Newsletter A Quarterly Update of Legal Developments in Korea December 2018, Issue 4
UPDATES NEWS SELECTED REPRESENTATIONS Fair Trade Law Amended, Allowing Punitive Kim & Chang Advises SK Telecom Damages in Damages Litigation Against and Macquarie in the Acquisition of ADT Caps from Carlyle for Cartels and Retaliatory Conduct Nearly KRW 3 Trillion, Creating New Market Synergies
Kim & Chang Advises Hoban Proposed Amendment to the Environmental Construction Housing in the Acquisition of Resom Resort Health Act Stipulates Treble Damages for under Rehabilitation Proceeding, Involving Some 10,000 Resort Harm Caused by Environmental Pollution Members
Kim & Chang Advises Pearl Abyss Network Act Now Requires Global Companies in Acquiring the Icelandic Video Game Developer, CCP Games, to Appoint Local Representative Most Known for Its Popular “Eve Online” Game
Samsung Fire and Samsung Electro-Mechanics Sell Their Stake in Samsung C&T in a CORPORATE Block Deal to Improve Corporate National Pension Service Adopts the Stewardship Code Governance
Supreme Court Rules That Policies of Three Major Mobile ANTITRUST & COMPETITION Carriers to Provide Sales Amended Organizational Regulation Likely to Strengthen the KFTC’s Incentives Was Not an Act Inducing Distributors to Pay Enforcement Efforts Regarding Unfair Trade Practices for Small Businesses in Unfair Discriminatory Subsidies Distribution Arrangements to iPhone Users
Kim & Chang Advises MKIF in the First-of-Its-Kind Dispute in BANKING Korea over Managerial Control Improvements to Regulations on Internet-Only Banks Against a Collective Investment Vehicle
MBK Partners Sells Its Majority SECURITIES Interest in Orange Life Proposed Amendment to Ease Regulations on Private Equity Funds Supreme Court Sets Precedent on the Scope of Certain Financial Services from VAT Exemption INSURANCE
Employment Insurance Commission Announces Unemployment Insurance “Centropolis” Sold for the Obligation for “Special Type Workers,” Including Insurance Agents Highest Ever Purchase Price Paid for an Office Building in Korea UPDATES (Continued) NEWS (Continued)
TAX Supreme Court Overrules Lower Proposed Amendment Introduces Instances to Treat Overseas Investment Tribunal to Recognize that a Patent for a Sustained Release Vehicles as Beneficial Owners of Korea Source Income Pharmaceutical Composition Satisfies the Description Requirements REAL ESTATE Government Approvals Obtained Amended Commercial Lease Protection Act Goes into Effect, Increasing Lease for Sale of D’Live’s Seocho SO Protection Period to Ten Years Business
LABOR & EMPLOYMENT Government Announces “Anti-Bullying Action Plan” to Address Workplace AWARDS & RANKINGS Harassment Only-Ranked Korean Law Firm for Fifth Consecutive Year – The Supreme Court Decisions Establish a Standard for Calculating Hourly Wage to American Lawyer’s Global 100 Determine Potential Minimum Wage Violations (2018)
Highest Ranking Korean Firm in the Asia-Pacific Region – INTELLECTUAL PROPERTY The American Lawyer’s Asia 50 Korea Adopts Treble Damages for Patent Infringement and Trade Secret (2018) Misappropriation Beginning July 9, 2019 Winner of Six Consecutive “Korea Law Firm of the Year” Titles – ALB Korea Law Awards 2018 ENVIRONMENT Amendment to the Atmospheric Environment Conservation Act Proposes to For Fourth Consecutive Year, “National Law Firm of the Year Strengthen Regulations on Air Pollutants - South Korea” – Asialaw and Benchmark Litigation Dispute National Assembly Enacts Special Act on Fine Dust Abatement and Management Resolution Awards 2018
Top Tier Across the Board for 15 INTERNATIONAL ARBITRATION & CROSS-BORDER LITIGATION Consecutive Years – IFLR1000 (2019) Hong Kong International Arbitration Centre Amends Its HKIAC Administered Arbitration Rules Again the Only Korean Law Firm Given Highest Ranking in All 24 Categories Ranked – Asialaw Profiles 2019
Again Ranked in the Top Tier in South Korea – ALB M&A Rankings 2018
PRO BONO Kim & Chang Committee for Social Contribution Helps Achieve New Guinness World Record and Shares Kimchi with the Local Community
Newsletter ANTITRUST & COMPETITION
By Sung Eyup Park ([email protected]) and Wooju Lee ([email protected])
Fair Trade Law Amended, Allowing Punitive Damages in Damages Litigation Against Cartels and Retaliatory Conduct
On August 30, 2018, Korea’s National Assembly Punitive damages will not be imposed for leniency passed an amendment to create a statutory basis in the applicants. Instead, leniency applicants will be jointly Monopoly Regulation and Fair Trade Law (“FTL”) to allow and severally liable with other cartel participants up punitive damages in civil lawsuits against cartels and to the actual damages suffered by the plaintiffs. retaliatory conduct. Additionally, the KFTC separately announced Generally: a proposed bill to completely overhaul the FTL amendment, in which the KFTC’s exclusive right to The amendment also gives the Korea Fair Trade make criminal referrals will be abolished for hardcore Commission (“KFTC”) an authority to request dispute cartels (such as price fixing or bid rigging cartels), mediation. allowing prosecutors to initiate criminal investigation and indictment against hardcore cartels without a The amended FTL, except for the punitive damage prior KFTC referral. The proposed bill was recently provision, will take effect on March 19, 2019. The approved at the cabinet meeting. punitive damage provision of the amended FTL will take effect on September 19, 2019. Significance: Given these developments, we expect the criminal and civil enforcement actions against The amended FTL addresses the previous FTL’s lack of cartels will become more frequent and will likely sufficient recovery scheme for damages suffered by the involve greater monetary exposure. At the same general public due to cartel and retaliatory conducts. time, the amendment reduces the liability for The previous FTL was criticized for its heavy focus on leniency applicants whose civil liability will be capped administrative sanctions that could be imposed by the at the actual damages. Therefore, companies who KFTC while neglecting recovery of damages suffered are considering leniency application should seek by the public due to violations. Substantial damage expert advice to minimize civil liability. recovery was further limited under the previous FTL, because the KFTC was not able to apply for dispute 2. The KFTC official authority to request dispute mediation. mediation granted
Key Aspects of the Amendment / Significance: The amended FTL creates a statutory basis for the KFTC’s authority to request the Korea Fair Trade 1. Punitive damages against cartels and retaliatory Mediation Agency (“KOFAIR”) to mediate a dispute. conduct allowed As such, the KFTC will be able to refer cases that do not warrant investigations to KOFAIR for mediation. The amended FTL provides that enterprises can be liable for damages up to three times the actual Significance: As the amendment will expand damages to the plaintiffs who were harmed by: companies’ exposure against civil liability for (i) cartels; and (ii) retaliatory conduct for filing a damages, companies facing disputes should prepare complaint against the enterprises with the KFTC. appropriate response strategies to minimize the risks.
December 2018, Issue 4 l 3 ENVIRONMENT
By Yoon Jeong Lee ([email protected]) and Hyeongjun Hwang ([email protected])
Proposed Amendment to the Environmental Health Act Stipulates Treble Damages for Harm Caused by Environmental Pollution
On October 5, 2018, the Ministry of Environment ■ The scope of hazardous substances, whose use announced a public notice of a proposed amendment is restricted when used with electrical/electronic to the Presidential Decree of Act on Resource Circulation products, has also expanded from five substances of Electrical and Electronic Equipment and Vehicles to nine substances. Di-EthylHexyl Phthalate (DEHP), (“RCEEV”) to broaden the scope of products subject to Benzyl butyl phthalate (BBP), Dibutyl phthalate (DBP), recycling obligations. and Diisobutyl phthalate (DIBP) were added to the existing list, which includes lead and mercury. The provision on the scope of electrical/electronic products and products subject to recycling and Significance collection, and the provision on the expansion of restricted hazardous substances are expected to Once the proposed amendment is enacted, the scope of become effective on January 1, 2020 and July 22, 2019, the RCEEV will be significantly expanded and associated respectively. obligations will be heightened. Therefore, businesses that manufacture, import or sell electrical/electronic Key Aspects: products should check whether their products fall under the newly added 23 products, and whether any of the ■ The scope of electrical/electronic products and newly restricted hazardous substances are being used. products subject to recycling and collection, for which the use of hazardous substances is restricted, has been expanded from 26 products to 49 products. The additional products subject to restriction include daily commodities such as dehumidifiers, toasters, electric kettles, electric water heaters, and hair dryers.
Newsletter TECHNOLOGY, MEDIA & TELECOMMUNICATIONS
By Dong-Shik Choi ([email protected]) and Wookil Kim ([email protected])
Network Act Now Requires Global Companies to Appoint Local Representative
On September 18, 2018, the National Assembly passed The amended Network Act requires privacy and data a bill to amend the Act on the Promotion of the Use of protection regulations governing overseas transfer the Information Network and Information Protection (the of personal information to apply to re-transfer “Network Act”). The amended Network Act will become of personal information overseas. Accordingly, effective on March 19, 2019. a business operator who intends to re-transfer the personal information that had already been The amended Network Act establishes several new transferred overseas, must now obtain separate requirements and obligations, including the obligation consent that is identical to the consent for the initial of certain global business operators to designate a local overseas transfer, and the re-recipient must take representative, and a consent requirement for re-transfer protective measures as required under the Network of personal information overseas. Act for the initial overseas transfer.
Key Aspects: However, like the initial overseas transfer of personal information, if the re-transfer takes the form of re- 1. Global business operators obligated to designate delegation of personal information processing, or if a local representative the re-transfer involves change of storage location, the company can be exempt from the (separate) Under the amended Network Act, online service consent requirement, in accordance with the providers (“OSPs”) having no address or place of Network Act. business in Korea, but meeting certain thresholds are required to designate a local representative in Korea. Significance:
The local representative must be designated When the amended Network Act comes into force, global in writing, and upon designation, information business operators with no place of business in Korea are about the local representative (e.g., the local expected to more frequently receive a user’s request for representative’s name and his/her telephone number) withdrawal of consent to personal information processing, must be disclosed in the company’s privacy policy. request for access, and request for correction.
The local representative’s responsibilities include The regulatory authorities are also expected to request responsibilities of the chief privacy officer, such as materials from the global business operators more handling user complaints, notification and report on frequently. personal information leakage, explanation of delay in reporting, and submission of materials required by The scope of global business operators obliged to the regulatory authorities. designate a local representative will be determined later in the follow-up amendment to the Enforcement Decree Violation of the Network Act by the local representative of the Network Act, based on several factors, including will be deemed as the OSP’s violation. the number of users and sales. Thus, it would be prudent to closely monitor how the regulatory authorities plan 2. Consent required for re-transfer of personal to amend the Enforcement Decree, as this may critically information overseas impact business operators subject to such an obligation.
