Will the 'Breach of Trust Crime' Be Abolished? Legal Community Split Between "Careful Review" and "Civil Resolution"

Criticism of the Breach of Trust Crime as "Ambiguous and Subject to Interpretation"
"Discovery System Needed," vs. "Civil Liability for Damages Takes Too Long"

On the 30th, participants including Kim Byungki, floor leader of the Democratic Party of Korea, and Koo Yoonchul, Deputy Prime Minister and Minister of Strategy and Finance, took a commemorative photo at the Economic Punishment Civil Liability Rationalization Task Force party-government meeting held at the National Assembly Members' Office Building.

The Democratic Party of Korea and the government have decided to revise the "breach of trust" provision under criminal law in response to criticisms that the requirements for this crime are too abstract and its scope of application is excessively broad, thereby discouraging normal business activities. While the legal community generally agrees on the need to revise the breach of trust law, they also emphasize the necessity of carefully addressing potential loopholes that could arise from its abolition.

According to the legal community on September 30, there have been ongoing criticisms from the business sector regarding the breach of trust crime, describing it as so ambiguous that it can be interpreted in any way one wishes. The argument is that even failed investments or managerial misjudgments by companies can lead to criminal punishment, which stifles business activities.

The biggest problem with the current breach of trust provision is the lack of clarity in its requirements. Legal experts point out that key elements such as "handling another person's affairs" and "acts in violation of duty" are so abstract and ambiguous that even professionals find it difficult to determine whether a breach of trust has occurred. As a result, it often falls to Supreme Court precedents to decide whether a particular case constitutes a breach of trust.

Despite the validity of revising the breach of trust law, both inside and outside the legal community, there are divided opinions: some argue that abolishing the breach of trust crime should be considered carefully, while others believe that the criminal provision should be abolished and liability should be pursued through civil damages claims instead.

One of the main concerns about completely abolishing the breach of trust crime is how to punish corporate executives and employees who use company funds or assets for personal purposes, or who provide unjustified financial support or guarantees to affiliates.

Moon Sung, a partner attorney at Yulchon LLC, stated, "The main challenge is how to address the problems that would arise from abolishing the breach of trust crime. Even if we try to resolve these issues through civil litigation, collecting evidence is difficult, so some suggest introducing a discovery system like in the United States. However, since the discovery system could have side effects, rather than adopting the American system as is, we should discuss modifying it to fit Korea's circumstances."

The discovery system (expert fact-finding or evidence disclosure) is a procedure in which plaintiffs and defendants are required to provide and exchange requested evidence before the main trial begins. In civil litigation, parties must collect and submit evidence themselves, and courts generally base their judgments on the materials submitted.

There are also opinions that civil lawsuits for damages could be used instead if the breach of trust crime is abolished under criminal law. However, critics point out that civil litigation can take a long time.

Kim Hyun, former president of the Korean Bar Association, said, "The breach of trust crime under criminal law served to ensure the faithful performance of duties by corporate directors, so if it is abolished, there is concern about a potential gap. While civil liability for damages should be imposed, not only does it take a long time, but it is also ineffective against those who hide their assets or have no assets."

The government plans to abolish the breach of trust crime to maximize corporate autonomy and predictability, while also preparing alternative legislation to ensure there is no gap in punishing serious crimes. The government and the ruling party aim to introduce alternative legislation within the year after consulting experts, but since there is little research on such alternatives and few legislative precedents for categorizing breach of trust acts, the task is expected to be challenging.

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