Sangui Calls for Comprehensive Review of Class Action and Punitive Damages Systems: "In-Depth Research Needed"

[Asia Economy Reporter Ki-min Lee] It has been pointed out that in-depth research on the consistency with our legal system and the impact on the economy should precede the introduction of the class action system and punitive damages system.

The Korea Chamber of Commerce and Industry (KCCI) recently announced on the 8th that it delivered an economic sector opinion letter containing such content to the Ministry of Justice regarding the proposed Class Action Act and amendments to the Commercial Act. The purpose is to emphasize the need for legislative impact assessment because the full introduction of the class action system and punitive damages system, which are Anglo-American legal systems, may conflict with the current civil law system.

First, KCCI pointed out that although the proposed Class Action Act is modeled after the U.S. class action system, it additionally includes a reduction of the plaintiff's burden of proof, which does not exist even in the U.S. This contradicts the principle of burden of proof allocation in civil litigation and is unprecedented worldwide. KCCI criticized that the reduction of the burden of proof is introduced in special cases with significant information asymmetry, such as the Environmental Pollution Damage Relief Act and the Product Liability Act, and applying it to class actions covering all civil liability for damages is unreasonable.

Furthermore, KCCI argued that the proposed Class Action Act’s adoption of the patent law’s data submission order system, which requires the unconditional submission of trade secrets?core assets of companies?even in general damage claims, is unfair. The data submission order in patent law imposes the obligation to submit trade secrets only in special cases such as patent infringement lawsuits, making it difficult to apply to class action systems dealing with general damage liability.

In addition, KCCI expressed concern about the potential abuse of lawsuits due to the relaxation of litigation requirements. The government’s proposed Class Action Act removes the clause in the current Securities Class Action Act that excludes participants involved in three or more cases within three years and relaxes the litigation permission requirements to a level more lenient than that of the U.S. Moreover, it allows retroactive application, raising concerns about nuisance lawsuits such as planned litigation and potential violations of the constitutional principle against retroactive legislation, according to the business community.

KCCI also criticized the introduction of citizen participation trials into class actions as inappropriate. Since class actions require expertise in complex issues and damage calculations, KCCI argued that even in the U.S., jury trials in civil cases have virtually disappeared. Unlike the Citizen Participation Trial Act, which applies to serious criminal cases and allows for challenges, the proposed Class Action Act fundamentally blocks the defendant’s right to challenge, conflicting with existing laws.

Accordingly, KCCI recommended that the amendment to the Commercial Act, which fully introduces the punitive damages system, be carefully reviewed for legal system consistency and overseas cases.

KCCI pointed out that simply grafting the Anglo-American system onto the civil law system by emphasizing only the deterrent effect of punitive damages on unlawful acts would cause “excessive punishment risks for all economic actors.” Traditionally, civil law countries distinguish between civil and criminal liability, compensating actual damages for damages and separately imposing criminal penalties and administrative fines. Introducing the punitive damages system fully into the general law, the Commercial Act, beyond partial introduction in individual laws, requires comprehensive discussion on the overall coordination of criminal sanctions, administrative sanctions, and prior regulations.

Jung Young-seok, head of the Corporate Policy Team at KCCI, said, “Companies also agree on the need to strengthen consumer protection and enhance responsible management. To improve the issues, it is necessary first to discuss various selectable alternatives, and even if the introduction of a new system is deemed necessary, we hope that sufficient research and discussion, including legislative impact assessment, will precede to ensure the consensus, acceptability, and effectiveness of the system among economic actors.”

This content was produced with the assistance of AI translation services.