December 2018, Issue 4 l 5 CORPORATE
By Jong Koo Park ([email protected]) and Seoyeon Lee ([email protected])
National Pension Service Adopts the Stewardship Code
On July 30, 2018, the Fund Management Committee (6) Periodically report on voting and stewardship (“FMC”) of the National Pension Service of Korea (“NPS”) activities; and ratified the Principles on Stewardship of the NPS (the (7) Build up capabilities and expertise. “NPS Stewardship Code”). Institutional investors may adopt the stewardship In October 2018, the Special Committee of Stewardship code voluntarily, and have discretion to set the scope (the “Stewardship Committee”), which will take charge of its application. However, once an institutional of implementing the NPS Stewardship Code, launched investor adopts the code, it must provide justification its activities. The business community and the financial in case of any non-compliance. industry are keen to understand how this development will impact the corporate management environment. The KCGS is tasked with monitoring and disclosing the state of the adoption and implementation of the Key Aspects: stewardship code periodically.
1. Stewardship code primer 2. NPS’ plan for implementing the stewardship code The NPS Stewardship Code is based on the model “stewardship code” regarding fiduciary duties, The NPS plans to implement the NPS Stewardship and was first introduced by the Korea Corporate Code in steps, first limiting the scope to its Governance Service (the “KCGS”) in December 2016 application to exercising NPS’ non-managerial rights under the title, “Principles on Institutional Investors’ as a shareholder (e.g., establishment of a dividend Fiduciary Duties.” policy) in its investees to avoid excessive managerial intervention. The purpose of the stewardship code is to guide institutional investors with equity holdings in listed NPS will expand such scope to shareholder activities companies (e.g., pension funds and asset managers) that are considered managerial (e.g., appointment/ exercise their voting rights in accordance with the dismissal of executive officers and approval of M&A fiduciary duties expected of an asset manager. Since transactions) when the conditions are ripe. The its introduction, around 70 institutional investors NPS had expressed that it would engage in private have adopted the stewardship code. discussions with select companies to recommend improvement of their dividend policies, and that The stewardship code presents seven principles for the Stewardship Committee would determine the institutional investors: scope of advanced disclosure of NPS’ voting plans by the second half of 2018. The NPS also laid out (1) Establish and disclose a fiduciary responsibility specific plans for expanding the scope of shareholder policy; activities in 2019 and 2020 as follows: (2) Establish and disclose a conflicts of interest policy; (3) Periodically monitor investee companies; ■ By 2019, the NPS will engage in private discussions (4) Establish internal guidelines on stewardship with its portfolio companies to an expanded activities; set of issues related to shareholder value, such (5) Establish and disclose a voting policy and voting as embezzlement, breach of fiduciary duty, and records; Newsletter unlawful subsidy. The NPS will also establish active in exercising their shareholders’ rights. Further, general principles for the composition and the amendment to the Enforcement Decree of the operation of the board of directors of its portfolio Financial Investment Services and Capital Markets Act entities. will allow discretionary investment managers to exercise their voting right by proxy, and will likely induce the NPS ■ By 2020, the NPS plans to engage in shareholder to delegate its voting rights to the managers, possibly activities publicly (e.g., disclose names of beginning in 2019. problematic companies and issue public letters.), and to exercise veto rights against companies In selecting such managers, the NPS will likely give whose efforts to streamline their management priority to those who have adopted and implemented and corporate procedures (which would have the NPS Stewardship Code dutifully. Such initiative is been raised in private discussions) fell short of expected to encourage more institutional investors to NPS’ expectation. show their commitment to the NPS Stewardship Code.
NPS intends to exercise its shareholder’s right on Accordingly, listed companies should prepare proactive a non-public basis, but will immediately publicize measures to respond to more vibrant shareholder any action it takes if it could materially impact the activities. Such preparations include preliminary corporate value of the investee. monitoring of any changes in their shareholding ratios, and monitoring institutional investors on the adoption of Significance: the stewardship code and any exercise of voting rights.
As more institutional investors adopt the stewardship Listed companies should also engage in proactive code, it is expected that they will become increasingly dialogue with their institutional investors.
ANTITRUST & COMPETITION
By Sung Eyup Park ([email protected]) and Wooju Lee ([email protected])
Amended Organizational Regulation Likely to Strengthen the KFTC’s Enforcement Efforts Regarding Unfair Trade Practices for Small Businesses in Distribution Arrangements
The amended Organizational Regulation of the Korea be headed by the Distribution Policy Officer, a newly Fair Trade Commission (the “Amended Regulation”) created Director-General level position within the KFTC, became effective on November 6, 2018. and to reinforce manpower dedicated to monitoring and investigating unfair trade practices in the supplier- The Amended Regulation is designed to establish a new distributor field. division, the Distributor Transaction Division, which will
December 2018, Issue 4 l 7 Key Aspects of the Amended Regulation: 2. In its annual surveys, the KFTC is expected to focus on several major items 1. Investigations commenced on the KFTC’s own motion is expected to increase On May 24, 2018, by announcing the Measures to Eradicate Unfair Trade Practices in the Distribution Under the Amended Regulation, the Distributor Industry (the “Measures”), the KFTC has indicated Transaction Division will consist of nine officials, that it will conduct annual industry surveys to who will be solely dedicated to and responsible for identify business practices that require improvement, enforcing the Fairness in Distributor Transactions and accumulate information to use for its ex officio Act (“FDTA”). Currently, the FDTA is enforced by the investigations. KFTC’s Anti-Monopoly Bureau. Based on the KFTC’s model distribution agreements With the creation of the Distributor Transactions (food & beverages and apparel industries), the Division, the KFTC’s ex officio initiative is expected Notification and the Measures, the KFTC appears to increase based on the whistleblowing system and to view the following practices as problematic and increased written surveys. requiring improvement in the distribution sector:
The KFTC has already laid the legal foundation ■ Unfavorable changes to payment conditions to enforce its policies relating to distribution (e.g., sales incentives) during the term of the arrangements, having amended the FDTA to make agreement; the FDTA applicable to agreements in place before ■ Unfair prohibition or limitation imposed on the enforcement date of the FDTA. The KFTC has product returns; also set forth legal grounds to provide rewards to ■ Imposition of excessive transaction costs; whistleblowers, and to undertake written surveys. ■ Excessive allotment of expenses (e.g., promotional expenses); In addition, starting January 1, 2019, distributors ■ Unfair interference with business activities and can seek dispute resolution through the Distributor demands for store improvements; Dispute Mediation Council located in each city and ■ Forced sales by means, such as false sales records province. or bundling; and ■ Unilateral termination during term of the Also, on September 4, 2018, the KFTC announced agreement and unfair refusal to renew. the draft Notification on Specific Types and Standards of Unfair Trade Practices Prohibited under the FDTA Potential Impact / Prospects for Policies and Enforcement (the “Notification”), which includes specific examples on Distributor Transactions: of each of the five types of unfair trade practices prohibited under the FDTA (previously open to public In light of the above changes, the KFTC is expected to comment from September 4 to 27, 2018). Once the pursue vigorous enforcement efforts in the distribution Notification is promulgated, the KFTC will be able to sector. As such, companies should assess the impact fully undertake its enforcement activities through the of the relevant policies, and consider making changes Distributor Transaction Division. to existing distribution practices from a longer-term perspective, as well as having in place a concrete compliance system tailored to the company’s specific circumstances.
Newsletter BANKING
By Sang Hwan Lee ([email protected]) and Keun-Chul Song ([email protected])
Improvements to Regulations on Internet-Only Banks
On September 20, 2018, during the Plenary Session shareholder was required to waive the right to exercise of the National Assembly, the Act on Special Cases voting rights for any amount of shares owned in excess concerning the Incorporation and Management of of 4%. However, upon the enactment of the Internet- Internet-only Banks (“Internet-only Bank Act”) was passed only Bank Act, a non-financial business operator may and is expected to take effect on January 17, 2019. hold up to a maximum of 34% of the voting shares in an internet-only bank, provided, that the approval of Also, on October 17, 2018, the Financial Services the FSC is obtained at each point in time when the non- Commission (“FSC”) issued a pre-announcement of the financial business operator holds such voting shares in proposed Enforcement Decree of the Internet-only Bank excess of 10%, 25%, and 33%. Act (the “Proposed Enforcement Decree”), which details specific regulations on matters concerning internet- It should also be noted that the Internet-only Bank Act only banks, such as their incorporation, shareholder limits the scope of non-financial business operators composition, operation method, and other important eligible for the above special provisions. Under the issues. Proposed Enforcement Decree, a non-financial business operator is eligible to acquire more than 10% of the Background: voting shares in an internet-only bank if the non- financial business operator is: (i) not a part of an Although K-Bank1 and Kakao Bank of Korea (“Kakao enterprise group subject to limitations on mutual Bank”)2 are currently operating as Korea’s first internet- investment under the Monopoly Regulation and Fair only banks, many have raised concerns that applying Trade Act; or (ii) if it is a part of an enterprise group, the the Banking Act as it currently stands may impose sum of the total assets of telecommunications business fundamental barriers in building a foundation for the operators within such enterprise group accounts for operation of internet-only banks, citing, among others, 50% or more than that of the non-financial business restrictions on innovative ICT companies from becoming operators of the enterprise group. major shareholders of internet-only banks. In connection with legislative discussions on whether To resolve such systemic issues, a number of internet-only banks must conduct all of their businesses amendments to the Banking Act and new Special Acts via electronic financial transactions (i.e., an automated were proposed, and as a result of such legislative efforts, means of operation that wholly excludes any face-to- the Internet-only Bank Act was enacted. face interaction or communication with bank users), the Internet-only Bank Act stipulates that internet-only Internet-only Bank Act: banks should, in principle, operate banking businesses via electronic financial transactions. The exceptions First, the Internet-only Bank Act has special provisions are those cases set forth in the Proposed Enforcement setting forth the maximum number of voting shares that Decree as unavoidable circumstances for the protection a so-called “non-financial business operator” may hold. and improved convenience of internet-only bank users (e.g., when it is unavoidable for the protection and The Banking Act allowed non-financial business convenience of disabled users and the elderly over operators to only hold up to 4% of voting shares and up the age of 65, or when it is difficult to complete the to 10% if approved by the FSC; in the latter case, such a
1 K-Bank received its banking business license on December 14, 2016. 2 Kakao Bank received its banking business license on April 5, 2017. December 2018, Issue 4 l 9 financial transaction due to technical reasons, such Significance: as loss or malfunction of information communication devices). Given that the enforcement of the Internet-only Bank Act would make it easier for innovative business entities Finally, to prevent side effects, such as collusion with to take a leading role in the operation of internet- large conglomerates, the Internet-only Bank Act lowers only banks, we expect the proposed legislation to not the barrier for non-financial business operators to only boost the growth engines of existing internet-only participate in internet-only banking, while at the same banks, but also facilitate the entry of new internet-only time, establishing stricter restrictions on transactions banks. with large shareholders than those with commercial banks, such as by: (i) prohibiting enterprises other than However, given that the review on acquisition of shares those small and middle-sized enterprises from taking out in excess of the 10% shareholding limit was previously loans; or (ii) in principle, prohibiting credit extension to based on the presumption that the shareholders are large shareholders or the acquisition of equity securities financial business operators, it would be necessary to issued by large shareholders. monitor how financial regulators will take into account the unique features of non-financial business operators and prescribe the requirements to expand their review to also encompass non-financial business operators.
