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Kim Byung-ki, floor leader of the Democratic Party, speaks during a policy meeting of the ruling party-government task force on the rationalization of economic crime penalties and civil liability at the National Assembly in Yeouido, Seoul, on September 30. / Source: Yonhap News

South Korea will abolish the criminal offense of breach of trust for the first time in more than seven decades, a move aimed at easing what policymakers described as “excessive economic punishment” that has hampered normal business operations and discouraged investment in new industries.

Under the reform plan, minor violations committed in the course of economic activity will no longer be subject to criminal penalties but instead handled with administrative fines.

Reflecting President Lee’s policy direction

The Democratic Party and the government announced the “Rationalization of Economic Crimes and Civil Liability” plan at a task force meeting at the National Assembly on Tuesday.

The decision reflects President Lee Jae-myung’s economic philosophy that “excessive punishment must not discourage business management activities.”

Democratic Party floor leader Kim Byung-ki said, “The breach of trust law has criminalized even legitimate business decisions, creating a burden on management and investment. Its abolition has been a long-standing demand of the business community.”

While there was debate within the ruling bloc over whether to reform or fully repeal the law, the leadership settled on a “repeal first, supplement later” approach.

Kim stressed that “replacement legislation will be introduced to prevent any gap in punishing major crimes.”

Replacement legislation and safeguards

Task force head Rep. Kwon Chil-seung explained that administrative measures such as corrective orders would precede punishment, and penalties would be eased if existing laws were found to be disproportionately harsh.

Some opposition lawmakers argued that the reform was designed to benefit President Lee personally. However, Rep. Oh Ki-hyung countered that even under the previous administration, former Financial Supervisory Service chief Lee Bok-hyun and business leaders had called for repeal of the law.

The government also plans to revise overlapping penalty rules under the Minimum Wage Act to exempt employers who exercised due diligence from liability. Finance Minister and Deputy Prime Minister Koo Yoon-chul said, “We will prevent good-faith businesses from being unfairly penalized, while shifting issues that can be addressed administratively out of the criminal realm.”

Justice Minister Chung Sung-ho added that prosecutors had already been applying the breach of trust law cautiously. He pledged to push for swift legislative changes to ensure its formal abolition.