act prohibited “electric generation business entities” (i.e., independent power producers and other power generators (collectively, “IPPs”)) with generation capacity exceeding 1MW from concurrently engaging in an “electric sales business” (i.e., selling electricity directly to electricity consumers other than through the Korea Power Exchange (the “KPX”), Korea’s wholesale cost-pool market operator). This means that electricity consumers in Korea are currently not allowed to purchase power directly from IPPs and instead must contract for the purchase of electricity with the majority state-owned Korea Electric Power Corporation (“KEPCO”), the only “electric sales business” licensed under the Electric Utility Act. The Direct PPA Amendment effectively ends KEPCO’s monopoly on the retail sale of electricity (with respect to renewable energy only) by: introducing a newly defined “renewable energy electricity supply business” classification; stipulating that a “renewable energy electricity supply business may supply electricity generated from renewable sources to electricity consumers directly without going through the [KPX]”; and affirming that in such instances “the parties may separately agree on and enter into an agreement on the supply charges and other terms and conditions of supply” (i.e., a PPA). Although power sold under a direct PPA will not be eligible for issuance of renewable energy certificates (“RECs”), the same agency that issues RECs (the Korea Energy Agency) plans to issue “renewable energy use certificates” with respect to such power. These use certificates will include the information currently included in RECs to enable easy tracking of the environmental attribute and to prevent double-counting for purposes of compliance with corporate sustainability goals such as the RE100 initiative. RPS Amendment Prior to the RPS Amendment, the Renewable Energy Act required power producers that generate 500MW or more annually to source a designated percentage of their overall generation (the “RPS Obligation”) from renewable energy sources (either through self-generation or purchase of off-setting RECs) or face fines of up to 150% of the market value of the REC shortfall that would have been required to offset such percentage of overall power generation. The Renewable Energy Act stipulated that the RPS Obligation will be set by Presidential Decree on an annual basis, but shall not exceed 10%. The RPS Amendment replaces this 10% limit on the RPS Obligation with a 25% limit, meaning that future Presidential Decrees may continue to increase the demand for renewable energy from Korea’s largest IPPs subject to the RPS Obligation. Implications The Direct PPA Amendment and the RPS Amendment are expected to further catalyze continued growth in Korea’s renewable energy sector. Even before passage of the Direct PPA Amendment, the Ministry of Trade, Industry and Energy (the “MOTIE”) launched RE100-enabling policies on January 5, 2021 which allow electricity consumers to selectively purchase electricity generated from renewable sources. MOTIE-approved methods for such selective purchase of renewable power include “third-party PPAs” (by which the MOTIE means indirect PPA arrangements where IPPs and electricity consumers enter into back-to-back PPAs with KEPCO), a new system for trading RECs for RE100 purposes and a green pricing tender auction system. The MOTIE did not, however, include direct PPAs as a measure to implement the RE100 initiative since prior to passage of the Direct PPA Amendment this was not permitted under the Electric Utility Act. Following the effectiveness of the Direct PPA Amendment, direct PPAs are expected to be a welcome additional method of implementing the RE100 initiative in Korea. Passage of the RPS Amendment means that the RPS can continue to play a supporting role in encouraging the development of new renewable power generation facilities for the foreseeable future. Because the RPS Obligation for 2021 is 9% and is scheduled to increase to 10% for 2022, absent the RPS Amendment the RPS would have no longer played a role in encouraging additionality beyond 2022. Although the RPS Amendment itself does not include an affirmative increase in the RPS Obligation, by increasing the statutory ceiling on the RPS Obligation by 25% it ensures that the government can continue to use the RPS scheme as an increasingly aggressive tool for encouraging additionality in the domestic market. .content_view .view_area ul li:before { top: 13px; }
2021.04.01