SECURITIES
By Sun Hun Song ([email protected]), Tae Han Yoon ([email protected]), and Sungjin Kim ([email protected])
Proposed Amendment to Ease Regulations on Private Equity Funds
On November 2, 2018, 15 National Assembly members These changes reflect the demands within the submitted a bill proposing to amend the Financial industry to ease the PEF regulations in Korea to be Investment Services and Capital Markets Act (“FSCMA”) more in line with global standards and to increase the to relax regulations on private equity funds (“PEFs”). competitiveness of domestic PEFs.
The proposed amendment will unify the current two- Key Proposed Changes: track regulatory framework for PEFs that apply different requirements to “specialized investment-type” PEFs 1. Unified regulatory regime for PEFs (i.e., hedge funds) and “management participation- type” PEFs. The proposal includes changes to relax the The proposed amendment will eliminate the current regulations on fund management and on “institutional requirement for management participation type PEFs investors PEFs,” and to increase the current investor to have more than a 10% stake for management number cap for PEFs.
Newsletter participation, thereby unifying the current PEF Additionally, the examinations of institutional regulation regime. investor PEFs by the regulatory authorities will be conducted from the perspective of stabilizing the Under the amended FSCMA, PEFs will no longer be financial markets, rather than investor protection, classified as specialized investment-type PEFs and and only when necessary. management participation-type PEFs. While it is unclear under the current regulation The regulations on investment management by PEFs whether GPs are included in the scope of will be unified as below: examination, the proposed amendment specifically includes GPs. ■ The current requirement for specialized investment-type PEFs restricting exercise of voting 3. Increase of investor number cap from 49 to 100 rights for shares held by the PEF in excess of 10% will no longer apply. The proposed amendment increases the number of ■ The current requirements for management investors permitted for PEFs from “49 persons or less” participation-type PEFs to do the following will to “100 persons or less.” no longer apply: (i) invest at least 50% of their capital in equity within two years from the capital 4. Transitional measures contribution date; (ii) acquire at least 10% of shares; and (iii) hold acquired shares for at least six Under the proposed amendment, existing specialized months. investment-type PEFs will be converted into general ■ The current prohibition of loans for management PEFs, and management participation-type PEFs will participation type PEFs will no longer apply. be converted into institutional investor PEFs.
2. Introduction of institutional investment PEFs As such, existing management participation- type PEFs will be prohibited from receiving capital Instead of the previous two-track system, the commitments from non-institutional investors from proposed amendment introduces “institutional the enforcement date of the amendment. investor PEFs,” which funds exclusively from institutional investors, and will be subject to minimal Significance: regulation as compared to “general PEFs.” The unification of the two-track regime is expected The specific scope of institutional investors will be to bring substantial changes to the PEF regulations defined later through the subordinate regulations. in Korea. Hence, it is recommended that you closely Under the new regime, the management monitor the legislation status of the proposed participation-type PEF will fall under the institutional amendment and the changes it may bring. investor PEF.
December 2018, Issue 4 l 11 INSURANCE
By Jae-hong Ahn ([email protected]), Hyun Wook Shin ([email protected]) and Il-Suk Lee ([email protected])
Employment Insurance Commission Announces Unemployment Insurance Obligation for “Special Type Workers,” Including Insurance Agents
On July 31, 2018, the Employment Insurance Commission annual remuneration will have to be contributed equally announced that “special-type workers,” which encompass by each worker and his/her employer. Further, if there various types of non-conventional types of laborers, such is more than one layer of subcontracts for a given as insurance solicitors, golf caddies, workbook tutors, project, the primary contractor is anticipated to apply and delivery service workers, would become eligible for and withhold the insurance premium on behalf of its for unemployment benefits in a gradual step based subcontractors and/or the special type workers that they on the specific type of employment and the need for hire. unemployment protection. Significance: However, details of coverage, such as the jobs that will first become eligible, the standard for calculating Accordingly, the labor costs for the companies that the amount of benefits, and the overall timeline for use special type workers are expected to increase due enforcement, have not yet been finalized. to their new obligation to pay additional insurance premium. Also, as unemployment benefits are paid Key Aspects: to those who are unemployed against their will, legal disputes on how, and in what circumstances, the Under the expanded coverage of the new unemployment special type workers left their previous employment insurance plan, special-type workers and their employers position are expected to increase. (like any other regular-type employee and his/her employer) are required to equally bear the cost of the This new system will most likely be implemented unemployment insurance premium. during the first half of 2019. As such, companies using special type workers, such as insurance solicitors, For instance, according to the published unemployment would need to pay special attention to their human insurance premium rate for 2018, as the premium, an resources management. amount equivalent to 0.65% of the special type worker’s
Newsletter TAX
By Woo Hyun Baik ([email protected]), Christopher Sung ([email protected]) and Sung Sik Kim ([email protected])
Proposed Amendment Introduces Instances to Treat Overseas Investment Vehicles as Beneficial Owners of Korea Source Income
On July 30, 2018, the Ministry of Economy and regarded overseas funds as a BO, and has imposed the Finance announced its proposed tax law amendments. share transfer income tax according to the Korean Tax Within the proposed amendments (the “Proposed Law, since there is no tax treaty between Korea and the Amendment”), a special provision was introduced to country where the overseas fund is located. address instances where an Overseas Investment Vehicle (“OIV”) would be treated as the beneficial owner of Since then, the OIV Regime has been introduced, but Korea source income. the Supreme Court decision and the purpose of the OIV Regime are in conflict with each other, and taxpayer The Proposed Amendment was finalized in December confusion has increased. 2018, and the law will become effective as of January 1, 2020. Accordingly, the Ministry of Strategy and Finance announced an amendment to the Korean Tax Law to Background: resolve the conflict between the Supreme Court decision and the purpose of the OIV Regime. Under the current Korean Tax Law, if capital gains are earned from the share transfer, such Korea source Key Aspects of the Proposed Amendment: income is taxable in Korea. With respect to the application of the tax treaty for Korea Specifically, the Korean Tax Law provides that the Korea source income, if Korea source income is paid to the source income attributed to the Beneficial Owner(s) foreign investor through an OIV, the foreign investor – (“BO”) can be exempt if: (i) foreign investors who invest rather than the OIV – should be treated as the BO of the in shares in a Korean company through an OIV are BO Korean source income, unless an exception applies as of the Korea source income; (ii) if the country having provided below. jurisdiction of the BO has made a tax treaty with the Republic of Korea; and (iii) Korea source income derived When any one of the following exceptions is met, the OIV from the share transfer can be exempt based on such a receiving the Korea source income rather than the foreign tax treaty. Also, in order for each BO to be allowed the investor would be treated as the BO of such Korea source tax exemption, each BO must fill out a form prescribed income under the Proposed Amendment: by the Korean Tax Law, and submit it to the Korean tax authorities. These provisions in the Korean Tax Law are (i) The OIV is liable to tax in the country in which it is generally referred to as the “OIV Regime.” a resident, and the OIV is not established for the purpose of unjustly reducing its income/corporate In the meantime, before the OIV Regime was newly taxes with respect to its Korea source income; introduced in the Corporate Tax Law, in 2013, the (ii) The OIV is treated as the BO of income under the Supreme Court decided that the BOs for capital gains on relevant tax treaty; or the share transfer were not foreign investors who invested (iii) The OIV is unable to certify its investors investing in overseas funds – similar to OIV – but overseas funds in the OIV (in case of partial certification, only for themselves. Based on this, the Korean tax authorities has the portion for which the certification cannot be made). December 2018, Issue 4 l 13 Further, when the OIV is an “entity other than a foreign In addition, when the OIV is treated as the BO of income corporation” within the meaning provided under the by meeting condition (iii), the withholding tax rate to be Korean Tax Law, the rule above applies only when applied is the default withholding tax rate provided under conditions (ii) or (iii) is met (i.e., condition (i) is irrelevant the Korean Tax Law (usually 22%, including local surtax). for OIVs that are not classified as a “foreign corporation” within the meaning provided under the Korean Tax Law).
REAL ESTATE
By Yon Kyun Oh ([email protected]) and Bo Hyun Kim ([email protected])
Amended Commercial Lease Protection Act Goes into Effect, Increasing Lease Protection Period to Ten Years
On October 16, 2018, the amendment to the Commercial agreements, and the previous protection period Building Lease Protection Act (the “Commercial Lease of five years will continue to apply to the lease Protection Act”) became effective. Among others, the agreements that were already in existence prior to amendment includes the extension of the period (up to a the effective date of the amendment (i.e., October total of ten years, including the initial lease term) during 16, 2018). which a commercial building tenant can exercise its right to demand lease renewal. 2. Exercise period of tenants’ right to demand compensation for business goodwill (kwon-li- In light of the increasing number of disputes arising geum) extended between tenants and landlords, the newly enforced amendment seeks to ensure stable operation of the Prior to the amendment, a tenant could seek tenants’ businesses. compensation for any premium or goodwill (known as “kwon-li-geum” in Korean) created on its leased Key Aspects: premises against subsequent tenants of the leased premises, and the tenant had the choice to exercise 1. Exercise period for tenants’ right to demand such a right three months before the end of the renewal of lease term extended lease term. If, during the three-month exercisable period, the tenant finds and introduces a prospective Prior to the amendment, the Commercial Lease tenant to the landlord, but the landlord rejects Protection Act limited the exercise period for tenants’ such prospective tenant (thereby interfering with right to demand lease renewal to five years. Under the tenant’s actions to collect goodwill against the amendment, the exercise period has been subsequent tenants), the landlord was obligated increased to ten years (including the initial lease to compensate the tenant the reasonable goodwill term). assessed on the lease premises.
However, the new lease protection period will Under the amendment, the tenant’s exercisable only apply to newly executed or renewed lease period for collection of goodwill has been increased to six months prior to the end of the lease term. Newsletter This amendment applies to existing leases regardless discussion in the real estate industry about what would of their execution dates. constitute justifiable grounds for landlords’ refusal of lease renewal requests from a tenant under the newly Significance: amended Commercial Lease Protection Act.
