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Mar 31, 2011

Yachting in Shenzhen: China Cup International Regatta

Like all great films that come out of the can strong, we often can’t wait for the sequel. Well, as I blawged in early Spring about my client and friends Jame Guo and Ben Hart at Farnova Yachts they came out of the can strong with their first “China” designed and built cruising yacht and it was a beauty. Almost a year later the sequel is just as good if not better as the original as they have learned a great deal about making quality yachts in their Shenzhen, China shipyard.

In this year's China Cup International Regatta  James and Ben entered two boats – a 48′ Farnova and a 52′ Farnova. Both beautifully appointed cruising yachts hat are not supposed to go fast and win races. As one of our crew members who is from Appalachia pointed out – “this here boat would be perfect with a cooler full of Bud and a barbecue hanging off the back.”

Indeed it is a cool yacht and one that you could feel comfortable cruising around the world or just hanging out at the yacht club – a racing yacht it is not although this video of the 52′ in stiff breeze tells a different story.

So, the sequel was indeed better than the prequel as the 48′ Farnova won a runner-up trophy in the China Cup with a largely novice, but spirited, Chinese crew representing Tsinghua University. The 52′ Farnova was sailed by a semi-professional crew with yours truly having more than a cameo and taking the helm when there wasn’t a lot of wind and no other boats around to run into!

As Ford and GM and Honda and Ferrari test their cars at Nascar and Formula One, so did Jame and Ben test their new 52′ at the China Cup. They learned a lot from our crew with a combined 150yrs of sailing and racing experience and will take the lessons learned and make the future models faster, stronger and better.

What more could you want from an entrepreneurial sequel? As I have been pointing out for the last 8 years to anyone that will listen, the entrepreneurial spirit is alive and well in China and the rest of the world should either join the fray or sit on the sidelines in their overtaxed and indebted economies and watch it go by. For these entrepreneurs at Farnova, they are taking a firm grasp of the helm and steering their ships toward a successful and profitable future. Bon voyage!

Mar 25, 2011

Korean Medical Malpractice Arbitration System

The Korean National Assembly, recently, passed a law that will create a state agency with the authority to control arbitration of medical malpractice cases in Korea.

The facial thrust of the new law is to reduce the cost and time of resolving Korean medical malpractice cases. My Irish pessimism leads me to believe that this is more of a tool for doctors to avoid the shame and time associated with criminal and civil complaints.

I assume, in most cases, those with informed attorneys will likely opt to resolve their dispute with a Korean doctor through criminal and civil complaints and forego this arbitration procedure.

Yonhap news has noted a few troublesome aspects of the news law.
It is very welcoming that patients will be able to get compensation for their damages from medical treatments quickly and easily. There are, however, a number of problems in the law that should be contemplated.

One major point is that the law lacks a provision that obliges doctors to prove they were not responsible for medical accidents. Because the patients have no professional medical knowledge it is difficult for them to prove the doctor was at fault, and naturally, they can be at a disadvantage in the course of arbitration.

Another point that should be reconsidered is the provision that the state arbitration agency should compensate patients for medical accidents that are judged to have occurred beyond human control.

There is criticism that it is not reasonable to use the money of unrelated taxpayers to settle conflicts that are between the patients and doctors.

A former judge, at my firm, who formerly lead a court solely handling medical malpractice cases is very interested in seeing how this system will function in reality. He is handling a number of medical malpractice cases for foreigners in Seoul courts.

A present, only a handful of attorneys are actually capable of handling medical malpractice cases. This reality is often leading doctors to avoid liability for actions that would be clearly negligent abroad. This system may provide a viable option, only, for those without access to a quality attorney or those with injuries that do not justify hiring an attorney.

Only hire an attorney that has handled a significant number of medical malpractice cases and preferably an attorney that has practiced as a judge.


Mar 10, 2011

Unfair/Wrongful Dismissal of Foreign Executives under Term Contract with Korean Chaebols

Expat executives in Korea are typically hired by Korean conglomerates based on two or three year contracts. These employment contracts often have three to six-month at-will termination clauses. In many cases, these contracts are in violation of the Korean Labor Standards Act.

Many foreign executives, recently, have been pushed out of these Korean conglomerates with nothing more than a few months salary and a bitter taste in their mouth.

These actions are giving Korea a bad image amongst potential foreign employees and foreign employees are too often letting the conglomerates get away with these actions because of ignorance of Korean law. I was told by an employee-side executive recruiter that he always advises clients to choose China over Korea, since he believes that, in Korea, you have a far greater chance of not completing your contract.

We are normally on the business-side of litigation for foreign companies, but the increase in these actions by the Korean big fish has led many foreign executives to our doors and in an unusual stance by my team (me), we have warmly welcomed suits against the big fish Korean employers.

Korea is in need of foreign executives and in need of Korean companies that will not prejudice Korea in the eyes of potential foreigner employees. If President Lee’s vision of a globalized Korea is to come to be – the government and attorneys must give these companies a wake-up call.

