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Apr 22, 2014

IPG Legal's LAW BLOGS

The Asian Law Blog aggregates most of the content from:
 Please checkout these blogs for additional articles.  We have stopped aggregating content on 4/23/2014, because of changes in Google's search algorithm.  
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Feb 13, 2014

Weekly Asian Legal News from International Law Firm - IPG Legal

This Week's Asian Legal News Reported by the Media
Most Recent Posts from The Asian Law Blog
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Fair Transactions with Subcontractors Act of Korea: So Buyer Beware or Simply Avoid the Risk and Buy the Seller?

Because of perceived abuse by Korean conglomerates of subcontractors, the Korean Fair Transactions in Subcontracting Act was passed in March of 2011. The Act was effective since the beginning of July of 2011.

The Act, in short, grants wide discretion to the Korea Federation of Small and Medium Businesses. This agency is now authorized to request adjustments to Korean subcontractors contractually obligated delivery prices and additionally may impose treble damages for certain violations of this Act, including for the act of misappropriation of the technology of subcontractors.

The Act also reverses the burden of proof in many instances, while requiring conglomerates to make technical requests in writing and to conduct formal subcontractor practice surveys.

The treble damages component of this Act is very rare in Korea. Punitive damages are only available in the most rare of cases and only if authorized by statute.

The inclusion of treble damages in Korea is welcome, but I am still always alarmed that even in the most egregious of professional negligence cases and in most other types of cases, treble/punitive damage is not available in Korea and the compensation awarded by the Korean court is often comical.

The Act seems “fair” on its face, but I have already been privy to instances when subcontractors have been using the Act to essentially extort more profit from conglomerates.

We expect that courts, if the Korean Federation of Small and Medium Businesses becomes overly aggressive, may, also, aggressively overturn the agency’s actions. The agency, in most respects, has been fair with regard to its power to fine, make formal recommendations and issue cease and desist orders, however, the agency, as its website clearly proclaims is an agency that “was established in 1962 to develop measures that can help SMEs to meet the challenges of the ever-changing management environment, while increasing their competitive power. By offering diverse user-oriented services, we are helping the SMEs to consolidate their position as the core of our domestic economy. We need to shift the focus of our economy from being centered on large companies to a greater emphasis on SMEs, so that we can share the effects of economic growth with all people, and to create a positive loop of growth and employment.”

The agency, if you employ a creative and proactive litigator is often able to convince the agency how a negative disposition is actually harmful to Korean SMEs. We recently dealt with such a case and the agency is willing to hear and often accept these arguments. However, the normal passive Korean attorney approach is not advised.

What do you think? Will this lead to more conglomerates in Korea buying subcontractors in order to eliminate the cost adjustment risk?
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SeanHayes@ipglegal.com

Feb 11, 2014

"Ordinary Wages" Under Korean Labor Law Clarified by the Supreme Court: "Regular, Uniform & Flat" Definition

The definition of "ordinary wage" has been clarified by the Korean Supreme Court in two decisions handed down on December 18, 2013.  The cases will have a significant impact on Korean Labor & Employment Law and will, likely, lead to additional litigation.

The calculation for an Ordinary Wage is utilized to calculate statutory entitlements, thus, has an impact on the aggregate amount of contributions necessary to be paid to an employee.  The issue is one of the most significant issues, this year, for domestic and foreign employers.

For example, under Article 56 of the Korean Labor Standards Act, an employer must pay 50% of the "ordinary wage" plus the ordinary wage for overtime, night and weekend work performed by the employee.  For many companies, this calculation could increase costs to a point that will make profitable companies head, immediately, to the red.

The basic test has been that an Ordinary Wage is a payment that is: "regular, uniform and flat" Obviously, this "test" leaves much unanswered.  The vagueness of this test has led to considerable litigation over the past few years.  Additionally, the Korean courts have inconsistently interpreted the definition, thus, leading to much confusion.  The confusion coupled with the significant burden on companies that may be imposed, led to a major lobbying drive by foreign and domestic companies.

I have written many memos on this issue with few opportunities to give a definitive answer, because of the lack of a consistent interpretation of the definition by the lower courts and, seemingly, even the Supreme Court.  The situation has improved with the following two decisions, however, we expect disputes to continue with regard to the issue of "good faith."  This issue is addressed in a post that may be found at: (Ordinary Wages and the Principle of Good Faith in Korea: Definition and For How Long?).

On December 18, 2013 the Supreme Court of Korea, in a case that I will call the Regular Interval Bonus Case, has delivered  a couple of more clear examples, than in the past, of cases were compensation will be considered "Ordinary Wages" under Korean labor and employment law.  The cases, in this regard, is a great development in making Korean Labor & Employment law more consistent.  In the Regular Interval Bonus Case, the employer in the case was providing a "regular bonus" every two months to employees.  Seemingly, the major reason was to not increase "ordinary wages."

REGULAR INTERVAL BONUS CASE HOLDING
The Court in the Regular Interval Bonus Case opined, in part, that:
  1. Any collective bargaining agreement (labor-management agreement or like agreement) that deems a certain type of payment as not an Ordinary Wage is void and, thus, unenforceable.  An exception is available for certain specific companies that have implemented this practice in particular limited situations based on the vague principle of "good faith and trust." Discussed at: (Ordinary Wages and the Principle of Good Faith in Korea: Definition and For How Long?); and
  2. Payments paid at regular intervals are Ordinary Wage.  The specific examples below are key in understanding the decision.  The "test" is the same and, thus, is still vague.  Thus, the Supreme Court did a great job in details situations that would "pass" and "fail" the test (found below).
The Supreme Court remanded the case to the High Court to determine if the "good faith" exception is applicable.  As noted this is discussed in another post on this blog.

ALLOWANCE CASE HOLDING
The second case, that I will call the Allowances Case, utilized the Ordinary Wage definition and rationale in the Regular Interval Bonus Case to opine that these allowances when paid just for being employed at a certain period of time will not be considered "flat" under the Ordinary Wage "regular, uniform, and flat" definition.

The Allowances Case was remanded, also, to the High Court to determine if the payments were, only, payments made for being employed during a certain period of time.

The cases are important, since they did a very good job in detailing situations that will and will not be considered Ordinary Wage payments.

EXAMPLES OF PAYMENTS TO INCLUDE IN ORDINARY WAGES
A few examples of payments that should be considered as "ordinary wages" include:
  1. Installment Payment (e.g. payments made every other month);
  2. Prior Year Incentive Pay (e.g. incentive pay based on previous year work performed);
  3. Present Year Incentive Pay if Not Based on Performance (e.g. all employees receive even if lowest performance rank);
  4. Prorated Daily Wages; and
  5. Wages Based on Years of Employment.
EXAMPLE OF PAYMENTS TO NOT INCLUDE IN ORDINARY WAGES
 A few examples of payments that should not be included in ordinary wages include:
  1. Present Year Incentive Pay Based on Performance;
  2. Non-Negotiated Wages (e.g. wages determined by future negotiations);
  3. Wages Paid based on Working at a Fixed Date; and
  4. Wages Paid based on Working for a Certain Number of Days.
I will explain the rationale for each of this situations in future posts.

