Environmental Law 2023 Comparisons

Article 35 of the Constitution of the Republic of Korea provides for the environmental rights of the citizens of the Republic of Korea (“South Korea”) and the corresponding obligations of the State, serving as the foundation for the Framework Act on Environmental Policy. This legislation establishes the core objectives of the nation’s environmental policy, as well as fundamental principles in environmental law. In addition, specific environmental statutes have been enacted and enforced to address distinct environmental concerns.

South Korea’s major environmental laws and related regulations are as follows:

• the Framework Act on Environmental Policy;
• the Environmental Impact Assessment Act;
• the Act on the Integrated Control of Pollutant-Discharging Facilities;
• the Act on the Control and Aggravated Punishment of Environmental Offences;
• the Environment Dispute Mediation Act;
• the Act on Liability for Environmental Damage and Relief Thereof;
• the Framework Act on Sustainable Development; and
• the Framework Act on Carbon Neutrality and Green Growth for Coping with Climate Crisis.

The Ministry of Environment (MOE) is the primary authority responsible for the administering and enforcing of South Korea’s environmental policy. However, multiple other regulatory authorities are also involved in environmental matters, leading to potential regulatory overlap and jurisdictional ambiguities. By way of example, the oversight of wild flora and fauna in South Korea falls under not only the MOE’s jurisdiction but also under the jurisdiction of the Korea Forest Service, the Cultural Heritage Administration, and the Ministry of Agriculture, Food and Rural Affairs. Moreover, although the MOE handles water management, the Ministry of Land, Infrastructure and Transport regulates water supply and dam construction. Meanwhile, the National Police Agency and the Prosecutor’s Office is responsible for the investigation and prosecution of environmental criminal offences.

Although variations exist depending on the applicable laws and regulations, the MOE, regional environmental offices, and local governments conduct routine inspections of regulated facilities. They may also initiate irregular investigations in response to incidents.

The MOE sets national environmental standards and regulations. Local governments are responsible for implementing and enforcing these regulations within their jurisdictions. They often adopt the MOE standards as local ordinances, ensuring compliance at the community level. Local government may conduct inspections, issue permits, and take enforcement actions against individuals or businesses that violate environmental laws. The MOE provides guidelines and support to ensure consistent enforcement. Local governments collect environmental data within their regions, which is often shared with the MOE. This data includes information on air and water quality, waste management, and other environmental parameters. The MOE uses this data for national-level analysis and policy-making. In return, the MOE may provide local governments with research findings and analysis to aid in their environmental management efforts.

The major laws protecting environmental assets are the Clean Air Conservation Act, the Water Environment Conservation Act, and the Soil Environment Conservation Act. The Clean Air Conservation Act provides for proper and sustainable management of the atmospheric environment, whereas the Water Environment Conservation Act regulates water environments (such as rivers, lakes, and marshes), and the Soil Environment Conservation Act regulates soil contamination.

Other significant laws related to the protection of environmental assets include the following:

• the Act on the Conservation and Use of Biological Diversity, which provides for the implementation of the Convention on Biological Diversity;
• the Wildlife Protection and Management Act, which provides for proper management of wildlife and it habitats in order to maintain the ecosystem in equilibrium by promoting biodiversity;
• the Conservation and Management of Marine Ecosystems Act, which provides for the conservation of marine environments; and
• the Natural Environment Conservation Act, which provides for safeguarding the natural environment, including wildlife and plant species, from human-induced harm.

Individuals or companies violating these regulations may face administrative and criminal penalties. Competent authorities may also issue orders to take corrective actions or to suspend operations, where necessary. In cases where breaches cause damage, affected parties have the option to pursue civil claims for damages.

The authority of regulatory bodies to investigate environmental incidents and violations of environmental laws varies based on the specific regulations at hand. Although the MOE oversees general environmental protection matters, in many cases, its powers are delegated to other competent authorities (eg, local governments or regional environmental offices). In such cases, local governments or regional environmental offices are tasked with monitoring adherence to environmental laws and regulations and ensuring compliance. These authorities may also have the power to routinely inspect regulated facilities or to conduct investigations in the case of an incident and such powers include the right to access land and buildings.