If the foreign executive is an “employee” under Korean labor law, the termination clause will, in most cases, be deemed in violation of Korean labor law, thus, allowing the employee to continue employment until the termination of the agreement if no cause exists to terminate. In some cases, the employee may even be entitled to employment until retirement.

Additionally, even if the agreement does not provide for severance, the employer is required to pay severance in most cases, where an individual is deemed an employee.

Even representative directors and directors may be protected by Korean labor law.
Korean labor law, in most cases, deems a representative director, director or general manager as an “employer,” thus, not providing the majority of protections afforded by Korean labor law. Numerous exceptions apply. The case law on this matter has been well settled by the Korean Supreme Court. A recent Supreme Court case has detailed the settled principles:

Even when a person is registered as a representative director of a corporation, in exceptional cases when his status as a representative director is only formal/nominal - that he holds no power to execute internal business operations of the company, and also the external business operations are only being executed under his name for the sole reason that he is the one who holds the registered name and that there is an actual manager other than him who actually makes the decisions in such business operations, and that the nature of his payment is compensation to his labor itself rather than his managerial achievements or business performance since he only provides labor under the specific individuals instruction/supervision of the actual manager, such person shall be classified as an “employee” as defined in Industrial Accident Compensation Insurance Act.” (The Industrial Accident Compensation Insurance Act and the Labor Standards Act share identical definitions of “employee.”)
Additionally, the Supreme Court has noted that the form of an agreement is of little concern in determining if an individual is an “employee”:

Whether a person shall be classified, as an “employee” as defined in the Labor Standards Act shall be decided substantially - that is regardless of the form of the contract, in accordance to whether the person has been providing his labor to the employer under a subordinate relationship for the purpose of receiving wages.


Mar 7, 2011

Terminate/Layoff an Employee in Korea

The Korean Labor Standards Act mandates that employees under contract or regular employees may only be terminated for justifiable reasons or managerial reasons.

Both standards are often difficult for an employer to meet without the professional structuring of HR policies and procedures and a careful analysis of the situation.

I strongly suggest, prior to even considering firing or laying off Korean workers, to put a system of internal contacts in place that provides evidence to substantiate the any employment decision.

Company executives/directors are normally not considered company "employees" and thus are not benefited by most of the protections afforded by the Labor Standards Act. However, if the company is operating as a subsidiary and not maintaining the appearance of a unique legal entity, Korean courts have been increasingly willing to deem, even a director, an employee.

Justifiable Reason
The Korean Labor Standards Act places the burden on the employer to prove a “justifiable reason to terminate.” According to the Korean Supreme Court, the reason must be “directly attributable to the employee.” Stealing, missing an excessive number of days of work, and violating laws related to the job, have all been deemed sufficient to terminate. Prior to termination, an attorney should be contacted to allow your company not to terminate an employee in violation of law.

Managerial Reasons
The Korean Labor Standards Act places the burden on the employer to prove that an “urgent managerial necessity exists” before an employee is laid off. The Supreme Court has interpreted this to mean that a company should prove that without the layoff, the company would have extreme difficulty in maintaining operations.  The standard is interpreted strictly.

Prior to layoffs the company should prove that it has exhausted all other remedies including offering voluntary retirements. The layoffs, also, must be conducted based on a fair and reasonable” standard. The courts have noted that the time of service, age, performance records, and technical skills may be factors in determining layoffs.  Additionally, in mass layoffs, employees or the trade union must be consulted fifty days before the layoffs.

We highly recommend consulting with an attorney before firing or laying off a Korean employee. Too many companies have found themselves in court over improperly following procedure and the lack of a little Korean creativity. 


Mar 6, 2011

Following the Chinese Lead

Sean Hayes, the main contributor to this blog, wrote an interesting piece entitled Following the Chinese Lead in the Korea Times on March 2, 2011. The article can be found below.

Following the Chinese Lead
By Sean Hayes (Korea Times Weekly Column)

Most of the world has come to realize, including even the Chinese ruling elite, that central planning leads to inefficient utilization of capital, low growth and entrenched poverty.

This realization led the Chinese ruling elite to scrap most facets of its Mao-dictated centrally planned economy in favor of a decentralized one based on the freedom of contracts and other major basic tenets of capitalism.

However, the developed world seems to have mistaken the evils of centralized planning with the need for a centralized strategy and thus is often ignoring one of the most critical historical roles of effective central governments.

Throughout modern history, great leaders with great visions led their nations to great economic and social developments. Great leaders like Winston Churchill, Abraham Lincoln and Mohandas Gandhi immediately come to mind.

The Chinese government officials with prior experience and education in central planning are utilizing their Mao-era developed central planning skills to develop strategies and policies to meet the needs of the economy and, thus, the citizens in a fashion that is reminiscent of the success of our past great world leaders.

For example, Chinese listed-companies flush with Chinese government cash are investing an increasing portion of GDP on forwarding-thinking aggressive ventures including the purchase of natural resource exploration rights, R&D in high-tech industries and M&As with the purpose of acquiring technology.

