Civil asset recovery

Parallel proceedings

Is there any restriction on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter?

There are no restrictions on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter. A claimant, however, should carefully consider whether to wait until the conclusion of the criminal proceedings first before commencing any civil proceedings. On the one hand, a conviction against a defendant in a criminal proceeding may in many cases assist the claimant in proving civil liability of the defendant. Also, documentary evidence obtained or created by investigation authorities and adduced in the criminal proceedings is usually transferred to the relevant civil proceedings upon request of a party. On the other hand, there may be situations in which the claimant needs to move quickly (eg, making an application to freeze and seize assets). In practice, courts are quite willing to stay the civil proceeding to wait until the conclusion of the relevant criminal proceedings, if one of the parties requests a stay.

Forum

In which court should proceedings be brought?

Civil proceedings should be brought to the district courts or the branches thereof (based on the amount in dispute), which are located in most major municipalities. Generally, proceedings should be brought in the district court (or the branch thereof, as the case may be) of the region in which a defendant debtor or a tortfeasor’s address is located. The Civil Procedure Act (KCPA) also provides that civil proceedings involving real property right disputes can be brought in the district court (or the branch) in which the relevant real property is located (if the subject matter is property right other than real property, the foregoing applies only in cases where the defendant does not have any address in Korea).

Limitation

What are the time limits for starting civil court proceedings?

For most civil claims (eg, breach of contract), the statute of limitations is 10 years. However, shorter periods apply for certain contractual disputes. For example, the statute of limitations for claims in commercial contract disputes is five years, and the statute of limitations for claims for construction price or claims for interests is three years.

Tort claims must be brought either within 10 years from the date the tort was committed, or within three years from the date the claimant became aware of both the damage and the identity of the tortfeasor.

Jurisdiction

In what circumstances does the civil court have jurisdiction? How can a defendant challenge jurisdiction?

District courts (and branches thereof) are the courts of general and original jurisdiction. They try all civil and criminal cases at first instance.

In deciding the jurisdiction of a court, the parties’ relationship, or the connection of the subject matter with the territory through various points of contact - comparable to the criteria used by the modern American long-arm statutes - is of primary importance. Doctrines of in rem and quasi in rem jurisdiction have not gained a foothold in civil law countries. In Korea, the presence of a defendant’s assets forms a basis for jurisdiction, but this basis allows the courts to render an in personam, not in rem, judgment.

At trial, parties can challenge the court’s jurisdiction or apply for dismissal based on grounds such as lack of standing or lack of capacity. However, article 34 of the KCPA prescribes the court not to dismiss a lawsuit that lacks jurisdiction for the cases filed with an incorrect court or an incorrect division of the court, rather, it must transfer such lawsuit by its ruling to the competent court or division, so that the claimant is relieved of detriments.

Time frame

What is the usual time frame for a claim to reach trial?

First, Korean civil proceedings, as opposed to their counterparts in the United States, are composed of several hearing dates. After the complaint and the answer are filed, parties are to exchange ‘preparatory briefs’ until the court is satisfied that the case, or particular point of legal or factual issue for complex cases, is ‘ripe’ enough to proceed to trial. Preparatory briefs become effective as argued in the proceeding only when and whether they are verbally pleaded in an open-court hearing. Typically, the court sets the hearing dates at intervals of four to six weeks, and the parties file the preparatory briefs sequentially during the intervals. When the court is prepared to render the judgment, it announces the closure of the hearings and sets a date for pronouncement of the judgment. It usually takes about nine to 18 months from the filing of the complaint until the court issues the judgment.

Admissibility of evidence

What rules apply to the admissibility of evidence in civil proceedings?

The KCPA does not provide discovery similar to that afforded by US courts or in other common law jurisdictions that recognise relatively broader discovery. A party in a civil litigation may only obtain evidence from the other party through the court. The court may, upon a request of the parties, examine evidence prior to the commencement of a civil proceeding (ie, the service of complaint on the defendant).

