'Geomsu Wanbak' Companies on High Alert... Judicial Risks Amid Rising Economic Uncertainty (Comprehensive)

Business Community on High Alert Amid Domestic and International Challenges, Judicial Risks Loom
Experts: "The Most Affected Companies Will Experience Contraction in Business Activities"

Rep. Kwon Seong-dong, floor leader of the People Power Party, and other lawmakers are condemning the Complete Inspection Ban Act in front of the National Assembly plenary session hall on the 3rd. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Park Sun-mi, Choi Dae-yeol, Moon Chae-seok] "It is clear that the most apparent victims of the complete removal of prosecution investigation rights (Geomsu Wanbak) are companies. Although the prosecution’s direct investigation rights over corruption and economic crimes have been temporarily retained, the prosecution may exercise these retained rights more aggressively, potentially creating an environment where companies become even more constrained." (Choi Jun-seon, Professor Emeritus at Sungkyunkwan University)

Regarding the significant adjustment of prosecution investigation rights due to the amendment of the Prosecutors’ Office Act, frontline companies are clearly tense, saying "uncertainty has increased." Although the scope for prosecutors to initiate investigations is limited to ‘corruption and economic crimes,’ there is room for further expansion through presidential decrees, and concerns remain about overlapping investigations by the police or the soon-to-be-established Serious Crime Investigation Agency (Jungsu-cheong) and other investigative bodies. Furthermore, amid rising economic uncertainties such as soaring raw material prices and logistics difficulties, the possibility of judicial risks compounding these issues has increased.

Experts also point out that risks for companies have grown due to Geomsu Wanbak, especially expressing concerns about police investigations in fields requiring specialized expertise.

Lee Tae-gyu, Senior Research Fellow at the Korea Economic Research Institute, said in a phone interview with Asia Economy on the 4th that regarding the so-called ‘Geomsu Wanbak,’ "Regardless of positive or negative aspects, it is still a law opposed by the majority, and it is uncertain how well it will settle," adding, "From the perspective that companies and managers are most anxious about uncertainty, there is clearly a risk."

A representative from Company A said, "There is great uncertainty about whether the scope or subjects of investigations will expand when the prosecution’s role in fair trade investigations shifts to the police," adding, "It is still difficult to predict, but we have no choice but to respond according to the situation."

A representative example of confusion caused by uncertainty in wording or expressions during the introduction or revision of a system is the Serious Accident Punishment Act (Jungdaejae Cheobulbeop). Even as the 100-day mark (May 6) approaches since its enforcement, companies see many ambiguous areas regarding the scope of responsibility and safety obligations.

The second bill among the inspection ban laws, the amendment to the Criminal Procedure Act, passed the National Assembly plenary session on the 3rd. Photo by Yoon Dong-joo doso7@

Companies Face Overlapping Adverse Factors: Economic Uncertainty and Legislative Risks

The recently promulgated amendment to the Prosecutors’ Office Act is no different. Despite passing through the National Assembly after many twists and turns and receiving presidential approval, a protracted negotiation process is expected over how specifically to define the scope of investigation initiation. Under the current presidential decree, major crimes such as bribery, solicitation of bribes, illegal political funds, embezzlement, breach of trust, technology leakage, and violations of the Fair Trade Act are considered special investigation areas for the prosecution.

The amended law allows the designation of major crimes by presidential decree, and there is speculation that the new administration will revise it again. Presidential decrees can be amended without going through the National Assembly. Both President-elect Yoon Seok-youl and Justice Minister nominee Han Dong-hoon have extensive experience investigating businesspeople in special investigation units during their time as prosecutors.

There are also voices expressing skepticism about police investigations in fields requiring expertise such as the Fair Trade Act. An executive from Company B said, "There is skepticism about whether police investigations into cases reported by the Fair Trade Commission (previously investigated by the prosecution) will be conducted properly." Senior Research Fellow Lee Tae-gyu added, "Recently, issues like industrial espionage and intellectual property (IP) infringement have been challenging for companies, and due to confusion over investigative authorities, companies face risks that those who steal secrets may not be properly punished."

Given that corporate investigations are likely to attract internal and external attention, concerns about ‘investigative drives’ after the legal framework is established are also being raised. Professor Emeritus Choi said, "Companies will be the most affected," adding, "Details will be set in the enforcement decree, but depending on how the scope of corruption and economic crimes is finalized, there will be discretionary power, so we need to observe the situation further."

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