SOUTH KOREA Law and Practice Contributed by: Heejun Choi, Kyoung-Ho Kim, Sungsok Yang, Eunjee Kim and Kwang-Chun Park, Dentons Lee
1. Legal System 1.1 Legal System and Judicial Order
2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments Foreign investment in South Korea generally does not require prior governmental approval. Under the Foreign Investment Promotion Act (“FIPA”), most for - eign investments are implemented through a filing or notification process rather than an approval regime. To qualify as a “foreign investment” under the FIPA, an investment must generally be at least KRW100 million and result in either: • the acquisition of 10% or more of the voting shares or equity interests of a Korean company; or • the acquisition of an equity interest together with the right to appoint or dispatch officers. A foreign investment report is ordinarily filed before completion, although certain transactions – including listed share acquisitions, mergers, stock-for-stock exchanges, inheritance, gifts, dividend reinvestment and conversions or exercises of convertible securities – may instead be reported after completion. Prior approval or enhanced review is required only in limited circumstances, principally where national security or specially regulated industries are involved. A foreign investor acquiring shares in a defence industry company must obtain prior approval from the Ministry of Trade, Industry and Energy (“MOTIE”). Even where no sector-specific approval is required, an investment may be subject to national security review if it results in effective managerial control over an exist - ing Korean company and raises concerns such as: • disruption to defence production; • diversion of goods or technologies for military use; • exposure of state secrets; • material interference with international peace and security obligations; or • leakage of national core technologies or national high-tech strategic technologies. Such investments may be reviewed by MOTIE and the Foreign Investment Committee, which may impose corrective measures or require divestment.
South Korea is a civil law jurisdiction. Codified legisla - tion is the primary source of law, with the legal hierar - chy headed by the Constitution, followed by Acts of the National Assembly, presidential decrees, ministe - rial rules and local ordinances. The principal areas of private and public law are gov - erned by statutes, including: • the Civil Act; • the Commercial Act; • the Criminal Act; Judicial decisions are not formally binding under the doctrine of stare decisis. In practice, however, Supreme Court decisions carry significant persuasive authority and are generally followed by lower courts. Academic commentary also plays an important role in statutory interpretation. • the Civil Procedure Act; and • the Criminal Procedure Act. The ordinary court system has a three-tier structure. District Courts serve as the principal courts of first instance, High Courts hear appeals and the Supreme Court is the court of final appeal. South Korea also has specialised courts, including the Patent Court, Fam - ily Courts, the Administrative Court and Bankruptcy Courts. Separate from the ordinary judiciary, the Constitu - tional Court has jurisdiction over constitutional review of statutes, constitutional complaints, impeachment proceedings, dissolution of political parties and com - petence disputes between state organs. Accordingly, South Korea’s judicial system is best characterised as a civil law system with a three-tier ordinary court hierarchy, supplemented by specialised courts and a separate Constitutional Court.
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