The court may grant a party’s request for pretrial examination of evidence if the court finds potential undue hardship in examining evidence later in the trial unless there is an immediate examination (see article 375 of the KCPA). The pretrial examination in such a case may include witness testimony, production of documents or inspection of the actual site of controversy.

Although article 308-2 of the Criminal Procedure Act expressly prescribes that any evidence obtained in violation of the due process shall not be admissible, there are no provisions in the KCPA on limiting the admissibility of collected evidence in a civil suit. Nor has the KCPA any provision on relevance. Rather, the KCPA (article 202) follows the civil law principle of free evaluation of evidence, which courts have interpreted to give them flexible room for assessing the probative value of the adduced evidence, rather than following any set formalistic rules such as requiring the signature of the person who created a document (see the Supreme Court 8 November 1994 94Da31549). In the same vein, civil proceedings do not have limitations on the admissibility of documents created even after the initiation of a lawsuit, let alone on hearsay evidence. Case law is no different, as courts have found that even illegally taken evidence (eg through unconsented recording of a phone call) may be admitted subject to the court’s discretion (see the Supreme Court 14 April 1981 80Da2314). However, the party that took evidence illegally would nonetheless face liability based on applicable laws (eg, the Protection of Communications Secrets Act for an illegal recording and/or civil damages).

Witnesses

What powers are available to compel witnesses to give evidence?

If a witness does not appear to testify without a justifiable ground after receiving a subpoena, he or she will be subject to an administrative fine of up to 5 million won and shall bear the litigation costs increased by the non-compliance with the subpoena. If the witness does not comply regardless, he or she will be subject to detention up to seven days. As soon as the witness is detained, the court shall hold a hearing to examine the witness, and if the witness testifies, he or she will be released. If the witness does not testify without a justifiable ground (after voluntarily appearing before the court or taken to the court), the witness will be subject to an administrative fine of up to 5 million won (see articles 311 and 318 of the KCPA).

Publicly available information

What sources of information about assets are publicly available?

The following sources of information about assets are publicly available (for free or for a fee):

  • land and building registration;
  • companies and business registration;
  • intellectual property (patents and trademarks) registration;
  • securities registration;
  • vehicle, boat and aeroplane registration;
  • factory estate registry; and
  • mine estate registry.

There are also private companies that can run collective searches for various assets.

Cooperation with law enforcement agencies

Can information and evidence be obtained from law enforcement and regulatory agencies for use in civil proceedings?

In the course of the proceedings and also during trial, the court, at its own discretion or upon request by an interested party (including victims of the underlying fraud), may order law enforcement and regulatory agencies (and other public bodies) to provide or deliver documents deemed necessary for the court’s final decision. In addition, private persons may file an information disclosure request with the relevant government agencies. Such information requests are, however, subject to close scrutiny and complex requirements, and are often denied if there is a pending trial.

Third-party disclosure

How can information be obtained from third parties not suspected of wrongdoing?

A party can request the court to issue an order to produce specific documents in the possession of the other party or any third party. Specifically, under article 344 of the KCPA, a party can file an application for an order for document production under any of the following circumstances:

  • the other party possesses the document that it cited in the action;
  • the applicant is legally entitled to request the document holder to deliver or make the document available for inspection; or
  • the document has been prepared for the benefit of the applicant, or prepared with regard to the legal relationship between the applicant and the document holder.

A party’s application for document production must clearly indicate the following (article 345 of the KCPA):

  • the document requested;
  • the contents of the requested document;
  • the holder of the document;
  • the fact to be proved by the document; and
  • the grounds on which the document should be produced.
Interim relief

What interim relief is available pre-judgment to prevent the dissipation of assets by, and to obtain information from, those suspected of involvement in the fraud?

To maintain the status quo of a tortfeasor’s or a debtor’s assets, a claimant can apply for one or both of the following provisional reliefs - provisional attachment or provisional injunction, as the case may be.

A creditor may apply for these reliefs ex parte in cases of provisional attachment and provisional injunction to prohibit the debtor from disposing of the relevant asset.

