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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 assist the claimant in proving civil liability of the defendant. 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 is located. The Civil Procedure Act (KCPA) also provides that civil proceedings involving property right disputes can be brought in the district court (or the branch) in which the relevant property is located.

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 the damage and the identity of the tortfeasor (whichever is earlier).

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 division of the court, rather, it must transfer such lawsuit by its ruling to the competent 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 collected 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).

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 up to 5 million won (see article 311 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 as a result of 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?

In order 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.

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 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.

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 (articles 257 to 259 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 304 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 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 or Commercial Matters 1965 and the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters 1970. 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 (article 217 of the KCPA and article 26 of the Civil Execution Act). The recognition of a foreign judgment is subject to certain requirements (article 217 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 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; 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.

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, No. 14716, last amended 18 April 2017 (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). In cases without significant disputes, if the claimant asks for a cash payment and requests an order for such payment, the case proceeds based only on written submissions and without oral arguments. If the defendant 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 include 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 or amount 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.

Criminal asset recovery

Interim measures

Describe the legal framework in relation to interim measures in your jurisdiction.

The law prescribes the act of disguising the proceeds of crime as legitimately acquired or concealing such proceeds (ie, money laundering), and recovers assets based upon relevant laws, including the Criminal Act, the Act on Regulation and Punishment of Criminal Proceeds Concealment and the Act on Special Cases Concerning the Confiscation and Return of Property Acquired through Corrupt Practices (the Criminal Proceeds Act). Korean law also governs concealment or disposition of properties with a ‘preservation order for the purpose of confiscation’, which allows the freezing of assets prior to conviction or indictment under certain specific statutes.

Proceeds of serious crime

Is an investigation to identify, trace and freeze proceeds automatically initiated when certain serious crimes are detected? If not, what triggers an investigation?

Article 10-3 of the Act on Regulation and Punishment of Criminal Proceeds Concealment provides for the grounds for the prosecutors’ investigation to identify, trace and free proceeds from serious crimes. Although the language of the provision does not provide for an automatic initiation of the relevant investigation, there is a special department at Seoul Central District Prosecutors’ Office that is in charge of the relevant investigations.

Confiscation – legal framework

Describe the legal framework in relation to confiscation of the proceeds of crime, including how the benefit figure is calculated.

The Criminal Act (article 48) and the Criminal Proceeds Act (articles 8 to 10) provide the general framework for confiscation of the proceeds of crime, as well as properties, equipment and instrumentalities used or planned to be used in corruption offences, with due protection of the rights of bona fide third parties. Additionally, there are confiscation provisions in the Criminal Proceeds Act (articles 3 to 6) and the Act on Special Cases Concerning Confiscation on Offences of Public Officials (articles 3 to 6). Criminal proceeds include income derived from such proceeds. Value-based confiscation is also possible. The value of the property is determined by the court based on the prosecution’s evidence.

The laws above, together with the Act on Reporting and Use of Certain Financial Transaction Information, address the identification, freezing or seizure of criminal proceeds and instrumentalities.

Confiscation procedure

Describe how confiscation works in practice.

Typically, law enforcement authorities seize the proceeds and the instruments used to commit crime to preserve them as evidence, pursuant to search-and-seize warrants during an investigation, and keep them during the trial. Once the court decides that the seized property should be confiscated, the prosecutor will enforce the court’s confiscation order and the property will belong to the government.

In cases of cash proceeds, the prosecutor will deposit the proceeds with the Treasury. For instrumentalities with value, the prosecutor will sell them via a public auction and deposit the proceeds with the Treasury. A legitimate owner of the confiscated property (eg, a bona fide third party who had no knowledge of the crime) can request the return of such property or its proceeds (if it has already been sold at an auction).

Agencies

What agencies are responsible for tracing and confiscating the proceeds of crime in your jurisdiction?

Agencies responsible for tracing and confiscating the proceeds of crime are as follows:

  • the Public Prosecutor’s Office (under the supervision of the Supreme Prosecutor’s Office);
  • the police; and
  • the Financial Services Commission.

Secondary proceeds

Is confiscation of secondary proceeds possible?

Yes. Several Korean laws, including the Act on Special Cases Concerning Confiscation on Offences of Public Officials and the Criminal Proceeds Act, provide prosecution with the authority to confiscate secondary proceeds.

Third-party ownership

Is it possible to confiscate property acquired by a third party or close relatives?

Yes. Several Korean laws, including the Criminal Law (article 48) and the Criminal Proceeds Act, provide that the proceeds of crime transferred to a third party may be confiscated if the third party knew of the crime at the time of acquisition.

Expenses

Can the costs of tracing and confiscating assets be recovered by a relevant state agency?

Yes. When confiscating from the criminal perspective, the person upon whom a judicial decision is being executed must bear the execution costs under article 493 of the Criminal Procedure Act. Such costs must be paid concurrently with the execution. Thus, costs arising from asset recovery and confiscation must first be paid out of the asset that is being confiscated. However, costs arising from asset tracing, other than those arising from legal procedures, constitute investigation expenses.

Value-based confiscation

Is value-based confiscation allowed? If yes, how is the value assessment made?

