Class Suits Coming, Group Concedes

Bowing to what it sees as the inevitable, the Korea Chamber of Commerce and Industry has backed away from its opposition to class action lawsuits by shareholders complaining of corporate malfeasance.

Instead, it plans to submit suggestions to the government to reduce the negative effects on companies from the proposed new law. Uhm Ki-woong, a chamber executive, said Monday that the chamber will hold a hearing on Thursday to reflect the opinions of its members before finalizing the suggestions and submitting them to government. Class action suits are those filed on behalf of a group of shareholders having an identical grievance.

"The class action suit law is only effective in a few developed countries like the United States and Japan, but both the ruling party and the opposition parties agreed on the introduction of the law, and the International Monetary Fund recommends it," the chamber official said. "We will accommodate the introduction of the law, but we will also push for supplementary measures to reduce the side effects."

An official at the Federation of Korean Industries said, "Officially, we oppose the introduction of the class action suit law, but since government is so firm on introducing the law, we will arrange some protective measures."

The chamber urged the government initially to limit the law to companies with 2 trillion won ($1.5 billion) in assets and expand the limit step by step, after carefully examining the effects of the law. The chamber also insisted that, to prevent abuse of the law and excessive filings, class action suits should be allowed only when a court rules that illegal actions, including manipulating stock prices, false financial reporting and book rigging has taken place. There are 106 domestic companies with at least 2 trillion won in assets, including 84 Korea Stock Exchange firms, eight on the Kosdaq and 14 that are unlisted.

Lee Ki-ho, senior presidential secretary for economic affairs, told heads of foreign companies Friday that such a law will soon be sent to the National Assembly, and is expected to go into force in March.

The new law is expected to have the biggest effect on companies with a large number of minority shareholders and those that 0are largely owned either by foreign investors or conglomerates. These groups have often been targets of criticism from civic groups about transparency in management.

by Hong Seung-il