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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

Jan 19, 2014

How to Solve your Domain Fraud Issues in Asia

I recently contacted one of my clients doing business in China concerning a Chinese company that failed to take a business ethics class.

The Chinese company registered a domain that simply attached the word China onto the client’s registered trademark.  Yes, as I advised on this blog many times, the client registered their trademark in China.

This tactic by the Chinese Company is intended to increase hits to the website and sometimes to even sell fake goods.  In this case, it seemed like the company was intending, in the near future, to sell its own goods with an intent to confuse buyers.   The site was good enough to confuse even the most careful of buyers.

The client was not too amused.  Luckily, we shook the domain out of the Chinese company and put the fear of a lawsuit and prosecution into the company.

However, if your lawyer is not able to succeed in the shack down - a great option is available.

Have you lawyer file a complaint/dispute to the The Internet Corporation for Assigned Names and Numbers (ICANN) through  ICANN’s  dispute resolution system.  ICANN is an organization authorized through an international agreement to, inter alia, register, deregister and transfer domains.

If the tribunal rules that the domain is being utilized in “bad faith,” then ICANN may deregister or transfer the domain name.  If the procedure fails, then, local options are available.

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SeanHayes@ipglegal.com

Jan 16, 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

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.

Jan 15, 2014

Going to Court in China

It’s been a slow and steamy summer here in the Pearl River Delta.  Anytime I think of Delta’s: Mississippi, Me Kong, Delta Dawn, I think of humidity and other things.  It’s been all of those here recently, but it hasn’t slowed down the pace of business or life in Southern China.  On a non legal note, it doesn’t seem like the world is in a recession when you walk around here.  People are moving and spending money and buying stuff like crazy.

Onto a legal hodgepodge from the Delta:
  • Stay away from Court in China (or anywhere else for that matter).
We had an opportunity to attend a hearing in the Shenzhen Peoples Court the other day and it was once again an interesting experience.  As I always tell y’all “stay out of court at all costs.”  Even in China, the only one who wins in court are the lawyers – who conveniently get their fees paid up front.

Anyway, I was observing a hearing between a Chinese national and a foreigner and although the result seemed to come out fairly, it didn’t seem to be based upon law, precedent, logic or much else.  I also don’t think the foreigner thought it came out fairly.

The judge, in China, is basically a mediator and he listened to both sides of the story, then he met with both sides separately and after a few hours in a hot and steamy court room, he issued his order.  My advice to y’all is to make sure that you have everything in order so that you don’t need to go to court.  How many times do I have to hear about the foreigner who trusted his Chinese factory or partner and then ended up with an expensive lesson.  Have agreements and do things legally and you will undoubtedly avoid court.

  • The taxman striketh again.
I’ve been telling y’all how our governments are all broke and printing money and that the only way to even attempt at lowering the deficits is to get back lost tax revenues from citizens and corporations operating offshore.  You can see my previous blawgs for more information.

Well, seems that the UK government just reached an agreement with Liechtenstein to end banking secrecy which will undoubtedly churn out substantial tax bills to UK citizens who have been legally keeping their money in Liechtenstein banks.  While many of these are “super” wealthy people, for those of you who are “kinda” wealthy and want to be more wealthy, there are alternative and legal tax havens here in the PRD that you can take advantage of.  Here is an excerpt of the article on the UK – Liechtenstein agreement, pay attention to the last line:
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The UK is expected to sign a deal to recover lost tax from Britons holding bank accounts in Liechtenstein.

HM Revenue & Customs (HMRC) has agreed with the Alpine tax haven to start exchanging information.  Up to 5,000 British investors have an estimated £3bn stashed away in secret accounts in the country.
Investors are expected to be offered the chance to volunteer details of their deposits in return for limited penalties and low risk of prosecution.  More details of the deal with Liechtenstein’s royal family and its government will be announced later on Tuesday.

Pressure has mounted on tax havens to share information since April’s G20 Summit and similar deals have already been struck with the US and Germany.   The small principality between Switzerland and Austria is renowned for the secrecy that shrouds the financial affairs of rich investors.

It was once considered to be among the most secretive jurisdictions in the world.  Governments are particularly keen to trace and recover unpaid revenues as tax receipts fall in the global recession.

