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Kim & Chang Legal Newsletter (2021 Issue 4) This is a quaterly update of legal developments in Korea from Kim & Chang. This issue includes: FSC Draws a Blueprint on the Future of Banking Business Administrative Notice of Proposed Guidelines for Review of Information Exchange Cartel Government’s Commitment to Carbon Neutrality - Carbon Neutrality Framework Act, 2030 NDC, and Carbon Neutrality Scenarios Implementation of Criminal Leniency Program for Cartel Cases and Strategic Considerations Legislative Trends in Corporate Governance, Including Strengthened Disclosure Requirements under the FSCMA and FTL Fractional Share Trading to be Allowed in Korea Regulation on Online Financial Platform Services New Financial Action Task Force Guidance Released on Virtual Assets and Virtual Asset Service Providers New Amendment to Specify Unfair Uses of Data and Publicity Rights under the UCPA En Banc Supreme Court Holds that Posting Links to Copyright Infringing Content Can Be Criminal Violation Settlement Made Between the US and EU on Section 232 Tariffs on Steel and Aluminum The Supreme Court’s Decision on the Number of Paid Annual Leave Days Granted to One-Year Fixed-Term Employees Trends in Enactment and Amendments of Laws Regarding Promotion of Data Industry and Easing of Regulations on Location Information and Game Industry To view the newsletter, please click the link below. Kim & Chang Legal Newsletter (2021 Issue 4) .content_view .view_area a { color: #2c3e50; text-decoration: none; }
2021.12.22

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Fifth Anniversary of the Anti-Graft Act: Trends and Enforcement Outlook When the Improper Solicitation and Graft Act, popularly known as the “Anti-Graft Act” or the “Kim Young-ran Act” (hereinafter referred to as “Anti-Graft Act”), first became effective on September 28, 2016, it quickly emerged as a hot social topic. On the one hand, there were rising expectations that the new law would serve as an effective means of strengthening the integrity of public officials; at the same time, there was also criticism that the scope of application of the new law was overly broad and that setting strict limits even on mundane items like the price of meals was excessive. This year marks the fifth-year anniversary of the implementation of the Anti-Graft Act, which provides an occasion to look back on how it has been enforced since its inception, with a view to anticipate how this law will be enforced going forward. Public attention on the Anti-Graft Act appears to have died down to some extent over the past five years since it was first implemented. However, there has been renewed attention on the Anti-Graft Act as a result of a recent case in which several high-profile figures were investigated for having received lavish gifts from a questionable CEO of a fisheries business and was suspected of having defrauded investors. The high profile figures in this case included a former Special Prosecutor, as well as members of the National Assembly, media, and senior government officials. In the following, we will examine some of the key issues in the form of common misperceptions associated with the Anti-Graft Act, and also trends in enforcement that we have seen over the past five years. Misperceptions Relating to the Anti-Graft Act Do the Sanctions Amount to a Mere “Slap on the Wrist?” Over the past five years, a total of 39 individuals (involved in 26 cases) have been convicted in criminal court solely on the basis of charges under the Anti-Graft Act. Of these, only five individuals were sentenced to imprisonment and the remaining 34 individuals were given lighter sentences, such as a criminal fine or a deferred sentencing. At the same time, according to data published by the Anti-Corruption and Civil Rights Commission (“ACRC”), a total of 1,025 individuals have been sanctioned for violating the Anti-Graft Act as of the end of 2020. These figures tend to suggest that the proportion of individuals held criminally liable and punished for violating the Anti-Graft Act is relatively low compared to the total number of individuals subject to sanctions ? meaning that most of those who were sanctioned were subject to non-criminal sanctions (i.e., administrative fines or disciplinary sanctions). In this regard, a popular perception has been that a violation of the Anti-Graft Act is punished merely by a “slap on the wrist.” However, according to a press release of the ACRC, 651 out of the 1,025 individuals were subject to an administrative fine, and 236 individuals were subject to a disciplinary impositions. More specifically, in cases where benefits were provided in connection with the recipient’s public duties, the relevant individuals were subject to an administrative fine of two to five times the amount they provided/received, and the companies were also held liable on the basis of vicarious liability even for provision/receipt of a relatively small amount of benefits. Cases involving lower amounts of benefits included the following: (i) food and beverages amounting to less than KRW 30,000 per person, (ii) a gift amounting to less than KRW 50,000, or (iii) a 20% discount (KRW 13,750) on golf club green fee through the use of corporate memberships.1 Furthermore, according to the ACRC, in addition to the 1,025 individuals who have already been sanctioned, 1,086 individuals are currently