SOUTH KOREA Law and Practice Contributed by: Byung Chang Lee, DR & AJU 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 categorisation 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 inten - tion to obtain property gains. According to Arti - cle 347 of the Criminal Act, the crime of fraud is stipulated as follows: a person who deceives another party to receive property or property gains shall be punished by imprisonment for not more than ten years, or by a fine not exceeding KRW20 million. The main factors that can con - stitute fraud under criminal law include: • specific intent to commit fraud; • deception; • an act of disposition; and • causation. The act of deception can involve omission or non-action that is required by law or other regulations in certain situations, in addition to an aggressive act of making false statements. Fraud claims can include various kinds of situ - ations and business transactions; for example, excessive exaggeration and false advertise - ment can be categorised as enabling a fraud claim based on Korean law. It is said that some exaggeration in product promotion and adver - tisement lacks deception as long as it can be acknowledged in light of good faith and the practice of general commerce. However, in the event of a false notification in a way that is repre -
hensible in light of good faith, it goes beyond the limits of exaggeration and false advertising, and can constitute a deceptive act of fraud (Supreme Court 97do1561 Decision). This Supreme Court case was the first case in Korea that accepted a fraud claim regarding excessive exaggeration in product advertisement. The making of corrupt payments to public offic - ers or the personnel of financial institutions can also constitute another violation of a special act, like the Foreign Corrupt Practices Act in the USA. From the Perspective of Civil Claims In terms of civil claims, fraud can generally be the triggering point of a tort claim. The declara - tion of expression caused by a fraudulent act or omission by the other party who had intent to commit fraud can be cancelled, or be the trigger - ing point of revocation of a former declaration. Also, the party who has been deceived by the other party’s fraudulent acts can file a civil claim arguing compensation for damages rather than arguing for cancellation or revocation of former transactions. Fraud can lead to claims for dam - ages due to breach of contract in addition to claims for damages due to tort. When a fraud claim is involved, the claimant typically uses both a criminal claim and civil claim. The Korean Supreme Court held that “in cases where damages are caused to others by fixing stock prices through the trading of listed securi - ties, then the stock price manipulator shall be liable for damages resulting from the illegal act to the extent that there is reasonable causal rela - tionship” (Supreme Court 2013da 2740 Deci - sion).
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