A provisional attachment is invoked by a creditor with a monetary claim against a debtor, and it covers monetary claims (eg accounts receivables and bank accounts), personal properties as well as real properties (article 276 of the Civil Execution Act). Provisional attachments remain effective even if the assets were later disposed to third parties. The creditor must identify in his or her application the specific assets the debtor owns or possesses. If the claimant wins the lawsuit, he or she can enforce his or her right through the court auction (in case of personal and real properties) or a court order assigning the claim to the claimant (in the case of monetary claims).

A creditor who has a non-monetary claim (eg, specific performance for transfer of real property) may apply for a provisional injunction to prohibit the debtor from disposing the asset, and seek delivery of personal property, transfer of accounts receivable or bank account, or registration of real property (article 305 of the Civil Execution Act). The order prevents the owner or holder of the property from delivering possession of or assigning the property to a third party, or encumbering the property. Like a provisional attachment, a provisional injunction is effective against third parties who obtain the property in violation of the injunction.

A creditor who is seeking to prohibit certain actions (eg, unfair competition, copy financial documents of the debtor corporation, dismiss directors or appoint a provisional representative to the debtor corporation) may file a petition for a provisional injunction to set a tentative status (article 300(2) of the Civil Execution Act). The court shall hold a hearing to decide on this type of application. The court usually reviews the petition and supporting evidence without witness testimony, and has discretion as to the issuance of the injunction and the necessary undertakings (eg, provision of securities for damages) to protect the parties’ interest.

Non-compliance with court orders

How do courts punish failure to comply with court orders?

As a general matter, the court may impose fines (of up to 5 million won) or detention (up to seven days) for witnesses who fail to appear to testify under oath (see article 311 of KCPA). In addition, a witness who makes a false testimony under oath may be punished for perjury by imprisonment for up to five years and a fine of up to 10 million won (see article 152 of the Criminal Act). Finally, when applicable, the court may draw adverse inferences against a party refusing to comply with a procedural order, such as an order to produce documents (see article 349 of KCPA).

The law provides for additional sanctions against debtors who refuse to comply with court orders. The court may detain a debtor for up to 20 days for failure to appear at a disclosure hearing, refusal to provide the list of his or her assets or refusal to testify under oath. A debtor who files a false list of assets is subject to up to three years of prison or a fine of up to 5 million won (see article 68 of the Civil Execution Act). Further, if a debtor does not satisfy his or her obligation within six months after the court order, the creditor may petition to list the debtor on the ‘defaulters’ list’, a publicly available list that serves as a detriment to obtaining a loan or otherwise conducting business activities (see article 70 of the Civil Execution Act).

Obtaining evidence from other jurisdictions

How can information be obtained through courts in other jurisdictions to assist in the civil proceedings?

Information can be obtained through courts in other jurisdictions under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil, Commercial Matters 1965 and the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters 1970 or through diplomatic channels (ie, Korean diplomats to the jurisdiction) under Act on International Judicial Mutual Assistance in Civil Matters. Korea is also a party to several multilateral or bilateral legal assistance treaties with foreign nations that concern the sharing of evidence.

Assisting courts in other jurisdictions

What assistance will the civil court give in connection with civil asset recovery proceedings in other jurisdictions?

Assistance with service of process

Korea is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. In accordance with the Convention, service of process is conducted by the Ministry of Court Administration at the Supreme Court, which is the designated central authority for processing the service of documents from other contracting states. Documents from other contracting states are served on a Korean resident according to the method prescribed by the KCPA.

Taking evidence from a witness in Korea

Korea is a party to the 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters. Under the Convention, a request to take evidence from a witness in Korea can be sent through a letter of request to the Korean central authority, which will then transmit the letter to the relevant Korean court. If accepted, the court will conduct an in-court witness examination in accordance with the KCPA.