As the tenants’ right to demand lease renewal has been significantly strengthened, we expect an active
LABOR & EMPLOYMENT
By Weon Jung Kim ([email protected]) and Do-Yoon Kim ([email protected])
Government Announces “Anti-Bullying Action Plan” to Address Workplace Harassment
“Workplace bullying” and “workplace harassment” have Key action items of the Plan include: been gaining increased media attention and social interest in South Korea. To address these issues, on ■ Define the concept of workplace bullying; July 18, 2018, a joint committee of Korea’s various ■ Set up an internal channel for victim-employees to ministries and other relevant agencies (i.e., the Office report incidents of workplace harassment or bullying; for Government Policy Coordination, the Ministry ■ Obligate the employer to commence investigation of Employment and Labor (“MOEL”), the Ministry of into alleged workplace harassment or bullying; Education, the Ministry of Culture, Sports and Tourism, ■ Streamline the reporting channels and processes to the Ministry of Justice, the Ministry of Health and the government agencies; Welfare, the National Police Agency, and the Anti- ■ Where relevant laws and regulations are violated, Corruption & Civil Rights Commission) (the “Joint allow the MOEL to open ex officio inspection; Committee”) announced the Anti-Bullying Action Plan ■ Protect the victim by expanding occupational (the “Plan”) to combat harassment and bullying in the insurance coverage or assistance in lawsuits; workplace. ■ Obligate the employer to punish the harasser; ■ Where the employer retaliates against the victim, Key Aspects: provide for punishment of the employer; and ■ Obligate the employer to provide employees with The Anti-Bullying Action Plan sets out six stages to education on prevention of workplace harassment or manage the risk of workplace bullying or harassment, bullying. and to properly deal with such incidents in the workplace: (i) reporting; (ii) investigation; (iii) disciplinary Implementation Plan: action against the harasser; (iv) support for the victim; (v) employer liability; and (vi) prevention. For each In order to implement the Anti-Bullying Action Plan, stage, the Plan also provides detailed action items for the Joint Committee: (i) noted that in or around August businesses to take, such as mandatory training. 2018, it has amended the Guideline on Work Duties
December 2018, Issue 4 l 15 of Labor Inspectors (however, as of December 2018, it In particular, we expect that disputes arising out of or appears that such amendment has not been made); (ii) in connection with these issues will increase, due to plans to establish joint guidelines and prepare standards the increased enforcement of laws and regulations that for Rules of Employment; (iii) has or plans to amend/ prohibit workplace harassment and workplace bullying, enact relevant laws and regulations (e.g., introduced such as the Amendment to the Equal Employment the amendment to the Labor Standards Act (“LSA”), and Opportunity and Work-Family Balance Assistance Act plans to introduce changes to the Occupational Safety (effective May 29, 2018) and to the Amendment to the and Health Act), and/or guidelines (around December Occupational Safety and Health Act (effective October 2018); and also, (iv) in discussion with the National 18, 2018). Assembly, the Joint Committee announced that it is looking into the possibility of enacting a special act to Recommendations: prevent workplace harassment. We recommend that you continue to monitor the social As of December 2018, amendments to the LSA and atmosphere and dynamics involving workplace bullying enactment of a special act to prevent workplace bullying issues, and the government’s position and follow-up are still currently pending before the National Assembly. actions.
Significance: Also, this is a good opportunity to actively review your company’s current status, handling and preparedness With increased national concern and growing attention, on these issues, including any workplace harassment through the Anti-Bullying Action Plan, the Korean incidents, whether investigation and disciplinary measures government has indicated a strong willingness to have been sought and how they have been handled, address harassment and bullying in the workplace. whether training has been properly implemented and Consequently, it is likely that the government will seek provided to employees, and whether the Rules of to voluntarily amend the related laws and regulations, Employment and related policies/guidelines are updated and vigorously strengthen its enforcement efforts. to reflect the most current laws and regulations (and also, depending on further government action, make the appropriate updates if and when it becomes necessary).
Supreme Court Decisions Establish a Standard for Calculating Hourly Wage to Determine Potential Minimum Wage Violations
The Supreme Court recently rendered a series of Background: meaningful decisions, which set a standard for calculating hourly wages for purposes of determining To determine whether wages, which are commonly paid whether minimum wage violations have been in the form of monthly salaries, exceed the minimum committed. wage under the Minimum Wage Act, the following calculation should be made:
Newsletter ■ Among the wage items paid monthly, divide the sum As such, it became clear that to convert an employee’s of wages or allowances paid regularly or uniformly at monthly salary to an hourly wage for reference to the least once a month under a predetermined payment applicable minimum wage, reference wages (including rate and conditions (the “reference wages”) by weekly holiday allowances) are divided by the prescribed prescribed monthly working hours. monthly working hours. ■ Then, this hourly wage should be compared to the applicable minimum wage for that year. However, Significance: it should be noted that in the past, the scope of reference wages and the number of working hours Nonetheless, in response to the controversy on whether used in the calculation have been subject to different weekly holiday hours should be included in the number interpretations and controversies. of working hours used in the calculation discussed above, the MOEL pre-announced legislation on August Details of the Recent Supreme Court Decisions: 10, 2018, that would amend the working hours to the “sum of: (i) weekly prescribed working hours; and The Supreme Court has clarified in a series of decisions (ii) hours other than prescribed working hours, which that to determine minimum wage violations, weekly are deemed as paid.” The MOEL’s position is in direct holiday allowances should be included as part of the opposition to the recent Supreme Court decisions. reference wages, but weekly holiday hours should not be included in the number of working hours used to On December 24, 2018, the MOEL announced a determine the reference wages. proposed amendment that partially amends the Enforcement Decree. According to the proposed If an employee receives wages in the form of a monthly amendment, ‘non-statutory paid holidays’ are excluded salary, it would include not just compensation for the from the calculation of the minimum wage, but the work performed by the employee in a given week, but position regarding ‘weekly holiday hours’, which were also include compensation for paid holidays (i.e., weekly the key issue of the aforementioned Supreme Court holiday allowances). Decision, are maintained.
The Supreme Court has repeatedly held in its decisions3 For your reference, the minimum wage for 2019 is KRW that all components of a monthly salary, including 8,350 per hour. Using the MOEL’s preferred calculation weekly holiday allowances, should be used to calculate formula, if an employee works five days a week, and the reference wages to determine potential minimum wage rest of the week consists of one unpaid day off and one violations, and that there is no reason to exclude weekly paid holiday (which is required by the LSA for employees holiday allowances from reference wages. who work a full weekly schedule), and receives a monthly salary of KRW 1,500,000, the hourly wage of On the other hand, when dividing monthly reference the employee would be KRW 7,177 (1,500,000/209). wages by working hours to determine the hourly wage, whether the weekly holiday hours4 are included in the This hourly rate would be in violation of the minimum working hours has been called into question. The MOEL wage requirement under the MOEL standard, but if continued to maintain its position that weekly holiday calculated according to the above Supreme Court hours must be included in the number of working hours decisions, the hourly rate would be KRW 8,640 used to determine the hourly wage rate. However, (1,500,000/173.4), which would not violate the earlier in 2018, the Supreme Court held that only the minimum wage requirement. actual prescribed working hours should be used for this calculation, and the paid weekly holiday hours are not included.5
3 Supreme Court Decision 2006Da64245, January 11, 2007 and Supreme Court Decision 2018Do6486, October 12, 2018 4 Under the LSA, this is paid even though the employee does not provide actual labor, but receives weekly holiday allowances for the hours. 5 Supreme Court Decision 2014da44673, June 19, 2018 December 2018, Issue 4 l 17 INTELLECTUAL PROPERTY
By Jay (Young-June) Yang ([email protected]), Duck Soon Chang ([email protected]) and Seung-Chan Eom ([email protected])
Korea Adopts Treble Damages for Patent Infringement and Trade Secret Misappropriation Beginning July 9, 2019
On December 7, 2018, the National Assembly approved damages, courts are instructed to consider the proposed amendments to the Patent Act (the “Patent following factors: (i) whether the infringer has a Act Amendment”) and to the Unfair Competition dominant position; (ii) whether the infringer knew the Prevention and Trade Secret Protection Act (the “Trade act of infringement would cause harm to a patent or Secret Act Amendment,” collectively the “Amendments”), trade secret owner, or intended such harm; (iii) the which include new provisions for awards of up to treble significance of any such damages; (iv) the economic damages for certain acts of patent infringement or trade benefits to the infringer from the infringement; (v) secret misappropriation. how frequently and how long the infringing activity was committed; (vi) the criminal penalty for the The Amendments were officially announced on January infringing activity; (vii) the infringer’s financial status; 8, 2019, and will become effective on July 9, 2019. and (viii) what efforts the infringer has made to reduce the harm to the patent or trade secret owner. Key Changes: Impact: 1. New provision for treble damages for intentional or willful infringement/misappropriation6 These newly-added punitive damages provisions of the Amendments will apply to infringing The current Patent Act and Trade Secret Act only activities committed after the effective date of allow a patent or trade secret owner to claim the Amendments, as well as to utility model actual damages for patent infringement or trade infringement. The newly introduced treble damages secret misappropriation. In practice, this has led to provision should improve remedies for patent relatively low damages awards in Korea, even for infringement or trade secret misappropriation, and knowing acts of infringement or misappropriation, are expected to contribute to stronger protection of and damages awards for patent infringement intellectual property in Korea. or trade secret misappropriation often have not been high enough to effectively discourage such 2. "Reasonably expected" royalties as basis for infringement or misappropriation. damages calculation7
However, under the Amendments, courts are now The current Patent Act calculates royalty damages authorized to award damages as a punitive measure based on the royalty that would be “ordinarily expected” of up to three times the amount of actual damages from an arm’s-length license. This has often led to for intentional or willful acts of infringement/ difficulties in royalty calculation where there are not misappropriation. many examples of royalties for a particular technology in the market, or information regarding “ordinary” When calculating the amount of such punitive royalties is not easily available, contributing to the
6 See new Article 128, Paragraphs 8 and 9 of the Patent Act, new Article 14-2, Paragraphs 6 and 7 of the Trade Secret Act. 7 See Article 65, Paragraph 2 and Article 128, Paragraph 5 of the Patent Act. Newsletter common perception in Korea that royalty damages for patent plaintiffs to prove meritorious infringement awards tend to undervalue damages to patentees. claims as well as speeding up patent litigation proceedings in general. However, the Patent Act Amendment changes the term “ordinarily expected” to “reasonably expected,” 4. Lowered maintenance requirement for trade essentially allowing courts to calculate a royalty secrets9 that may be reasonable under the totality of the circumstances, regardless of whether similar royalties Under the current Trade Secret Act, a “trade secret” have actually been granted. is defined as technical or managerial information useful for business activities which is: (i) unknown to Impact: the public (i.e., secret); (ii) has independent economic value; and (iii) has been maintained as secret through The increased flexibility is expected to encourage “reasonable efforts.” courts to award larger damages amounts where royalties are the basis for the damages calculation. In practice, this third requirement has often been a difficult hurdle, as courts often find that efforts to 3. Accused patent infringer denying infringement maintain secrecy have been lacking, particularly for small must describe the actual product/process used8 or medium-sized companies that may have difficulty implementing systematic trade secret protocols. In fact, Due to the limited discovery that is available in Korea, this requirement was already previously reduced in 2015 it can be difficult for a plaintiff to access relevant (lowering the requirement from “substantial efforts” information regarding infringing activity that takes to “reasonable efforts”), but proving this element has place within an infringer’s premises. Often, an remained difficult even after the change. accused infringer will simply deny any infringement on the basis that the plaintiff bears the burden The Trade Secret Amendment further eases the third of proof, without presenting any evidence to the requirement by deleting the phrase “by a reasonable contrary, even if the plaintiff has made a prima facie effort” entirely, effectively meaning that as long as showing that there is a good chance infringing secrecy is simply maintained, the third requirement activities are being committed by the accused. will be considered met, without reference to the “effort” of maintenance at all. The Patent Act Amendment makes it more difficult for an accused infringer to simply deny infringement where Impact: the plaintiff has shown it is plausible that the infringer is using the patent, by requiring the accused infringer It is expected that the Trade Secret Amendment will to provide details regarding the product or process it substantially expand the scope of confidential information is actually using. If an accused infringer unjustifiably that can be protected as trade secrets in Korea. refuses to present such details, the court may presume that the alleged infringer has actually committed the 5. Stronger criminal penalties for trade secret infringing activity claimed by the plaintiff. misappropriation10
Impact: The current Trade Secret Act only provides for criminal penalties for acts of acquiring, using or disclosing to This new requirement applies to patent enforcement a third party the trade secret of another party for the actions initiated after the effective date of the Patent purpose of obtaining an unjust benefit or harming Act Amendment, an d is expected to make it easier the trade secret owner.
