Product Liability 2009 - Arnold & Porter LLP

Lee & Ko Korea
Under the FAC, consumers may request compensation for damages
due to a defective product to the Korea Consumer Agency (“KCA”)
(Article 55(1) of the FAC), which is created pursuant to the FAC.
Upon receiving the request, the Head of the KCA may recommend
the parties of a claim for the settlements of the claim (Article 57 of
the FAC), or if the request is unsuitable to be settled by KCA, then
the Head of the KCA may discontinue the settlement process of the
case (Article 55(4) of the FAC). If the concerned parties fail to
reach an agreement by recommended conciliation of the KCA, then
the party or the Head of the KCA may request a mediation of
dispute to the Consumer Dispute Mediation Commission
(“Mediation Commission”) of the KCA. When the Mediation
Commission receives a request for dispute mediation under the
FCA, it will complete the mediation process within 30 days
(Articles 65 and 66 of the FCA). When the mediation process is
completed, the Mediation Commission would promptly notify the
parties of the result of mediation without delay. Upon notification
of the results, the parties shall notify the Mediation Commission of
their intentions to accept the result within 15 days thereof,
otherwise, the parties will be considered to have accepted the result
of mediation. If the parties accept or are considered to have
accepted the result of mediation, then the Mediation Commission
will prepare an official record regarding the settlement of the
dispute in accordance with the result of mediation, which shall be
regarded to have the same legal effectiveness as final judgment
rendered by courts (Article 67 of the FAC). However, if the parties
have not accepted the result of mediation and make an objection to
the results within 15 days, then such result of mediation would have
no legal bearing on the parties.
1.3 Who bears responsibility for the fault/defect? The
manufacturer, the importer, the distributor, the “retail”
supplier or all of these?
Under the PLA, a manufacturer is strictly liable for its defective
product. The term manufacturer includes (i) a person that is
engaged in the business of manufacturing, processing or importing
any product, and (ii) a person who presents itself as a manufacturer,
processer or importer of such product by putting his name, firm
name, trademark or any other distinguishable feature on the
products or a person who puts any distinguishable feature on the
products, which makes that person mistaken for a manufacturer,
processer or importer of such product.
With respect to any product the manufacturer of which cannot be
identified, a person who, for profit, supplies it in a form of sale or
lease, etc. would be liable for damages by defective products, if, in
spite that he knows or would be able to know the identity of the
manufacturer or the person who has supplied it to himself, and he
fails to inform any injured person of said identity within a
reasonable period (Article 3(2) of the PLA). Also, where 2 or more
persons are liable for the same damage by defective products, they
would be liable jointly and severally (Article 5 of the PLA).
Further, any special agreement intended to exclude or limit any
liability for damage under the PLA would be null and void;
provided, that this would not apply to cases where a person who is
supplied with a product to be used for his own business concludes
such special agreement with respect to any damage to his business
property caused by the product (Article 6 of the PLA).
1.4 In what circumstances is there an obligation to recall
products, and in what way may a claim for failure to recall
be brought?
The PLA does not provide for provisions on recalls. However, the
ICLG TO: PRODUCT LIABILITY 2009
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FAC provides provisions on the duty to report, voluntary recalls,
etc. Specifically, if any enterpriser discovers the existence of any
serious defects in the manufacture, design or indication defect of
the products provided to the consumers which can or potentially can
cause danger to the lives, bodily harm or property damage, then the
enterpriser must promptly report the defects to the head of the
competent central governmental authorities (Article 47(1) of the
FAC). After such report, the enterpriser must recall, destroy or
repair the defective product, or exchange them for other products,
or refund their costs, or cease manufacturing, importing, or selling
of such products, or take other necessary measures accordingly
(Article 48 of the FAC).
In case the head of the central governmental authorities deems that
the products provided by an enterpriser can or potentially can cause
any danger to the safety of consumers’ lives, bodies, or damage to
property due to their defects, he may recommend or order the
enterpriser to recall, destroy or repair the defective product, or
exchange them for other products, or refund their costs, or prohibit
the manufacturing, importing, or selling of such products, or take
other necessary measures (Articles 49 and 50 of the FAC). The
failure or breach of the duty to report or comply with the order of
the head of the central governmental authorities carries with it
administrative and/or criminal penalties (please see question 1.5).
Aside from civil litigation cases involving damages arising out of
the enterpriser’s knowingly failure to recall the defective product, a
recall of defective products would be carried by voluntary recall or
by recommendation or order for recall by the central governmental
authorities under the FAC.
1.5 Do criminal sanctions apply to the supply of defective
products?
The PLA provides only for a civil cause of action for injured
persons and not criminal penalties. As abovementioned, the central
governmental authorities pursuant to the FAC is empowered to
recommend or order the enterpriser to recall, destroy or repair the
defective product, or exchange them for other products, or refund
their costs, or cease manufacturing, importing, or selling of such
products, or take other necessary measures. In case the enterpriser
violates an order by the central governmental authorities, the
enterpriser could be punished by imprisonment for not more than 3
years or by a fine not exceeding 50 million Korean Won. In case
the enterpriser breaches its duty to report or reports falsely, the
enterpriser could be punished by an administrative penalty not
exceeding 30 million Korean Won. (Articles 80, 84, 86 of the
FAC.)
2 Causation
2.1 Who has the burden of proving fault/defect and damage?
Under the PLA, the claimant bears the burden of proof of existence
of the defect in the product, damage, and causation between the
defect and damages, but does not bear the burden of proving that the
manufacturer had intentionally or negligently caused the defect. If
the manufacturer fails to prove any of the affirmative defences
provided for under the PLA (please see question 3.1), then the
manufacturer would be held liable for the defective product.
In case of tort claims under Article 750 of the Civil Act, the
claimant would bear the burden of proving that the manufacturer
had intentionally or negligently caused the defect as well as burden
of proving the defect, damage, and causation between the defect
and damages (please see question 1.1).
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