"Flexible Response to Economic Conditions"
The Ministry of Justice is pushing for an amendment to the Commercial Act to adjust the statutory interest rate applied to debts arising from commercial transactions according to interest rates, inflation, and other factors.
On the 16th, the Ministry of Justice announced a draft partial amendment to the Commercial Act, which includes the introduction of a variable interest rate system for statutory interest rates.
Article 54 of the current Commercial Act stipulates the statutory interest rate for debts arising from commercial transactions at 6% per annum. The Ministry of Justice explained the purpose of the amendment, stating, "Market interest rates continuously fluctuate, but the statutory interest rate has remained fixed since the enforcement of the Civil Act and Commercial Act," and added, "There are criticisms that the interests of creditors and debtors are not properly considered due to the difference between the statutory interest rate and market interest rates."
Furthermore, it added, "We aim to allow the statutory interest rate to change according to economic conditions such as interest rates and inflation, to respond flexibly to economic situations and minimize unreasonable gains or losses for creditors and debtors."
Earlier in February, the Ministry of Justice also announced a draft amendment to the Civil Act, which includes provisions for determining the statutory interest rate for claims by presidential decree, considering the Bank of Korea’s base rate, market interest rates, and inflation rate.
In this regard, the Constitutional Court recently ruled by a 7 to 1 majority that the current Civil Act (5%) and Commercial Act, which fix the statutory interest rate, do not violate the Constitution. However, Justice Kim Hyung-doo dissented, stating, "There is a need to introduce a variable statutory interest rate system," and argued that "the current fixed interest rate system is unconstitutional."
The amendment to the Commercial Act also includes the establishment of the right to claim supplementary performance. The right to claim supplementary performance refers to the right to demand complete performance when the debtor has incompletely fulfilled their obligation. The Ministry of Justice explained, "Through the amendment of the Civil Act, we intend to establish the right to claim supplementary performance as a remedy for buyers, and the purpose is to reflect this remedy in the Commercial Act."
The Ministry of Justice will collect opinions on the amendment draft until the 26th of next month.
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