8 See new Article 126-2 of the Patent Act. 9 See Article 2, Item 2 of the Trade Secret Act. 10 See Article 18, Paragraphs 1 and 2 of the Trade Secret Act. December 2018, Issue 4 l 19 Under the Trade Secret Amendment, however, the trade secret overseas or knowledge that such the scope of criminally punishable acts has been overseas use will occur generally may be punished expanded to include: (i) removing a trade secret with imprisonment of up to 15 years or a fine of from an authorized location to an unauthorized up to KRW 1.5 billion (increased from ten years location for the purpose of obtaining an unjust or KRW 100 million); and (ii) all other trade secret benefit or harming the owner; (ii) continuing to misappropriation generally may be punished with possess another’s trade secret after receiving the imprisonment of up to 10 years or a fine of up to owner's request to delete or return the trade secret KRW 500 million (increased from five years or KRW for the purpose of obtaining an unjust benefit or 50 million). harming the owner; (iii) acquiring a trade secret by theft, deceit, threat or other illegal means; and (iv) Impact: acquiring or using a trade secret knowing that it may have been misappropriated. It is expected that the substantially increased criminal penalties under the Trade Secret Amendment will Further, the Trade Secret Amendment increases the more effectively discourage parties from disclosing or criminal penalties for trade secret infringement: (i) misusing others’ trade secrets without authorization. misappropriation of a trade secret involving use of
ENVIRONMENT
By Yoon Jeong Lee ([email protected]) and Hyeongjun Hwang ([email protected])
Amendment to the Atmospheric Environment Conservation Act Proposes to Strengthen Regulations on Air Pollutants
On August 3, 2018, the Ministry of Environment (“ME”) air pollutant measurement agents, which may interfere issued a public notice of a proposed amendment with their measurement of the air pollutant level. (the “Regulation Amendment”) to the Enforcement Regulation of the Atmospheric Environment Key Changes Being Proposed: Conservation Act (“AECA”), which is expected to strengthen the regulations on air pollutants. The 1. Establish emission standards for eight specific Regulation Amendment is expected to become effective hazardous air pollutants on January 1, 2020. The Regulation Amendment will establish emission Also, on September 17, 2018, the ME proposed an standards for chloroform, polycyclic aromatic amendment (the “Act Amendment”) to the AECA, hydrocarbons, 1,2-dichloroethane, acrylonitrile, which would prohibit operators or business owners of tetrachloroethylene, styrene, ethyl benzene, and air pollutant emission facilities from giving directions to carbon tetrachloride (see table below).
Newsletter As a result, businesses will have to pay close attention of fine dust (a type of general air pollutant) – to their facilities’ emission levels for these eight air approximately 30%; pollutants and take necessary measures in accordance ■ For other general air pollutants (e.g., “hydrogen with the Regulation Amendment (e.g., report sulfide”) – between 3% and 67%; and whether a new prevention facility was established or ■ For 13 specific hazardous air pollutants, which whether an existing emitting facility was modified). include “mercury,” “lead,” “cadmium,” “hydrogen chloride,” and “phenol” – approximately 33%. Moreover, the ME expects to establish emission standards for eight additional air pollutants in 2019, Regarding categories of facilities, 52 out of the which would include acetaldehyde and beryllium. total 69 categories of facilities would be subject to stricter emission standards under the Regulation Amendment. Specific Hazardous Emission Air Pollutant Standard 3. Unlawful influence on air pollutant measurement Chloroform 5 ppm agent prohibited & criminally punished
Polycyclic aromatic hydrocarbons 0.05 mg/Sm3 Under the AECA, air pollutant emission facilities are (Benzopyran) required to measure the level of air pollutants emitted 1,2- Dichloroethane 12 ppm during operation either by itself or by outsourcing it to an independent air pollutant measurement agent. Acrylonitrile 3 ppm However, it has been reported that some facility operators or business owners have put pressure on air Tetrachloroethylene 10 ppm pollutant measuring agents in an attempt to tamper the measurements (i.e., influence them to produce Styrene 23 ppm more favorable data). As a result, the credibility of
Ethyl benzene 23 ppm the measurements by air pollutant measuring agents is often undermined and questioned. Carbon tetrachloride 3 ppm To resolve these issues, the ME proposed this Act Amendment to prohibit any direction by an operator or a business owner that may have an influence on 2. Strengthened emission standards for air measurement analysis results. If violated, a facility pollutants operator or a business owner may be subject to imprisonment up to one year, or a criminal fine not Currently, the AECA categorizes air pollutants into exceeding KRW 10 million (approx. USD 8,800). general air pollutants and specific hazardous air pollutants, and establishes emission standards for Significance: each category of air pollutants. As the ME has been recently trying to strengthen its The Regulation Amendment proposes to strengthen enforcement on air pollutants (e.g., concerning fine the emission standards: dust), business owners who own air pollutant emission facilities will need to prepare response plans to the ■ For “dust,” “nitrogen oxides,” “sulfur oxides” and heightened enforcement. “ammonia,” all of which are known to be a source
December 2018, Issue 4 l 21 National Assembly Enacts Special Act on Fine Dust Abatement and Management
On August 14, 2018, the National Assembly enacted a Unless a justifiable excuse for non-compliance is Special Act on Fine Dust Abatement and Management provided, a violator may be subject to administrative (the “Special Act on Fine Dust”) to effectively reduce fines up to KRW 100,000 (for a violation of the first and manage fine dust emissions aimed at addressing measures) or KRW 2 million (for a violation of the growing public health concerns. The Special Act on Fine second or third measures). Dust will become effective on February 15, 2019. ■ In addition to the implementation of the Emergency Key Aspects: Reduction Measures for Fine Dusts, the mayor or governor may recommend a business owner or ■ Particulate matters with 10 micrometers or less facility operator to temporarily suspend operations in diameter are defined as fine dusts. Particulate or to adopt a flexible work schedule. However, no matters with 2.5 micrometers or less in diameter are penalty provision is currently included in the Special defined as micro-fine dusts. Nitrogen oxide (NOx), Act on Fine Dust for a failure to comply with such sulfuric oxide (SOx) and volatile organic compounds recommendation. (VOCs) are defined as precursors to fine dusts. Significance: ■ If a concentration level of micro-fine dusts is expected to exceed the level to be set by the Ministry Once the Special Act on Fine Dust becomes effective, of Environment on any given day, the mayor or businesses may be ordered to adjust operation hours or governor in the area of concern may take any of rate of production and/or adopt flexible work schedule the following measures (the “Emergency Reduction at their facilities. As the details of the law will be Measures for Fine Dusts”): supplemented through lower regulations in the future, businesses are advised to closely monitor the status of (i) Restrict vehicle use; lower regulations. (ii) Order air pollutant-emitting facilities to change its uptime or rate of production, or to improve efficiency of on-site air pollutant preventive facilities; and (iii) Order the hours for construction activities to be changed.
Newsletter INTERNATIONAL ARBITRATION & CROSS-BORDER LITIGATION
By Byung-Chol(B.C.) Yoon ([email protected]), Byung-Woo Im ([email protected]) and Bo Ram Hong ([email protected])
Hong Kong International Arbitration Centre Amends Its HKIAC Administered Arbitration Rules
Effective November 1, 2018, The Hong Kong In its amendment, HKIAC’s amended rules conform International Arbitration Centre (“HKIAC”) recently to this by allowing third-party funding. Specifically, amended its International Arbitration Rules. the amended rules provide that a party receiving third-party funding must immediately disclose its The amended rules have incorporated various new funding agreement with the third party, and the provisions to ensure efficient and speedy arbitration identity of the third party. Also, as an exception to proceedings, including provisions for a disclosure of the confidentiality obligation for arbitral proceedings, third-party funding, single arbitration for multiple a party may disclose information regarding the contracts, early determination procedure, and arbitration to the third party providing the funding, notification of expected award issue date. or to a third party from whom the party is seeking third-party funding. The HKIAC amendments are in line with demands expressed in on-going debates within the arbitration Further, the arbitral tribunal may take into industry worldwide for arbitration institutions to consideration the third-party funding when allocating improve their rules to ensure more efficient arbitration the arbitration costs. proceedings. For example, the London Court of Arbitration, the Korean Commercial Arbitration Board, 2. Single arbitration for multiple contracts and the International Chamber of Commerce have all made significant amendments to their arbitration rules When multiple disputes arise from multiple contracts in the last few years. – which relate to a single transaction or related transactions, and the disputes involve the same Key Amendments: legal or factual relations – there may be a benefit in having a consistent and uniform dispute resolution 1. Disclosure of third-party funding process across the several disputes.
In recent years, one of the popular trends in HKIAC’s amended rules allow for a wide application arbitration is third-party funding of a party’s expenses of such a provision, and allows the parties to in the arbitration proceeding. Jurisdictions differ as resolve these types of disputes under a single to whether this practice is permitted, and if yes, how arbitral proceeding. Hence, even in cases where the such funding should be allowed has been subject to parties to the contracts are not the same, multiple much debate. parties may be able to consolidate the disputes for resolution through a single arbitral proceeding. Hong Kong, through the amendment of the Hong Kong Arbitration Ordinance in 2017, has allowed 3. Early determination procedure third parties to fund arbitration expenses, if such a funding party has no legal interest with the disputing The HKIAC’s amended rules have incorporated a new parties. “Early Determination Procedure” for an expedited proceeding.
December 2018, Issue 4 l 23 At the request of a party and after consulting To address these user needs, the HKIAC’s amended with all other parties, the arbitral tribunal has the rules have a new provision requiring the tribunal to power to decide, by way of an “Early Determination inform the HKIAC and the parties of the anticipated Procedure,” on a certain point of law or facts if: (i) date by which an award will be communicated to such points of law or fact are manifestly without the parties. merit; (ii) such points of law or fact are manifestly outside the arbitral tribunal’s jurisdiction; or (iii) if no While some extensions may be allowed by the HKIAC award could be rendered in favor of the party against or upon parties’ agreement, the key principle is that whom the Early Determination is sought, assuming the award should be rendered no later than three that all the points of law or fact(s) in question are months from the date on which the tribunal declares decided against the applying party (and in favor of the entire proceedings or the relevant phase of the the non-applying party). proceedings closed.
In terms of timing, the tribunal is required to decide Significance: whether to allow for the Early Determination Procedure within 30 days from one of the parties HKIAC is considered an arbitration institution of choice filing of the request for such a procedure. If the by parties in Asia, including Korea, and especially for tribunal decides to proceed with this procedure, the cases where a party to the arbitration agreement is tribunal must decide on the matter within 60 days from China. Thus, parties considering arbitration in from the date of its decision to proceed. Hong Kong are encouraged to become familiar with the newly amended HKIAC arbitration rules so they can be Through this Early Determination Procedure, it is deployed to their benefit, as appropriate. expected that the parties will be able to clear away issues at an early stage of the arbitration, and ultimately, save time and costs.