Enforcing foreign judgments

A judgment obtained in a jurisdiction outside Korea can be recognised and enforced by Korean courts. To enforce a foreign judgment, a party must request and obtain an enforcement judgment from a Korean court (articles 217 and 217-2 of the KCPA and article 26 of the Civil Execution Act). The recognition of a foreign judgment is subject to certain requirements (articles 217 and 217-2 of the KCPA), including the following:

  • the judgment is final and conclusive;
  • the court that rendered the judgment has jurisdiction under the principles of international jurisdiction laid down in Korean law or treaties;
  • the defendant was properly served (excluding by way of public notice) with the complaint or summons in advance to allow sufficient time for preparation of his or her defence, or the defendant responded to the suit without having been served;
  • the effect of the judgment is not contrary to Korean public policy (in particular, the nature and the amount of damages ordered in the judgment); and
  • a guarantee of reciprocity exists.
Causes of action

What are the main causes of action in civil asset recovery cases, and do they include proprietary claims?

Under Korean law, a party injured by fraud may file a suit under at least two legal theories: breach of contract or tort under the Civil Act. Particulars of the case and other considerations such as the statute of limitations should dictate with which of the two theories to present the case. The amount of damages from either action is the same, and there are no punitive damages available under the law when it concerns fraud and asset recovery.

In certain limited circumstances, fraudulent transfer suits are allowed against third parties who received the property or benefit from the debtor with knowledge. Proprietary claims are allowed subject to strict showing of chain or flow of interests from the original rightful owner claimant to the debtor or third party.

Remedies

What remedies are available in a civil recovery action?

Courts can order the following:

  • performance of specific obligations (eg, delivery, transfer or both of certain property);
  • seizure;
  • restitution;
  • damages; and
  • injunctions.

As to damages, punitive or treble damages are not allowed in most civil litigation, but see, for example, article 3 of the Product Liability Act (treble damages are allowed for manufacturers found liable under the Act).

Judgment without full trial

Can a victim obtain a judgment without the need for a full trial?

If the defendant does not file an answer within 30 days from service of the complaint, the court may render the judgment on the premise that the defendant is deemed to have admitted all the facts alleged by the claimant (see article 257 of the KCPA). Also, in cases without significant disputes, if the claimant requests an order for a cash payment (instead of commencing the regular proceeding), the case proceeds based only on written submissions and without oral arguments. If the defendant, after the payment order is served, requests a full trial, however, the regular proceeding is automatically commenced.

Post-judgment relief

What post-judgment relief is available to successful claimants?

The main post-judgment relief available to successful claimants includes the following:

  • appointment of a receiver, in a case in which an insolvent debtor otherwise meets the requisite elements under the Debtor Rehabilitation and Bankruptcy Act;
  • examination of judgment debtors in identifying the whereabouts of their assets;
  • enrolment of the debtor on the ‘defaulters’ list’;
  • attachment or garnishment of debtors’ assets; and
  • discovery of the judgment debtors’ assets held by the debtors or third parties (eg, banks) through a separate court application.
Enforcement

What methods of enforcement are available?

Methods of enforcement include seizure and sale of assets, garnishee orders and insolvency proceedings.

Funding and costs

What funding arrangements are available to parties contemplating or involved in litigation and do the courts have any powers to manage the overall cost of that litigation?

There are currently no clear court precedents or jurisprudence on third-party litigation funding. The Attorney-at-Law Act, however, prohibits a lawyer from becoming an assignee of any rights in dispute.

Contingency fees for representation in civil matters are permitted under the law and are frequently used in practice. Nonetheless, parties and attorneys are advised to exercise caution with regard to contingency fee arrangements. For instance, a court may reduce an excessive contingency fee to a reasonable level if the fee amount is found to violate public policy.

Insurance is available to cover all or part of a party’s legal costs for certain types of civil and commercial cases. With respect to costs, a final court judgment includes a decision on the allocation of costs of the proceedings. The losing party bears litigation costs in principle (article 98 of the KCPA). In a partial win, the court has the discretion to decide the ratio of litigation costs that the respective parties must pay. However, there is a ceiling on the reimbursable attorney’s fees as set out in the Supreme Court regulations, which in most cases is not high enough to cover the actual costs.