subject to pending investigations or litigation relating to administrative fines under the Anti-Graft Act, and therefore, the number of those sanctioned is expected to increase. The reason for a relatively small number of individuals being subject to criminal sanctions under the Anti-Graft Act may be because criminal sanctions are imposed only when certain set monetary thresholds are exceeded, i.e., only when the amount of benefit provided/received exceeds KRW 1 million in a single instance, or KRW 3 million in aggregate during one fiscal year. If the amount of benefits provided/received is below these thresholds, only non-criminal penalties, such as administrative fines, may be imposed. It would be erroneous to conclude that a violation of the Anti-Graft Act results in light punishment, based on the low proportion of violators who are subject to criminal sanctions. Rather, the appropriate conclusion is that the high total number of violators who have been generally sanctioned show that the Anti-Graft Act is being actively enforced. Lenient Enforcement Against Members of the Media Compared to Government Officials? Another misunderstanding of the Anti-Graft Act is the perception that enforcement has been somewhat lenient with respect to journalists and members of the media compared to government officials. Over the past five years, a total of 93 individuals (involved in 53 cases) underwent a court proceeding and received final sentences at least in part for violating the Anti-Graft Act. Among the 93 individuals, 69 were public officials (with the remaining 24 being “civilians” who provided benefits to public officials); among the 69 public officials, journalists made up the largest group, comprised of 24 individuals. In the cases involving the 24 journalists, most were cases where journalists received benefits from local companies with a request that they would write a positive story or refrain from writing a negative story. There is also a case in which “advertising fees” were paid to the bank account of a media company and yet the court determined that the payment had been intended for an individual reporter working at the media company and that effecting such payment was in violation of the Anti-Graft Act. As these cases demonstrate, the Anti-Graft Act appears to be strictly applied to and enforced against journalists. Enforcement Trends After five years of enforcement, there has been a growing track record of cases which has enabled some further elaboration of some of the details concerning the types of conduct that would be subject to enforcement. In addition to the cases mentioned above, the following are some key cases involving violations of the Anti-Graft Act based on media reports and court decisions. A. Violation Found in Absence of an “Improper Request” Facts: A, a local official, received benefits from a local businessman he had known for years, in the form of KRW 1 million in cash as a “gift to congratulate A’s recent promotion” and a meal worth KRW 300,000. The businessman did not make any special requests to A. When A recognized the potential issue in receiving such benefits, A immediately returned the cash gift and voluntarily reported the matter. Punishment: Deferred sentencing of criminal fine of KRW 1 million Key Takeaway: If a public official receives a benefit exceeding KRW 1 million in a single instance, a criminal penalty may be imposed for violating the Anti-Graft Act even if the provider of the benefit does not make any improper request, and the public official returns the money he/she received. While the bribery provisions of the Criminal Code require a showing relating to a request made to a public official, this is not the case under the Anti-Graft Act. B. Violation Found Even if No Action Taken by Public Official Facts: B, an administrative officer at the Prosecutor’s Office, received KRW 2 million in cash from an acquaintance who was the subject of a criminal complaint and a pending criminal investigation. The acquaintance asked B to “check on the status of the police investigation.” The administrative officer did not actually take any action to influence the investigation. Punishment: Criminal fine of KRW 1 million Key Takeaway: A criminal penalty may be imposed for violating the Anti-Graft Act even if the public official who received the benefit does not take any action in return for the benefit he/she received. C. Preferential Treatment in Hiring Facts: C worked at a public institution. When C’s son applied for a job at the same public institution, C asked the interviewers to favorably evaluate his son. However, the interviewers voluntarily reported the matter, and C’s son gave up on the interview and was not hired. Punishment: Administrative fine of KRW 10 million Key Takeaway: A violation can be found for making an improper request to a public official under the Anti-Graft Act, even if the public official does not take action pursuant to the improper request. There have been a number of cases where an individual improperly requested preferential treatment in personnel matters (e.g., hiring process, promotions), and the improper request was detected through internal audit, voluntarily report, etc. D. De Minimis Amount of Benefit Facts: D, who had applied for industrial accident compensation, mailed a box of 24 cans of Sik-hye (a Korean beverage) worth KRW 9,700 to an employee of the National Health Insurance Services in