Concerns are mounting among businesses over expanded litigation risks as the ruling Democratic Party of Korea pushes ahead with legislation to broaden the class action system, currently limited to the securities sector, to cover corporate activities across the board. At a public hearing held by the National Assembly's Legislation and Judiciary Committee on Wednesday, ruling and opposition lawmakers and experts sharply disagreed over the introduction of the class action law. Democratic Party lawmakers and pro-government opposition members argued that enacting the class action law is necessary to provide remedies for individual victims. They even advocated an "opt-out" system, under which victims are automatically included in a class action unless they explicitly opt out. People Power Party lawmakers, while acknowledging some need for a class action system, pointed out that rampant strategic lawsuits could harm small and medium-sized enterprises.
As concerns raised at the hearing suggest, legislation that fully expands the scope of class actions warrants caution. Despite the legitimate aim of protecting consumer rights, the litigation risks that businesses must bear must be carefully considered. If the bill passes as is, there is significant concern that "strategic lawsuits" or "frivolous lawsuits" could hamstring even routine corporate management activities. In particular, the Democratic Party's proposal to apply the law retroactively to cases from up to three years ago to provide remedies for past damages goes too far. Experts who appeared as panelists at the hearing pointed out that retroactive legislation could have serious implications for legal stability and predictability. For the same reason, major countries including the United States, Japan, and Germany, as well as Korea's existing class action law in the securities sector, prohibit retroactive application.
Businesses are deeply worried about the political push to fully expand the class action system. The class action law will clearly impose an even greater burden on the industrial sector, which is already in turmoil from the implementation of business-restrictive laws such as the Yellow Envelope Act and the introduction of a "tougher Commercial Act." Earlier, the Federation of Korean Industries (FKI) submitted a written opinion to the National Assembly calling for the removal of the retroactive application clause, stating that "management difficulties from increased litigation could lead to shareholder losses."
Having completed the public hearing, the Democratic Party plans to pass the class action law within this month. However, given concerns on the ground that the bill could dampen corporate investment and employment, it is right to determine the content and timing of the legislation only after thorough design and sufficient social discussion. In this process, measures to minimize side effects — such as strictly limiting litigation conditions and filtering out poison-pill provisions — must be deeply debated.