In principle, permits are required for the construction and/or operation of facilities that emit pollutants into the air, water, or soil for handling and/or disposal of wastes. South Korea has also adopted an integrated environmental permitting regime for certain pollutant-emitting facilities that may otherwise be individually licensed. An integrated permit is required for those facilities of certain types of businesses with significant environmental impact, exceeding the prescribed level of annual air pollutant/waste-water emissions; this is issued by the MOE. Other facilities may be subject to individual permits under relevant laws depending on the medium of pollution. Both the integrated permit and individual permits typically require the installation of prevention facilities, an emission threshold for each type of pollution, and a reporting obligation.

Administrative dispositions such as a refusal to grant an environmental permit can be challenged through an administrative appeal and/or administrative litigation. If an interested party wishes to contest an administrative disposition by a competent authority (such as the MOE), they could file an appeal with the Administrative Appeal Commission before filing administrative litigation or they file administrative litigation directly with the court. The judicial authority in South Korea is exercised by courts on three levels ‒ namely, the Administrative Court, the High Court, and the Supreme Court. The judgment made in the Administrative Court can be appealed to a High Court, which can then be appealed to the Supreme Court.

Regulators recognise violations of environmental laws through regular or ad hoc inspections or reports. Upon confirmation of a violation, a prior notice of disposition is issued, informing the offender of the violation and intended penalty. The offender is given an opportunity to submit their opinion; some laws provide for an administrative hearing process. Taking the offender’s opinion into account, the regulator issues the final decision. Offenders dissatisfied with the decision can initiate administrative proceedings (ie, an administrative appeal or administrative litigation). Generally, regulators aims to rigorously apply and enforce environmental laws as stipulated in statute. Specific criteria for penalties (administrative dispositions and criminal penalties), based on the frequency and seriousness of violations, are clearly outlined in the legislation.

Environmental permits can be transferred to other business entities in accordance with the legislation applicable to the permit. Depending on the type of permit and the statute involved, the transferee needs to either report the transfer to or obtain approval from the relevant authority with regard to the change.

If facilities are discovered to be operating without the necessary permits or in violation of permit restrictions, a range of sanctions can be imposed. The regulators decide on the extent of sanctions applicable to each violation with reference to detailed standards prescribed under relevant regulations.

Possible sanctions include:

• requiring the installation of pollution control equipment;
• cessation of infringing activity;
• suspension of work or business;
• shutdown of a facility;
• revocation of the permit; and
• imposition of administrative fines.

Injunctive reliefs can also be sought to require the abatement of the violation or environmental harm. In addition to imposing sanctions for substantive violations of the various environmental laws and regulations, the regulators can also exercise their enforcement powers for procedural violations such as deceiving or misleading regulators or obstructing investigations.

Moreover, violating an environmental permit can constitute a criminal offence. Depending on the seriousness of the breach, individuals or entities may face imprisonment and fines as penalties.

The key types of environmental liabilities available in South Korea are civil liability, criminal liability, and administrative liability.

Civil Liability

Civil liability stems from intentional torts, negligence, or strict liability resulting in pollution. In tort claims under Article 750 of the South Korean Civil Code, four essential elements must be proven – namely, intentional tort or negligence, wrongful act, damage, and causal link (ie, the party responsible for pollution will only be held liable for damages if a clear “causal link” can be established). The final requirement often presents a significant challenge for those seeking compensation, as proving causation in pollution cases is inherently difficult. Therefore, in 2014, the Act on Liability for Environmental Damage and Relief Thereof (EDRT) was enacted to provide the victims of environmental damage with prompt and unbiased relief by reducing the victim’s burden of proof.

Under the EDRT, the business owner of a facility bears strict liability for environmental damage occurring in relation to their installation and/or operation of such facility. Moreover, if there is substantial evidence suggesting that a facility is responsible for environmental damage, it is presumed that the damage resulted from that facility (unless the facility owner took significant measures to prevent environmental damage ‒ in which case, the presumption can be overturned). Successful proof of these requirements under the Civil Code or the EDRT can result in the awarding of compensatory damages.

Criminal Liability

A polluter may be criminally liable if the applicable law provides criminal punishment (fines, imprisonment, etc) for violation of its rules. In addition, the Act on the Control and Aggravated Punishment of Environmental Offences provides aggravated penalties for actions or omissions in relation to environmental pollution or damages.

Administrative Liability

Companies or individuals operating facilities or engaging in activities regulated by environmental laws (eg, the Air Environment Conservation Act or the Water Environment Conservation Act) are held accountable for environmental damage occurring in relation to their facilities or activities. Regulators determine and impose appropriate type of sanctions by evaluating the damage incurred and the measures taken to prevent or mitigate it. Please refer to 4.5 Consequences of Breaching Permits/Approvals for more details on possible types of sanctions that the regulators can impose.