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Jan 14, 2014

Ssangyong's Korean Bankruptcy/Rehabilitation Proceeding & Many other Korean-based Construction Companies

Ssangyong Engineering & Construction filed for rehabilitation proceeding based on the Korean Debtor Rehabilitation and Bankruptcy Act.  The Act requires, among other things for:

1.  The Receiver to submit to the court a Creditor List;
2.  For the court to determine that the company's "going concern" value is greater than the "liquidation" value of the company;
3.  The Receiver to submit to the court a Rehabilitation Plan;
4.  The Rehabilitation Plan to be approved by 2/3 of the unsecured and 3/4 of the secured claims.

This procedure is similar to Chapter 11 in the United States.  

We have a few cases that are proving to be very difficult to obtain approval of both secured and unsecured creditors.  Often, the Rehab Plan is, only, approved after litigation, prosecutions and/or one creditor gobbling up a good deal of the other debts.   This case will be interesting. 

For the purpose of full disclosure we are working on a few cases related to the rehabilitation of construction and other companies.  My friend over at the Kimchi Law Blog motivated this post.
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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 13, 2014

Protecting your Companies Reputation in China: Counterfeit Goods

You know that I like to write about the various copied products that are made here in the Jungle.  I usually find things like copy salt and eggs to be humorous, but, in this case it is not funny as the lives of civilians and military personnel are on the line when counterfeit parts are sold to the U.S. and other armed forces.

After a year long investigation, where we advised the Senate Armed Services Committee on the real problem with counterfeit parts and the harsh reality of counterfeiting in China, the SASC released its report which you can find a synopsis here with the full report being available on the SASC website soon.

While one of the objectives is to place the blame squarely on the counterfeiters in China, there is little legal recourse available and given that most companies that purchase electronic components from China know that many of the parts are counterfeit, they look the other way and pass the parts up the Defense Department supply chain.  Up until now, that hasn’t been much of an issue and the reward far outweighed the risk.

Of course cost is an issue when there are four or five companies involved in the supply chain and each one has to make some margin on the product.  However, an easy solution, to this problem, would be to ensure that the parts are inspected by a reputable third party electronic component inspector, such as the non-Chinese owned Whitehorse Laboratories who has been warning everyone of this problem for years and was also involved in advising the SASC on this matter.

As the Justice Department and various enforcement divisions of the Defense Department and Department of Homeland Security begin investigating defense contractors and component suppliers and this has already begun and will be ramped up considerably in the near future, the simple solution is to test the components and have agreements in English and Chinese with the Chinese suppliers that provides for recourse.

The penalties for supplying counterfeit parts are set forth in the recent National Defense Authorization Act which you can find a summary here and investigation and enforcement has begun.
While the SASC and the State Department will continue to pressure China to wipe out counterfeiters, it will not happen.  Counterfeiting and copying is woven into their DNA, especially in certain parts of Guangdong Province where even the late Chairman Mao had a difficult time trying to control the leaders who ruled this region.

So, what can you do so that your company will not be investigated and fined.
1.  Have a sample of the parts tested by an independent and professional laboratory.
2.  Purchase from reputable vendors in China and have written agreements with them which could be as simple as purchase order terms or terms of purchase on your website in English and Chinese.
3.  Keep records of the efforts you make to ensure that you are not passing on counterfeit parts.
4.  Don’t trust your Chinese employees to handle any of the above and if you do, supervise, supervise, supervise.
More on this as it develops.  Be vigilant.
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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 12, 2014

Failed Korean Corporate Compliance and the Role of Attorneys in Korea

The following article appeared in the Korea Times on May 6, 2011.

The National Assembly of Korea, recently, voted in favor of a bill that requires listed companies with large market capitalizations to establish independent compliance support offices. Business organizations strongly opposed the bill.

The details of the system are not yet known, since many key aspects of the bill have been delegated to the president through an enforcement ordinance.

The surface purpose of the bill is to improve companies compliance with Korean law, thus, upgrading the image of Korean companies domestically and abroad. Some scholars have noted that transparency and other corporate governance issues, within Korean companies, have led to the “Korea discount” and that the discount may be overcome with more active compliance departments.

Additionally, fear has spread that an Enron-type scandal may hit Korea in the future and that the implementation of this system may contribute to lessening the risk. An Enron-type scandal, in Korea, may have a more far-reaching affect, since the scandal may contribute to a market-wide sell-off by foreign shareholders.

The greatest risk, according to many foreigners, is the accuracy of corporate information and transparency and a large local scandal could lead to a spreading of fear and a collapse of the markets.

The effectiveness of implementation of the system has good support in the financial service sector in Korea. The structure of the bill is based on the successful implementation of a like compliance system for financial institutions.

