1.

Key Amendments

The key provisions of Article 26-2 of the amended ALA are as follows:
 
Section 1 of the newly added Article 26-2 of the ALA grants attorneys and their clients, including prospective clients, the right “not to disclose confidential communications exchanged for the purpose of providing or receiving assistance in legal cases or legal affairs.”
 
Section 2 expressly provides that attorneys and their clients “may refuse to disclose documents or materials prepared in connection with litigation, investigations or regulatory examinations in matters for which they have been retained.”
 
However, ACP may not apply in certain cases, such as when the client or prospective client consents thereto, or where there are special provisions under other laws (Section 3).
 

2.

Implications for Tax Practice

The introduction of ACP is expected to have the following practical effects in the tax sector:
 
First, it is expected that confidential communications between clients and attorneys, as well as attorney work product, will be protected in the course of tax investigations and audits. Previously, there was a concern that advice received from attorneys, including email communications and similar materials, could be discovered during investigations. Going forward, confidential communications for legal assistance should, in principle, be protected. In addition, the scope of protection covers not only documents and materials (including electronic documents) prepared for investigations, but also those prepared for "regulatory examinations." This appears to provide a legal basis for refusing disclosure in the course of tax audits of materials such as opinion letters or analysis reports prepared by attorneys. It should be noted, however, that as this privilege is recognized only in relation to attorneys-at-law, the protection of confidential communications and work product will be available only where an attorney-at-law is involved.
 
In addition, in cases where attorney opinion letters or other documents prepared in preparation for tax audits, tax appeals (adjudications), or tax litigation were submitted to the tax authorities, the taxpayers were at a disadvantage as the reasoning underlying their arguments could be disclosed to the tax authorities in advance. With the codification of ACP, there will be more room for attorneys and clients to claim protection of confidential communications and attorney work product, so that clients can, with the assistance of legal counsel, prepare a more comprehensive defense strategy.
 
Though the Amendment will take effect after a one-year grace period after its promulgation (Article 1 of the Addenda), it will also apply retroactively to the confidential communications and work products created before its effective date (Article 2 of the Addenda). Therefore, it would be advisable to consider consulting with attorneys regarding ongoing matters.
 
The codification of ACP is expected to bring significant changes to Korea’s legal landscape. It is important to monitor how ACP is applied in practice, including its interaction with individual statutes and regulations. Companies and law firms operating in Korea should therefore establish clear standards for marking and protecting confidential materials and communications in the course of providing legal advice and services.