Please do your company a favor and get a proactive adviser to discuss these matters with you.  I have been preaching about this risk for years and a proactive counsel could have structure payment schemes to lessen this type of risk.
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Feb 10, 2014

Public Defenders in Korea: 77.6% of Defendants Satisfied with Public Defenders

The prosecutor office, recently, conducted a survey of defendants and found that 77.6% of defendants were "satisfied" with their public defender. 

The survey, only, polled 134 suspects and, only, for a five week period.  It would be interesting to see how many of the suspects plead innocent.  I would assume most of these defendants plead guilty, thus, the role of the public defender was not as significant of a role as a case when a defendant is pleading guilty. 

A few interesting results from the survey:
  •  104 of respondents (77.6%) noted that the appointed lawyer "was a great help to defendants"
  •  28 respondents (20.8%), noted that the appointed lawyer "was not that helpful."
  • 100 respondents (82%) noted that the appointed attorney "answered requests and advised faithful."
Overall, the survey is a positive reflection on a public defender system.  The system has, greatly, improved over the past decade.  Of course, if you have the necessary funds, it is, always, advisable to hire a private attorney.  The public defenders are, typically, less experienced and connected than private criminal attorneys.  However, for those that do lack the funds, the Korean public defender system has greatly improved and is an adequate solution for the less severe crimes. 

A few more articles that may be of interest:
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Feb 9, 2014

Ordinary Wages and the Principle of Good Faith in Korea: How long should the principle be applied to Korean CBA?

We wrote a post on this blog a few weeks back entitled: Ordinary Wages Under Korean Law Clarified by Supreme Court: Regular, Uniform & Flat Defined.

Our post noted, in part, that:
" . . .the Supreme Court, in a case that I will call the Regular Interval Bonus Case, has delivered  a couple of more clear examples, than in the past, of cases that will be considered Ordinary Wages.   In the case, the employer was providing a "regular bonus" every two months.

The Court in the Regular Interval Bonus Case opined, in part, that:
  1. Any collective bargaining agreement (labor-management agreement or like agreement) that deems a certain type of payment as not an Ordinary Wage is void and, thus, unenforceable.  An exception is available for certain specific companies that have implemented this practice in particular limited situations based on the vague principle of "good faith and trust."  I will elaborate on this more in a followup post after the holidays; and
  2. Payments made at regular intervals (e.g. every other month) are Ordinary Wages.
The Supreme Court remanded the case to the High Court to determine if the exception is applicable.

In the second case, that I will call the Allowances Case, utilized the Ordinary Wage definition and rationale in the Regular Interval Bonus Case to opine that these allowances when paid just for being employed at a certain period of time will not be considered "flat" under the Ordinary Wage "regular, uniform, and flat" definition.

The Allowances Case was remanded, also, to the High Court to determine if the payments were, only, payments made for being employed during a certain period of time."
I promised to explain in the post the meaning and application of the principle of "good faith" to situations where an implicit or explicit agreement between management and employees exist that excludes from "ordinary wages" certain payments made to an employee (e.g. night-time, holiday or overtime payments - excluded from being calculated as a regular bonus).

The Supreme Court has noted that these "agreements" are not void when:
  1. When the agreement is considered as a "customary practice" in the company;
  2. The increase in cost to the company will cause "serious managerial difficulty" or, otherwise not within the capability of the company to pay; and
  3. The increased cost was not considered in the calculation of the "base salary," when negotiating wages thus, the base salary would have decreased if the company and the employees considered these additional expenses to the company.  
This test, obviously, will need a great deal of interpretation by the lower courts in the future.  We expect this case to lead, in many cases, to additional litigation to determine, among other things:
  1. If an agreement exists (does not need to be a "written" agreement);
  2. If an agreement exists is it a "customary practice";
  3. Will the additional cost cause "serious managerial difficulty"; and
  4.  Whether the employer and employees knew when negotiating wages that compensation to the employee should decrease if this cost was assumed by the company.
Also, we are not, yet, how long will the application of this principle of good faith will assist companies in avoiding this unexpected expenses.  The Supreme Court noted in a press release that any agreements of this sort after the Supreme Court decision are void (December 18, 2013)  However, we are unsure how long, specifically, the principle is applicable for agreements prior to December 18, 2013 when no new agreement is able to be reached.

We will, likely, soon be litigating cases that will determine the specific application of this principle and the length of time this principle should be applied.

Interesting case?  What should be the outcome?
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Playing by Local and/or International Rules in Korea by Tom Coyner

The old axiom of "when in Rome, do as the Romans" may seem like practical wisdom. But sometimes that may not be your best option. First of all, going native is a pretty tough thing to do as a foreigner. Usually, at best, an expat can act approximately Korean and hope to get some sympathetic appreciation from the local populace. Other times, one can be in what seems to be a hopelessly disadvantageous position given the cultural and language differences.

At the same time, being a Korean in Korea hardly comprises a bed of roses. Often there seems to be more thorns than petals given the various social and regulatory obligations and responsibilities. In this context, there are some inherent advantages of being foreign since by being alien one is not inferior or superior but simply separate from the mainstream. As such, one can work by slightly different rules.

Often these rules are technically in place within Korean business and legal parameters, but generally are not observed due to overriding social and political concerns. Since as a foreigner -- and even as a foreign business -- the expatriate manager may be surprised at how this can work in his or her favor.

For example, with some small Korean companies, oral agreements may be preferred to written ones. A foreigner's insistence on long, written agreements can be regarded as almost insulting. Nevertheless, it is imperative to have written agreements. Generally a foreigner can insist on this easier than a Korean. He or she has the option to demand negotiated agreements to be as explicit as possible due to the business cultural differences.

This is not to say one needn't be sensitive about practical considerations that may seem unique to doing business in Korea. A comprehensively detailed agreement drafted by a Western company's legal department may seem to cover all bases. Yet such a document can confuse and cause major problems during and following negotiations. The expatriate business professional should be prepared to redraft the head office's prepared document to say exactly the same thing but in simpler language. Not to do so is likely to confuse the Korean counterpart with Western "legalese,'' that in turn can lead to major misunderstandings.

One simple approach is to break up long contractual paragraph blocks, with the sub-clauses presented in easy to find and understand outline form. It is often a good idea to add hypothetical examples of unusual or complicated concepts or conditions to ensure not only agreement but also complete understanding by all parties.

Being culturally sensitive, one should be careful in discussing indemnification for malfeasance so as not to insult the other party. This issue normally does not exist in purely Western business, but often a Korean may take exception to how a Western attorney may describe the other party being liable for potential penalties.

Addenda should be freely and fully included to contracts to specifically point out issues such as payment terms and timing so that there is no misunderstanding or possible variance of interpretation.

Now, all of this is a lot of extra work for the Western business person -- but it's worth it given the likely headaches and incriminations that may follow if one doesn't do this kind of preparation.

Not only are the business cultures different, basic commercial concepts may significantly vary in the details -- or possibly not even exist within one's Korean counterpart's normal activities. So it can be dangerous to assume understanding. When in doubt, define in writing.

Furthermore, Korean employees are quite frequently transferred among the various departments. Rarely is there time for a decent handover of responsibilities. It is not uncommon for the exiting employee to neglect to mention to his/her replacement where one's contract has been filed. Consequently, an extremely detailed, heavily illustrated, and well-organized agreement, with full addenda, can be critical for getting the replacement employee up to speed.

This kind of document can also get the new employee off the hook with his or her boss should a disagreement arise. If the disputed matter is covered in the agreement, clearly explained as a contingency or possibility -- complete with hypothetical examples, the new employee can report that the matter has already been contractually settled.

