SOUTH KOREA Law and Practice Contributed by: Byung Chang Lee, D&A LLC
1. Fraud Claims 1.1 General Characteristics of Fraud Claims The general characteristics of fraud claims in Korea can be broadly categorised into both criminal claims and civil claims. The main reason for this broad cat - egorisation is that the concept of fraud is not specific to criminal law but can also entangle civil claims. From the Perspective of Criminal Claims Fraud is defined as a crime in which a person deceives the other party with the wrongful intention to obtain property gains. According to Article 347 of the Crimi - nal Act, the crime of fraud is stipulated as follows: a person who deceives another party to receive prop - erty or property gains shall be punished by imprison - ment for not more than ten years, or by a fine not exceeding KRW20 million. The main factors that can constitute fraud under criminal law include: • specific intent to commit fraud; • deception; • an act of disposition; and • causation. A deceptive act may arise not only from an affirma - tive misrepresentation, but also from an omission or failure to act where there is a legal or regulatory duty to disclose. In this sense, fraud-related claims may encompass a wide range of situations and commer - cial transactions. For instance, excessive exaggera - tion and false advertising may, under Korean law, fall within conduct capable of supporting a fraud allega - tion. That said, certain levels of promotional exaggeration in product marketing are generally not regarded as deceptive, provided they can be understood within the bounds of good faith and accepted commercial practice. However, where a false representation is made in a manner that is considered reprehensible in light of good faith, it exceeds the permissible limits of exaggeration and advertising puffery and may amount to a deceptive act constituting fraud (Supreme Court Decision 97Do1561). This decision is regarded as the first case in Korea to recognise fraud liability in rela - tion to excessive exaggeration in product advertising.
The making of corrupt payments to public officers or the personnel of financial institutions can also consti - tute another violation of a special act, like the Foreign Corrupt Practices Act in the USA. From the Perspective of Civil Claims In the context of civil claims, fraud generally serves as a basis for a tort claim. A declaration of intent induced by the other party’s fraudulent act or omission, where there is an intention to defraud, may be rescinded, or may constitute grounds for the cancellation of a prior declaration. Alternatively, a party deceived by fraudu - lent conduct may bring a civil claim seeking compen - sation for damages instead of pursuing rescission or cancellation of the underlying transaction. Fraud may therefore give rise not only to claims for damages based on tort, but also to claims for damages aris - ing from breach of contract. In practice, where fraud is alleged, claimants commonly pursue both criminal proceedings and civil remedies in parallel. The Korean Supreme Court held that “in cases where damages are caused to others by fixing stock prices through the trading of listed securities, then the stock price manipulator shall be liable for damages resulting from the illegal act to the extent that there is reasona - ble causal relationship, and this legal principle applies likewise to cases where damage is caused to others by fixing the market price of securities that are the underlying assets of financial investment products” (Supreme Court Decision 2013Da2740). 1.2 Causes of Action After Receipt of a Bribe The So-Called Kim Young-Ran Act From the perspective of criminal law in Korea, receipt of a bribe can constitute a serious violation of the Criminal Act in addition to the so-called Kim Young- ran Act, which prohibits a person from providing a gift or benefit beyond a certain amount of money to a public officer, or someone with a similar position. This Act is named after the former Supreme Court justice of Korea who had proposed such a regulation in order to prevent widely prevalent acts of giving and taking gifts in the so-called Gap-Eul relationship in Korea. The coverage can extend to gifts or benefits that are not related to a benefit in return, that is, the typical character of a bribe; therefore, the aforementioned act
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