After the 1997-98 Asian currency crisis, the International Monetary Fund (IMF) and others pushed for the implementation of the system to financial institutions in order to avoid the potential need for another IMF bailout. Many have considered the implementation of the system a success that may have contributed to Korean financial institutions survival during the recent financial crisis.

Critics, however, have noted that the purpose of the bill is, in reality, to accommodate attorneys who have recently found it difficult to secure decent employment. Of course, this is one of the motivations for the bill and as noted is not the only.

Many of the details will be in the pudding ― the presidential enforcement ordinance. For example, we are not yet certain, how the independence of the compliance support officer will be guaranteed, what the qualification will be to qualify as a compliance support officer, the effectiveness of the system on the respective company, and how the relationship between the officer and the in-house legal team will affect the effectiveness of the system.

These issues will be resolved in the near future, since the bill is set to be promulgated in April 2012.

The matter seems to be more of an issue of “who shall hang the bell on the cat’s neck.” If lawyers are not going to bring to light corporate compliance issues and shareholders are unable or unwilling, who will be able to correct these Korean corporate realities?

It seems rational to consider that those with legal training working in more broad areas of society will increase the capabilities of organizations to comply with law, thus, moving Korea closer to a most developed nation status.

Therefore, the system seems to have little chance of creating any downsides with a large potential for upsides. The opposition of the companies is on the surface based only on expense, but seems to be based on much more. Companies of the size needed to trigger the law will never see or feel their burden in their large corporate budgets. The expense will likely be less than the expense of the bonus of any C level employee.

Thus, the issue seems to be more about corporations not wanting another “mother-in-law” meddling around in their corporate moat protected castles.

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SeanHayes@ipglegal.com

Jan 8, 2014

Doing Business in Shenzhen, China and the Pearl River Delta

Shenzhen, China is approximately 80 kilometers (50 miles for those of us who have trouble with the metric system) north of Hong Kong.  It used to be a fishing village, and while there are locals and native Shenzheners, they are few as everyone seems to be from somewhere else.   Shenzhen was established as a “Special Economic Zone” (“SEZ”) as part of China’s reform policies in the late 70′s and early 80′s.

Anyway, for the last  decade I have been here in Shenzhen and I consider it my second home.  It is a beautiful city and I particularly like the tropical climate and proximity to the sea.  As an SEZ, Shenzhen is filled with techonology, consumer electronics and other companies and to me is the Silicon Valley of China.

We have about 12 million people here, but I tend to believe that it’s considerably more as I always have to wait in line for everything.  This article just in from the China Daily concerning Shenzhen and it’s expansion.

Remember what we have been telling you about the plans for Free Trade in the Pearl River Delta and loosening of forex rules in the region.  This is big news and another example of the methodical and strategic approach taken by the government here to continue to make the PRD into a global economic power.
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Shenzhen SEZ aims to be 5 times bigger

By Chen Hong in Shenzhen, Joey Kwok in Hong Kong and Xin Dingding in Beijing (China Daily)
Updated: 2009-05-22 07:40

The Shenzhen government has drawn up a blueprint to expand the country’s first special economic zone (SEZ) to the whole city – as a restructuring strategy to increase its competitiveness amid the economic downturn.

“Legislators are working on the proposal to expand the scope of Shenzhen SEZ to the whole city, but it needs the approval of the State Council,” an official with the legislative affairs office of the Shenzhen People’s Congress, who did not want to be identified, told China Daily Thursday.  Earlier this month, the State Council added the city to the list of two more areas to pilot comprehensive reforms. But “important reforms regarding the scope of the SEZ, land and finance should get approval case by case,” the document specifies.

If the proposal is approved, Bao’an and Longgang districts, which make up four-fifths of the city’s land mass, will become part of the SEZ, whose area will swell from the current 395.81 sq km to more than 1,900 sq km.

“In the face of the economic downturn, the SEZ has been retooling its strategy to bring in more high-tech enterprises in place of labor-intensive industries.  The economic restructuring will sharpen its competitive edge,” explained Cheng Jiansan, an economist with the Guangdong Academy of Social Sciences.
In the land-strapped SEZ, where the government also needs to develop commercial facilities and green areas for residents, IT enterprises like Huawei have hardly any room for expansion, he said.  Huawei is moving its production base to Longgang district, which is not yet part of the SEZ. “But, if in the future, Longgang district becomes part of the SEZ, IT companies like Huawei will be able to enjoy preferential policies like lower income tax,” he said.