Keeping a Practical Balance

Now should it not be already obvious, the important lesson is not to get suckered into the "cultural gotcha'' of surrendering good business sense due to cultural differences. The Korean cultural trait of not wishing to put things down on to paper or taking contracts as literally serious as Westerners should be accommodated just so far. To repeat, the Westerner is not a Korean and thereby is not part of Korea's social web of obligations and potential penalties. As the Westerner regularly works across the "cultural divide,'' he or she must protect the company's interests by refusing to compromise the company's core values and policies.

It is critical to be as clear and as explicit as possible when negotiating a strategic legal agreement in Korea. It is also important to keep in mind that ultimately Korean contracts are fully enforceable. But be aware that these documents are literally as good as they are written. There are almost no additional legal safeguards beyond what appears on the paper.

So be prepared and be explicit. Most important, do not assume, but always confirm, genuine understanding, in writing, of all points with one's Korean negotiating partner.

Business negotiation is an exacting and demanding matter, particularly complicated when playing by a different set of cultural rules and business practices. The more the expatriate executive is familiar with the rules, the more there can be a meeting of minds -- and the more success he or she can achieve at the bargaining table. It is all to the expat's advantage to be thoroughly familiar with the counterpart's set of mind and behavioral patterns. At the same time, consider what one's strengths may be -- including those that may not strictly fit in the normal Korean cultural context. The fact that other, Korean companies may not have these qualities should not prevent the expat from leveraging those advantages in Korea.

To give an example, if one's company is challenged by government regulator, one should establish a legal defense much as one would in one's native country. Resist _ or at least seriously question -- advice from your Korean employees -- and even Korean legal counsel -- to settle and compromise if one is convinced that the company is totally in the clear. Even if there is indeed a problem, a Western legal defense can be the best course of action.

Korean government officials are accustomed to sometimes unfairly getting their way, since most Korean companies will quickly try to settle, even when they are completely innocent. If the regulatory challenge is unjustified, it is often best from the first moment to emphatically state so and get one's legal ducks in a row. The regulator will probably not be amused, but will also realize that dealing with the foreign company is going to be more work and it may not be worth the hassle. Even if the regulator decides to proceed, be prepared to act "un-Korean'' and cite chapter and verse of the government's regulations, since often they can be used to one's advantage.

Keep in mind that Korean business practices, though often based on deep cultural foundations, are rapidly changing. The marketplace is becoming more open to international practices. Women and those Koreans who have lived extended periods abroad are making their impacts, along with the changes resulting from the wide application of broadband communications.

The above-discussed points are what one may consider being bedrock when it comes to doing business. Bear in mind the rules are changing. Therefore, it is wise to occasionally review and test one's understanding with a Korean colleague, while being sure not to give up some of the advantages of being a foreign business professional.
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Tom Coyner is President of Soft Landing Consulting(www.softlandingkorea.com), a sales and business development consultancy, and serves as senior commercial advisor to IPG Legal. His professional involvement with Korea began in 1975.

The original appeared in the Korea Times and may be found HERE.
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Feb 5, 2014

Contracts with Korean Companies

If you would like to avoid court expenses and headaches related to your business in Korea, please do yourself a favor and have a contract drafted by an experienced professional prior to conducting any business with a company in Korea.

We handle litigation and arbitration matters for many clients that have either used an attorney without adequate experience in Korea or that have foregone the use of an attorney in favor of form contracts they find on the internet. The matter is, often, complicated because of these, too often, poorly drafted agreements and lack of some basic clauses that would add protections for a non-breaching party.

Any client that pleads that the fee to draft the agreement is too high or that they will just download a form agreement from the internet is immediately sent the following.

The primary reason to have a carefully tailored Korean-specific agreement drafted is the following:

1.  Parties Understand Who They are Going to Bed with and What will Happen under the Covers.  We, often, see a party to a dispute jump into bed with a Korean company before knowing what is under the covers and what will happen when they are both under the covers.  A carefully drafted and explained agreement will allow the parties to know what are the obligations of the parties and, also, know the remedy for not meeting these obligations.  Prior to even discussing any relationship with a party, please don't forget our post entitled: Listen to My Mother: JVs in Asia.

For example, lets say that you contract with a Korean company to provide you with 100 widgets every 90 days.  Without a clause setting out the damages for delay, often the Korean company will sign the agreement and, then, note that they thought this 90 days was, simply, a guideline.  The penalty clause makes the Korean party understand the seriousness of delay.

Also, do not forget due diligence comes before the deal - NOT after the deal is completed.  Sometimes it is better to forgo an opportunity in order to avoid unnecessary risk, expense and headaches . Korea Due Diligence: Not So Different than China.

2.  Non-Breaching Parties Have Remedies through a Korean Court or Arbitrator
The Korean courts will enforce written agreements, but are skeptical to enforce oral promises or relationships based on course of dealings.  A carefully drafted agreement will, normally, consider the major arguments that, typically, occur in Korea and, thus, the issues that may arise in the future will likely be addressed in the agreement.  This, allows, the potentially breaching party to reconsider breaching because of the likely damage from the breach, while, also, providing a remedy for breach.  Thus, in all but the most rare of cases, will an agreement, in Korea, be simply one of these three pagers pulled off the internet.

The Korean courts are ranked Second by the World Bank for the enforcement of contracts.  The ranking maybe be found at: World Bank: Doing Business Ranking of Economies.

3.   Liquidated Damages & Related Remedy Clauses Are Your Friends
Liquidated damages clauses should be utilized in most agreements.  Without an agreement with liquidated damages clauses it is, often, difficult for the non-breaching party to establish damages that equal the actual damages.  For a post on liquidated damages take a look at:  Liquidated Damages Necessary in Most Korean NDAs and Non-Compete Agreements.

4.  Korean Companies Fear Lawyers
Korean companies that know that you have an attorney are less likely to play footsies under the covers.  When having a contract drafted make sure the attorney is capable of, also, negotiating the agreement. 

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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Korea's U-Turn Program: Enticing Korean Companies to Return to Korea

The Korean government has passed the Act on the Support for Korean Enterprises Re-shoring from Overseas ("U-Turn Company Support Law").  The Law, among other things, allows Korean enterprises that have setup operations overseas that return to Korea to benefit from:
  • Assistance from KOTRA
  • Government Paid Legal and Other Consulting Fees related to Re-shoring and windup
  • Corporate Income Tax Cuts
  • Land Subsidies
  • Custom Clearance Support
  • Use of Free Trade Zones
  • Equipment Investment subsidies
  • Foreign Worker "special activity visas"
  • Employment subsidies
  • Export Financing
Will it work?
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Feb 4, 2014

Protecting Your Brand in Korea: Parallel Imports

The Korean courts have been very reluctant to enforce prohibitions on the imports of non-counterfeit/grey market products into the Republic of Korea.  The following case is one example.

Don't fret, proactive counsel can be utilized to assist in developing strategies to protect your brand and distributor, agent, dealer or subsidiaries business in the Korean market.  Some of the strategies are obvious and some come from the unique gained from doing business in Korea.   