charge of approving such compensation. Punishment: Administrative fine of KRW 20,000 Key Takeaway: A penalty may be imposed for violation of the Anti-Graft Act even when the amount of the benefit is quite small, if the benefit was provided/received in connection with the public official’s duties. E. Active Request for Benefit Facts: E, who handles camera work at a media company studio, had an acquaintance who had a complaint against a third party. E told the acquaintance that he would need “KRW 100 million to get the story on air.” E received a total of KRW 65 million in five installments, and used his influence at the media company to have a reporter broadcast the story. Punishment: Sentence of ten months Key Takeaway: The court regarded the fact that E actively demanded money and received a large amount of money as aggravating factors in determining the level of sanctions. F. Requesting Favorable News Articles Facts: F, a local reporter, received KRW 20 million from a construction company executive who requested F to write articles promoting the sale of units in an apartment complex. F then gave out amounts ranging from KRW 500,000 to KRW 1.5 million to 13 reporter colleagues (totaling KRW 12.4 million, out of the KRW 20 million F had received). F and his reporter colleagues then wrote promotional articles relating to the apartment complex. Punishment: Sentence of eight months; suspended for two years Key Takeaway: The reviewing court imposed criminal penalties finding that the conduct at issue had undermined the local residents’ trust in the fairness and objectivity of the media. G. Request of Payment for Blocking Negative Media Coverage Facts: G, a vice president and reporter of a media company, suggested to a subcontractor of an apartment construction project that G would prevent reporters from writing articles criticizing the subcontractor, if the subcontractor would pay G KRW 9.8 million. G dissuaded reporters from writing articles criticizing the subcontractor, and then demanded the subcontractor to pay the indicated amount. Punishment: Criminal fine of KRW 3 million Key Takeaway: Under the Anti-Graft Act, a criminal penalty may be imposed on a public official simply for demanding benefits, regardless of whether benefits were actually provided to the public official. H. Receiving Payments on Behalf of the Media Company Facts: H, the editor-in-chief of a newspaper, demanded money and valuables from local businessmen in return for suppressing negative media coverage. H also received money and valuables in the form of “advertising fees” through an account opened in the name of the newspaper in return for writing favorable articles. Punishment: Sentence of 8 months; suspended for 2 years. In this case, the sanctions also related to charges of commercial bribery (breach of trust), in addition to charges under the Anti-Graft Act. Key Takeaway: In principle, the Anti-Graft Act does not apply when benefits are provided to/received by a public institution or organization, rather than by an individual public official. However, a violation of the Anti-Graft Act may still be found in cases where, although the money and valuables were provided to/received by a public institution or organization (e.g., media company) in form, but in substance such benefits were intended for an individual public official (e.g., employee of the media company), or where circumstances indicate that the individual public official rather than the entity actually received the benefit. Enforcement Outlook Since the introduction of the Anti-Graft Act, there have been conflicting voices, with some calling for further tightening of the standards for imposing sanctions to enhance the integrity of the public service community; while others have called for loosening the scope of application or monetary limits. Over the past five years, both the efforts to tighten and relax the application of the Anti-Graft Act have been enacted or proposed as summarized in the table below. Measures to Strengthen Regulation Measures to Loosen Regulation Removal of “securities” from the scope of permitted gifts Addition of the newly-established “Criminal Investigation Office for High-Ranking Officials” as “Public Institution” under the Anti-Graft Act Expanding the scope of activities where an “improper request” can be made to include selection of interns at public institutions, and review of research performance of schools Adoption of anonymous reporting procedures and special protection measures for reporting persons similar to those under the Whistleblower Protection Act Draft amendment to include representative directors, officers and employees of internet news service providers, such as Naver and Kakao, in the definition of “Public Officials” Draft amendment to include principals of childcare centers and infant care teachers in the definition of “Public Officials” Temporary relaxation of monetary limits for gifts that are agricultural, livestock or fishery goods, before and after Korean traditional holidays, to lessen the impact on related industries Relaxation of monetary limits for amount of honorarium paid for outside lectures by school employees However, it would be fair to say that the general trend is moving towards the direction of further strengthening the regulatory framework of the Anti-Graft Act, especially given the following factors: there is a greater social expectation of enhanced integrity of