[Policy Pulse] "Not Reluctant Acceptance, But a Welcome Wish"

Widespread Anxiety Over Legal Revisions Across Industries
Concerns Grow Over Accelerating Corporate Exodus Amid Tariff Pressure

Not long ago, I attended an alumni gathering and was shocked by the complaints of a senior who works in the construction industry. After seven years of preparation for a mixed-use building project, the entire 170 billion won project financing (PF) loan fell through at the last minute because the construction company refused to guarantee completion. The chairman of the construction company reportedly refused to guarantee the PF loan, stating, "Due to the Yellow Envelope Act (the amendment to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act), we simply cannot bear the extended construction period and increased costs." Although I had anticipated some level of disputes between prime contractors and subcontractors, construction period extensions, and cost increases in the construction industry following the passage of the Yellow Envelope Act, encountering an actual case made the situation feel all the more bitter.

This is not limited to the construction industry. In major sectors of our economy such as automotive, shipbuilding, steel, and distribution, labor disputes that we have not seen before are occurring frequently. Production costs are rising, yet there are growing concerns that productivity may decline. In addition to the Yellow Envelope Act, there is the amendment to the Commercial Act that expands directors' fiduciary duties from the company to shareholders. Even as this amendment proves burdensome, even stricter amendments that further tighten the board of directors are steadily passing through the National Assembly.

It is undeniable that the labor sector has called for improvements in working conditions and a better quality of life for workers. However, labor policy and industrial policy must be balanced in a relationship of mutual tension. Only then can we keep the goose laying golden eggs alive, rather than killing it. If the goose dies, there will be no golden eggs. If corporate governance is shaken from the outside through amendments to the Commercial Act, and labor disputes persist on the inside, can entrepreneurs continue to do business in this country?

What is truly regrettable from a legal perspective is that, during the amendment process of the Commercial Act and the Yellow Envelope Act, the fundamental principles of modern law are repeatedly ignored. Modern law is fundamentally based on defining the rights and obligations between parties who have entered into direct contracts. Yet, the National Assembly now enacts laws that impose obligations or legal status based on vague concepts among parties with no contractual relationship. For example, imposing a duty of shareholder protection on directors who have no contractual relationship with shareholders, or imposing labor law obligations on prime contractors based on the ambiguous concept of "substantial control" over subcontractors. From the perspective of business owners, they have no choice but to rack their brains and seek ways to escape these risks.

Our government is currently engaged in a tug-of-war with the United States over the astronomical issue of $350 billion in investment in the US. It is also known that companies have investment plans exceeding $100 billion. I cannot help but wonder whether these investment commitments by companies are solely due to US tariff pressures. From the companies' perspective, might they not be seeking opportunities in more business-friendly overseas markets?

If these developments become reality, it is highly likely that profits earned by domestic companies abroad will be consumed by reinvestment overseas rather than flowing back into the country. Ultimately, this can only result in a reduction in domestic jobs and losses for workers. If the exodus of companies overseas accelerates, it will inevitably lead to the decline and downfall of South Korea.

A businessperson I met described the rush of overseas investment in response to US tariff pressure as "not a forced investment made with reluctance, but rather, from the company's perspective, an outcome that is not only welcome but even desired." In fact, this is what they have been hoping for. These days, those words do not sound hollow.

Lee Dongryul, Managing Partner at Lawbacks (former Chief Prosecutor of the Seoul Western District Prosecutors' Office)