In Case No. 2009Ga Hap 125399 (Simmons Korea  vs. Karahan) Decided 12/10/2010, the Seoul Central District Court ruled that Simmons Korea could not prohibit the import of beds from parallel importer Karahan.  Karahan was importing Simmons beds from abroad.  Simons Korea was manufacturing beds in Korea under the Simmons name (licensed from Simmons to Simmons Korea).  Simons USA did not have an equity stake in the Simmons Korea entity.

The court reasoned that the regulation entitled: Notice on Treatment of Import and Export for the Protection of Intellectual Property of the Custom Service of Korea notes that the parallel import of non-counterfeit goods into Korea does not infringe the trademark of the trademark holder if:

1.  The Korean trademark registrant and foreign trademark registrant are the same entity, an affiliated entity and/or an agent of the holder.  Except in the case when an exclusive licensee manufacturers the goods by itself domestically.

2.  The Korean trademark registrant and foreign trademark registrant are not the same, but when the domestic registrant or an exclusive licensee imports and sells only genuine goods manufactured by the foreign trademark registrant. 

The Seoul Central District court held that the parallel import of Simmons beds from the United States does not infringe the trademark even though it seems to neatly fit into to: " Except in the case when an exclusive licensee manufacturers the goods by itself domestically" exception to the general rule.

The Seoul Central District Court reasoned that:
  • Simmons Korea did not gain independent techniques in creating the "pocket springs."
  • Simmons Korea products are similar in quality to the U.S. products.
  • Even though Simmons Korea is a separate legal entity with no ownership by Simmons USA of Simmons Korea, the Court opined that a relationship regarding the "division" of the trademark rights exists - thus not satisfying the exception.
  • Simmons Korea is treated as one in the same as Simmons USA by Korean consumers. 
The Korean courts have, also, been willing to impose sanctions for attempting to prohibit the import of grey market goods into Korea under Korean Antitrust/Competition laws.  I will followup next week with how to handle your parallel import issues in Korea.
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Feb 2, 2014

Korea, the Land of Perpetual Crisis, is facing yet another crossroads

Korea, the Land of Perpetual Crisis, is facing yet another crossroads -- this time Korean the focus is on renewed challenges facing manufacturing. The weakening Japanese yen together with the growing strength of Chinese manufacturing, not to mention rising costs of local labor, is placing Korea once again as the proverbial shrimp positioned between the two whales.

In fact, to a large degree, the real growth of Korean manufacturing is taking place in Korean-owned facilities outside of Korea. While this trend is real, it does not satisfactorily address what needs to be done overall. There are simply not enough domestic jobs in design, marketing and administration. A core of Korea's economy must continue to be in-country manufacturing as a central economic pillar.

Since this is an English newspaper, I'm writing with the assumption that a disproportionate percentage of readers are expatriate. Consequently, I am specifically writing to this audience, but what I have to say may also apply to Korean managers.

Though only 11 percent of the Korean workforce is unionized, that small percentage has a disproportionate influence on the overall workforce. Furthermore, I suspect when it comes to foreign-owned factories in Korea, the percentage is considerably higher. While some unions have been discredited in the public eye for all ready being well paid and perhaps spoiled, many media-grabbing labor actions highlight a real or imagined "struggle" between management and other employees in many non-unionized employee's minds.

As the old saying goes, "what we have here is a failure to communicate.'' This is the perennial challenge of any organization, but in Korea with cultural, language and sometimes political divides to cross, this issue has the potential to drive even Job up the wall.

The biggest failure for communication is a breakdown in trust between management and employees -- organized or not. And as much as it is easy to blame radical unions, most of the time the fault must be laid at the feet of management for not putting in adequate time and effort back when problems were minor and relatively easily manageable.

Last year, when I was researching our book on doing business in Korea, I had the privilege to interview some of Korea's leading executives and attorneys. Their comments reminded me of my first professional decade as a human resources manager, first working with a bank union in Seoul and later keeping a union out of a Japanese factory in California. What struck me was even after the decades working in sales & marketing, the principles of good labor relations have not really changed -- no matter where one works.

Given the limited space on this page, I will bullet point some of the most important points that can foster management-employee trust, which in turn may get everyone reading off the same page to reduce waste, improve productivity and increase overall competitiveness. Though much of the following may seem aimed at unionized shops, most if not all applies to good employee relations, regardless if there is a union.

  1. Establish and hold regular rap sessions between employees/employee representatives and the management team; summarizing the discussion in all-employee memoranda or in company newsletters.
  2. Use company training to concretely demonstrate management's commitment to your employees and the Korea operations _ as well as upgrade professional skills and teamwork.
  3. Disentangle management's compensation schemes from the union's pay increases. For example, consider keeping management's salary increases on a different cycle from the union's -- and not tied to the same economic benchmarks, such as cost of living, used to rationalize the union's pay increases. Otherwise, you may find collusion between your managers and employees.
  4. Hire a new or replace your human resources manager with someone who is not only experienced but also trained. Frankly, from over a decade in international HR, I can tell you there are competent HR professionals but they are in a small minority. Too often general management does not adequately respect the HR function and too often low company expectations allow incompetency to dominate that function.
  5. Treat all employees equally at all times, regardless of the manager's natural preferences. This should be a no-brainer, but it's one of those easier-said-than-done issues.
  6. Communicate frequently and openly about the real situation of the company to both union leadership and employees so informed employees can in time differentiate between company business concerns and union political concerns.
  7. Use athletic and social events as opportunities to signal to the rest of the employees that the union and management are getting along with mutual respect.
  8. Put in all the time that is necessary with the union or your employees' concerns -- even if it may seem excessive compared to one's past assignments.
  9. Spend at least three times as much time communicating with your management team about dealing with the union as directly communicating with the union. One bad manager can destroy a great deal of union bridge building. This also applies to non-union shops when it comes to good management-employee relations.
  10. Be aware that often senior local managers harbor grudges and prejudices against the union or groups of employees. One may find that 90 percent of your management's thinking needs to change. It is equally important to work for change with your managers as with one's union or one's other employees.
  11.  Recognize in most instances that management has much more power and resources than the union. If you are a certain distance apart between labor and management, management should travel 90 percent and labor 10 percent -- and then, together, the two can move on and steer back to the center.
  12. Don't restrict negotiating to the time of CBA re-negotiations. A skillful general manager is always negotiating. Sometimes he or she will try for a major union concession shortly after a CBA has been signed when the union leadership may be emotionally worn out.
  13. Consider unions are often like adolescents in that they are constantly probing to see what their limits may be. It is important to clearly and concretely communicate one's limits and governing principles.
  14. Do not allow unions to have a voice in promotions. Promotion is a key management control vehicle. Koreans highly value promotions for social as well as economic reasons. Management should have full control in this area as a way to keep employees in line.
Regardless of how many of the above points may apply to your company, the truly effective manager is the one who personally takes the initiative to learn about his or her employees by walking about and asking questions about them both on a personal level and professional level. Korean employees sincerely appreciate senior managers taking sincere interest in them as human beings and they are often proud to demonstrate their expertise in their given company roles. Often the difference between a successful manager who instills strong employee loyalty versus the remote manager who is often at odds with the employees is whether that executive takes a regular initiative to spend time really trying to get to know the employees and to learn from them how they are making company contributions.

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Tom Coyner is President of Soft Landing Consulting(www.softlandingkorea.com), a sales and business development consultancy, and serves as senior commercial advisor to IPG Legal. His professional involvement with Korea began in 1975.

