On 28 July 2016, the Constitutional Court of Korea upheld the constitutionality of the Korean “Anti-corruption and Bribery Prohibition Act” (the “Act”) which was enacted in 2015. The Act is more well-known as the “Kim Young Ran Act”, named after the former Supreme Court justice and head of the Anti-corruption and Civil Rights Commission who had proposed the first draft of the Act in 2012. The Act makes it illegal for public officials and certain defined civilians to accept bribes or make unlawful requests (regardless of bribes), either directly or through a third party. A violation of the Act could result in a fine of up to KRW 20,000,000, as well as a prison term of up to 2 years.

Although the Act was intended to create a momentum for important changes in Korean society, due to the wide scope of its application, it has been subject to heavy criticism ever since it passed the National Assembly in March 2015. In fact, it was brought before the Constitutional Court’s scrutiny, even before going into force. The Act was challenged on four bases: (i) the Act includes civilians such as journalists and private school officials within its definition of “public officials”, thus affecting over 4 million individuals out of the whole Korean population ; (ii) the Act violates freedom of conscience by obligating public officials to report violations of the law, including actions of the officials’ spouses; (iii) the Act is too vague regarding what constitutes an unlawful request; and (iv) the Act unconstitutionally delegates the scope of exceptions to what constitutes bribes to a Presidential Decree.

The Constitutional Court ruled 7:2 that it is, in fact, constitutional to include journalists and private school officials within the Act’s definition of “public officials”, given the huge influence these two sectors have on the society as a whole. The Constitutional Court also ruled 5:4 that it is constitutional to impose the reporting obligation on public officials, as well as to delegate to a Presidential Decree the exceptions to bribes, in order to flexibly adjust the scope of the application of the Act in accordance with changes in society. Finally, the Constitutional Court unanimously decided that the Act is sufficiently clear as to what is meant by an “unlawful request”.

Since the Act will now go into effect from September 28, 2016 as originally planned, it is crucial for companies operating in Korea to take measures to make sure that their officers and employees do not violate the Act. The Act provides that companies themselves, as well as individuals, can be subject to penalties, if they have not taken proper compliance measures to prevent violations of the Act. At a minimum, we strongly recommend that companies carefully review their current business practices, set up new internal compliance programs to address the requirements of the Act, and regularly audit their compliance with the Act.