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 January 27, 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.