These efficient investments are in contrast to the stimulus in the U.S. that was used, in large part, to pad the pockets of political loyalists.

My team at my law firm witnesses, on a daily basis, the great ventures that these Chinese companies are engaged in throughout Asia and wish that we would see more U.S., European and Korean companies with the economic resources and courage to follow the lead of the entrepreneurial goal-centered Chinese.

Additionally, I witnessed as part of a Korean government delegation to Anyang City in China ― domestically, the Chinese government is investing significant resources in forward-thinking infrastructure development programs countrywide, an admirable education renaissance and an environment protection scheme, while encouraging foreign investment through tax holidays, low cost leases and grants.

This is in contrast to the Western world with its aging and often embarrassing infrastructure (i.e., JFK airport), high corporate tax rates and children that lack basic math and science skills.

Internationally, the Chinese are coyly engaging the less developed and recently developed world through the building of long-term economic bonds that is tying nations solidly into the cash flush hands of the Chinese government. The Chinese are also encouraging the developed world to accept Chinese political and social realities through the funding of nations’ debt and the promise of increased Chinese foreign direct investment.

While nations like Korea and the U.S. are blundering through diplomacy by keystone cop-type intelligence agents and policies.

The developed and recently developed world must wake up. We are plagued with incompetent politicians hell-bent on engaging in decade-long battles over manure and an increasing portion of the population and bureaucracy that happily lackadaisically ekes out an existence through government generosity and political spoils.

Let us learn a little from the Chinese and support and foster great forward-thinking leaders.

These leaders must be allowed to return to the days when Churchill, Ronald Reagan, Margaret Thatcher, FDR, Gandhi, Nelson Mandela, George Washington and Oscar Arias Sanchez were able to gain enough support in their democracies to lead their nations through their travails into a better place for their respective nations and the world.

If we do not, the present developed world will be relegated, in the not so distant future, to a simple tributary relationship with China. A tributary relationship that may provide less benefit than the tributary relationships that China is presently developing in the developing world.


Mar 3, 2011

Noted Islamic Bond Expert on Boneheaded Korean Fundamentalist (Evangelical) Christians

John A. Sandwick, an American Banker created one of the first Sukuk funds. He was recently interviewed by the Korea Times.

Mr. Sandwick had some less than kind remarks for these peculiar Christians opposing the Sukuk bill.

Mr. Sandwick noted to the Korea Times that: "Sukuk don’t help terrorists. Zakat is a community tax similar to religious taxes paid all over the world. Sukuk are bond-type securities. How can we be speaking about them in the same sentence? Where is the link?"

He went on to note that it is "so silly that [I] normally would not answer" because zakat is "completely unrelated to the issuance of sukuk.

If governments were to tax these distributions as if they were dividend interest then the entire Sukuk market would be eliminated."

I hope that reason will prevail or these boneheads in Korea will lose a great opportunity and potentially may alienate itself in the Middle East – a market that Korean construction companyies rely.

Korean politicians should learn to ignore the ramblings of these Shamanist quasi-Christian cult leaders and let reason and the mainstream thoughts of the general population prevail.

For another post on Sukuk see: Korean Islamic Bond Tax Bill May be Doomed


Mar 1, 2011

Korean Islamic Bond Tax Bill May be Doomed - OK only in Korea

Korean evangelical Christian’s vocal opposition to an Islamic bond bill pending in the Korean National Assembly seems to have led to the death of the bill. The bill would have allowed, amongst other things, a tax deduction for those subscribing to Sukuk bonds.

According to the Donga Ilbo newspaper:

The party reportedly reached a consensus Monday that putting to public debate the so-called sukuk bond bill is difficult after shunning deliberation of the proposal in this month`s extraordinary parliamentary session amid strong Protestant opposition.

Sukuk bonds allow parties to conduct financing that complies with Islamic religious restrictions on charging of interest. A Sukuk bond, in short, creates a dividend (rent) interest in the instrument, thus, complying with the Islamic prohibition against the charging of interest.

It is unfortunate for Korean companies that the Sukuk bill was blocked by these groups in Korea. The opposition to the bill will have immediate effects.

While neighboring nations are accepting these types of bonds and granting tax exemptions, it seems likely that Korea will not. Korean firms, thus, may be at a competitive disadvantage in international natural resource, building development and infrastructure projects in the Middle East, while also potentially precluding needed liquidity in the domestic market.

Moreover, the tabling of the bill may have the secondary effect of alienating Korean firms with Islamic nations and thus hindering Korean companies’ aggressive expansion efforts in Middle East markets.

Oddly, it is unclear what, or why, the Protestant groups gain by preventing the bill from being passed in the Korean National Assembly.

Pastor David Yonggi Cho is quoted in a recent interview in reaction to the Korean president’s support for the bill that: “Since many Protestant believers have worked hard to facilitate Lee’s presidential victory, I will fight for Lee’s resignation.”