See 6.2 Reporting Requirements, 17.3 Corporate Disclosure Requirement and 18.2 Disclosure of Environmental Information.

According to the Framework Act on Environmental Policy, individuals or businesses that cause environmental pollution or damage through their actions or activities are responsible for preventing the pollution or damage and restoring the affected environment. They are obligated to bear the cost of remedying the harm caused by environmental pollution or damage. As such, South Korean law is fundamentally based on the “polluter pays” principle. However, this principle may be modified or expanded in cases where:

• it is impossible to identify the polluter;
• it is difficult to estimate environmental costs; or
• imposing the cost on the polluter is not equitable or practical.

By way of example, under the Soil Environment Conservation Act, any person who currently occupies or owns contaminated land is held liable for historical environmental incidents or damage (see 13.2 Clearing Contaminated Land).

In the event of a chemical accident, the individual managing the chemical substance must promptly report to the competent local government, local environmental agency, national police agency, fire agency, or local employment and labour agency. In addition, in the case of a chemical accident (or the potential for one), the person handling the relevant chemical substance must immediately take the necessary emergency measures necessary to prevent and control hazards in accordance with the chemical accident prevention and management plan.

See 5.1 Key Types of Liability.

Civil Liability

Other than the general rules explained in 5.1 Key Types of Liability, there are no specific regulations outlining a corporate entity’s responsibility for environmental harm or violations of environmental laws. If a corporation’s actions result in harm to individuals or other entities, the corporation can be held civilly liable.

Criminal Liability

In principle, criminal liability is borne by the individual violator of the environmental laws. In the case of a corporate entity, the individual violator would be the employee who acted on behalf of the corporate entity. However, most of the environmental regulations (eg, the Water Environment Conservation Act) stipulate that both the corporation and its individual members can be penalised – a concept known as “joint penal provision”. Under the joint penal provision, employers can be criminally liable for the crimes committed by their employees if the employers failed to perform duty of care and supervision over their employees. In such cases, while the individual employee may be subject to either a fine or imprisonment, criminal punishment imposed on the corporate entity takes the form of a fine ‒ given that corporations cannot be incarcerated.

The general principle is that charges must be imposed to the minimum extent necessary to fulfill the purpose of creation so that impartiality and transparency are secured. No charges can be imposed twice on the same subject unless extraordinary grounds exist under the Framework Act on the Management of Charges.

The environmental improvement levy, the air/water pollution levy, the ecosystem conservation levy and the water quality improvement levy are representative green taxes.

Environmental Improvement Levy

The MOE must impose and collect charges for the improvement of the environment from the owners or occupants of buildings or other facilities discharging various environmental pollutants, as well as from the owners of motor vehicles using diesel. This is in accordance with the Environmental Improvement Cost Liability Act (EICL).

Environmental improvement levies are calculated using a specific formula that multiplies a basic charge per vehicle by a pollution-inducing factor, the age of the motor vehicle and a regional factor.

Air/Water Pollution Levy

Under the Clean Air Conservation Act, businesses are subject to pollution levies that are categorised into two types. The first (known as “basic charges”) applies to businesses emitting air pollutants within or below the permitted standards, with fees determined by the quantity and concentration of emissions. The second category (“excess charges”) targets businesses surpassing the allowed emission standards, whereby the charges are based on the quantity and concentration of pollutants they emit.

Likewise, the Clean Water Conservation Act imposes effluent charges on business entities discharging water pollutants to prevent or reduce water pollution and damage to aquatic ecosystems due to water pollutants.

Basic charges apply when pollutants in waste water exceed effluent water quality standards but stay below permissible discharge limits, including cases from public treatment facilities. Excess charges are imposed for exceeding permissible discharge limits or discharging pollutants into public waters from non-discharge facilities (ie, waste water discharge facilities that must not discharge into public waters).

These regulatory approaches aim to incentivise adherence to emission standards while penalising those exceeding the limits and thereby promote cleaner air and water environmental conservation.

Ecosystem Conservation Levy

The MOE can impose an ecosystem conservation charge on businesses significantly affecting the natural environment, ecosystem, or biological diversity through their activities. This tax, following the polluter-pays principle, aims to encourage ecosystem preservation by imposing charges corresponding to the affected area. It helps secure funds for the restoration and conservation of the natural environment when unavoidable damage occurs owing to development projects.