Yes. If the exact property cannot be confiscated, the value of the property will be subject to confiscation. The value of the property will be determined by the court based on the prosecution’s evidence.

Burden of proof

On whom is the burden of proof in a procedure to confiscate the proceeds of crime? Can the burden be reversed?

As a general matter, the burden of proof is on the prosecution. Under the Criminal Act and Criminal Procedure Act, no provision alleviates the burden of proof regarding confiscation in general. However, certain special acts have provisions on the burden of proof regarding the calculating or proving of illegal profits or assets.

Using confiscated property to settle claims

May confiscated property be used in satisfaction of civil claims for damages or compensation from a claim arising from the conviction?

Yes, partially. Under relevant laws, the property of the victim of a predicate offence, which has been confiscated or an equivalent value of which has been collected, must be returned to the victim (eg, article 333 of the Criminal Procedure Act).

Confiscation of profits

Is it possible to recover the financial advantage or profit obtained through the commission of criminal offences?

Yes. Particularly under relevant laws on redemption of the proceeds of crime, the scope of assets that could be confiscated or redeemed is extensive, which allows for confiscating secondary proceeds derived from the proceeds of crimes. Article 48 of the Criminal Act prescribes that only a thing that has been used or was sought to be used in the commission of a crime, produced by or acquired by means of criminal conduct, and received in exchange for such a thing can be subject to confiscation. However, various statutes extend the scope of confiscation to include proceeds of crime or assets obtained as fruits to such proceeds.

Non-conviction based forfeiture

Can the proceeds of crime be confiscated without a conviction? Describe how the system works and any legal challenges to in rem confiscation.

Article 48 of the Criminal Act provides for confiscation of a thing (in whole or in part) used or sought to be used in the commission of a crime, produced by or acquired by means of criminal conduct, and received in exchange for such a thing. Article 49 provides for confiscation even when a conviction has not been achieved when the requisites of confiscation in article 48 have been met.

Management of assets

After the seizure of the assets, how are they managed, and by whom? How does the managing authority deal with the hidden cost of management of the assets? Can the assets be utilised by the managing authority or a government agency as their own?

In principle, the prosecution manages confiscated assets. However, upon the transfer of ownership rights to the government, which causes the assets to become government property, the Korea Asset Management Corporation manages such assets under the supervision of the Ministry of Strategy and Finance. Once the assets become national property, no more taxes or maintenance costs arise. The duty of the Korea Asset Management Corporation is to sell the obtained personal and real properties, and it may lease them until sold.

Making requests for foreign legal assistance

Describe your jurisdiction’s legal framework and procedure to request international legal assistance concerning provisional measures in relation to the recovery of assets.

Under the Act on International Judicial Mutual Assistance in Criminal Matters, a prosecutor seeking mutual assistance prepares and sends a written request for mutual assistance to the Minister of Justice. If the Minister of Justice deems it reasonable, he or she will send it to the Minster of Foreign Affairs, who will then send it to the foreign country. Such requests may be made for assistance in relation to the following:

  • investigation into the whereabouts of a person or object;
  • provision of documents and records;
  • service of documents, etc;
  • gathering of evidence - seizure, search and inspection;
  • delivery of objects, such as evidence; and
  • hearing of statements and other measures to make any person testify or cooperate with an investigation in the requesting country.

Complying with requests for foreign legal assistance

Describe your jurisdiction’s legal framework and procedure to meet foreign requests for legal assistance concerning provisional measures in relation to the recovery of assets.

Under the Act on International Judicial Mutual Assistance in Criminal Matters, a foreign request for legal assistance in a criminal matter should be directed to the Minister of Foreign Affairs, who will then send the written request to the Minister of Justice, along with related materials and his or her opinion.

Such requests may be made for assistance in relation to the following:

  • investigation into the whereabouts of a person or object;
  • provision of documents and records;
  • service of documents;
  • gathering of evidence - seizure, search and inspection;
  • delivery of objects, such as evidence; and
  • hearing of statements and other measures to make any person testify or cooperate with an investigation in the requesting country.

Any request for mutual assistance shall be made in writing specifying the following matters:

  • the agency taking charge of the investigation or the trial related to the request for mutual assistance;
  • a summary of the case for which mutual assistance is requested;
  • objectives and contents of a request for mutual assistance; and
  • other matters necessary for providing mutual assistance.

In a recent case, the Korean law enforcement and Ministry of Justice assisted US government agencies in executing US confiscation judgment against a debtors’ assets located in Korea. This reflects the trend of broader assistance by the Korean government, expanding cooperation from traditional information gathering to assistance in seizure and recovery of assets.

Treaties

To which international conventions with provisions on asset recovery is your state a signatory?

Korea is a signatory to several international conventions, including the following:

  • the Council of Europe Convention on Mutual Assistance in Criminal Matters 1959;
  • the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Paris, 17 December 1997;
  • the UN International Convention against Corruption, New York, 31 October 2003; and
  • the UN Convention against Transnational Organized Crime, New York, 15 November 2000.

Private prosecutions

Can criminal asset recovery powers be used by private prosecutors?

Private prosecution does not exist in Korea.