public officials following the recent case involving the fake fisheries businessman, and other high-profile corruption cases; the National Assembly recently passed the Act on the Prevention of Public Officials’ Conflicts of Interest (expected to enter into effect in 2022) following a real estate speculation scandal (also known as the “LH Scandal”) involving officials at the Korea Land and Housing Corp., who allegedly used non-public information for their personal purchase of undeveloped land around Seoul on speculation; the amendment to the Act on Anti-Corruption and the Establishment and Operation of the ACRC is expected to enable the ACRC to undertake fact-finding with respect to alleged violators named in whistleblower reports, which will likely facilitate the processing of corruption-related whistleblower reports, and according to the results of a survey conducted by the ACRC in September 2020, 87.8% of the Korean population stated that they support the Anti-Graft Act. Taking into account these developments as a whole, we expect that the Anti-Graft Act will continue to be actively enforced by the relevant regulatory and criminal investigation authorities, as well as the courts. Accordingly, companies should continue to make efforts to comply with the Anti-Graft Act. [Korean version] 1 See Collection of Key Cases published by the ACRC
2021.12.22

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Legislative Amendment to Promote the Use of Cloud Services by the National and Local Governments On December 9, 2021, the proposed amendment to the Act on Development of Cloud Computing and Protection of Its Users (the “Cloud Computing Act”) passed at the plenary session of the National Assembly (the “Proposed Amendment”). The Proposed Amendment seeks to promote the use of cloud computing services by the national and local governments in addition to public sector customers. Now that the Proposed Amendment passed the final stage of legislative process at the National Assembly, we expect that it will be promulgated in the near future. The Proposed Amendment is in line with the “Third Master Plan for Cloud Computing” which was announced by the ICT Strategy Committee, that is presided by the Ministry of Science and ICT (the “MSIT”), last September, which was also designed to promote the use of commercial cloud services in the public sector, including the initiative to convert all information systems of the national and local governments and public institutions into cloud services by 2025. Please find below the key points of the Proposed Amendment: 1. The national and local governments and public institutions are required to formulate action items to facilitate their use of cloud computing services (Article 3 (1) and Article 20 (1) of the Proposed Amendment) While the current Cloud Computing Act generally requires public institutions to promote the development and use of cloud computing services in Korea, the Proposed Amendment imposes on the national and local governments and public institutions an affirmative duty to prepare action items to facilitate the use of cloud computing services within the national and local governments in particular. 2. The public sector customers are required to consider the use of cloud services that have been certified by the Cloud Security Assurance Program (“CSAP”) with priority (Article 20 (2) of the Proposed Amendment) In general, obtaining the CSAP certification is not mandatory for commercial cloud service providers. The Proposed Amendment, however, does encourage the national and local governments and public institutions to consider with priority the CSAP-certified cloud computing services when selecting cloud computing services. 3. The MSIT can designate certain digital services that facilitate public sector customers’ use of commercial cloud services and also establish a central support system to manage such digital services (Article 20 (3) of the Proposed Amendment) The Proposed Amendment allows the MSIT to designate services that facilitate the use of the cloud services by public sector customers, which include cloud computing services, services that supports cloud computing services, and services that combine cloud services and other technologies such as artificial intelligence (collectively, “Digital Services” as defined in the Proposed Amendment). The MSIT may also establish and operate a support system so that the Digital Services are registered and managed through the support system. 4. The Proposed Amendment introduces a legal basis for the MSIT to provide the CSAP certification for eligible cloud computing services (Articles 23-2, 23-3, and 23-4 of the Proposed Amendment) Under the current Cloud Computing Act, the MSIT may publicly notify a set of standards for information security applicable to cloud computing services and may encourage cloud service providers to comply with such standards. While the CSAP certification has been already available under the current regulatory regime, the Proposed Amendment introduced a statutory basis for the operation and procedures of the CSAP certification including the MSIT’s authority to grant the CSAP certification. Please note that further details on the designation of the Digital Services, operation of the support system for the Digital Services, and the CSAP certification process will be prescribed by the Enforcement Decree, which is subordinate to the Cloud Computing Act.