4. Notification of anticipated date of rendering of award
Once the proceedings are closed, the parties are naturally anxious to know when the tribunal will render the award, and to receive the award as soon as possible.
Newsletter SELECTED REPRESENTATIONS
CORPORATE Kim & Chang Advises Hoban Construction Kim & Chang Advises SK Telecom and Housing in the Acquisition of Resom Macquarie in the Acquisition of ADT Resort under Rehabilitation Proceeding, Caps from Carlyle for Nearly KRW 3 Involving Some 10,000 Resort Members Trillion, Creating New Market Synergies
Hoban Construction Housing Co., Ltd. (the entity SK Telecom Co., Ltd., a telecommunications service which preceded the current Hoban Co., Ltd. “Hoban Construction Housing ) acquired all of the shares of provider (“SKT”), and Macquarie Korea Opportunities ” Resom Resort Co., Ltd. ( Resom ), a resort operator, at Management Ltd. (“Macquarie”) jointly acquired 100% “ ” of the issued and outstanding shares of Siren Holdings a purchase price of KRW 250 billion through a “stalking Korea Co., Ltd., which wholly owns, among others, ADT horse” bid process in Resom’s rehabilitation proceeding. Caps Co., Ltd. ( ADT Caps ), from the Carlyle Group for “ ” The transaction, which is considered to be of a substantial approximately KRW 3 trillion. size for a distressed M&A deal, involved around 10,000 The transaction, which will combine telecommunication resort members as interested parties, and attracted services with security services, is expected to create new considerable public attention. synergies in the market. A stalking horse bid is a relatively new transactional The transaction involved a consortium of SKT and method in the context of rehabilitation or bankruptcy Macquarie, each respectively acquiring 51% and 49% of proceedings, whereby a debtor pre-selects the best initial the shares of Siren Holdings Korea, and as a result, now bidder, offering certain protections (e.g., break-up fees) hold joint control of ADT Caps, Capstec and ADT Security. before the public auction.
Our Representation: Our Representation:
Kim & Chang advised the consortium in devising the To facilitate the process, Kim & Chang structured the optimal transactional structure, including refinancing transaction after persuading the custodian and the court, outstanding liabilities, and preemptively mitigated and conducted due diligence on a variety of issues specific potential legal risks, meeting the needs of multiple to the resort industry and rehabilitation proceedings. investors. After Hoban Construction Housing was selected as the Our firm provided comprehensive legal services, including purchaser, Kim & Chang advised in effectively convincing due diligence, examining a variety of legal issues and the resort members to agree to the acquisition based on drafting key transaction documents, including the share our in-depth expertise of rehabilitation proceedings and tourism-related laws. purchase agreement and shareholders’ agreement, as well as facilitating the successful closing of the transaction.
December 2018, Issue 4 l 25 Kim & Chang Advises Pearl Abyss in Samsung Fire and Samsung Electro- Acquiring the Icelandic Video Game Mechanics Sell Their Stake in Samsung Developer, CCP Games, Most Known for C&T in a Block Deal to Improve Its Popular “Eve Online” Game Corporate Governance
On September 6, 2018, Pearl Abyss Corp. (“Pearl Abyss”) On September 21, 2018, Samsung Fire & Marine acquired CCP ehf. (“CCP Games”), an Icelandic video Insurance Co., Ltd. and Samsung Electro-Mechanics game developer, for approximately KRW 252.5 billion. (the “Sellers”) sold their 3.98% stake in Samsung C&T Corporation (“Samsung C&T”) at approximately KRW CCP Games developed “Eve Online,” which boasts 930 billion through a block deal (after-hour trading of more than 40 million subscribers worldwide. As a substantial volume of stock). homegrown Korean game developer, Pearl Abyss’ successful acquisition of a global player in the gaming The transaction signifies Samsung Group’s effort to industry exemplifies the expansion of Korean game improve its governance structure by delinking some of developers in the global market. the cross holdings among the group companies. Of the link of seven cross-holding relationships among Our Representation: six Samsung Group companies, three links were dissolved earlier in April 2018 through Samsung SDI s As CCP Games had a number of subsidiaries around the ’ block sales of 4,040,000 shares in Samsung C&T. The world, Kim & Chang conducted extensive due diligence current transaction dissolved the remaining four links in on the target’s intellectual properties (deemed the Samsung Group s cross-holding relationship. most important asset of game developers) as well as on ’ financial and tax issues, while consulting local law firms From preliminary legal review to the closing, Kim & and the Bank of Iceland to address local requirements. Chang successfully advised the Sellers in minimizing legal risks and realizing optimal terms for the transaction. Since CCP Games’ shares were held by a number of minority shareholders, our firm provided tailored and strategic advice on the transactional documents so as to secure Pearl Abyss’ control over the management of CCP Games.
With extensive experience in advising domestic companies in acquiring foreign companies, Kim & LITIGATION Chang successfully navigated Pearl Abyss throughout the transaction to successfully close the deal. Supreme Court Rules That Policies of Three Major Mobile Carriers to Provide Sales Incentives Was Not an Act Inducing Distributors to Pay Unfair Discriminatory Subsidies to iPhone Users
Recently, the Supreme Court upheld an appellate court decision affirming that the three of Korea’s top mobile carriers and their responsible officers were not guilty in a case where “three major mobile carriers – specifically
Newsletter LG Uplus, SK Telecom, and KT – and their responsible Our Representation: officers were indicted by the Prosecutors’ Office for violating the Mobile Device Distribution Improvement On behalf of LG Uplus, Kim & Chang’s lawyers successfully persuaded the Court. Our team demonstrated thorough Act (“MDDIA”) by entering into an agreement with their distributors in or around October or November understanding of the sales incentive policies of the 2014, whereby the distributors: (i) were required to three mobile carriers, and provided in-depth analysis of pay subsidies in excess of the maximum cap, through the MDDIA and issues presented in the indictment of retailers, to iPhone 6 users who transferred to or newly the Prosecutors’ Office. Specifically, we reasoned that subscribed to the service plans of the said mobile although the terms “unfair discriminatory subsidy” and carriers; and (ii) were thereby induced to pay unfair “induce” under Article 9(3) of the MDDIA should be strictly discriminatory subsidies to users depending on the types construed, the sales incentive policy of LG Uplus was not an act inducing the payment of unfair discriminatory of the service plans to which they had subscribed.” “ ” “ ” subsidy as set forth in Article 9(3) of the MDDIA. Further, Under Article 9(3) of the MDDIA, “in concluding an citing the legislative intent of the MDDIA, we argued that agreement with their agents, mobile carriers shall not the Prosecutors’ Office had unreasonably determined instruct, coerce, demand, induce, etc. their agents that an act which failed to meet the requirements for to provide unfair discriminatory subsidies to users or a violation of Article 9(3) of the MDDIA constituted a include special provisions or conditions which make violation. agents recommend specific additional services, service fee plans, etc. to users in an unfair discriminatory Ultimately, our client, LG Uplus, was found not guilty. manner. ” Significance: Here, the issue was whether the iPhone 6-related The Supreme Court’s ruling on this case is significant, incentives paid by the three mobile carriers to their given that the Court accepted our reasoning that Article distributors in or around October or November 2014 9(3) of the MDDIA should be strictly construed and can be deemed to be connected to the discriminatory applied in accordance with the principle of statutory subsidies paid by the distributors to consumers, and criminal punishment, but found that the current sales thus, constitute an act of inducing agents to provide “ incentive policies of the three major mobile carriers should unfair discriminatory subsidies to users under Article ” not be subject to criminal sanctions under the MDDIA. 9(3) of the MDDIA.
Grounds for Indictment:
■ The three mobile carriers, including LG Uplus, increased the amount of incentives payable to distributors, and notified their distributors that under the policies, they are instructed or otherwise SECURITIES required by their standard distribution agreement to pay additional subsidies to users who would change Kim & Chang Advises MKIF in the to or newly subscribe to the service plans of the said First-of-Its-Kind Dispute in Korea over mobile carriers just in time for the iPhone 6 release; and Managerial Control Against a Collective Investment Vehicle ■ The term “induce” used in Article 9(3) of the MDDIA should be broadly interpreted in line with the legislative intent of the MDDIA.
■ Accordingly, the above conduct of the three mobile Macquarie Korea Infrastructure Fund (“MKIF”) carriers constitutes acts of inducing distributors to successfully defended a managerial dispute raised pay unfair discriminatory subsidies to users through by Platform Partners Asset Management (“Platform retailers. Partners”).
December 2018, Issue 4 l 27 In an extraordinary general meeting held on September Our Representation: 19, 2018, the shareholders rejected Platform Partner’s Kim & Chang provided comprehensive advisory services agenda to replace MKIF’s manager, Macquarie Korea to MBK Partners, the seller, including designing the Asset Management (“MKAM”), which was MKIF’s corporate director. transaction structure, conducting legal due diligence, negotiating and drafting the terms of the SPA, as well Our Representation / Significance: as preparing and filing the reports and all other closing- related matters necessary for the completion of this This was the first case in Korea of a managerial dispute transaction. raised against a collective investment vehicle. In fact, MKIF is the only fund listed on the Korea Exchange, aside from exchange-traded funds.
Kim & Chang’s team provided comprehensive legal advisory services throughout the process of defending the managerial claims, including preparing the TAX extraordinary general shareholders’ meeting, proxy solicitation, and petitions for preliminary injunctions. Supreme Court Sets Precedent on the In particular, our lawyers reviewed and analyzed Scope of Certain Financial Services from complex and unprecedented legal issues arising from the differences of a joint stock company (in Korean, VAT Exemption jusik hoesa) under the Korean Commercial Code and an investment company under the Financial Investment Services and Capital Markets Act. The Supreme Court recently rendered a significant decision on the scope of asset securitization services and asset management business, which are exempt from Value Added Tax (“VAT”) under the Value Added Tax Law (“VATL”).
INSURANCE Background:
MBK Partners Sells Its Majority Interest In this case, the credit information company conducted in Orange Life debt collection business that was classified as a financial business other than its own. The credit information company initially reported VAT, because the company thought that the service was not eligible for VAT exemption. On September 5, 2018, MBK Partners, the largest shareholder of Orange Life Insurance Co., Ltd. (formerly Afterwards, the company concluded that such a service known as ING Life Insurance Co., Ltd.) (“Orange was actually eligible for VAT exemption under the Life”), sold its 59.15% equity stake in Orange Life for Presidential Decree of the VATL, and filed a VAT refund approximately KRW 2.3 trillion, by entering into a share request with the National Tax Service (“NTS”). The sale and purchase agreement (“SPA”) with Shinhan NTS rejected this request, and the credit information Financial Group Co., Ltd. (“Shinhan”). company then appealed the rejection, and eventually won a final decision from the Supreme Court. Once each of the conditions precedent of the purchaser and the seller is satisfied, closing will take place, and Article 26 of the VATL (Article 12 under the former Shinhan will obtain the necessary approval from the VATL) enumerates businesses that are eligible for VAT financial regulator on the acquisition, making the exemption, and Article 40 of the Presidential Decree of acquisition official. the Act (Article 33 under the former VATL) lists specific
Newsletter businesses in the financial/insurance business (which is On these issues, the first and second-level courts exempt under Article 26(11) of the VATL) that qualify for accepted the taxpayer’s arguments, and decided that the exemption. the debt collection services provided by the taxpayers were eligible for exemption under the VATL. In reaching That said, prior to the amendment of the Presidential this decision, the courts considered that if the VAT is Decree of the VATL (on February 15, 2013), debt imposed on debt collection services, which are part collection services provided by a credit information of the asset securitization business, then based on company until December 31, 2012, was explicitly abolishment of the exemption provision for ordinary stipulated as eligible for VAT exemption; however, debt collection services, such imposition would not be starting in 2013, this exemption was abolished due to consistent with the legislative purpose to provide tax the sunset of the above provision. support for asset securitization businesses.
