Lawsuits involving corporations are spreading into a pattern of "complex disputes" entangling civil, criminal, and public opinion battles. In the past, there were many single suits over contract interpretation or payment, but recently, conflicts starting with board injunctions have often expanded into criminal complaints, investigations by financial authorities, and shareholder activism.
Attorney Kwon Hyuk-jun (Judicial Research and Training Institute class 36) of YulChon called this a "package-type complex dispute." Kwon said, "Now it is difficult to respond to corporations cases with only legal theories and evidence," adding, "We have entered an era when we must also consider market reactions, regulatory trends, and reputational risk."
Kwon joined YulChon in March after serving 19 years as a judge. At the court, Kwon handled corporations, international transactions, and construction cases, and at the Seoul High Court's criminal division, took on capital markets, embezzlement, and breach of duty cases. Kwon also worked on secondment as an adviser to The National Assembly's Legislation and Judiciary Committee.
Kwon cited a securities-related class action filed against a major construction company as a memorable case from the time on the bench. The issue was whether belatedly reflecting overseas business losses in the accounts constituted accounting fraud. The first trial panel at the time dismissed the shareholders' claims. Kwon said, "The company won at first instance, but the parties reached a settlement during the appeal," adding, "In corporations cases, I realized that corporate image and market trust are as important as the outcome of the lawsuit."
The interview was conducted on the nth at YulChon's office in Samseong-dong, Gangnam-gu, Seoul. The following is a Q&A with Kwon.
—What has changed the most in recent corporations disputes?
"It has become more common for a single case to spread in multiple directions at once. A minority shareholder files for an injunction to suspend the effect of a board resolution while simultaneously submitting a criminal complaint, followed by probes by financial authorities and media coverage. In the past, issues ended with one lawsuit, but now civil, criminal, financial, and reputation issues move together. Multidimensional response strategies have become that much more important."
—What strategy should be established first in complex disputes?
"It is important to create a 'core story.' In trials, consistency and common sense are ultimately key. If the explanations differ between civil and criminal matters, the court will find it hard to trust them. Even if it is not false, if the logic wavers or defies common sense, it can work against you. The bench ultimately views cases through the lens of common sense."
—Where is the line between business judgment and breach of duty?
"A poor outcome does not immediately amount to a breach of duty. There is the business judgment rule. If a decision was made for a particular individual's benefit, that could be a problem, but if the decision was made at the time based on sufficient information and materials, it is hard to conclude breach of duty from the result alone. However, it is not easy to defend with ex post explanations only. There must be records showing that sufficient review took place in the decision-making process."
—What records should a board keep during capital transactions?
"As in the recent discussions on amending the Commercial Act, with the potential expansion of directors' liability to shareholders, the importance of records has grown for corporations and executives. It is no longer sufficient to leave only the result that 'it was unanimously approved.' You must transparently record what grounds and materials were used, and what internal dissenting opinions existed. In particular, for matters that affect share value, such as mergers, partitioning, or disposal of treasury shares, it is necessary to have objective analysis materials on hand."
—How should internal controls be proven?
"It is better to have rules than not, but what is more important is whether they actually work. It matters whether actual discipline or measures were taken under internal rules and whether there are records that controls worked on the ground. However, they should not look like materials cobbled together after the fact. Courts look comprehensively at timing, background, and motive."
—How did your National Assembly secondment experience affect your view of corporations cases?
"It was an experience that allowed me to look at the courts from an outside perspective. I learned that what seemed natural inside the courts could be seen differently outside. The National Assembly is like a microcosm of our society. By engaging with the positions of lawmakers, the government, corporations, and local communities, I gained a more balanced perspective."
—When should corporations start responding to legislative risk?
"The earlier, the better. Once a bill reaches the Legislation and Judiciary Committee or the plenary session, the room to respond dwindles. Preparation should begin when the government starts reviewing a system or when discussions take place in a standing committee's subcommittee. However, to avoid the misunderstanding of 'inappropriate lobbying,' explanations must be transparent, based on data and objective grounds. Recently, there has been a strong aversion within the National Assembly and the government to opaque contacts."
—As a former judge, what is the greatest value you can offer corporations?
"Predicting the outcome of a judgment is important, but that too is ultimately a matter of probabilities based on past cases and data. More important is building an argument structure that the bench can accept. Even with the same facts and evidence, persuasiveness can vary depending on how the logic is constructed."
—Why did you choose YulChon?
"I concluded it is a law firm with a strong culture of collaboration. There was a close-knit collaborative atmosphere not only within the litigation group but also with experts in other fields. Today's corporations cases are difficult for one person to resolve alone. Because civil, criminal, administrative, and capital markets issues move simultaneously, multiple experts must respond together. I believed it was the place where I could make the most effective use of my 19 years of trial experience."