SOUTH KOREA Law and Practice Contributed by: Byung Chang Lee, DR & AJU LLC
7. Special Rules and Laws 7.1 Rules for Claiming Punitive or Exemplary Damages No General Rule Recognising Punitive Damages In principle, the Korean legal system does not recognise so-called punitive damages in fraud claims and there is no general rule accepting punitive damages. Among the various kinds of damage compensation, the Korean legal system typically accepts compensatory damage in a tort or breach-of-contract claim. Adoption of Punitive Damages in Some Special Acts Since 2011 In 2011, in a case of compensation for damages caused by abuse of power by contractors, puni - tive damage compensation (more precisely, tri - ple-damage compensation) was first introduced in Article 35(2) of the Act of Fair Subcontract Transactions. This is the first legal provision to recognise punitive damages in Korea. Since the adoption of punitive damages in the Act of Fair Subcontract Transactions, special acts on various areas have adopted punitive damages clauses, including the following: • Act on the Protection of Fixed-Term and Part- Time Workers; • Act on the Protection, etc of Dispatched Workers; • Act on Fairness of Agency Transactions; • Act on Fairness of Franchise Transactions; • Product Liability Act; and • Antitrust and Fair Trade Act, etc. Although there is no general provision on puni - tive damages in fraud claims, special acts where fairness of transactions is thought to be need -
ed, and special clauses adopting triple-damage compensation, have been introduced. The Supreme Court’s Ruling Recognising That the US Court’s Punitive Damages Award Can Be Enforced in Korea Recently, the Korean Supreme Court held that a Hawaii court’s judgment, which approved punitive damages for a US company due to a Korean company’s unfair trade practices, can be enforced in Korea (Supreme Court 2018da231550 Decision). In this case, the Korean Supreme Court specifically held that “the domestic Fair Trade Act does not allow com- pensation for damages that exceed the scope of compensation for unfair trade practices, but is introducing a system that allows compensation within three times the actual amount of damages for unfair joint actions of business operators. It is difficult to see that it is unacceptable in light of the principles, ideology, and system of our coun - try’s damage compensation system to approve a judgment of a foreign court that ordered dam - ages equal to three times the actual amount of damage.” The Korean Supreme Court also held that even if the foreign law applied to a foreign judgment determines a certain multiple of the actual dam - age amount as the final damage amount, it is not possible to deny approval of the foreign judg - ment based on that alone. In the past, it has been acknowledged that punitive damages cannot be recognised and enforced in Korea, mainly because it is against public policy. However, since the recent afore - mentioned Supreme Court case, there will be recurring considerations on whether to recog - nise punitive damages in a specific case.
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