Details: On September 13, 2018, the Supreme Court affirmed the lower level courts decision. Against this backdrop, the key issue was whether a debt ’ collection service performed by a credit information Significance: company (limited to the collection service on asset securitization debt related to the asset securitization Efforts by our tax litigation team led to development business) was eligible for VAT exemption. of new case law. After prolonged and fierce battles with the tax authorities, our professionals successfully The NTS decided debt collection service performed by represented our clients at all three court levels. a credit information company was not eligible for VAT exemption, and denied the VAT refund requests filed by The courts’ decisions are significant, because the the credit information companies. decision on VAT exemption was reached by taking into account not only the literal meaning of the law, but also Then, the credit information companies filed a lawsuit its legislative purpose. for cancellation of the above denial of the refund requests. The two main issues in this appeal were: In addition, with the courts providing some standards for interpretation of Article 33(2) of the former Presidential ■ Article 33(1)(15) – rather than Article 33(1)(12) – of Decree of the VATL (currently, Article 40(2) of the the former Presidential Decree of the VATL stipulates Presidential Decree of the VATL), where there were no that VAT exemption applies to asset securitization and clear precedents, this decision should provide guidance asset management business conducted by an asset on numerous future disputes related to VAT exemption securitization company and asset manager. Thus, for financial/insurance services. the issue became whether debt collection services provided by a credit information company (limited Moreover, this case has implications beyond the VATL; to the collection service on asset securitization debt that is, since this decision may be interpreted to support related to the asset securitization business) may the proposition that tax effects consistent with the be eligible for the VAT exemption under the above legislative purpose should be considered if the text provision, even if the credit information company of the tax law and its Presidential Decree are unclear, does not satisfy the conditions for being an asset disputes involving other tax laws may now cite this manager prescribed under the law; and decision for arguments based on legislative purpose.
■ Even if the credit information company cannot satisfy the above conditions, the service at issue should be eligible for VAT exemption based on Article 33(2) of the former Presidential Decree of the VATL, based on which VAT exemption is available for a person operating a business other than the financial business prescribed under Article 33(1) (which provides the same or similar services as its ancillary business).
December 2018, Issue 4 l 29 REAL ESTATE basement floor of the building to preserve the artifacts. The Fund also required a minimum amount of lease “Centropolis” Sold for the Highest income after closing. Ever Purchase Price Paid for an Office Building in Korea Among the notable aspects of our team’s representation included advising on setting up an escrow account, where part of the purchase price would be deposited by the seller from which the Fund could draw any shortage in actual rent income. We also assisted the Fund in LB Private Qualified Investor Real Estate Investment Trust establishing a detailed set of leasing guidelines for the No. 10 (the “Fund”), a trust-type fund managed by LB seller to follow up until the closing. Lastly, we advised Asset Management Inc., acquired a newly constructed the Fund in getting a KRW 470 billion loan to finance office building known as Centropolis (“Centropolis”) parts of the purchase price. from Apple Tree PFV Co., Ltd.
Background & Significance:
Centropolis is located in the Insa-dong District, one of the most regulated cultural heritage preservation areas in Seoul. The Fund signed a forward sale and purchase INTELLECTUAL PROPERTY agreement (“SPA”) to purchase Centropolis while the building was still under construction. Construction Supreme Court Overrules Lower ended on July 30, 2018, and closing took place roughly Tribunal to Recognize That a Patent three months later on October 23, 2018. for a Sustained Release Pharmaceutical Centropolis boasts a total floor area of 141,474.68 m2, Composition Satisfies the Description 26 floors above-ground, and eight floors underground. Requirements It prides itself as being one of the highest-end office buildings in Korea, and it was purchased for the highest purchase price ever paid for an office building in Korea to date: KRW 1.12 trillion. The Korean Supreme Court recently overturned the nd Our Representation: Patent Court’s (2 level Court of Appeals) decision to invalidate a Novartis patent for a sustained release Kim & Chang represented the Fund on all stages of the formulation invention, where the pharmacological data transaction. The acquisition of Centropolis required was described based on animal testing for failing to carefully crafted multi-faceted considerations and advice meet description requirements.11 on zoning, construction, and financing-related issues. In its decision, the Supreme Court clarified what kind of The transaction presented particular challenges as data in the specification would be sufficient to satisfy the Fund agreed to purchase the building while still the description requirements for a sustained release in construction, and the completion of construction formulation invention by applying legal principles depended on whether various regulatory approvals regarding description requirements for a product would be granted. invention.
Notably, an excavation during construction revealed Background: buried cultural heritage artifacts underground, and the government ordered an exhibition hall on the first Novartis obtained a patent directed to a sustained release pharmaceutical composition comprising octreotide or a pharmaceutically-acceptable salt thereof as an active
11 Supreme Court Decision 2016Hu601, October 25, 2018.
Newsletter ingredient and two different polylactide-co-glycolide such estimation. In other words, the Patent Court had polymers (PLGAs) as further defined in the claims. determined that the animal test data disclosed in the specification was not enough to meet the description Octreotide is used for the treatment of acromegaly requirements. and symptom relief of carcinoid syndromes associated with gastroentero-pancreatic carcinoid tumors. The However, the Supreme Court reversed the Patent Court pharmacological effects of octreotide were already decision and found the patent to be valid. Specifically, known before the priority date of Novartis’ patent. The the Supreme Court held that (i) according to the rabbit claimed composition continuously releases octreotide data described in the working examples, octreotide is for about three months without large fluctuations in the continuously released for 89 days within a stable range plasma level. of plasma level; (ii) the sustained pharmacological effect can be verified by confirming whether the plasma level The patent specification describes that the claimed of the active ingredient is continuously maintained after pharmaceutical composition allows a sustained release the sustained release formulation is administered; (iii) of the active ingredient over a period of more than the method of predicting the plasma level in humans three months, preferably between three and six months through test results regarding measurement of the and that during the release of the active ingredient, the plasma level of a specific active ingredient in animals plasma levels of octreotide are within the therapeutic had been widely used in the field of sustained release range. The specification also provides working examples formulations at the time of the priority date; (iv) as regarding the method for an experiment where the described in the specification, if the plasma level compositions were administered to rabbits and the of octreotide measured after administration at the plasma levels of octreotide were measured for 96 days, appropriate dose of octreotide in rabbits was constantly as well as data obtained from the experiment. maintained over a certain level for about three months, then a person skilled in the art could have predicted Procedural History: that the plasma level of octreotide in humans would Dongkook Pharmaceutical filed an invalidation action be constantly maintained for a similar period based on with the Intellectual Property Trial and Appeal Board the rabbit test results; and (v) as long as a person skilled (“IPTAB”) against Novartis’ patent, arguing lack of in the art could manufacture and use the sustained novelty, lack of inventiveness, and failure to meet release pharmaceutical composition of the patent and description requirements. also could have predicted the effect of the patented invention on the basis of technology level at the time The IPTAB held that Novartis’ patent is novel and of the filing date of Novartis’ patent application, even if inventive, and that both the specification and the claims clinical trial data was not provided in the specification, met the description requirements. it is recognized that the description requirements have been satisfied. Dongkook Pharmaceutical appealed the IPTAB’s decision to the Patent Court. The Patent Court held that a person Significance: skilled in the art could not have properly understood the long term treatment effect of the patented invention The Supreme Court decision explicitly rejects the Patent from the rabbit data in the specification unless undue Court’s application of an unreasonably strict description experimentation was carried out or special knowledge requirement to Novartis’ patent which is in conflict with was added. the Korean patent practice, and provides legal principles regarding description requirements for a sustained Thus, the Patent Court found that Novartis’ patent release formulation invention, which are largely should be invalidated for failing to meet the description consistent with the legal principles established by the requirements prescribed in Article 42(3) of the Korean Supreme Court for a product invention. Patent Act. In its decision, the Patent Court indicated that a person skilled in the art could not have estimated Kim & Chang represented Novartis and obtained a the human plasma level profile from the rabbit data, and favorable outcome for Novartis. determined the therapeutic effect in humans based on
December 2018, Issue 4 l 31 TECHNOLOGY, MEDIA & TELECOMMUNICATIONS Our Representation:
Government Approvals Obtained for Acting as counsel for the Company in the Transaction, Sale of D’Live’s Seocho SO Business Kim & Chang’s team examined required approvals from the beginning of the planning of the business structure in a systematic, comprehensive manner to come up with the ideal approval strategy best suited for the Company’s timeline. Under the Broadcasting Act and the Telecommunications Business Act (“TBA”), the sale (the “Transaction”) of the We provided a logical and persuasive interpretation of Seocho region system operator (“SO”) business by D’LIVE applicable laws governing the unprecedented transaction (the “Company”), a cable television system SO, to Hyundai structure, while continuing to consult with the regulatory HCN required various government approvals. authorities to ensure that our interpretations were compliant with the relevant laws as well as the actual After obtaining the necessary consent and approvals from practice of the regulatory authorities in question. the Korea Communications Commission (“KCC”) and the Ministry of Science and ICT (“MSIT”) in October 2018, the Further, to avoid any delay for the Transaction, we timely parties successfully closed the Transaction. obtained the MSIT’s approval for the divestiture/change, the new establishment of the FSP business entity, and The Transaction is the first approved SO sale deal the change of the largest shareholder that followed prior involving a divestiture in Korea. Kim & Chang was able consent from the KCC. to obtain the necessary regulatory approvals that suited the Company’s timeline. As the first deal of its kind, the Transaction is highly significant as a precedent for future restructuring deals in the broadcasting industry.
Details:
The Transaction was structured as a share transfer following the divestiture of the Seocho region SO business. A key issue was that the various permits and licenses held by the Company (i.e., the SO license under the Broadcasting Act, the facility-based telecommunications service provider (“FSP”) license, and the specific service provider registration under the TBA) needed to be changed based on the aforementioned share transfer.
Considering that the Transaction involved a variety of regulatory concerns (including the Broadcasting Act), and since there was no precedent in the Korean market regarding the divestiture and sale of a SO business, our team faced the challenge of interpreting relevant laws and consolidating such interpretations into a logically coherent argument and persuade the regulatory authorities to approve the Transaction.
