When you enter into an endorsement agreement with a celebrity in order to advertise your products and services, the overall behavior of that celebrity impacts the value and reputation of your business positively, and sometimes negatively. Therefore, most endorsement agreements with a celebrity or a sports star have a so-called Morals Clause.

What is a Morals Clause?

The morals clause imposes a contractual obligation for the models not to cause any harm to the public image of the sponsor or the brand owner.  It is the same in South Korea. 

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Q) I would like to enquire about a situation of a director working at a Korean subsidiary (corporation) of U.S. company, who has secretly started a similar trade of business while still in employment with his current employer.  Having served in a managerial position, he has access to his employer’s full clientele’s information, trade secret and now he started the same business as his employer, directly causing many economic losses to his employer.  Is there any way legally to prevent the person from causing further damages?  

A) Under Korean law, a director of a corporation bears a fiduciary duty.  Thus the directors shall perform their duties in good faith for the interest of the company. Their activities shall not violate the statutes and the articles of incorporation of the company. (more…)

[Updated: May 6, 2020]

There was a news report that more than half of the foreign workers in South Korea are not aware of the fact that they can claim for the severance pay.   Yes, Korean labor law recognizes severance pay.  It is being regulated by the Guarantee of Workers’ Retirement Benefits Act(“GWRBA”).  In this article, we will provide you a guide to the general ideas of how severance pay works, who gets it and how much in Korea. (more…)

Korean Law OfficeThere is no doubt that intellectual property is a valuable asset.  Parties all around the world are taking an arrangement to utilize 3rd party’s intellectual properties.  Sometimes it could be a license agreement or sometimes a transfer.

In any case, it is very important to verify the validity of the underlying intellectual property before entering into a contract.  As for a patent, first, it looks relatively simple to clear the validity, compared to other intellectual property such as a copyright.  A patent is being registered with the Korean Intellectual Property Office.  The registration, however, does not guaranty the validity of the patent at issue.  It can be challenged later by 3rd party and could be nullified by the court’s decision.

Then what happens if the patent becomes void after the license agreement is entered into? (more…)

When you hire an employee in South Korea, you cannot freely fire the employee.  Article 23 of Labor Standard Act(“LSA”) requires a “justifiable cause” if and when an employer takes disciplinary actions, including termination of employment, with regard to its employees.  Korean courts have held that a “justifiable cause” refers to such causes as a criminal offense, serious illegal acts, and gross negligent acts, etc. which would make maintaining of the relevant employment relationships no longer possible under generally accepted public notions.

Especially, because termination of employment is the most extreme measure, taking away an employee’s means of making a living, Korean courts are known to be very strict in applying the above-noted criteria, when it determines whether a particular termination is justified.  Thus, unless an employee’s specific conduct is something that makes the current employer-employee relationship no longer possible to continue, it would be advisable for an employer to take less severe disciplinary actions such as suspension of employment, reduction of salary, or reprimand.

Further, as regards the employment termination, under LSA, an employer may also terminate employees where the employer can establish (more…)

그림 67When a foreign incorporated company does a business in Korea, it is very fundamental to determine whether the company is a domestic or a foreign corporation for Korean tax purposes.  A major difference in tax liability is that, in principle, a foreign corporation is liable for taxes only on the incomes generated in Korea rather than a worldwide income.

In this regard, the Corporate Tax Ac of Korea(“CTA”) defines a “domestic corporation” as a corporation with its headquarter, main office, or actual business management place located in Korea, and a “foreign corporation” as an organization which has its head office or principal place of business in a foreign country.  What makes distinguishing domestic corporation for a foreign corporation under CTA difficult and challenging is the meaning and application of the term of “actual business management place” set forth in CTA.  For example, in a case decided by the Supreme Court of South Korea in 2016, a Singapore incorporated company had challenged the Korean tax authority’s decision that its actual business management place was in Korea.

The Singapore company had a wide variety of international business portfolio and among them was a trading foreign issued corporate bonds including a Korean corporate bond.  The Korean tax authority decided that the company’s actual business management had taken place in Korea after finding the facts that the company had a liaison office in Korea, one of the directors was residing in Korea and financial documents relating to the Korean business was stored and managed in Korea.  And this (more…)

It is well known that the Korean labor law provides the employees with generous protections when it comes to the matter of disciplinary measures taken by the employer.  In this article, we explain what protection is given to foreign employees in the area of termination and other disciplinary actions.

Employment Is Not “At-Will” in Korea

Unlike many other foreign legal regimes, Labor Standard Act of Korea (LSA) requires the employer having five or more employees to establish a just cause in order to exercise dismissal and any other disciplinary actions.  In other words, employment is not “at-will” in Korea.  (Note:  There is a legal concept of no-fault dismissal based on the managerial hardship under the LSA, which requires very strict requirements to execute.  This will be the subject of our upcoming article) 

Foreign Employees Can Be Protected By the Korean Labor Law Even If the Labor Contract  Says Korean Labor Doesn’t Apply

This rule of labor laws shall equally apply to the employment contract between Korean employers and Foreign employees in Korea, and vice versa.

