International companies in South Korea have warned {that a} new office security legislation resulting from are available power subsequent 12 months will undermine the nation’s enchantment as a vacation spot for abroad firms.
The American, European and British chambers of commerce in Seoul stated the Extreme Accident Punishment Act, which is able to take impact in January, has exacerbated longstanding considerations about prison penalties for even minor regulatory infractions.
A number of chief executives whose firms have been investigated for transgressions starting from employment legislation violations to misfiling of customs declarations have been subjected to prison prosecution, journey bans and the specter of jail or deportation.
Kaher Kazem, chief government of Normal Motors Korea, was banned from leaving the nation with out permission between 2018 and 2020 after he and 4 different executives have been indicted over allegations that 23 staff had been saved on irregular contracts for too lengthy. The executives have denied wrongdoing and GM has contested the fees.
Beneath the brand new legislation, senior executives might be held criminally answerable for a variety of accidents and work-related accidents and diseases except they’ll display compliance with an extended listing of standards. Convicted executives face a effective and a minimal one-year jail sentence.
“CEOs in Korea — whether or not overseas or Korean — are personally liable for therefore many issues which can be past their management,” stated James Kim, chair of the American Chamber of Commerce in Korea. “They’re asking why they need to be taking up all these private dangers to return and work right here.”
“The legislation applies equally to Korean and overseas firms,” stated Christoph Heider, president of the European Chamber of Commerce in Korea. “However, for instance, to violate customs laws here’s a prison act, which places importers at a better danger.”
International executives describe the regulatory regime as a extremely advanced, opaque and unpredictable.
“The legal guidelines will not be clear and the punishments are extreme, so it’s no shock persons are involved,” stated a British CEO of the Korean subsidiary of a European producer. “It’s not simply that I’m unsure how laws are going to be utilized — I seek the advice of my legal professionals and so they’re unsure both. It’s scary.”
The laws can also be opposed by native employer our bodies, together with the Korea Enterprises Federation, which describes it because the “many uncertainties and ambiguities” surrounding the factors executives are anticipated to fulfil.
However advocates say the legislation is critical as a result of South Korea has one of the highest industrial death rates in the developed world, with greater than 2,000 work-related fatalities reported final 12 months, based on the labour ministry.
“Firms ought to make investments extra in security, not simply pursue earnings relentlessly,” stated Kim Woo-chan, a enterprise professor at Korea College. “In the event that they implement security measures completely, this can clearly assist stop critical work accidents.”
Jeffrey D Jones, an American lawyer and chair of Amcham’s board of governors, stated the reliance on prison prosecution was imposing pointless prices on the South Korean economic system.
“I recurrently hear from multinational firms that they spend extra on compliance in South Korea than in another jurisdiction,” stated Jones, who has practised within the nation for greater than 40 years.
“There’s simply method an excessive amount of prison legal responsibility in Korean legislation — whether or not it’s upkeep points, environmental points, employment points, customs points, or tax points. Korea and its economic system can be significantly better served if it adopted a a lot wider vary of administrative fines as a substitute.”
International enterprise teams in South Korea have lengthy complained of the nation’s lingering protectionism, whereas the nation’s inheritance tax legal guidelines are one other supply of unease.
Past a $550,000 exemption, anybody who dies whereas registered as a South Korean resident is liable to a tax charge of 40-60 per cent on everything of their worldwide belongings. The implications of this legislation have been introduced house to many overseas executives after Samsung’s ruling Lee household needed to pay an $11bn tax bill after the loss of life final 12 months of former chair Lee Kun-hee.
“Chairman Lee’s passing meant that loads of overseas executives woke as much as their tax liabilities right here,” stated James Kim.
“Many imagine that they higher time their loss of life away from Korea to make sure that their worldwide belongings will not be taken away from their beneficiaries.”
Further reporting by Track Jung-a
