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Dropping the appeal and the question of breach of trust

Published: 21 Nov. 2025, 00:03

Kim Chang-woo

The author is a senior economic reporter at the JoongAng Ilbo.

Prime Minister Kim Min-seok announced on Tuesday that Korea’s liability to pay roughly 400 billion won to the U.S. private equity fund Lone Star had “fully disappeared” following the tribunal decision. He called it a “major achievement” that protected public finances and taxpayer money.

Han Dong-hoon, former chair of the People Power Party (PPP) and justice minister when the cancellation suit was filed in 2022, pushed back. He argued that those who had opposed filing the suit now owed the public an apology rather than trying to “claim credit after the fact.”

Prime Minister Kim Min-seok and Justice Minister Jung Sung-ho hold an emergency briefing at the Government Complex Seoul in Jongno District on Nov. 18 regarding Korea’s request to nullify the Lone Star dispute ruling. [NEWS1]

Song Ki-ho, now presidential secretary for economic security and then a member of Lawyers for a Democratic Society who had led Freedom of Information efforts on the Lone Star case, also criticized the litigation strategy at the time. He argued that the odds of nullifying the ruling were “close to zero” and that a review process lasting about three years would only accumulate hundreds of billions of won in compound interest. The Democratic Party (DP) accused the Ministry of Justice of “groundless confidence,” warning that officials would “become criminals in history” and asking whether Han would “pay the accrued interest” if the state lost.

Han countered that some in the DP had even raised the possibility that filing the suit itself would constitute breach of trust, and said he had reassured ministry staff by saying he would take responsibility and “go to prison” if necessary.

Would Han have faced breach of trust charges had the government lost the suit? Probably not.

Korea recognizes breach of trust under both the Criminal Act, enacted in 1953, and a special clause in the Commercial Act added in 1962. The basic criminal breach-of-trust provision applies when a person entrusted with managing another’s affairs violates that duty and causes harm, punishable by up to five years in prison. When linked to occupational duties, it becomes an occupational breach of trust, with a maximum of 10 years. If the amount involved exceeds 5 billion won ($3.4 million), sentencing follows the Act on the Aggravated Punishment of Specific Economic Crimes, with a minimum of three years; exceeding 50 billion won raises that minimum to five years or even life imprisonment.

The special breach-of-trust clause in the Commercial Act applies only when corporate management intentionally harms company assets and is rarely invoked, making it largely symbolic.

Occupational breach of trust can apply even when a business decision was made in good faith if it ultimately harms the company. That means prosecutors, through retrospective judgment, can send executives to prison. The risk grew this July when revisions to the Commercial Act expanded directors’ fiduciary duties to shareholders.

Common-law jurisdictions such as the United States and Britain do not recognize breach of trust as a standalone criminal offense. Wrongdoing is handled through fraud charges or civil shareholder litigation. Countries in the civil-law tradition, such as Germany and Japan, punish breach of trust only when a specific fiduciary relationship exists and the intent to inflict harm is proven. Korea’s Supreme Court also warned in a 2011 ruling that broad interpretations could allow state criminal power to violate contractual freedom, urging narrow application.

When the DP recently proposed abolishing breach-of-trust charges, the PPP rejected the idea, calling it an attempt to shield President Lee Jae Myung. The stance is paradoxically aligned with civic groups like the People’s Solidarity for Participatory Democracy, which also opposes abolition. Business groups, including the Korea Enterprises Federation and the Korea Federation of SMEs, welcomed the proposal, noting that prosecutors have often criminalized business judgments that should be settled as civil disputes.

The PPP is not embracing concerns about abuse of power by controlling shareholders. Rather, it is reacting to the Daejang-dong case. Late last month, a lower court ruled that profits from land development that should have returned to the public instead flowed to private developers, sentencing key figures to four to eight years in prison for occupational breach of trust. If breach of trust is abolished, an appellate court could simply dismiss the case and avoid ruling on guilt, allowing those convicted to walk free and shielding President Lee Jae Myung, who was mayor of Seongnam at the time.

Then-Justice Minister Han Dong-hoon at the National Assembly on Dec. 21, 2023. [YONHAP]

But is preserving breach-of-trust law justified for that reason alone? As a sitting president and constitutional officeholder, Lee will serve out his term regardless of the law’s fate. Calls to preserve the statute risk being reduced to a desire to punish “private citizen Lee” after he leaves office. That leaves the PPP unable to answer DP spokesperson Baek Seung-ah’s criticism that it is suffering “collective amnesia” despite years of opposing excessive criminalization.

If the concern is specific pending cases, lawmakers can draft substitute legislation or stipulate that abolishment does not apply retroactively. If the DP pushes forward without negotiation, then the public can watch the Daejang-dong defendants walk free despite securing billions in profit — and hand down political judgment themselves.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.