More importantly, this is the case even when the employee working in Korea agrees in his employment contract that the Korean labor law does not apply.  That is because the Private International Act of Korea which provides the general principles for the choice of law enables every Korean and foreign employee working in Korea to enjoy the protections under the mandatory rules of the Korean labor law.

Therefore, it is highly advisable that any foreign employee working in Korea and a multinational which has employees in Korea must understand how the Korean labor law regulates the dismissal and under what situation the dismissal becomes a wrongful termination.

What is the Just Cause for Dismissal in Korea?

The LSA does not provide what the just cause exactly means.  It is up to the court’s review and interpretation.  In this regard, it is firmly established in the Supreme Court’s precedent that (more…)

Question) I am an American expat working in South Korea.  Originally I was working for a U.S. company incorporated in the state of New York, but 3 years ago I was seconded to the Korean branch of my U.S. company, and have been working for the branch until now.  When I was seconded, my new employment contract provided that the New York state law shall apply to my employment relation in Korea.  Now, my employment contract is expiring and I would like to know whether I am entitled to the severance pay under the Korean labor law.  I know my employment contract and my company’s policy do not provide the right to severance pay.  But, as I have been working in Korea for 3 years, I am wondering if the statutory rights of severance pay under the Korean labor law could be given to me.

Answer) The answer is Yes.  Expats are entitled to severance pay under the Korean labor laws.  (check here as to how the severance pay under Korean law is recognized and operates)

This answer could sound quite surprising considering the fact that the parties had previously agreed (i) the Korean labor should not apply and (ii) the severance pay should not be awarded.  How come the Korean labor law intervenes in the parties’ employment relation?  The answer lies in the provisions of the Private International Act of Korea which provides the general principles for the choice of law in Korea.

When a legal relation has certain foreign elements, the court must decide which jurisdiction’s law shall apply to interpret that legal relation.  In Korea, the Private International Act provides the general rules and principles for the governing laws of the various types of legal relations.  Specifically, the Act provides that if the employer and employee agree, the employment contract is governed by the law chosen by the parties.  But, this does not mean the parties can freely determine which law and regulations apply to their employment relation.  It is true in Korea that the party autonomy is a general principle of governing laws, but party autonomy is subject to limits imposed by the overriding public policy and mandatory rules.

Accordingly, (more…)

그림 2In April 2013, attorney Mr. Wonil Chung successfully obtained a Supreme Court’s ruling which overturned lower court’s decision in connection with the sponsored links, Internet keyword advertising services, operated by Overture Services Inc., a wholly-owned U.S. subsidiary of Yahoo! Inc.  Before this ruling from the Supreme Court of South Korea, there had been an increased controversy over whether Overture system user’s deployment of an automated program to access to the sponsored links could fall into a crime causing a harm to the Internet network system.  In this case, attorney Mr. Chung argued before the Supreme Court of South Korea that it cannot constitute a statutory crime, otherwise the result would be an over-reaching of Korean criminal statute and cause an excessive chilling effect on the free access to the Internet.  Responding to Mr. Chung’s arguments, the Supreme Court of South Korea held that it does not constitute a statutory crime of interference with stable operation of the Internet network.  With its ruling, the Court struck down the prosecutor’s attempt of excessive criminalization and reinforced online service user’s right of free and unrestricted access to the (more…)

Let’s assume you file an action for a money judgment in the US court or any jurisdiction other than South Korea, and the defendant has significant assets located in South Korea. In that case, you might need to consider putting a provisional attachment on those assets in order to prevent the defendant from hiding or liquidating the assets to render the judgement ineffectual. Then this situation entails the following question: can a plaintiff in a foreign proceeding apply for a provisional attachment to the Korean court, while pursuing the proceeding in the merit in foreign jurisdiction?

The answer is yes.  The Korean court grants and issues a provisional attachment order per the foreign creditor’s application in support of proceedings which have been or are to be commenced in a place outside of South Korea. It does not require the substantive proceedings are to be connected to South Korea. Further, it does not require the defendant to be the resident of South Korea. It just suffices only if the assets are located in South Korea. That said, for example, the US creditor pursuing an action in New York may apply to the court of South Korea for a freezing order on defendant’s bank account in Korean banks to restraint the defendant from dealing with, or disposing of, the funds.

In this regard, There was a case in Korean court where the provisional attachment order against the Korean stocks was issued by the Seoul Family Court as the security for a judgment soon to be obtained in the court of Virginia, USA. The defendant in the US proceeding, which was a divorce case where the plaintiff seek $6,700,000USD for her share of property division, filed an objection (more…)