The city can also have balanced development with the removal of long-existing policy and legal differences inside and outside the SEZ, scholars said.  Bao’an and Longgang are separated from the four districts in the SEZ by a 100-km-long border although in recent years, the government has allowed entry to the SEZ with special passports.

But “if the merger is approved, the two districts would enjoy the same legislation, same urban planning and same infrastructure. The integration will allow the city to achieve balanced development,” said Guo Wanda, vice-president of the China Development Institute, a government think tank.

For example, people living outside the SEZ cannot enjoy the superior education and healthcare resources inside the zone.  Also, the Shenzhen government tended to be partial to the SEZ, Cheng said. Likewise, the infrastructure and industrial planning in the two districts were often not in tune with the SEZ.
Cheng said the Zhuhai and Shantou SEZs face a similar problem and “if Shenzhen’s proposal for expansion is approved, I believe Zhuhai will try to go down the same path”.

Linus Yip, strategist at Hong Kong-based First Shanghai Securities, believes the expansion of Shenzhen SEZ will also benefit development in the Pearl River Delta region (PRD).  Yip also said it is just a matter of time for Shenzhen to further expand and combine with Hong Kong. “The two cities are, at the moment, quite closely correlated in terms of economic activities, and it will be irresistible for them to merge,” Yip said, adding a merger would bring synergy.

Since 1980, the government has set up five SEZs (Shenzhen, Zhuhai and Shantou in Guangdong province, Xiamen in Fujian province, and Hainan Island).  In 2005 and 2006, the State Council designated Shanghai Pudong and Tianjin Binhai as comprehensive reform pilot areas, with Shenzhen added to the list this month.  On May 6, Shanghai Pudong secured approval to expand by merging with Nanhui District, to facilitate its plan of becoming an international financial and shipping center.

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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 7, 2014

Why do Many Multinational Companies Fail in the Korean Market?

The Chosun Ilbo posted an interesting article on why some multinational companies fail in the Korean market.  The article notes, in part, that:
Struggling in Korea. Swiss multinational Nestle has achieved stellar performance in global sales of its mainstay coffee and powdered milk. Not so in Korea, where the market for coffee mix is worth around W1.3 trillion (US$1=W1,128). Nestle entered the Korean market in the 1980s with its Taster's Choice brand of instant coffee and maintained the No. 2 spot for 30 years. But it fell to third place in January this year after ceding the No. 2 spot to Namyang Dairy's popular French Café brand.
The gap between the No. 2 and 3 players grew wider with Nestle's market share plummeting to just 5 percent. In 2001, Nestle started selling its NAN baby formula products in Korea, but it pulled out altogether in 2008 after maintaining barely a 1 percent share of the market. Procter & Gamble accounted for 50 percent of the domestic market for sanitary napkins in 1995 through its popular Whisper brand. But it ceded the No. 1 spot to Yuhan Kimberly's White brand in 1999 and sank to No. 3 in 2010 after being beaten by LG Unicharm's Body Fit. The firm pulled out of the baby diaper market in Korea in 2007 due to lackluster sales of global bestseller Pampers. With Pantene shampoo and other labels, Procter & Gamble held the No. 2 spot in the 1990s but fell to No. 3 in 2008 with a market share of around 15 percent.
Even Unilever, which controlled the biggest share of the domestic market for body cleansers until 2006, now ranks No. 3 with only a 10-percent market share. Johnson & Johnson used to reign as the No. 1 player in the local market for baby and kid’s skincare products but was overtaken by Yuhan Kimberly in 2010.
Fickle Korean Tastes. The reason multinationals are having such a tough time here is because Korean consumers are notoriously picky and it takes too long for global behemoths to respond due to the long decision-making process from the Korean subsidiary up to headquarters. In the case of coffee mix, Korean manufacturers quickly adapted to changing conditions here, introducing a wide range of packaging options from just 10 packets to 50 per box to meet the needs of a growing number of single-person households.
Local coffee-mix makers also held taste tests every month to keep abreast of the preferences of consumers. "Foreign companies cannot change a flavor just for the Korean market," said one staffer with a foreign food manufacturer. When it comes to baby formula, U.S. and European manufacturers marketed products that are high in fat and carbohydrate according to the tastes of consumers in their home markets. But they failed to interest consumers here.
As shampoo, sanitary napkins and baby diapers containing traditional herbal ingredients began to take off in Korea, foreign products declined in popularity. "Sanitary napkins containing traditional herbal ingredients, which account for 30 percent of LG Unicharm's sales, were the reason why we were able to rise to the No. 2 spot despite being a latecomer," a company staffer said.
In the shampoo and rinse market, AmorePacific's Ryeo, which contains traditional herbal ingredients, became a huge hit propelling the company to the No. 1 spot from No. 3. "Companies that give consumers opportunities to sample their products see their daily sales triple or more, and when it comes to detergents, consumers flock to products that offer complimentary samples.
But foreign companies are very passive when it comes to such marketing tactics," said a staffer with a supermarket chain.
What do you think?
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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 5, 2014