Newsletter FIRM NEWS
AWARDS & RANKINGS Winner of Six Consecutive “Korea Law Firm Only-Ranked Korean Law Firm for Fifth of the Year” Titles – ALB Korea Law Awards 2018 Consecutive Year – The American Lawyer’s Global 100 (2018)
At the ALB Korea Law Awards 2018, Kim & Chang won “Korea Law Firm For the fifth year in a row, Kim & Chang is the only of the Year” for the sixth year in a Korean law firm ranked in The American Lawyer’s “The row. Kye Sung Chung, our firm’s 2018 Global 100” rankings. senior partner, was named “Managing Partner of the Year” for the third time, Remaining as the only Korean firm to rank in the top having been so named in 2013 as well as in 2016. 100 on all three charts, we placed 51st in the “Most th Revenue” category (gross revenue), 55 in “Most Profits” On top of retaining the “Korea Law Firm of the Year” th category (gross revenue per equity partner), and 67 title since the inception of the ALB Korea Law Awards six in the “Most Lawyers” category (average full-time years ago, we earned five firm awards, five deal awards, equivalent for the 2017 fiscal year). and one individual award. In taking a total of 12 awards – the highest number of recognitions given to a firm About The Global 100: The American Lawyer, a leading at this year’s ceremony – we continue to solidify our US legal magazine, issues the special rankings edition, position as the market-leading law firm in Korea. “The Global 100,” every year, based on survey responses and independent research of law firms across the globe. The following are the details of our wins: The special rankings edition assesses law firms in the following categories: “Most Lawyers,” “Most Revenue,” Firm Award Categories - Sole Winner and “Most Profits.” ■ Korea Law Firm of the Year ■ Banking and Financial Services Law Firm of the Year ■ Construction and Real Estate Law Firm of the Year ■ Regulatory and Compliance Law Firm of the Year ■ Tax and Trusts Law Firm of the Year ■ Technology, Media and Telecommunications Law Firm of the Year Highest Ranking Korean Firm in the Asia- Pacific Region – The American Lawyer’s Individual Award Categories - Sole Winner Asia 50 (2018) ■ Managing Partner of the Year: Kye Sung Chung
Deal Award Categories - Co-winner ■ Equity Market Deal of the Year: Kakao Corp’s Issuance of GDRs In the 2018 edition of the “Asia 50,” an annual special ■ M&A Deal of the Year: SK Hynix’s Investment in the rankings published by The American Lawyer, Kim & Acquisition of Toshiba’s Chip Unit Chang ranked 14th among the top 50 law firms in the ■ Projects, Energy and Infrastructure Deal of the Year: Asia-Pacific. Since the inception of the “Asia 50” in Canakkale Turkey Bridge and Motorway Project 2013, our firm has continued to be the highest ranking ■ Real Estate Deal of the Year: Acquisition of the Korean law firm on the list. Signature Tower in Seoul About the Asia 50: Annually published by The American ■ Technology, Media and Telecommunications Deal Lawyer, a market-leading legal publication, the “Asia 50” of the Year: HP’s Acquisition of Samsung’s Printer rankings draw from surveys and independent research of Business law firms in the Asia-Pacific region to identify the top 50 firms based on the number of full-time equivalent lawyers. December 2018, Issue 4 l 33 ALB Korea Law Awards: Asian Legal Business (ALB), Based on law firm submissions and independent a leading legal publication affiliated with Thomson research, Asialaw identifies and celebrates noteworthy Reuters, annually hosts the ALB Korea Law Awards dispute resolution cases, law firms, and lawyers in 14 to celebrate outstanding law firms, deals, private practice areas across 14 jurisdictions in the Asia-Pacific practitioners, and in-house teams in various categories. region. This year’s awards ceremony took place in Hong The winners are chosen based on law firm submissions, Kong. independent research, and an independent judging panel comprised of experts in the legal industry. This Our firm won the following awards: year’s awards ceremony took place at the Grand Hyatt ■ National Law Firm of the Year - South Korea Seoul on November 9, 2018. ■ Best in Insurance ■ Best in TMT ■ Disputes Star of the Year - South Korea: Jin Yeong Chung
For Fourth Consecutive Year, “National Law Firm of the Year - South Korea” – Asialaw and Benchmark Litigation Dispute Resolution Awards 2018 Top Tier Across the Board for 15 Consecutive Years – IFLR1000 (2019)
On September 20, 2018, Kim & Chang earned the highest ranking Kim & Chang was named (“Tier 1”) in all six practice areas in the “National Law Firm of the 2019 edition of IFLR1000. We are the Year - South Korea” for the only Korean firm to have received top tier fourth consecutive year at the Asialaw and Benchmark ranking in all categories for 15 consecutive Litigation Dispute Resolution Awards 2018. years. Our firm was also honored with recognitions in “Best IFLR1000 also recognized 30 Kim & Chang attorneys in Insurance” and “Best in TMT,” which are among the as Highly Regarded, Market Leaders, Rising Star, 14 practice area awards. Each practice area award is “ ” “ ” “ ” and Notable Practitioners. In describing our firm s given to one leading law firm in the Asia-Pacific region. “ ” ’ accomplishment, IFLR1000 stated, Kim & Chang is the Additionally, Jin Yeong Chung, a senior member of our “ largest and possibly the most recognisable law firm in Litigation Practice, received the “Disputes Star of the Year Korea. It dominates the market across all practice areas - South Korea,” an award given to only one individual in where it secures a top tier berth. each country. ” The following is our firm s 2019 rankings details: About Asialaw and Benchmark Litigation Dispute ’ Resolution Awards: Asialaw, a leading legal media Firm Rankings (Tier 1 in all six practice areas) affiliated with Euromoney, annually hosts the Asialaw ■ Banking and Finance and Benchmark Litigation Dispute Resolution Awards. ■ Capital Markets ■ Competition ■ M&A ■ Project Development ■ Restructuring & Insolvency
Newsletter Highly Regarded The following is a list of our recognitions in the Asialaw Kye-Sung Chung, Ick-Ryol Huh, Chiyong Rim, Jin-Yeong Profiles 2019: Chung, Jong-Koo Park, Hi-Sun Yoon, Chang-Hyeon Ko, Gene-Oh (Gene) Kim, Chang-hee Shin Firm Rankings (“Outstanding” in all 24 categories)
Market Leader Practice Areas Kyung-Taek Jung, Young-Kyun Cho ■ Banking and Finance ■ Capital Markets Rising Star ■ Competition/Antitrust Myoung-Jae Chung ■ Construction ■ Corporate and M&A Notable Practitioner ■ Dispute Resolution Bong Suk Koo, Hoin Lee, Hye Sung Kim, Hyeon Deog ■ Intellectual Property Cho, Ie Hwan Yoo, Jae Myung Kim, Jong Hyun Park, ■ Investment Funds Joon-Ho Lee, Kwon-Eui Park, Kyung Yoon Lee, Robert ■ Labour and Employment Gilbert, Sookyung Lee, Sun Yul Lee, Sung Uk Park, Yong- ■ Private Equity Ho Kim, Young Man Huh, Young Min Kim, Yun Goo ■ Regulatory Kwon ■ Restructuring and Insolvency ■ Tax About IFLR1000: IFLR, a leading financial law publication affiliated with Euromoney, annually publishes Industry Sectors the IFLR1000 as a global guide to law firms and lawyers. ■ Aviation and Shipping The guide ranks firms in six practice areas based on ■ Banking and Financial Services* surveys and independent research. ■ Consumer Goods and Services* ■ Energy ■ Industrials and Manufacturing* ■ Infrastructure ■ Insurance ■ Media and Entertainment* ■ Pharmaceuticals and Life Sciences* Again the Only Korean Law Firm Given ■ Real Estate Highest Ranking in All 24 Categories ■ Technology and Telecommunications Ranked – Asialaw Profiles 2019 (*newly added industry sectors) About Asialaw Profiles: Asialaw Profiles is an annually published legal directory by Asialaw, a legal media associated with Euromoney, covering law firms in 25 jurisdictions across the Asia-Pacific region. Asialaw In the 2019 edition of Asialaw draws from law firm submissions, interviews, and Profiles, Kim & Chang was once surveys of legal practitioners and clients, as well as from again the only Korean law firm its independent research to rank law firms in one of to receive “Outstanding,” the the following four categories: “Outstanding,” “Highly highest possible ranking, in all recommended,” “Recommended,” and “Notable.” 24 practice areas and industry sectors. Honored with Korean law firms were researched on 13 practice areas the top ranking category in every practice area and and 11 industry sectors. industry sector, including the newly added sectors, we have established ourselves as the only Korean law firm that possesses exceptional capabilities across a wide range of practice areas and industries.
December 2018, Issue 4 l 35 Again Ranked in the Top Tier in South PRO BONO Korea – ALB M&A Rankings 2018 Kim & Chang Committee for Social Contribution Helps Achieve New Guinness World Record and Shares Kimchi with the Local Community
According to the “ALB M&A Rankings,” published in the September 2018 edition of Asian Legal Business (ALB), Kim & Chang was again listed as a “Tier 1” (top tier) firm in South Korea. Twice this past winter, Kim & Chang attorneys and K&C As our firm continues to rank “Tier 1” Friends (staff volunteers) of Kim & Chang Committee for every year, we continue to prove our dominant position as Social Contribution had the opportunity to engage in the leader in Korea's M&A market. gimjang, a Korean tradition of preparing large quantities of kimchi for the winter, and share the kimchi with About ALB M&A Rankings: ALB, a leading legal members of our community. publication in Asia affiliated with Thomson Reuters, annually publishes the rankings based on law firm First, on November 4, 2018, our volunteers participated submissions, Thomson Reuters M&A data, interviews, in the Seoul Kimchi Festival 2018, and became part editorial resources, and market suggestions. Law firms of the 3,500 participants who made the Guinness are evaluated on various criteria, including volume, World Record for the most people making kimchi complexity and size of work, presence across Asia, and simultaneously. The festival, hosted by the Seoul key client assessments. Metropolitan Government, provided an opportunity to share Korea’s gimjang culture as well as experience the About Kim & Chang’s M&A Practice: Our firm’s M&A joy of giving. practice is widely recognized in Korea and throughout Asia for providing the highest quality advice and The 9,000 boxes of kimchi prepared on this day were services. Our team of experts provides clients a full delivered to 25 food banks and 13 social service range of legal services from pre-deal to post-transaction agencies through the Seoul Council on Social Welfare. stages, including transaction structuring, closing, and
Post-Merger Integration (PMI). Also, on November 17, 2018, our volunteers continued a tradition from past years and participated in gimjang with the Central Foster Care Family Center. The kimchi made on this day were delivered to 100 foster families, and the volunteers also hand-delivered 36 boxes of kimchi to Hannangok Senior Citizen Center and to Deulggot Youth World, an organization dedicated to caring for and educating children in need.
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This publication is provided for general informational purposes only and should not be considered a legal opinion of KIM & CHANG nor relied upon in lieu of specific advice. If you wish to change an address, add a subscriber, or comment on this newsletter, please e-mail [email protected]. For more newsletters and client updates of KIM & CHANG, please visit our website - www.kimchang.com December 2018,© Kim Issue& Chang 4 2019.l 36