The Democratic Party of Korea will push this year to legislate a Korea-style "discovery (evidence disclosure)" system to overcome limits in the current shareholder derivative suit system, in which collecting and proving evidence is difficult. As a follow-up to an amendment to the Commercial Act centered on directors' fiduciary duty to shareholders, the intent is to ease criminal economic penalties while strengthening civil liability.
On the 16th at the National Assembly Members' Office Building, the offices of lawmakers Kim Nam-geun, Oh Ki-hyeong, and Lee Gang-il, who serve on the Democratic Party of Korea's KOSPI 5000 Special Committee, held a roundtable titled "Exploring ways to activate pursuit of civil liability for damage to shareholder value." The roundtable discussed a "discovery system" as a way to strengthen civil liability for corporations.
The discovery system is a procedure in which parties disclose relevant information to each other at the other side's request before arguments in a lawsuit. At the roundtable, there was criticism that shareholder derivative suits—filed by shareholders against management on behalf of the company over management decisions—show limits in Korea due to evidence law issues. Some also argued that a discovery system is needed to strengthen civil liability instead of the government's push for the "rationalization of economic criminal penalties" such as the crime of breach of trust.
Oh Ki-hyeong said, "If market participants find violations of directors' fiduciary duty, they should be able to raise the issue boldly and hold them accountable," adding, "There is evidence to raise practical issues, and the (discovery system) can play a role in pursuing civil liability."
Lawmaker Kim Nam-geun said, "During the presidential election, we pledged a Korea-style discovery system. I think an evidence disclosure system between shareholders and large corporations will in practice help activate civil liability," adding, "This year we plan to move in earnest to amend the relevant laws."
Attorney Kim Ju-young of law firm Hannuri, who presented the keynote, emphasized the need for a discovery system and argued that the amendment to the Civil Procedure Act should include: ▲ codifying parties' duties of cooperation and truthfulness ▲ making the obligations to submit complaints and answers substantive and expanding the presiding judge's review authority ▲ strengthening procedures for preparing arguments ▲ introducing a questionnaire system.
Through the briefing materials, Attorney Kim noted, "It is commonplace for lawsuits to be dismissed because there is circumstantial evidence but no physical evidence, or because there is suspicion but it cannot be concluded," adding, "Instead of actively seeking to ascertain the facts, courts sometimes commit cases of 'passive misjudgment' by avoiding decisions through applying the principle of burden of proof."