Financial Supervisory Service Enacts 'Legal Counsel and Litigation Regulations'
Banks Appoint 5 Law Firms Each, FSS Only 2
Financial Firms Leading with Capital Helpless in Court
Joint Litigation Fees Set at 3 to 20 Million KRW per Case
Up to 100 Million KRW Compensation with FSS Chief Approval
[Asia Economy Reporter Song Seung-seop] Financial authorities are strengthening their own legal capabilities. In response to private financial companies hiring ultra-luxury law firms, they have expanded the limits on litigation fees and increased the number of internal legal advisory committee members. This policy is interpreted as reflecting the Financial Supervisory Service's (FSS) sense of crisis over losing legal battles.
According to the financial sector on the 5th, the Financial Supervisory Service recently newly established the "Regulations on Legal Counsel and Litigation Work." It integrated previously scattered related regulations, and in the process, raised the compensation level for litigation agents. This means it has become easier to hire law firms to represent the FSS in court when legal disputes arise with financial companies.
The compensation for FSS litigation agents is set within 40 million KRW. However, the regulations allow an increase of up to 50% considering the nature, content, complexity of the case, and the impact on the FSS’s supervision and inspection. Additionally, for joint lawsuits with similar issues, if there are 10 or fewer cases, 20 million KRW per case will be paid; for 10 to 30 cases, 5 million KRW each; and for more than 30 cases, 3 million KRW each. Furthermore, if the lawsuit has a very significant impact on the FSS, it is specified that compensation up to 100 million KRW can be paid with the approval of the FSS Commissioner.
Although litigation costs will increase, a clause has been added for the Financial Services Commission (FSC) and the FSS to share litigation expenses. According to a newly announced directive by the FSC last month, if a disciplinary case requested by the FSS to the FSC leads to litigation, the case acceptance fees can be shared. The method and ratio of sharing will be determined through consultation between the FSC Chairman and the FSS Commissioner.
To Prevent Decline in Status... "The FSS Must Win Even in Court"
In addition, the FSC has decided to increase the number of internal legal advisory committee members from 10 to 15. Legal advisory committee members at the FSC provide professional legal advice on various statutory interpretations.
Behind this decision lies the reality that financial authorities are facing difficulties in various legal disputes. Financial companies with strong capital usually hire three to five large law firms for legal disputes. Sometimes there are so many lawyers that they cannot all sit at the plaintiff or defendant tables and watch the trial from the gallery. When cases are complex and involve multiple issues, law firms divide the work and argue, which is advantageous.
On the other hand, due to budget constraints, the FSS often hires only two law firms even for important cases. Recently, due to a shortage of personnel, there have been situations where preparing materials was rushed or meeting the trial dates requested by the judge was difficult, causing inconvenience. An FSS official said, "Although it may seem like we are in a dominant position over financial companies, it is different in court," and lamented, "We inevitably lose to financial companies that form legal teams backed by capital."
Concerns are growing that as legal disputes in the financial sector become increasingly complex and the financial authorities lose lawsuits, their status will decline. The FSS faces cases involving incomplete sales or legal lawsuits linked to CEOs, so losing could cause significant damage. Another FSS official explained, "Adjusting the compensation limits compared to before ultimately means the intention to win the next lawsuit."
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