European Chamber of Commerce in Korea (ECCK) Chairperson Philippe Van Hoof, left, and President Stefan Ernst, sixth from left, display the 2024 white paper with European Union Ambassador to Korea Maria Castillo Fernandez, fifth from left, and the chamber's committee chairs during a press conference at the Korea Press Center in Seoul, Thursday. Courtesy of ECCK

European companies doing business in Korea warned that a law punishing CEOs for serious workplace accidents could deter foreign direct investments (FDI) and urged the Korean government to ensure clarity and predictability in the strict workplace safety regulations.

During a press conference on the publication of its 2024 white paper, Thursday, European Chamber of Commerce in Korea (ECCK) President Stefan Ernst emphasized the need for a more practical approach to the Serious Accidents Punishment Act (SAPA). He disclosed that 73 regulatory reform proposals had been submitted to the Korean government this year.

"One key area of our concern is SAPA, which could have far-reaching effects across all industries," he said. "Addressing these issues is vital to maintaining Korea's strong FDI performance and creating a supportive environment for investment in new innovation."

Ernst added that the law has discouraged foreign professionals from coming to Korea.

Under SAPA, which took effect in January 2022 and was extended to include small companies this year, CEOs can face up to one year in prison or a maximum fine of 1 billion won ($752,000) for major workplace accidents, including those resulting in deaths.

Korean business associations and foreign chambers here have expressed concerns about the law's potential negative impact on the economy, urging the government to stop holding CEOs liable for industrial accidents.

ECCK pointed out that SAPA is much stronger than the U.K.'s Corporate Manslaughter Act, which served as a model, as the Korean law imposes quadruple sanctions — fines for companies, individual punishment of managers, administrative sanctions and punitive damages — while the British law only stipulates fines for corporations without provisions for physical punishment.

The chamber also noted that the uniform designation of the "responsible managing person" for punishment, as outlined in the government's non-binding explanatory notes — which lack details in SAPA's enforcement decree — creates room for arbitrary enforcement by investigative agencies.

"If maintaining SAPA is inevitable, there is an urgent need to improve the relevant legal system to secure its consistency with the Occupational Safety and Health Act and to clarify punishment requirements so that punishment is proportional to the degree of violation of duties by the responsible managing person," the ECCK said in the white paper.

"We recommend clarifying the subject of obligations and the specific contents of the obligations."

During the press conference, European Union Ambassador to Korea Maria Castillo Fernandez emphasized the importance of addressing the commercial issues outlined in the ECCK white paper, especially as the fundamentals of the global economy and economic security are undergoing significant changes.

The ambassador highlighted some examples where she would like to see more progress, including financial services, renewable energy, automotive industry, alcoholic beverages and innovative health care.

ECCK Chairperson Philippe Van Hoof, who is also the country manager of ING Korea, emphasized that a management system based on international standards not only enables efficient regulation but also promotes global competitiveness.

Last year, the ECCK presented 114 recommendations in its 2023 white paper.

After discussions with the foreign investment ombudsman of the Korea Trade-Investment Promotion Agency (KOTRA), 37 percent of the recommendations receive positive reviews from relevant government departments, according to the ECCK.