Korean Intellectual Property Theft Enforcement/Monitoring Program by IPG Legal is now Flat-Fee Billed

Because of an increase in interest from clients in flat-services, we have created a Flat-Fee Billed IP Theft Enforcement & Monitoring Program for our Korea & China offices.  As you know, most lawyers charge based on time even if they are not telling you they are.  We all calculate services based on time.  Thus, we developed this fee scale based, primarily, on the following factors:

1.  Geographical Scope of the IP Monitoring;
2.  Number of Cease & Desist Letters Mailed;
3.  If the IP Theft will be Reported to the Prosecution; and
4.  If a Civil Suit is Required to be Filed.

We are utilizing the same group of retired Korean judges, prosecutors and attorneys for this work, in Korea, thus, the same aggressive and proactive approach is offered.  The, only, difference is you will no longer receive an invoice based on hours docked.  Nothing changes, but the format of the bill.

You will, still, receive the Monthly Monitoring Report, you will Still Receive the Monthly Cease & Desist Result Report and you will still receive the, normal, updates for the criminal and civil filings.

New clients can contact Sean Hayes.  The active clients will receive the specifics of the Program via email within the next few weeks.  Obviously, all clients can opt to be billed hourly.   We are very curious to see how many clients will choose, still, to be billed hourly.

Additionally, we have developed for the New Year a few more flat-fee programs, including, a Flat-Fee Billed Corporate Secretarial Service that will be announced soon.  We find that too many law firms are charging way too high fees for these basic clerical services, thus, we are offering these services based on a nominal quarterly fee plus translation expenses as a service to our present clients.  Now, no need to forgo the use of a law firm in favor of corporate secretarial services companies, bubmusas (legal scriveners) and accountants out of cost concerns.
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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 2, 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

Corporate Governance of Korea Reported as One of the Worst

What is the cause of the Korean discount? An economist article hits the nail right on the head.
So what is the source of the “Korea discount”, which means that the KOSPI has a forward price-to-earnings ratio of under ten, below most other Asian stockmarkets (see chart)? There are a few possibilities. The national economic model is still built on exports, often in highly cyclical industries such as shipbuilding. The capital structure of South Korean firms has historically been debt-heavy.
In this section

But the prime cause of the discount is more likely to be poor corporate governance at the family-run chaebol conglomerates that dominate the economy. Nefarious schemes to pass on control to sons, avoid taxes and exploit company assets for the benefit of family members are widely discussed in private. They are also lambasted abroad: a 2010 survey by CLSA, a broker, placed the country third-from-bottom in Asia on governance, ahead of only Indonesia and the Philippines.  . .
Other allegations are even more serious. On February 3rd, 2012 Hanwha Group   announced in a regulatory filing that its chairman, Kim Seung-yeon, was among several officials being investigated for alleged embezzlement. Chey Tae-won, the chairman of SK Group, was indicted in January over the disappearance of 99 billion won from company coffers, as part of a scheme allegedly planned by his brother to cover futures-trading losses. Mr Chey denies the charges. The Federation of Korean Industries, a chaebol pressure group, has urged prosecutors to go easy on Mr Chey. They say that punishing him would harm “entrepreneurial spirit”.

Mr Chey has had previous scrapes, having been convicted of a billion-dollar accounting fraud in 2003. He eventually received a full pardon from the president and was also chosen to represent the nation during the 2010 G20 summit, leading a meeting of international chief executives. Lee Kun-hee, the chairman of Samsung, received a similar pardon in 2009, having been found guilty of tax evasion, and was picked to front South Korea’s bid for the 2018 Winter Olympics. Yujeon mujwai, mujeon yujwai—an old expression meaning “money = innocence, no money = guilt”—is enjoying a resurgence in popularity. 
What do you think?

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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.

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