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Wednesday
Aug102016

Practice Note: A new look at South Korea's foreign bribery laws

South Korea has adopted the Foreign Bribery Prevention in International Business Transactions Act (FBPA), pursuant to its adherence to the Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

In our e-book on navigating anti-corruption compliance in emerging markets, we include a chapter about South Korea's domestic and overseas anti-bribery laws, and how those laws are interpreted and enforced.

In this post, we discuss the overseas anti-bribery laws.

 As a general matter, the FBPA criminalizes intentionally promising, giving, or offering a bribe (including “any undue advantage”) to a foreign official in relation to his or her official duties in order to obtain an improper advantage in the conduct of international business transactions.

The FBPA itself does not contain specific regulations concerning payments through intermediaries. The Criminal Code, however, does prohibit aiding or abetting and regards it as a criminal offense. Thus, payment through intermediaries or third parties to foreign officials is prohibited under the same circumstances.

The term “foreign official” encompasses three categories of individuals: (1) any individual appointed or elected to a legislative, administrative, or judicial office at any level of a foreign government; (2) any individual working for a public international organization; and (3) any individual who exercises a “public function” for a foreign government and who also does one of the following:

(a) conducts public affairs delegated by a foreign government;

(b) holds office in a public organization or public agency that conduct specific public affairs; or

(c) works in an enterprise in which a foreign government has invested in excess of 50 percent of its paid-in capital or over which a foreign government has de facto control as regards all aspects of its management, such as decision-making on important business operations and the appointment and
removal of executive officers.

Individuals, both Korean and foreign nationals, can be liable for violating the FBPA. Foreign nationals who engage in bribery within Korea are subject to criminal liability under territoriality principles. Under Article 3, individual violators of the FBPA may face up to five years of imprisonment or a fine of up to KRW 20 million (approximately $17,500). In the event that profits obtained through bribery of a foreign official exceed a total of KRW 10 million (approximately $8,700), the violator may be subject to imprisonment for up to five years or a fine of up to twice the amount of the total profits.

Unlike the Criminal Code, which criminalizes the conduct of individuals only, the FBPA contains a vicarious liability provision for the bribery of foreign officials. Legal entities and corporations can be liable for violating the FBPA if an entity’s representative, agent, or employee intentionally engages in foreign bribery in connection with its business. The FBPA does not establish any threshold as to the size or legal form of the entity. Thus, any legal entity recognized under the law, including associations, foundations, joint-stock corporations, limited liability companies, unlimited or limited partnerships, or other entities, may potentially be subject to the FBPA.

Although companies that operate within Korea can be held vicariously liable for bribery, the FBPA does not make a distinction between Korean companies and non-Korean companies. To date, non-Korean companies have not faced any liability for violating the FBPA. It is unclear whether a non-Korean company can be ultimately held liable for acts in furtherance of bribery of a foreign official done within Korean territory.
Penalties

Legal entities that violate the FBPA may be required to pay a fine of up to KRW 1 billion (approximately $870,000). If profits obtained through foreign bribery exceed a total of KRW 500 million (approximately $435,000), the legal entity may be subject to a fine of up to twice the amount of the total profits.

A corporate entity will have an affirmative defense, however, if it has afforded due attention or exercised proper supervision to prevent the offense.

Article 3.2 of the FBPA provides one exception: if the law of the foreign official’s country permits such payment. The FBPA used to permit facilitation payments. However, the facilitation payment exception was removed from the FBPA by an amendment passed in October 2014.

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In the next post, we'll talk about the legal implications of gift-giving in South Korea, and kickbacks. 

*     *     *

Our e-book, Anti-Corruption Compliance in Emerging Markets: A Resource Guide, is available here.

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Soo-Mi Rhee is senior counsel in Arnold & Porter’s Washington, DC office. She focuses her practice on economic sanctions laws, export control laws, antibribery laws, antiboycott laws, customs laws, and other foreign policy, national security, and economic policy-based trade and investment controls.

Keith Korenchuk is a partner in Arnold & Porter’s Washington, DC office. He counsels and advises global companies on regulatory and compliance matters worldwide, with a focus on compliance program effectiveness, compliance program implementation, operations and evaluation, and related regulatory counseling and advice.

Samuel Witten is counsel in Arnold & Porter’s Washington, DC office. He helps companies develop and implement FCPA compliance programs. He also represents clients in arbitrations at the International Center for Settlement of Investment Disputes. He joined Arnold & Porter in 2010 after serving for 22 years in legal and policy positions at the U.S. Department of State.

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