Jan 28, 2014

Christian Science Monitor on Korean Adoptions

I was quoted in today's issue of the Christian Science Monitor in an adoption matter that we are assisting on, in a drastically reduced cost capacity, as part of what we believe are our pro bono obligations to Korean society. We, normally, don't assist clients on adoptions matters, thus, if you have an adoption issue - we can refer you to attorneys that are more suitable in assisting in these matters.

I fear that the case may reach all the way to the Korean Constitutional and Supreme courts.

The case, I believe, is caused, simply, by misplaced nationalism. I, also, hope for Korea to be able to adopt most of its children locally, but the reality is that the nation is still not at the stage where this is possible. Maybe it will, not, ever be at a stage - most countries are not. Koreans, overwhelming, do not want to adopt children - the number of local adoptions has not significantly increased over the past decade. This should not be embarrassing - it is just a reality. Hey - I don't want to adopt a child and either does the majority of Americans I know.

It should not be embarrassing to Korea for the nation to have orphans, but it should be embarrassing for Korea to choose national interests over the welfare of children. Yes, it is, according to the vast majority of experts on adoptions, better for a child to have a loving family overseas than to live in an orphanage or like facility in Korea. Yes, some overseas adoptions don't work out. However, some Korean parents don't work out.

The law in Korea is clear. Under the Civil Act a "private adoption" is possible. The MHW seems to be trying to make sure that no private adoptions occur if Korean children will be sent overseas. If the government believes that this should be the case - it should revise the law to specifically say this.

We are hoping the cases by the MHW don't succeed for the benefit of Korea orphans. Success will, simply, be eliminating the rights of mothers to determine a child's destiny, will lead to more children in orphanages in Korea and will lead to more questions about the transparency of the Korean justice system.

Koreans, simply, should not be embarrassed that Korean is one of the largest "exporters of children." This is a trivial thing and should not affect the national psyche. I am proud of Korea and the Korean retired judges, retired prosecutors and attorneys that I work with are also proud of Korea and we are not embarrassed over Korea being placed in this category.

Lets try to think what is best for the children and try to ignore the view of the few crackpots that believe that sending Korean children overseas is "child abuse." The argument is so peculiar that it is not even worth discussing.
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South Korea tries to recall a US adoption

South Korea has taken up a fight for the return of a baby it charges was adopted illegally by a US family. Critics say Korea is just embarrassed by the number of foreign adoptions.
By Donald Kirk, Correspondent
The Christian Science Monitor
January 23, 2013
http://www.csmonitor.com/World/Asia-Pacific/2013/0123/South-Korea-tries-to-recall-a-US-adoption#.UP_2jPamWHg.email


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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com

Jan 27, 2014

Sean Hayes Quoted by Nature on the Woo Suk Hwang Cloning Case

New York Attorney Sean Hayes, Co-Chair of the Korean Practice Team for IPG Legal and former Korean government employee for the Constitutional Court of Korea was quoted by Nature Magazine.

Nature is a leading International Weekly Journal of Science.  He was interviewed on the infamous Woo Suk Hwang of cloning fabrication fame.  Sean described the procedure in the Korean courts and the, likely, outcome of the case.

The full article may be found at: Cloning Comeback.
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info@ipglegal.com_____
SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Jan 23, 2014

Weekly Asian Legal News from International Law Firm - IPG Legal

This Week's Asian Legal News Reported by the Media
Most Recent Posts from The Asian Law Blog
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Grey Market/Parallel Importing is Legal in Korea: Protecting your Brand in Korea

Parallel Importing, in general, is legal in Korea.  The Supreme Court has rule in 2002 in the landmark Burberry Case that:
"As a consequence, in spite of the Exclusive Importer's agreement with the Original Manufacturer that guarantees the exclusive right to Import to the Exclusive Importer, parallel importing does not constitute a violation of Korean Laws and the Parallel Importer is not bound by the contractual rights and obligations granted and imposed by the exclusivity agreement between the Sole Importer and the Original Manufacturer."
Simply, the argument is that the Parallel Importer is not a party to the contract and no other Korean Law is violated.   Most jurisdictions have come to identical conclusions.

I will be writing over the next few weeks about other parallel importing issues including issues related to unfair competition, trade secrets, copyrights, trademarks and how to protect your brands in Korea from grey market goods.  Take a look.

Other posts that may be of interest:
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team and Entertainment, Media and New Tech Law Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He assists clients in their contentious, non-contentious and business developments needs in Korea and China._____
SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Jan 22, 2014

Getting a Divorce in Korea: Hire a Korean Divorce Lawyer?

The following Korean divorce information is provided by the Seoul Global Center.  Non-Korean are capable of obtaining a divorce in Korea.  The Center is an excellent source in Seoul for no cost advice.

In many divorce cases, no divorce attorney in Korea will be needed.  However, in most cases involving non-Koreans it is advisable to seek assistance, because of the need, often, for, among other things, a detailed marital separation agreement prior to divorce and the inability of the parties to resolve all matters in an amicable. In all but the most contentious of divorce actions, the legal fees will not be a great burden.

The following is a clip of the advice noted by the Seoul Global Center on the Seoul Global Center Blog.  IPG has not edited any of the content.

Please also see the following articles on divorce/separations that may of use to the reader:

SeanHayes@ipglegal.com
(www.ipglegal.com)
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Korea’s divorce rate nearly quintupled between 1980 and 2004 (from 0.6 to 2.9), whereas average divorce rates have remained relatively low for the 25 OECD countries (1.7 to 2.3 between 1980 and 2007). Overall, average divorce rates have more than doubled for 4 Asian economies between 1980 and 2007 (from 0.9 to 2.0)

Another report released by Korea National Statistical Office the (KNSO), divorce rates are rapidly rising for international couples (meaning one Korean spouse and one foreign spouse) living in South Korea. Based on last year’s figures, divorce statistics show some 11,255 international couples divorced in 2008, representing a 29.8 percent increase from 2007 compared to a 7.5 percent increase for Koreans and their Korean spouses over the same period.

General Validity of Divorce
The general validity of divorce shall be governed by one of the following laws in the given order of priority, provided that in cases where a party to the marriage has his/her habitual residence in Korea, the divorce shall be governed by the 「Civil Act」 of the Republic of Korea (Article 39, Private International Act):

1. The same law of the habitual residence of both spouses
※ ’The habitual residence’ means the actual location where the couple resided for a given period of time.

