Overview

Court system

Outline the organisation of your court system as it relates to collective or representative actions (class actions). In which courts may class actions be brought?

Korea’s court system is based on a three-tier judicial system composed of district courts, high courts and the Supreme Court. The 18 district courts have original jurisdiction over most civil and criminal cases, with some exceptions, and the six high courts have appellate jurisdiction over cases decided by a trial panel of three judges in a district court. Ultimately, the Supreme Court functions as the highest court for most legal issues, including class action cases.

While there are other special courts, such as a patent court and a family court, there is no specific court exercising jurisdiction over collective or class actions. Class actions are, therefore, brought in the district courts. There is a unique characteristic in terms of jurisdiction, however, for securities-related class actions where an ‘opt-out’ system is applied: district courts with jurisdiction over defendants have an exclusive jurisdiction. Thus, when there are several defendants and the courts with jurisdiction over these defendants are different, several lawsuits should be filed against the different defendants, and the High Court, having common jurisdiction over the district courts where such lawsuits are brought, should appoint one district court as the court exercising jurisdiction over such consolidated cases.

Frequency of class actions

How common are class actions in your jurisdiction? What has been the recent attitude of lawmakers and the judiciary to class actions?

Korea has a securities-related class action law, the Securities-Related Class Action Act, allowing US-styled class action for certain types of securities-related cases. For other cases such as consumer, antitrust or environment, where there are unspecified numerous victims, general civil procedures should be applied. Because a class action system has not yet been adopted for such fields, those victims should bring actions individually or jointly.

Since 1 January 2005, the effective date of the Securities-Related Class Action Act, only 10 class actions have been filed up to 1 September 2020, with six cases finalised and four cases still pending in court. Among those six finalised cases, two were adjudicated (33 per cent), one was dismissed at the certification stage (17 per cent) and the other three were settled (50 per cent) before adjudication by the court. Other cases, such as consumer, antitrust or environment cases, or even securities cases, not eligible as class actions where general civil procedures are applied, have relatively low settlement rates. This is because expectations of both parties regarding the victory and defeat of an action are significantly different owing to the lack of a discovery system.

However, with the election of president Moon Jae-In in 2017, the authorities are trying to expand the areas where class actions can be filed (eg, securities, antitrust and consumer protection). Some lawmakers went even further and submitted a bill expanding the areas not just to antitrust and consumer protection but also to the environment and personal information leakage. It is generally agreed that the expansion of class actions is a trend that cannot be avoided with the growth of collective disputes, even with the vigorous opposition from the business side. The expansion of class actions is expected to replicate the existing securities-related class action law as well as expand the types of claims currently available under the law.

Legal basis

What is the legal basis for class actions? Is it derived from statute or case law?

In Korea, a civil law country, the Civil Procedure Act is the primary source of law for litigation. However, a special law has been adopted to govern the procedural aspect of class actions – the Securities-Related Class Action Act. The Act was proclaimed on 20 April 2004 and became effective on 1 January 2005.

Types of claims

What types of claims may be filed as class actions?

Only predetermined types of securities claims can be filed as class actions. Article 3 of the Securities-Related Class Action Act specifically provides the causes of actions on which the claims can be based as following:

  • false representation (or omission) of any material fact in a registration statement or a prospectus;
  • false representation (or omission) of any material fact in annual, biannual or quarterly reports;
  • unfair securities practices including insider trading or market manipulation; and
  • false representation in an audit report, all of which are causes of actions provided by the Financial Investment Services and Capital Market Act.

 

There is no court ruling that further limits the types of claims that may be litigated by class actions.

Relief

What relief may be sought in class proceedings?

Only money damages can be sought in class proceedings under the Securities-Related Class Action Act. Consumer protection law has a system that allows consumer groups to move for injunction against companies, but it is not widely used.

Initiating a class action and timing

How is a class action initiated? What is the limitation period for bringing a class action? Can the time limit for bringing a class action be paused? How long do class actions typically take from filing to a final decision?

Unlike general actions, where only a complaint is necessary to be filed as a class action, the plaintiff should prepare two sets of documents – complaint and application for certification. The application for certification, as the name of the document represents, is for certification as a class action. With the filing of the two documents, the case begins as a class action. If the proceedings are successful in getting certification as a class action, the case then goes on to the merits stage. There is no advance notice requirement.

The Financial Investment Services and Capital Market Act provides the statutes of limitations for the claims that may be filed as class actions as follows:

  • false representation (or omission) of any material fact in a registration statement or a prospectus: within one year from the date on which he or she becomes aware of the relevant facts, or within the three-year period beginning on the date a registration statement related to the relevant securities takes effect;
  • false representation (or omission) of any material fact in annual, biannual or quarterly report: within one year from the date on which he or she becomes aware of the fact, or within three years from the date of submission;
  • unfair securities practices, including insider trading or market manipulation: within two years from the date on which he or she becomes aware of the fact, or within five years from the date of submission; and
  • false representation in an audit report, all of which are causes of actions provided by the Financial Investment Services and Capital Market Act: within one year from the date the claimant becomes aware of the relevant fact or within eight years from the date the audit report was submitted.

 

While it is difficult to conclude general trends as to how long a class action lawsuit would take, it normally lasts for more than five years after filing the complaint.