Boardrooms to Barracks: The Implications of Yoon Suk Yeol’s (Failed) Martial Law on Business and Law
On the 3rd of December, 2024, South Korean President Yoon Suk Yeol declared martial law in a surprise late-night TV announcement. The 63-year-old leader justified the move as a measure to protect the country from “North Korea’s communist forces” and to “eliminate anti-state elements.” However, it was lifted just three hours later as lawmakers voted to block the move.[1] This article considers three legal impacts of Yoon’s failed martial law concerning businesses.
The Background
The former prosecutor’s proclamation followed various scandals, including allegations of stock manipulation and a bribery fiasco involving the First Lady accepting a Dior bag.[2] Some have even attributed the martial law declaration to Yoon’s increasing insecurity over his political unpopularity and instability.[3]
Martial law refers to temporary rule by military authorities during civil unrest, usually involving suspension of existing law, ordinary government administration and civil liberties.[4] South Korea last experienced martial law in 1979 following the assassination of President Park Chung-Hee, which led to the suppression of pro-democracy movements and widespread human rights abuses.[5]
In his televised announcement, Yoon accused the leftwing opposition majority in the South Korean parliament of paralysing state activities and harbouring North Korean sympathies. Following this decree, South Korean troops stormed the National Assembly, clashing with protesters and legislative aides. Lawmakers, some being seen clambering over walls of the legislature building, eventually voted to overturn the declaration, prompting Yoon to withdraw the ruling.[6]
The legal impacts
Business Restructuring and Securities law
The failed martial law is likely to prompt businesses, both domestic and abroad, to restructure their operations in South Korea. Whilst brief, Yoon’s martial law will likely affect investor sentiment and confidence in South Korea and the willingness of consumers to spend.[7] Following the declaration, for example, Korean shares fell 2% on the day of the fiasco, with chipmakers Samsung Electronics down 1.31%, suggesting shaky investor confidence in South Korean assets following political instability.[8]
The lack of capital due to reduced investments and consumption may push businesses to restructure by closing South Korean branches or selling South Korean stocks and other assets. Investors may also choose to divest over doubts about the security of their capital in South Korea. In the Ukraine-Russia conflict, for instance, the OECD points out, "A considerable number of companies have taken steps towards divesting their operations in Russia.”[9] Divesting companies would need legal assistance to navigate South Korean dissolution procedures – such as those detailed in the Korean Commercial Act[10] – to facilitate withdrawal and asset sale regulations – like the Financial Investment Services and Capital Markets Act.[11][12]
Employment and disputes
The three-hour fiasco is also likely to impact employment relations significantly. Following the event, one of South Korea’s largest umbrella unions, the Korean Confederation of Trade Unions, declared it would go on general strike indefinitely, demanding Yoon’s immediate resignation.[13] Now that the South Korean National Assembly has voted to impeach Yoon,[14] workers might return to work. However, companies may need assistance handling the fallout from these strikes prompted by martial law.
Some companies may dismiss workers seen to have unjustifiably avoided work by striking. These companies might need assistance navigating wrongful and unlawful dismissal in Korea, familiarising themselves with laws such as the Labor Standards Act.[15] On the employee or trade union side, there might be a need for assistance in conducting legal proceedings against employers. They may argue that dismissals following the strikes are unlawful or wrongful as union activities are protected under the Labor Standards Act or because the dismissals do not have ‘justifiable cause.’[16]
Regulatory advisory and corporate strategy
Following the lifting of martial law, South Korea’s finance ministry stated that it was ready to release “unlimited” liquidity into financial markets, responding to the event’s impact on the value of the South Korean won.[17] To benefit from this state aid, businesses would need legal assistance in applying for state aid and advice on structuring the terms and conditions of state-backed loans and grants.
Moreover, companies will need to engage in ‘horizon scanning’, analysing potential risks that result from the political instability following martial law. Horizon scanning is particularly crucial after the National Assembly voted to impeach President Yoon.[18] Increased doubts over ‘who is in charge’[19] and the potential impacts of a successful impeachment will require companies to adapt their strategies and policies to mitigate the negative impacts of the failed martial law.
Conclusion
President Yoon’s brief but tense imposition of martial law sent shockwaves through South Korea’s business and legal environment, exposing underlying political instabilities, and raising doubts about the commercial suitability of Asia’s fourth-largest economy. The event’s impacts will likely be experienced in areas such as corporate restructuring and securities law, employment and regulation. Businesses operating with commercial operations in South Korea will need to be adaptable to navigate the political, and likely legal, uncertainty in the coming months.
[1] Amy Walker, ‘South Korean president lifts martial law after MPs block it’ (BBC News, 3 December 2024) <South Korea President Yoon Suk Yeol lifts martial law after MPs block it - BBC News> accessed 4 December 2024.
[2] Ibid.
[3] Koh Ewe and Jake Kwon, ‘Yoon Suk Yeol, South Korea’s scandal-hit president who declared martial law’ (BBC News, 4 December 2024) <Yoon Suk Yeol: South Korea's scandal-hit president who declared martial law - BBC News> accessed 10 December 2024.
[4] The Business Times, ‘What is martial law, and how does it affect South Korea’s business and economic activity?’ (The Business Times, 4 December, 2024) <What is martial law, and how does it affect South Korea’s business and economic activity?> accessed 4 December 2024 .
[5] Chun In-bum, ‘Democracy under pressure: unpacking fears of martial law in South Korea’ (The Korea Times, 4 September, 2024) <Democracy under pressure: unpacking fears of martial law in South Korea - The Korea Times> accessed 10 December 2024.
[6] (n1).
[7] (n4).
[8] Cynthia Kim, ‘South Korea rushes to stabilise markets after Yoon’s martial law bid’ (Reuters, 4 December 2024) <South Korea rushes to stabilise markets after Yoon's martial law bid | Reuters> accessed 10 December 2024
[9] OECD, ‘International investment implications of Russia’s war against Ukraine’ (OECD, 14 April 2022) <https://doi.org/10.1787/a24af3d7-en.> accessed 19 December 2024.
[10] The Korean Commercial Act (상법) (2010).
[11] The Financial Investment Services and Capital Markets Act (자본시장과 금융투자업에 관한 법률) (2017).
[12] Ask Korea Law, ‘Process to Withdraw from Korean Market: Company Dissolution and Liquidation in Korea’ <Process to Withdraw from Korean Market: Company Dissolution and Liquidation in Korea - Ask Korea Law’> accessed 10 December 2024.
[13] Choe Sang-Hun, John Yoon, Jin Yu Young and Victoria Kim, ‘Fury in South Korea After President Imposes Martial Law’ (The New York Times, 6 December 2024) <Fury in South Korea After President Imposes Martial Law - The New York Times> accessed 10 December 2024.
[14] Jean Mackenzie, Jake Kwon and Leehyun Choi, ‘South Korea’s President Yoon suspended after MPs vote to impeach him’ (BBC News, 14 December 2024) <South Korea latest: South Korea's President Yoon suspended after MPs vote to impeach him - BBC News> accessed 19 December 2024.
[15] Labor Standards Act (2012).
[16] Ibid. Article 23(1).
[17] (n8).
[18] (n14).
[19] Christian Davies, ‘No one knows who is in charge’: South Korea’s president clings to office’ (Financial Times, 10 December 2024) <‘No one knows who is in charge’: South Korea’s president clings to office> accessed 10 December 2024.
