New anti-bribery regime in Korea comes into effect today

In an e-bulletin published in March 2015, we reported that the South Korean National Assembly passed the “Act on the Prohibition of Illegal Solicitations and the Prevention of Conflicts of Interest of Public Officials”. The Act is also known as the “Kim Young-ran Law”.

The Kim Young-ran Law comes into force today, 28 September 2016, and introduces far-reaching changes to South Korea’s anti-bribery landscape. We summarise the key changes below.

Companies operating or investing in South Korea should ensure they undertake a comprehensive review of their compliance policies to address the requirements of the new law.

Significantly broader definition of “public servant”

South Korea’s anti-corruption laws apply to public sector bribery (eg, the bribery of public officials). The new law significantly widens the definition of public official to include more than 4 million individuals, including civil servants, court officials, employees of central and local governments and government-owned institutions, and more controversially, journalists, public school teachers, and directors and teachers at private schools.

In July 2016, an appeal to Korea’s Constitutional Court arguing against the inclusion of educators and journalists in the Act failed, with the Court citing public interest as a reason for maintaining their inclusion in the law. The Court noted that educators and journalists should be covered by the law, given the extensive and long-lasting damage that can occur to society if they are involved in any form of corruption.

New strict liability offence

The Kim Young-ran Law introduces a new strict liability offence prohibiting the provision of a benefit to a public official where the benefit is: valued in excess of 1 million won; or, when aggregated with other benefits from the same source, is in excess of 3 million won over a one year period (the New Offence).

Unnecessary to prove quid pro quo

The New Offence effectively removes the evidentiary requirement to prove that a benefit is provided “in connection with the receiving official’s duties”, the requirement under the Criminal Code. Prosecutions may arise where there is no quid pro quo: the evidentiary requirement to prove a direct link between the acceptance of a gift and a subsequent favour has been effectively removed.

New Monetary Limits on Gifts and Entertainment

The Kim Young Ran law provides for some benefits which will be exempted from the New Offence. In this respect, the Kim Young Ran law provides for exemption thresholds at KRW30,000 for meals, KRW50,000 for gifts and KRW100,000 for congratulatory or condolence money. This is expected to bring significant changes to Korean business culture.

Corporate Liability

For the first time in Korea, the Kim Young-ran law also introduces the concept of corporate liability for private companies. This will apply where an employee of a company commits the New Offence. As under the UK Bribery Act, proof of a robust compliance system within the company will constitute a defence to the corporate offence.

Potential punishments

Individuals who provide cash or gifts valued at more than one million won (approximately US$900) at any one time face imprisonment for up to three years or a fine of up to 30 million won. An individual who provides cash or gifts valued at more than one million won but less than three million won during any given fiscal year can be fined between two and five times the value of the bribe.

For any questions, please contact the authors or your usual Herbert Smith Freehills contact.