2021.12.20

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Korea Environmental Legal Update (Winter 2021) This issue includes: Regulatory Update on Product Packaging and Resource Recycling Requirements Relaxed Environmental and Chemical Regulations Proposed enactment of the Enforcement Decree of the Carbon Neutrality Framework Act [Attachment] Korea Environmental Legal Update (Winter 2021)_EN .content_view .view_area a { text-decoration: none; color: #2c3e50; } [Korean version]
2021.12.15

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Release of the “K-ESG Guidelines” On December 1, 2021, the Ministry of Trade, Industry and Energy (the “MOTIE”) released the “K-ESG Guidelines” as one of its main initiatives regarding the “ESG Infrastructure Expansion Plan” that was jointly announced by various government bodies in August 2021. Although interest in ESG management has been rapidly increasing, many companies have been left in the dark because of the lack of information on ESG measures and guidelines, and especially on how domestic and international rating agencies evaluate a company’s ESG management. Therefore, the purpose of the K-ESG Guidelines is to set forth the key elements of ESG management so that companies can freely put an effective ESG management into practice. However, the MOTIE makes it clear that the Korean government does not intend to use the K-ESG Guidelines for any government-level ESG evaluation regarding companies. Based on more than 3,000 ESG evaluation and disclosure indicators provided by 13 major domestic and international ESG-related agencies (such as DJSI, MSCI, EcoVadis, Sustainalytics, WEF, and GRI), the K-ESG Guidelines set forth 27 “Social Values” that companies should pursue through ESG management. In addition, the guidelines provide 61 Evaluation Items and specific details for each item (“Item Specification”) so that companies can evaluate themselves on how well they are achieving such “Social Values.” “Item Specifications” consist of: (1) an “Explanation” section which summarizes the purpose, content, and method regarding the Evaluation Items, (2) a “Performance Evaluation” section which provides data sources, data period, data scope, and data formula and explains how to review a company’s performance based on such information, and (3) an “Evaluation Standard” section which provides guidance for evaluating a company’s ESG management based on the information reviewed under the “Performance Evaluation” section. Each item is scored on the basis of five levels (with a maximum of 100 points) for each item in order to facilitate comparison of ESG performances (across companies or items) that have been subject to evaluation. In order to make it easier for companies to conduct self-evaluation, there is an “Additional Explanation” section at the end of the Item Specifications. Through 61 Item Specifications, the K-ESG Guidelines provide the basic elements necessary for establishing an ESG management system. By utilizing the guidelines, companies can evaluate their own ESG status. The guidelines are designed in a way that allows companies as well as domestic ESG rating agencies to freely use the guidelines. The guidelines are also expected to contribute to a more transparent and mature rating market as they can be used not only by existing rating agencies, but also new rating agencies. The K-ESG Guidelines provide the minimum standard and implementation method necessary for establishing an ESG management system in the real business world by considering consistency with global indicators, characteristics that are unique to the Korean market, and consistency with applicable laws and policies. However, please note that the K-ESG guidelines should be treated as a “bare minimum” rather than as an “all-encompassing” set of conditions for establishing an effective ESG management system. Therefore, companies should analyze and consider other ESG criteria required by various global evaluation and disclosure standards when establishing their ESG management system based on the K-ESG Guidelines. The Korean government plans to update the K-ESG Guidelines once every one or two years to reflect global ESG standards and trends, and will also provide specific guidelines for various industries and companies of different sizes starting from 2022. We will keep you updated on future developments. [Korean version]
2021.12.10

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“Band 1” in 18 Practice Areas in Chambers Asia-Pacific

Kim & Chang ranked “Band 1” in 18 practice areas in Chambers Asia-Pacific 2022, receiving the most number of top rankings among Korean law firms. With the guide also naming 74 of our professionals as “Leading Individuals” we demonstrated our market-leading capabilities across a wide range of fields.
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Kim & Chang’s Serious Accidents Punishment Act Practice

Kim & Chang’s Serious Accidents Punishment Act (“SAPA”) Practice draws on the market-leading resources of the firm’s diverse practices to provide clients with comprehensive support on complying with SAPA and responding to accidents.
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“Korea Law Firm of the Year” for Nine Years in a Row at ALB Korea Law Awards

Kim & Chang won the “Korea Law Firm of the Year” award at the ALB Korea Law Awards 2021. At the awards ceremony, we received the highest recognition in a total of 16 categories, including seven more firm awards, four individual awards, and four deal awards.
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