Class Action Scarcity: An Empirical Analysis of the Securities Class Action in Korea

Abstract

Class actions, originally developed in the United States, have recently spread internationally. Not every country that has emulated the US’s style of class actions has seen the class action tool being frequently used. Korea, one of the civil law countries that adopted a US-style class action in securities law more than 10 years ago, has a securities class action that serves as an excellent example of a legal transplant that is underutilized. Over the last 13 years since the Securities-Related Class Action Act (‘the SCAA’) was enacted in Korea in 2004, only 10 class action suits have been filed. Instead, securities damage suits in the form of non-class actions (‘securities damage suits’) are more frequently used in Korea. In this article, I aim to fill the gap in the literature by empirically researching why the securities-related class action is seldom used in Korea, focusing on the perspective of the plaintiffs’ lawyers and considering securities damage suits as a substitute. To accomplish this, the study relies on a mixed-methods research approach: (1) interviews with plaintiffs’ lawyers and plaintiffs themselves and (2) a content analysis of court decisions on securities class action suits and securities damage suits. This research finds that risk-averse plaintiffs’ lawyers, facing large costs in bringing securities class action suits, consider bringing securities class actions only for cases that have a higher possibility of winning and enforcement. This research provides insights into the conditions for successful legal transplants to other countries considering a US-style class action as an option.