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Amendment to the FSCMA on Private Fund Regulations On March 24, 2021, the National Assembly passed an amendment to the Financial Investment Services and Capital Markets Act (the “FSCMA” and such amendment, “Amendment”) to substantially overhaul the Korean private fund regulations. In particular, the Amendment unifies the existing classification of private collective investment vehicles (or “private funds”) and regulates funds based on the type of investors. The Amendment will take effect six months after its promulgation. 1. Reclassification of Private Funds Unification of private funds and distinction between “institutional private funds” and “general private funds” Under the current FSCMA, private funds are classified into two categories based on the investment objective of the fund: (i) management participation (i.e., private equity funds or "PEFs") and (ii) private funds for qualified investors (i.e., hedge funds for non-management participation), and each classification is separately regulated. In order to serve as a general partner of a PEF, the company is required to register with the regulators as a general partner, and in order to serve as the management company for a private fund/hedge fund, the company is subject to more stringent eligibility requirements and required to be registered as a private asset management company (“Private AMC”). The Amendment removes such classification, and instead, the Amendment distinguishes between “institutional” private funds (which are funds sold to institutional investors) and “general” private funds. The main implication of this change is that existing general partners of PEFs will be permitted to establish and managed institutional private funds, while existing Private AMC will be permitted to establish and manage general private funds. Existing general partners will however need to satisfy certain investment management personnel requirement under the Amendment (which will be set out in the Presidential Decree), but will be given a one-year grace period to satisfy such requirements. As for new market participants, they may apply for registration either to manage institutional private funds or general private funds, the latter being subject to more eligibility and ongoing compliance requirements. Moreover, under the Amendment, existing PEFs shall automatically be deemed as institutional private funds, and existing private funds/hedge funds shall be deemed as general private funds. Increase in the number of private fund investors The current FSCMA and sub-regulations limit the number of actual investors in a private fund to up to 49 investors. However, the Amendment relaxes this limit to up to 100 investors, although the specific method of calculating the number of investors will be set out in the Presidential Decree and the number of non-professional investors (who are in need of greater protection) is still limited to up to 49. In addition, in order to avoid the public offering rules, the number of offerees must be limited depending on the type of investor as follows: General investors: The total number of investors as well as the number of offerees is limited to up to 49. Institutional investors: No limitation for investors as well as offerees. Professional investors that are not institutional investors: Not counted for purposes of determining the number of offerees but are included in the number of investors. The regulations are relaxed from “up to 49” to “up to 100.” Unification of regulations on investment management Currently, different sets of regulations apply to PEFs and non-PEFs (hedge funds) in order to ensure that such funds are managed in compliance with their respective objectives. However, the Amendment removes such distinction and eases the regulations as follows: Type Current Amendment Management participation investment obligations Hedge funds: May not participate in management PEF: Must acquire 10% or more of shares with voting rights or exercise de facto control No such classification. However, if either a general private fund or institutional private fund chooses to invest by way of management participation, they are required to exit the investments within 15 years. Limits on voting rights Hedge funds: Voting rights limited to 10% PEFs: No limit No limit Borrowing Hedge funds: Within 400% of net assets PEFs: Within 10% of net assets for the fund itself, and within 300% of net assets for the special purpose company Within 400% of net assets Loans Hedge funds: Loans are allowed, but personal loans are prohibited PEF: Prohibited Loans are allowed in principle. However, funds investing in loan receivables have restrictions on investor qualifications, and funds are prohibited from lending to individuals or those prescribed by the Presidential Decree. Changes in regulations for institutional private funds Since institutional private funds can only be sold to classified institutional investors, the Amendment eases some of the existing regulations including: Management personnel requirements for registration of general partners: Currently, there is only a minimum personnel requirement to register as a general partner of the PEF. However, the Amendment introduces a qualification requirement by adding “certain investment management experts designated by the Presidential Decree.” Audit by regulatory authorities: The Amendment provides that general partners, in addition to institutional private funds, may be subject to FSC measures or audits by the Financial Supervisory Service (the “FSS”) where “necessary for the stability of the financial market and transaction order.” 2. General Private Fund Regulations Strengthened for Investor Protection There have been a number of high-profile incidents involving certain local private funds which resulted in substantial losses to investors. As a result, the Amendment introduces certain investor protection measures applicable to a general private fund. Private AMCs are required to prepare “key product disclosures” (but not a full offering memorandum) and provide it to potential investors (through the distributors). Distributors are required to verify that the content of the key product disclosure is consistent with the fund documents (i.e., collective investment agreement). Even after the sale of the general private funds, the distributors are required to confirm that the Private AMC’s management thereof conforms to the key product disclosure, and if they do not, the distributors are required to request that the Private AMC rectify its management activities. The reinforcement of the regulations discussed above, along with the introduction of new regulations relating to financial consumer protection, is expected to lead to substantial changes in the business environment of financial companies (such as distributors and trustees). 3. Conclusion The Amendment brings significant changes to the Korean private fund industry as it relates to the overall management and sale of private funds. However, specific details will be finalized in the Presidential Decree and subordinate laws in the coming months. [Korean version] .content_view .view_area ul li:before { top: 13px; }
2021.03.26

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Serious Accident Punishment Act – Class Action & Punitive Damages in Korea The pending class action and punitive damages bills sponsored by Korea’s Ministry of Justice are now in their final stages of review within the government. We anticipate they will soon be introduced to the National Assembly, where they will be taken up for deliberation. This update concerns another recently passed law which will work together with the class action/punitive damages system to increase the risk for companies doing business in Korea. On January 8, 2021, the Korean National Assembly passed the Serious Accident Punishment Act (“SAPA”), which imposes criminal liability on individuals and entities responsible for “serious accidents” (becoming effective on 27 January 2022 for larger companies). Under SAPA, the term “serious accident” encompasses not only accidents at industrial sites (e.g., at factories or construction sites), but also “public” disasters caused by defects in the design, manufacture, installation and management of products, product ingredients or public facilities/transportation. SAPA imposes criminal liability against (i) business owners or executives (as defined by the law) who fail to ensure the safety of their business operations and (ii) businesses or institutions who fail their supervisory duties. In case of willful misconduct or gross negligence, SAPA also imposes punitive damages of up to five times the actual damages. SAPA is a very broad law, although the details still need to be worked out through the lower regulations to be announced. SAPA also impacts the impending class action and punitive damages legislation, since a serious accident could very well trigger liability under all three laws. For instance, if a serious accident leads to injury or death, and involves 50 or more claimants with a common question of law or fact, this would trigger a potential class action, punitive damages and criminal penalties under SAPA. As such, the risks faced by companies and senior management under SAPA are amplified by the new class action/punitive damages system, and vice versa. We think this highlights the importance of companies in Korea assessing their risk exposure under these new laws and seriously considering new safety measures to reduce the level of risk. A good place to start would be to review/update SOPs, manuals, safety checklists and best practices to institute further safeguards against accidents. We also suggest making sure that all licenses, permits or registrations are up-to-date, as this could be an important factor in limiting both criminal and civil liability. .content_view .view_area a { text-decoration: none; color: #2c3e50; } [Korean version]
2021.03.24

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Named Leading Innovative Law Firm in Korea by IFLR

Kim & Chang won “National Law Firm of the Year: South Korea,” an award given to the firm with the most innovative cross-border deals, at the IFLR Asia-Pacific Awards 2021.
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Top Ranking in All 9 Practice Areas in Chambers Global 2021

Kim & Chang once again topped the charts in Chambers Global 2021 as the only Korean law firm to rank “Band 1” in all nine practice areas surveyed for Korea.
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Opening of Kim & Chang’s Singapore Office

With the opening of our Singapore office, we now take our successful track record to our clients on a wider regional platform.
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