South Korea has implemented an emissions trading system but has not adopted or imposed a carbon tax. However, the South Korean government is now actively considering introducing a carbon tax and has subcontracted related research projects. In addition, the National Assembly has proposed a carbon tax bill.

The MOE has the authority to offer incentives to environmentally conscious businesses under the Environmental Technology and Industry Support Act. The MOE can recognise enterprises and workplaces that significantly enhance environmental quality by reducing pollutants, conserving resources and energy, enhancing product eco-friendliness, and implementing green management systems. These designated entities are termed “green enterprises”.

Green enterprises can substitute the permit application for air or water pollution emission facilities with a report. They are exempt from on-site inspections and receive financial and technical support for environmental improvements at their facilities. Instead, green enterprises must prepare and disclose environmental information in the same way that Korean Composite Stock Price Indexes (KOSPI entities) with assets exceeding KRW2 trillion are obligated.

In terms of civil and administrative liability, in principle, corporate entities are held liable for breaches of environmental law and/or pollution. However, the civil liability of a company can be extended to the parent company or shareholders under certain circumstances (particularly if there is evidence of improper or fraudulent activities), thereby piercing the corporate veil.

Mandatory ESG Regulations

ESG regulations in South Korea encompass essential environmental mandates concerning air, water, soil, waste, resource management, chemicals, and climate change. Social obligations are addressed through various laws covering competition protection, product and consumer safety, labour, and data protection. Key governmental requirements are outlined in laws specifying agent duties, disclosure rules, business group regulations, and anti-corruption measures.

Moreover, there is a compulsory requirement for ESG governance reporting in South Korea. The Financial Services Commission has introduced a Sustainability Reporting Rule, which will be implemented gradually. By the end of 2025, it will apply to KOSPI entities with assets exceeding KRW2 trillion – extending to all KOSPI entities by the end of 2030. The Korea Exchange also has issued Guidelines on Corporate Governance Reports for listed companies. Starting from 2022, companies listed on the KOSPI market with total assets of KRW1 trillion or more are required to prepare and disclose corporate governance reports.

Voluntary Guidelines

Apart from the obligatory regulations, ESG responsibilities have been broadened to align with the increasing global ESG trends. In the past few years, K-ESG Guidelines, K-Taxonomy, and the Green Bond Guideline have been introduced.

• K-ESG Guidelines were released in 2021 by the Ministry of Trade, Industry and Energy. The guidelines provide 61 evaluation items and specific details for each item by analysing 13 major domestic and foreign assessment indicators and disclosure criteria. The guidelines present assessment indicators that are most frequently dealt with by assessment agencies.
• K-Taxonomy is a framework for fostering sustainable investment and was built under the Environmental Technology and Industry Support Act. Following the initial draft announcement in December 2021, an amended version was published in December 2022, incorporating additions regarding nuclear research, development, and demonstration, construction and operation of new nuclear power plants, disaster prevention, and the establishment of climate prediction facilities.
• The Green Bond Guidelines were implemented in January 2023 to enhance the credibility of investments in green bonds and promote the active growth of the green bond market by preventing the issuance of greenwashing bonds.

Moreover, as part of a voluntary disclosure initiative, the Korea Corporation Governance Service released a revised edition of the ESG Best Practice Guideline in 2021. This guideline has been applied in ESG assessments and serves as a reference for ESG management standards in domestic listed companies and diverse government policies. It aligns with the international movement towards increased transparency in ESG information, as well as the promotion of responsible investment.

Under the applicable environmental laws and regulations that regulate pollutants (eg, the Clean Air Conservation Act, the Water Environment Conservation Act, and the Soil Environment Conservation Act), the installation and operation of facilities emitting pollutants may be subject to environmental audits by the relevant competent authorities.

Individuals including directors and other officers may face criminal liability for breaches of environmental law if they have actively engaged in environmental management or the operations or decisions that resulted in violation. In addition, directors can be held liable for environmental damage or breaches of environmental law based on the liability arising from the South Korean Commercial Code.

