Korea’s cryptocurrency environment still remains cloudy as ever. Although the Korean government has taken steps to regulate the use and sale of cryptocurrency by proposing six bills in the National Assembly, it remains to be seen which regulations will finally be implemented. The proposed bills, though all different, contain several common threads such as clauses to protect users and clauses that prohibit money laundering, market manipulation as well as the use of nonpublic information.
In 2018 Korean regulators backtracked on the original threat to ban cryptocurrency trading and now even support it to a certain extent. As one of the most active countries in the cryptocurrency world, with over 3 million citizens trading cryptocurrency on a regular basis, Korea suddenly left its anti-cryptocurrency stance and announced regulations on the use of cryptocurrency. It also blocked some individuals from trading.
It should be noted that cryptocurrency, once touted as digital cash, has run into many regulatory hurdles as governments refuse to categorize it as a financial asset, let alone as a currency. Plagued with illegal uses such as money laundering, drug sales, and terrorism funding, cryptocurrencies such as Bitcoin are facing more and more government regulations designed to curb illegal uses. Korea has hopped onto that wagon, but the future of cryptocurrency in Korea still remains murky.
Picking a law firm in Korea has been the topic of a number of articles and books. In Chapter 30 of his book, Doing Business in Korea, Tom Coyner describes the trials and tribulations of picking the right law firm in Korea. He opines that some (if not many) domestic and international lawyers are commercially incompetent, as many Korean attorneys fail to appreciate the commercial context in which they offer counsel. In his Korean Law Blog, Sean Hayes has also written about the importance of selecting a commercially competent lawyer when looking for counsel in Korea.
Failure of appreciating or understanding the commercial environment in which one operates is not unique to Korean lawyers. I’ve witnessed firsthand lawyers in other jurisdictions, including the US, act as if they were giving legal advice inside a vacuum. However, I firmly believe that Korean law schools which, until recently, failed to emphasize the commercial/international nature of legal practice in Korea, are partly to blame. As Korea’s economy is primarily export driven, the legal market is less competitive than in other jurisdictions in Asia, such as Hong Kong and Singapore, which are known for producing internationally focused lawyers schooled in common law.
Be that as it may, picking the right law firm in Korea is like picking a law firm in other jurisdictions. It is up to the manager or in-house counsel to meet with Korean lawyers and determine if they are a good fit. One should ask plenty of questions, get referrals, and look at trade journals and publications to get an idea of which firms are known for their international expertise.
Remember, in Korea, be particularly careful as only a handful of firms dominate the legal market.
I will blog more on picking law firms and law firm management in the future.
South Korea has taken data protection very seriously and has implemented a general data protection law: the Personal Information Protection Act, PIPA. Amended in 2016, PIPA places strict requirements on data privacy in sectors such as IT networks, credit card information, cloud computing, and online advertising.
The 2016 amendments were in response to the 2014 credit card scandal when three major credit card companies faced a massive data breach. Korean data privacy laws, as well as regulations and guidelines, have all been tightened in an attempt to prevent a reoccurrence of such a scandal. There will always be a risk of unauthorized access to data unless companies and governmental agencies implement and continuously update risk management processes. There have been many changes to Korea’s main data privacy law, PIPA, as well as to specific industry-related data privacy laws and regulations over the last few years. Some are listed below.
It is clear that the regulatory trend for data protection in Korea focuses on increased accountability for the collection, storage, and use of personal information and data. Basically, stricter requirements have been placed on financial institutions and credit card companies. Compliance with PIPA and other regulations will become very important as more and more penalties and fines are levied against those who fail to comply. Other countries in Asia are also increasing or strengthening data protection laws, but that topic requires another blog down the road.
For those doing business in Korea or wanting to do business in Korea, it helps to have an understanding of the local antitrust laws and regulations. To begin with, the Korean antitrust regime is governed by the Monopoly Regulations and Fair Trade Act (MRFTA) of 1981. Like in the US and other jurisdictions, the MRFTA‘s goal is to promote free and fair competition. Currently, the MRFTA is used as a tool to curb the monopolistic behavior of Korean multinationals (Chaebols) and to help accelerate good corporate governance. Currently, Korea is using the MRFTA to help establish a “level playing field” for businesses.
The main features of the MRFTA are as follows:
Currently, the KFTC is planning to take strong initiatives in order to strengthen its enforcement capacity under the MRFTA. It plans on increasing its regulations concerning cartels, review of supplier-distributorship issues, abuse of dominance penalties, and review of superior bargaining issues and concerns. Therefore, it is recommended that companies conduct a more thorough antitrust compliance audit.
Remember: companies should implement a comprehensive audit in order to cover all antitrust issues in Korea because of:
Like directors in the US and elsewhere, directors in Korean companies have fiduciary-related duties. Such duties are set forth in the Korean Commercial Code and include:
In Korea, if a director violates the duty of care as a good manager (including the duty to faithfully perform in the company’s best interest) he or she may be held liable to the company or even to third parties and could be required to pay damages. Under Article 382-3 of the Korean Commercial Code, a director’s duty of care and good faith encompasses a number of duties including the:
A director may even be subject to criminal liability as well as civil liability upon the negligent failure of fulfilling the obligation of care. In Korea, directors have usually been prosecuted for negligence involving financial issues of the company. A failure to protect a company’s assets by refusing to obtain the requisite insurance or agreeing to contracts that put the company in jeopardy (without seeking legal advice, etc) can definitely lead to prosecution. Liability may be found in other instances when the director fails to fulfill the duty of care and loyalty by:
A director needs to proceed with caution and acknowledge the fiduciary duties that he or she has agreed to by becoming a director in the first place.
There are many kinds of risks facing companies on a daily basis. Geo-political risk is definitely one of them and it is a major risk that companies and countries alike must navigate.
The geo-political risks in greater Asia have long been overshadowed by the risks facing us here on the Korean peninsula. Ever since the end of the Korean War, South Korea has faced an enemy to the north whose sole purpose was the unification of the Korean peninsula under the aegis of North Korea. After the inter-Korean summit between Moon Jae In and Kim Jung Un, in which North and South Korea pledged an end to hostilities and to push for denuclearization, the risks on the Korean peninsula have abated, right? Perhaps not.
President Moon Jae In has long called for peace on the peninsula. But at what cost? Does this peace include the US leaving the peninsula? What does denuclearization really mean? North Korea has in the past claimed that it will only give up its nuclear weapons if the US leaves the Korean peninsula
It appears that the US and Japan’s hard line against North Korea may have resulted in Kim Jung Un and Moon Jae In’s inter-Korean summit, but the summit has also resulted in differing state goals for South Korea and the US. It is highly possible that North Korea has achieved its goal of driving a wedge between the US and South Korean, something that it has long wanted to do. So where does this leave us?
Some may remember the “Peace for Our Time” by Neville Chamberlain speech prior to WWII. Are we facing another “peace in our time” moment? Or are all the parties sincerely trying to solve the geopolitical risks in the region?
