Category: Commercial Business

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The Securities-related Class Action Act: Overview

Korea’s Securities-related Class Action Act(hereinafter the “Act”) has been effective from January 1 2005.  Currently the Act covers all companies whose securities are listed on the Korea Stock Exchange or registered with the Korea Securities Dealers Association.

There are four causes of action under the Act: (i) damages for false information in a securities report or prospectus; (ii) damages for false information in business reports and semi-annual and quarterly reports; (iii) damages for insider trading or price manipulation; and (iv) claims against auditors.

Damages are calculated in accordance with the Securities and Exchange Act(SEA) and other existing laws. For example, under the SEA, damages caused by false information are calculated by the acquisition price minus (i) the market price at the closing of the courtroom arguments, or (ii) if disposed of earlier, the disposition price.  If damages are complex to work out, however, courts may use sampling, averaging, statistical or other rational methods.

In certain cases, the burden of proof of the lack of causal connection between the falsity and damages will fall on the defendant.  Damages will then be reduced by the portion that is proven as unrelated to the cause of action.

Class certification requires (i) at least 50 class members, with the total number of their shares constituting 0.01% of all issued and outstanding shares of the company; (ii) commonality of legal or factual issues; (iii) class action being an efficient and suitable means for protection of rights or interests of all members; and (iv) the complaint being properly drafted and not defective. The representative member should be one will the largest stake and capable of fair and proper representation.

The Act also includes provisions on opt-out and preclusion effect on members who did not opt out, (more…)

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On April 3, Seoul Central District Court ruled that Pandora TV infringed copyright of Japanese animation by letting its members upload unauthorized animation clips onto Pandora TV’s channel(shared folder).  Pandora TV is a famous Korean internet UCC service provider, something like YouTube.  Its members can upload any files they want, so bunch of copyrighted movies, animations, dramas have been uploaded without permission and anyone who visits its web page can view the copyrighted materials, even though he or she is not logged in.

The court addressed that the Pandora TV has recognized copyright infringements of its members and facilitated and induced it by giving “cyber money or coin” to the members who uploaded much more items.  Also the court pointed that Pandora TV has had an advertising revenues from any views.

Also the court ruled that the individual members are held liable for simply making copyrighted materials (more…)

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It is reported that the Fair Trade Commission, the Korean Antitrust watchdog, has begun an investigation whether 3 national broadcasters, KBS, MBC, SBS, violated Fair Trade Law.  Before this investigation, TV drama producers had publicly claimed that 3 broadcasters abused their market dominating positions and forced them to assign all the intellectual properties regarding the produced drama to the broadcasters.  The producers also alleged that the broadcasters have fixed consignment sale fees. (more…)

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Today it was reported that 2,078 customers of Auction(the “Company”), the largest on-line shopping mall which has almost 18,000,000 people as its registered users, filed a lawsuit against the Company alleging it accidentally had leaked millions of files containing personal information about its customers.

Previously on February, the Company announced its sever had been hacked by allegedly a Chinese hacker.  However the Company has not cleared up to what extent personal information had been leaked by the accident.  Not satisfied by the Company’s handling, the customers jumped into a lawsuit.  The plaintiffs are seeking 2,000,000won(approximately 2,000 US dollars) per person.

There has been several internet personal information leakage cases.  For example, (more…)

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“X Company” is a U.S. company that provides and sells Software Products in Korea through the appointment of local distributors.  “X Company” would like to review its standard distribution contracts (the “Reseller Terms”) with Korean distributors and want to know whether there are any clauses in the Reseller Terms that may be deemed illegal under the laws of Republic of Korea.

In view of the nature of the Reseller Terms, under the Monopoly Control and Fair Trade Act of Korea (“MCFTA”), the type of the Reseller Terms may be characterized as both a “copyright license contract” and an “import distribution contract.”  MCFTA has published guidelines on the types and criteria for determining unfair business practices in international contracts (the “Guidelines”), and the Reseller Terms would need to be reviewed against the Guidelines.

For example, paragraph 11 of Article 3 (Transfer of Improvement Technology) of the Guidelines provides that “When a licensor requires a licensee to provide the licensor, without compensation, with the ownership of or the exclusive (non-exclusive) right to use the technology (product) improved by the licensee…,” the practice shall be unfair.

Moreover, because the Reseller Terms is a standardized type of contract applicable to all local distributors, the Reseller Terms may come into the purview of the Regulation of Standardized Contracts Act (“RSCA”).  The purpose of RSCA is to prevent business entities from imposing standardized contracts on their customers containing unfair terms and conditions that (more…)

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Here comes another news warning hemorrhaging savings banks of south Korea.  The news reported that the Financial Services Commission yesterday ordered nearly bankrupt Hyundae Mutual Savings Bank, which is nothing to do with Hyundai group, to suspend its operation for six-months.   The news added that, according to industry insiders, six savings banks of 108 nationwide as of late December failed to meet the minimum 5 percent requirement for capital adequacy (more…)

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Recently I got a question about a jurisdiction of legal dispute arising of a labor contract made between a Korean company and a foreigner here in Korea.  The foreigner told me his contract had an exclusion clause which ruled out the jurisdiction of Korean court.

According to Article 2(1) of the Private International Act, a Korean court shall have the jurisdiction over an international trial in the case where the parties or the issue has substantial relation to South Korea, and according to Article 28(5) of PIA, the parties of an employment contract may make an agreement on the international jurisdiction only in cases where a dispute has already occurred or an employee is allowed to bring a lawsuit to a court in addition to the governing court in accordance with the PIA.

So even if parties of an employment agreement had agreed to rule out the jurisdiction (more…)

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I found a very informative article for foreigners interested in Korean project financing market.  Korean project financing deal is largely dominated by real estate development financing deal.  The author addressed current situation and problem of Korean Savings banks regarding withering Korean project financing market.  I have seen many bank clients considering extension of their project financing or ABCP terms due to the withering project-financing market and (more…)