Director’s Liability for the Company

A director owes a general fiduciary duty to the company to exercise a duty of care to the standard of a good manager and a duty of loyalty to faithfully perform their duties in the best interests of the company in accordance with applicable laws and regulations. A director who is found to have breached their fiduciary duty can face personal civil liability for resulting damages caused to a third party (including a creditor). A claim for repayment can be filed by the company where fines or surcharges have been imposed on the company as a result of the director’s negligence. If such act was committed by a resolution of the board of directors, the director who voted for the resolution will also be liable. A director who participated in a resolution of the board of directors and whose objection is not recorded in the minutes is presumed to have voted in favour of the resolution. Such liability to the company may be discharged by the consent of the general shareholders.

One thing to note is that the business judgment rule applies in South Korea. The directors of a corporation are not subject to a judicial review as long as they make a business judgment in good faith, are well-informed enough with regard to the subject of the business judgment to reasonably believe it to be appropriate under the circumstances, and rationally believe that their business judgment is in the best interests of the corporation. In such situations, the directors are considered to have fulfilled their fiduciary duty.

Director’s Liability for a Third Party

If a director is in breach of their duties owing to intention or gross negligence, they will be jointly and severally liable to compensate third parties for damages.

Companies can purchase insurance that covers the directors and officers of the company against lawsuits alleging a breach of the fiduciary duties of loyalty and care (duty of good faith) to the company.

Anyone who installs and operates a facility discharging pollutants or treating hazardous materials must obtain environmental liability insurance under the EDRT. The maximum liability cap for the environmental damage to be borne by the business owner is KRW200 billion per business site as prescribed by the Presidential Decree of EDRT, and can vary on the facility.

EDRT covers “environmental pollution damages”, which is specifically defined as harm to the life, body (including mental distress) and property of others due to air, water, soil, or marine pollution, noise, vibration, or ground subsidence caused by facility installation and operation. This includes a series of damages arising from the same cause.

Under South Korean law, there is no concept of lender liability. Therefore, a financial institution is not liable for environmental damages or breaches of environmental law caused by a company or person to which it has extended a loan.

There is no concept of lender liability under South Korean law.

Damage claims (see 5.1 Key Types of Liability) and injunctive reliefs can be sought. Injunctive reliefs are acknowledged under the South Korean Civil Code. An asset owner has the right to request an injunction to halt environmental destruction (Article 214 of the South Korean Civil Code). The plaintiff must demonstrate that the activity (in question) resulted or will result in unlawful harm to their asset. In urgent situations, a preliminary injunction can be sought. However, if granted, the preliminary injunction will undergo regular court review.

Unlike US law, South Korean law generally does not recognise punitive damages in civil liability for tortious acts. However, punitive damages are introduced only in certain exceptional cases under specific laws. By way of example, punitive damages have been enforced under the Environmental Health Act since 13 June 2019, aiming to enhance the duty of care for businesses and prevent malicious actions. This system imposes punitive damages liability, up to three times the actual damages, on businesses that cause “environmental diseases” to others owing to “environmental hazards” occurring in the course of their operations ‒ particularly when such harm results from intentional or grossly negligent actions.

A class or group action refers to a legal form where one or several individuals, representing a group with common interests, can file or be sued on behalf of the entire group. The judgment in such cases is binding not only on the representative parties but also on all members of the group. There is generally no system for class action lawsuits in South Korea, except for specific issues such as securities under the Securities-Related Class Action Act, and there is no existing framework for environmental class action lawsuits.

In South Korea, only co-litigation (in which individuals with comparable claims can join a legal case as co-plaintiffs) and the “appointment of a party” (whereby claimants can designate other claimant(s) to represent the entire group of claimants) are permitted. In that, the judgment typically applies only to those who participated in the lawsuit, making it difficult to achieve a one-time resolution for collective disputes.

Criteria for Claims and Injunctions Based on Sunlight Reflection Damage (Supreme Court Decision on 3 June Case No 2021, 2016da33202, 33219)

Recently, in downtown areas of South Korea, glass curtain-wall buildings have been extensively constructed. As part of the renewable energy promotion policy, the installation of solar panels has also been expanded nationwide. Consequently, significant issues related to disturbances in daily life caused by sunlight reflection have begun to emerge. Residents of apartments affected by sunlight reflection from a glass curtain-wall building located in Seongnam City have filed a civil lawsuit against the defendant company, seeking:

• compensation and injunction based on disturbances in daily life caused by sunlight reflection;
• compensation for damages due to illegal actions related to nighttime lighting;
• compensation for damages due to violations of view rights and airspace rights; and
• compensation for damages due to invasion of privacy.