2. The law of the area that is most closely relevant to the couple.
※ Whether a specific area is most closely relevant to a couple shall be determined by comprehensively considering specific factors such as how long the parties stayed there, what they stayed for, whether their family members reside in the same area, whether their work is in the area, etc.
Divorce by Agreement under Civil Act(Article 834,Civil Act)
Element Requirements
For a married couple to divorce by agreement, the following requirements must be satisfied:
  1. The parties to the marriage should agree to divorce.
  2. The parties should have the will to divorce not only when they write the divorce report but when the court receives the report. (Supreme Court Judgment 93Meu171 dated June 11, 1993)
  3. Since the agreement to divorce requires the parties’ mental capacity, if a party to the marriage is an incompetent, he/she must get consent from his/her parents or guardian. (Article 835 and Article 808.(2) and (3); 「Civil Act」).
Procedural Requirements
  1. Guidance and Reconsideration Period – Any person who intends to divorce by agreement shall first seek the guidance on divorce provided by the Family Court and, if necessary, the Family Court may recommend the parties to take counsel with a professional counselor who has expertise and experiences in counseling. (Article 836-2.(1), 「Civil Act」).
  2. The Family Court confirms the intention to divorce after 3 months has passed since the couple received its guidance on divorce if the parties have any child to take care of, and 1 month if not. (Article 836-2.(2), 「Civil Act」). The parties shall submit a written agreement on who would foster and/or have custody of their children or seek adjudication of the Family Court. (Article 836-2.(4), 「Civil Act」). 
  3. The Family Court may exempt the couple from or shorten the above-indicated period if there is an urgent circumstance to proceed with the divorce procedure such as, for example, when a party is expected to suffer unbearably from domestic violence. (Article 836-2.(3), 「Civil Act」).
  4. Divorce Report – A divorce by agreement shall take effect upon reporting it in accordance with the 「Act on the Registration, etc., of Family Relationship」 after obtaining the confirmation of the Family  Court. (Article 836.(1), 「Civil Act」).
  5. Nullity/Revocation of Divorce by Agreement – Even if a divorce report has been filed, a divorce by agreement is null if the parties did not agree to divorce, and any person who declared the intention of divorce by fraud or duress may make a claim to the Family Court for revocation of such divorce. (Article 838, 「Civil Act」).
Judicial Divorce under Civil Act (Article 840, Civil Act)
Causes for Judicial Divorce
- You may file for a divorce with the Family Court in any of the following cases (Article 840, 「Civil Act」):
  1. If your spouse has committed an act of unchastity – An act of unchastity’ is a broad concept that includes a wide range of unfaithful conduct, which may fall short of adultery. (Supreme Court Judgment 89Meu1115 dated July 24, 1990)
  2. If your spouse has maliciously deserted you – Malicious desertion’ refers to the conduct of failing to implement the obligation to live together with, financially support, and aid the other spouse with no justifiable reason.
  3. If you have been extremely maltreated by your spouse or his/her lineal ascendant;
  4. If your lineal ascendant has been extremely maltreated by your spouse;
  5. If whether your spouse is dead or alive is unknown for three or more years; 
  6. If there exists any other serious cause that makes it difficult to continue the marriage – Any other serious cause that makes it difficult to continue the marriage’ refers to a situation where the couple’s communal life, the essence of a marriage that is based on mutual affection and trust, has been irrevocably damaged and therefore forcing the continuation of such marital life exposes a party to the marriage to unbearable sufferings. In judging whether there indeed is such situation, various factors and circumstances should be considered such as whether the parties have the will to continue the marriage, which party is responsible for the failure of the marriage and to what degree, how long they have been married, whether they have children, how old the parties are, and whether the parties can earn their livelihood after a divorce. (Supreme Court Judgment 90Meu1067 dated July 9, 1991). 
Procedure of Judicial Divorce
  1. Conciliation – Since a judicial divorce is subject to family litigation of Category B, anyone who intends to file for a judicial divorce shall first make a request to the Family Court for conciliation proceedings. (Article 50.(1), 「Family Litigation Act」).
  2. If you institute litigation without going through the conciliation process, you will be sent back for conciliation; provided that the same shall not apply when deemed that it is impossible to summon one or both of the concerned parties unless resorting to a service by public notice, or that it is impossible to constitute conciliation even if the said case is referred to conciliation. (Article 50.(2), 「Family Litigation Act」).
  3. Litigation Procedure – If there has been a decision not to have conciliation, conciliation has not been constituted, or a decision amounting to conciliation has been made invalid upon an objection, the litigation is regarded to have been instituted when the conciliation request was made. (Article 49, 「Family Litigation Act」; Article 36, 「Judicial Conciliation of Civil Disputes Act」).
  4. A divorce takes effect upon the divorce judgment (Article 12, 「Family Litigation Act」; Article 205, 「Civil Procedure Act」), and the person who instituted the litigation should report the divorce within 1 month from the time when the final divorce judgment is made, by submitting a certified copy of the litigation document and its confirmation certificate. (Article 78 and 58, 「Act on Registration, etc., of Family Relationship」).
Effects of Judicial Divorce
  1. General Effects – Upon a divorce, a marital relationship is dissolved, all kinds of rights and obligations that presupposed the continuation of the marriage expire, and affinity relations created through the marriage get terminated as well. (Article 775.(1), 「Civil Act」). Both parties may remarry.
  2. Effects on Children – If there are underage children when a divorce is established, the parents shall decide and agree on who will have the custody of the children (Article 836-2.(4), 「Civil Act」), and in addition, determine matters related to fostering of the children such as protection of the children and fostering expenses (Article 837, 「Civil Act」).  The children and the parent who does not take care of such children shall have the visitation right (Article 837-2.(1), 「Civil Act」); provided that the Family Court may limit or forfeit such visitation right on its authority or upon the request of a party if such measure is deemed necessary for the welfare of the children (Article 837-2.(2), 「Civil Act」).  The above-indicated’visitation right’ means that the parent who does not take care of his/her children has the right to meet and talk with such children. Included activities are, for example, exchange of letters, talking on telephone, exchange of gifts, staying with the parent over weekends, etc.
  3. Effects on Property – Upon the establishment of a divorce, a party to a marriage may claim the division of property against the other party within 2 years from such establishment. (Article 839-2, 「Civil Act」).  The party may also claim damage compensation against the negligent party. (Article 843 and 806, 「Civil Act」).
FAQ
Q1: I’m a foreigner presently married to a Korean woman for the last ten years and we have a child with both nationalities (until they come of age to choose one).  What happens in case of divorce? Do I have to leave Korea? Is my visa going to be cancelled? If so, how can I take care of my child (see them regularly) if the mother is in Korea and I can’t stay because of visa problems? Do you know? Can I stay in Korea or not? If not, that is going to be extremely unfair and harsh on everybody.
A1: According to the Immigration office, first you need to clarify your type of visa status to get the appropriate information. The reason is that it can be different procedures what types of visa you have. If you want to prolong the duration of visa, you need to report the divorce and verify the reason to stay in Korea to  the Immigration Office.
For F-5 visa holders, the visa won’t be affected by the result of divorce. They don’t have to surrender their F-5 visas or have to leave the country either.
For F-2-1 visa holders, the visa will be valid until the visa expiration date. Immigration Office will allow you to extend your visa on the following cases.
  • When your divorce is caused by your Korean spouse
  • When you have custody of the child born in the marriage
Q2: We are a couple, both foreigners, considering getting divorce under the mutual agreement while we are here in Korea. Can the Korean government do that?
A2: Except in the case when mutual agreed divorce is not accepted by the law in your country, as long as you both have an alien registration card issued by the Korean Government, foreigners can process their divorce in Korea. Those who are residing in other cities in Korea, still need to process the divorce at the Seoul Family Court. Required documents are alien registration card, passport, a marriage certificate both in Korean and English, and an interpreter.
**The Seoul Global Center provides free legal advice service every Monday, Wednesday and Friday from 2pm to 5pm.

Content Provided by: Seoul Global Center Blog
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Jan 21, 2014

Korean FTC Fines Korean Refiners for Collusion

In a possible reaction to Korea’s rising inflation, the Korea Fair Trade Commission (KFTC) fined the four major Korean refiners a total of KRW 434.8 billion (USD 442 million) for preventing competition through collusion.

