The Korean law on class action lawsuits which went into effect on January 1 2005 is the Securities Class Action Lawsuits Act. As of now, this statute applies only to securities-related claims for damages based on false securities reports and information circulars, false business reports, semi-annual or quarterly reports, use of non-public information, stock price manipulation or negligent auditing by an external auditor. Due to various strict requirements in addition to such limited grounds for the commencement of a class action lawsuit in Korea, this statute has rarely been used. Thus far, only six class action lawsuits have been filed, and even among such lawsuits, not one has progressed to a final decision from the court of first instance. Due to criticisms of this status quo, the National Assembly and citizens' groups have been discussing a complete overhaul of the Securities Class Action Lawsuits Act.
So far, the discussions involve three different options: (i) the passage of a single law that covers not only capital markets, but also antitrust, fair trade and others, and allows investors or consumers to commence class action lawsuits; (ii) the passage of an amendment expanding the grounds for commencement of securities-related class action lawsuits and easing various requirements, and at the same time, passing a separate law on class action lawsuits for areas other than securities law by reference to the amended provisions of the Securities Class Action Lawsuits Act; and (iii) the inclusion of antitrust and fair trade to the scope of the existing Securities Class Action Lawsuits Act, expanding the grounds for commencement of suits, and easing various requirements.
The Korean Government, especially the Ministry of Justice, the Financial Services Commission and the Korea Fair Trade Commission, is in the process of preparing a draft amendment to the Securities Class Action Lawsuits Act, but a detailed draft amendment has not yet been finalised. However, the provisions of the draft amendment known to be under discussion are as follows: (i) in addition to securities, matters relating to derivative products are to be included among the grounds for commencement of securities-related class action lawsuits; (ii) adoption of provisions relating to unreasonable concerted acts (cartel activities) under the Monopoly Regulation and Fair Trade Act and, after reviewing their implementation, a decision will be made on whether to expand their scope; and (iii) reasonably improving exclusive jurisdiction provisions, requirements for composition of injured parties, qualifications for plaintiffs' counsel, procedures for disputing decision to grant class action status, and others.
Once discussions among various government agencies are completed, the Korean Government reportedly plans to announce a draft law tentatively titled, Draft Law on Financial Investment Products and Antitrust/Fair Trade Class Action Lawsuits, and to finalise it after a public hearing. If the draft law is prepared and adopted by the National Assembly as proposed by the Korean Government, it is expected to have a considerable impact on Korean society. In particular, if the law on class action lawsuits is applied to the antitrust and fair trade area, many experts believe that the impact would be considerably greater than the impact on the capital markets area.
Soonghee Lee, Yoon & Yang