The KFTC noted that: “In their meeting in March of 2000, officials of the four refiners agreed to respect the rights of former exclusive oil suppliers to gas stations and refrained from supplying their products to even gas stations with ties with a particular brand in the past.”

The KFTC claims that this alleged collusive act, led to consumers being forced to pay increased margins to suppliers even when prices of a barrel of the unrefined product decreases in the international markets.

Korea government is attempting to do anything to reign in on inflation seemingly in every manner with the exception of raising interest rates and the suppliers of fuel, food products, autos and other top consumables are, thus, the target of the present administration.

The tactic will likely force Korean conglomerates to lower margins temporarily.

The answer to the problem, however,  is not simply for the Korean government to engage in these types of aggressive measures, but to lessen the burden on SME Korean businesses and foreign business and decrease the benefits to the big Korean players that are increasingly involved in more and more business lines and more abuse tactics to suppliers.

The refiners, from recent Korean news reports, seem to be set to appeal the decision. In Korean Antitrust cases, the Seoul High Court is often less aggressive than the KFTC.

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SeanHayes@ipglegal.com

South China Legal Blues: Enforcing of Law in China by Jordon Dotson

One quiet Thursday evening, three men from a second-tier, coastal South China city known for its Soprano like families, entered a luxury hotel. Bleary eyed and floating in a haze of rice liquor though they were, none of the three men seemed out of place in this particularly busy lobby. Practically straddling a bustling Hong Kong border crossing, this Chinese-owned, internationally operated hotel sees its fair share of tycoons and traders, miscreants and manufacturers on a daily basis. It is the seat of luxury, the kind of place that shines like a beacon for local businessmen caught in the heady mix of dinner, drinks, and deal-making.
According to the police statement, they were drunk.

None of the men were hotel guests – they more likely had their eye on the oak- and brass-coated lobby bar. Before settling at a table though, the three of them sauntered into the lobby bathroom to excise the effects of a fine dinner. One settled into the toilet stall, the other two wavered in front of the urinals before heading back out to the bar. For five minutes they talked and laughed in the lobby, unaware that two foreign guests were simultaneously recoiling at the sight of a limp hand lying beneath a toilet stall door.

Just like that, their friend was dead of a heart attack, collapsed on the cold tile, wedged against the door.
The foreign guests ran out to notify hotel staff that, perhaps, something wasn’t right in the bathroom. Security personnel hurried in to investigate. The stall door was locked tight, supporting the weight of the man’s body through his neck. Not sure if he’d simply fainted or passed out in a drunken haze, security was fearful of breaking in the door. The way the man’s body was positioned, a blow to the door surely would’ve injured his neck. Paramedics were called. Hotel managers notified. Engineers rushed in to remove the door frame, and less than fifteen minutes after he entered, the man’s body was lying lifeless before them.

Almost immediately after the stall door was removed, an ambulance rolled into the entryway. Medical staff cleared the scene, but there was little hope. The man’s heart had obviously stopped. Hotel administrators, wracked with urgency, offered their regulatory defibrillator. Maybe the man’s heart could be revived. The paramedics waved it away. They had their own defibrillator, they said, but it seemed they weren’t in a hurry to plug it in. Hotel managers waited as the paramedics tended to the body, hoping for CPR, hoping for some sign of life.

They inserted an IV drip into a limp arm.
Again hotel staff offered a defibrillator. Leave it to us, they were told. Finally they initiated CPR, leaning on the man’s motionless chest, but it was too late. They were unable to resuscitate him. Forty minutes after he entered the bathroom, the man was pronounced officially, legally, bureaucratically deceased.

The man’s two friends stood quietly on the perimeter, perhaps in shock, perhaps suddenly sobered by the gravity of the situation. Either way, they never objected, never offered assistance. The two foreigners, hotel security, the engineers and the man’s friends all scratched their heads and gave solemn statements to the police. The official conclusion: he died of a bum ticker, its decline accelerated from a life of smoking, overeating and drinking;  the hotel did everything possible to help him, it was in no way liable. It was an unfortunate accident, an extraordinary occurrence, a sad day.

Approximately one hour after his death, a crowd began mulling about the lobby. We’re family, they claimed, pushing ambulance personnel aside, shielding the man’s body. Tensions rose. Tempers flared. Through the night they all but fought with everyone who wasn’t family. Only after several rattling hours were police able to distract them so the body could be removed. The air was electric, the crowd growing, the voices rising like the typhoons that rage into the South China night.

By seven o’clock the following morning, more than thirty bodies filled the hotel lobby. Though short on luck, this man apparently had an abundance of family. Fists pounded the front desk, demanding compensation, demanding a cash payment to pacify all of that…grief. The hotel didn’t act quickly enough, they said. First aid should have come sooner, they railed. The door should have been knocked in, they screamed. Their brother was dead, they claimed, dead at the hands of a glistening, five-star monument to luxury, consumerism, hospitality…and large bank accounts.

Hotel management responded. They were sorry for this family’s loss, but would not, could not accept any liability until police prepared a formal report. A very solemn conversation would have to take place with the Chinese owner and the international  corporation whose name graced the door.

Meanwhile, another crowd was forming outside the hotel. Paying guests ambled around, wondering what all the fuss was, wondering why this odd crowd was pushing them away from the lobby lounge. Hotel staff stood on a chair and announced to the now seething crowd that the lounge was for paying customers, requesting that everyone please go outside where they could accommodate the sheer size of the herd. The family was agitated already. Now they grew hostile. Paying customers turned from the hotel as closed signs went up around the lounge, the bar, the second floor restaurant. The hotel had no choice. Every public room was occupied by a screaming, increasingly aggressive crowd.

Exasperated, the General Manager made repeated requests for police assistance, if only to explain that the hotel couldn’t pay the crowd off until an investigation was complete. Eventually the police came. They stood and watched. They smoked cigarettes (apparently unworried about public smoking bans). They raised their hands as if to say not our problem. They meandered around the perimeter of the crowd, refusing to clear the room, even as it exploded into a full scale riot. Screams rang out at hotel staff, demanding compensation, cash, now. Even the hotel manager, a brave Malaysian Chinese himself, had to run away as fingers twisted his clothes, fists flew at his face. All the while, the police watched. As too did the CCTV camera, during the most interesting day of its career.

Eventually the riot stopped. Hotel staff observed from a distance and security did their best, hoping that the police would do their job and everything would just go away. But it didn’t, it wouldn’t, not that day. Even as the rioters calmed, police refused to remove them from the hotel, refused to even ask for their names or ID cards, and an eerie calm descended over the entire hotel.

In the late afternoon, lawyers settled into the local sub-district police station. The foreign lawyer with sixteen years of international experience dressed smartly in a fitted suit and the lawyer appointed for the family, a genial young local fellow who didn’t seem able to afford socks. Across the table, the oldest, largest, and loudest members of the dead man’s family sat with their arms crossed. The lawyer had seen these types before in positions of local power in the factory villages that populate South China.  A police official declared, according to their report, that the hotel had no liability in the man’s death. Again the yelling. Again the pounding of tables. There were children to take care of, parents. Who would pay for their food, their schooling, their medicine?

Even as the foreign hotel lawyer reasserted the matter of liability, even as they detailed the lost revenue and negative publicity, there was no action other than the reading of reports. The lawyer tapped his fingers on the table, politely reminding police that foreign guests were already frightened. How could such lawlessness occur in this, oh-so-modernized of cities? How long before international media arrived with their wide angle lenses? How long before international guests arriving for the University Games would learn of this riot and, perhaps, change their minds about visiting?  He wouldn’t be able to keep the lid on this for very long.
Around the perimeter of the room, a handful of policeman glanced sideways at each other before slinking out the door. Not our problem.

For hours upon hours, the dead man’s family told the same story over and over again, that most tried and true of Chinese negotiation tactics. After awhile, even the mediator couldn’t stop herself from yawning. The foreign lawyer, seeing that the negotiations were going nowhere, and knowing that rioters were still in the hotel, offered a solution – a weekend respite with a follow up meeting on Monday afternoon, provided that the rioters agreed to leave. Even the appointed, sockless lawyer agreed – things would cool down, the hotel would have time to meet with the owner, he himself a native of the same coastal city as the victim. Despite the family’s dogged insistence on receiving more than two million Yuan in compensation (about $307,000 USD, which they did not receive), somehow, some way, almost exactly twenty-four hours after the man sat down on his most fated of toilet seats, the crowd leaked out of the lobby and agreed to return on Monday afternoon.

After discussions with Hotel Management, weekend or not, the owner refused to offer compensation. But he got it. He understood. These were his people, after all. The General Manager agreed to help with funeral expenses as an act of compassion. Ritual purification of the bathroom would be allowed – there were already enough ghosts and demons floating about. The Hotel Manager who’d barely escaped the crowd with his skin intact (his suit wasn’t so lucky), even lowered his head and offered free use of hotel facilities to the widow. All they had to do was leave the hotel, promise not to return. The foreign lawyer prepared to present this offer to the police conducting mediation on Monday.

Monday afternoon came in with a grinding halt. At 2PM, coincidentally just after the still-present police force left for lunch and a habitual nap, the dead man’s family poured back into the hotel lobby. Please leave. This area is for paying Customers only. Please. Please. They brought their own food and boxes of bottled water, the were prepared to use the two negotiation tactics that bring all foreigners to their knees – time and disregard for the law.

Again the screams rose. The word riot bounced around the room like a super ball. At some point, the police walked back through the lobby door, immediately turned around, and lit a round of cigarettes.

The General Manager picked up the phone and immediately called their lawyer. The family had breached their promise and, no, the hotel no longer wanted to help them. 150,000 RMB in costs and lost revenue. 10,000 a day in extra security costs. They could pay for their own funeral. Ghosts and demons be damned.
The foreign lawyer was prepared. He had already copied and translated the relevant parts of the Civil Law of the People’s Republic of China and was preparing a counteroffensive with reporters from International News media standing by in the event the meeting didn’t proceed as it clearly should.

He presented the following to the police mediator, the police lawyer, the sockless lawyer, and the family. It’s hard to argue with their own law.

General Principles of the Civil Law of the People’s Republic of China:
Chapter I, Article 5
The lawful civil rights and interests of citizens and legal persons shall be protected by law; no organization or individual may infringe upon them.


Chapter IV, Article 75
A citizen’s or legal persons property shall be protected by law and no organization or individual may appropriate, encroach upon, destroy or illegal seal up, distrain, freeze or confiscate it.


Chapter VI, Article 106
Citizens that who through their fault encroach upon the property or person of other people shall bear civil liability.


Article 109
If a person suffers damages from preventing or stopping encroachment on their property, the infringer shall bear responsibility for compensation.

Article 117
Anyone who encroaches on the property of another person shall return the property and failure to do so he shall reimburse the loss.  If the victim suffers other great loss, the infringer shall compensate for those losses as well.


Article 120
If a right of personal name, reputation or honor is infringed upon, he shall have the right to demand that the infringement be stopped, his reputation be rehabilitated, the ill effects be eliminated and an apology be made, he may also demand compensation for loss.


Article 130
If two or more persons jointly infringe upon another person’s rights and cause him damage, they shall bear joint liability.


Presenting the law in written Chinese, the foreign lawyer formally requested to police that all who were in violation of Civil Law be arrested and pay compensation to his client.

Hold on a minute…maybe we can resolve this.

The lawyer provided a list of costs, expenses and lost revenue.

Hmm…that’s difficult. The family isn’t going to buy this and we are going to have to enforce the law.
Tea was offered. Cigarettes were smoked (the matter of a public smoking ban was not discussed).
Not recognizing logic, rational or the rule of law, the family countered. They were sure they had the upper hand – the lobby was once again closed, filled with rioters. 350,000 RMB (about $53,000 USD), the piece of paper said. No riots. No more screams in the lobby. All for the tidy fee of 350,000 RMB. If not that, then only one act of retribution would suffice. They’d tear the hotel apart, and not even the police would make it out unharmed.

One police official spoke directly to the foreign lawyer’s legal assistant and translator – she was being unpatriotic, he said. She had a duty to convince the foreign lawyer to help police solve this matter. Calmly the assistant stated that it wasn’t the foreign lawyer’s decision to make – that decision belonged to his client the owner and hotel management. That’s how legal representation and advocacy works in the rest of the world.  If only the rioters hadn’t returned to the hotel, she said, the foreign lawyer would have presented an offer of aid to the family.

The police didn’t relent in their attempts at persuasion. After three hours and countless cups of tea and cigarettes, the foreign lawyer declared an end to negotiations. He could sense that, though the family would never grow tired (time, after all, was irrelevant to them), the police, the sockless lawyer and the mediator were indeed trying to convince them to leave, to accept some small act of gratitude from the hotel, or else they’d be arrested. If the police and government deemed the hotel responsible, so be it, the lawyer said. They’d follow the rule of law. If the family wanted to sue the hotel, so be it. They’d abide by the Court’s decision. They settled into their respective cars and sat silently until they walked through the doors of the hotel lobby. Upstairs, a congregation of police were eating dinner. Outside, a separate congregation stood behind a wall of riot shields. Not our problem, someone seemed to say.

The oldest member of the family ambled back into the hotel entryway with his hands clasped tightly behind his back. How could he save face? He had failed. It was time to go, he said. But even he could only stand aside as voices rose and limbs pushed against police shields. Finally, something in the evening clicked. Perhaps boredom, perhaps the family simply grew tired of being so angry, so loud. Either way, the lobby emptied as if a drain had been pulled, and a quiet group of policeman sat down to smoke cigarettes.
Stalemate.

All is back to normal in the hotel lobby. Management agreed to pay the family 50,000 RMB as a humanitarian gift (20,000 of which, the police promised, would be returned as an award for being a model member of the business community). Even now though, no one is quite certain whether or not the crowd will return, and its screams and threats hang over the lobby like a fog. Desk clerks and waitresses eye the door with suspicion, biting their lips, hoping for a quiet night. Even the ghosts in the bathroom sit quietly, wishing it would all just go away.

In the end, the hotel was generous. They had no legal or moral obligations. And as the envelope of money changed hands, as a written agreement not to return to the hotel was signed, fingerprinted and chopped by police, the only sound in the room was a hushed thank you from the family…to the police. They sauntered out of the room, averting their eyes from the foreign lawyer, holding tight to their envelope of cash.

Jordon Dotson is a Commercial Adviser for IPG Legal's Shenzhen, China Office. 
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SeanHayes@ipglegal.com