In the first-instance judgment of this case, the court partially granted claims related to compensation and injunctions based on disturbances in daily life caused by sunlight reflection, while rejecting the remaining claims. In the second-instance judgment, all of the plaintiffs’ claims were dismissed. Ultimately, the case was appealed to the Supreme Court, which provided significant legal principles regarding the requirement of “the socially tolerable limit” as a criterion for claims and injunctions based on disturbances in daily life caused by sunlight reflection, as follows.

• To claim compensation based on excessive sunlight reflection from buildings with glass exteriors constructed on adjacent land, causing significant disturbances in daily life for residents owing to the influx of this excessive sunlight reflection into nearby residential areas, the extent of such disturbances caused by the construction activity must exceed the socially tolerable limit in general societal norms.
• To determine whether the extent of disturbance caused by sunlight reflection from constructed buildings exceeds the socially tolerable limit, factors such as:
1. intensity and angle of sunlight reflection entering the affected building;
2. timing and duration of sunlight reflection;
3. nature and extent of damage based on the location of windows and living spaces in the affected building;
4. content of damage and benefits;
5. circumstances and public nature of the construction of the offending building;
6. distance between the affected and offending buildings;
7. compliance with public regulations and violations of construction laws;
8. zoning restrictions and conditions where the buildings are located;
9. preventive measures and possibilities of damage avoidance;
10. chronological order of land use; and
11. negotiation process should be comprehensively considered.

It seems that the Supreme Court essentially upheld the first-instance judgment. The Supreme Court concluded that the second-instance judgment was flawed, as it failed to properly consider whether sunlight reflection had entered the plaintiffs’ primary living spaces with a certain level of brightness for an extended period and thereby causing visual impairment and significantly impairing the functionality of the apartment as a residence, exceeding the socially tolerable limit. The court deemed this failure to be a mistake and remanded the case to the Seoul High Court for reconsideration.

Recognising Compensation for Mental Distress of Residents in the Area Where the Public Opinions Gathering Process Under the Environmental Impact Assessment Law Was Not Conducted (Supreme Court Decision on 12 August 2021, Case No 2015da208320)

The Korea Electric Power Corporation (KEPC) changed the initially planned route to a different location (Area A) for a transmission line in response to opposition from the residents of the original intended area. However, the KEPC did not follow the statutory procedure for gathering public opinions from the residents of Area A regarding environmental, transportation, disaster, and related impacts, as required by the Environmental Impact Assessment Act. Despite this, the KEPC obtained approval for the construction project, including Area A, from the relevant authority. Subsequently, without conducting a process of gathering opinions of the residents of Area A and revising the draft environmental impact assessment report, the KEPC proceeded with the project. Residents of Area A filed a civil lawsuit against the KEPC for damages. The Supreme Court recognised that, by not providing the residents of Area A with the opportunity to submit their opinions (which would have allowed them to minimise the infringement of their environmental interests), the KEPC deprived them of a chance to voice their concerns. Consequently, the court concluded that the KEPC had an obligation to compensate the residents of Area A for the significant mental distress they suffered.

This ruling is significant in that it opens up the possibility of not only administrative litigation (a public law remedy) seeking the annulment or invalidation of the disposition, but also civil litigation (a judicial remedy) to claim compensation from residents in the affected area when the procedure for collecting residents’ opinions under the Environmental Impact Assessment Act has not been carried out.

The parties may agree to transfer or apportion liability for environmental damages in the form of indemnities or other contractual agreements. There are no regulations in South Korea that restrict such transfer or apportion between private parties.

Nevertheless, such agreement is enforceable only on the parties involved and cannot bind regulators. For instance, even with such agreements in place, individuals designated as responsible parties for contaminated soil under the Soil Environment Conservation Act are not exempt from liability. In that case, the person responsible for soil remediation (eg, the indemnified party) under the Soil Environment Conservation Act would bear the legal obligation to comply with the remediation order. They would also have the right to claim reimbursement for the remediation costs and/or seek compensation for damages incurred owing to the remediation order from their contractual counterpart (eg, the indemnifying party).

See 9.1 Environmental Insurance.

Under the Soil Environment Conservation Act, the following is prohibited:

• disposing of soil pollutants; and
• spilling or discharging soil pollutants during storage, transportation or decontamination processes.

The MOE installs monitoring devices and measures soil contamination levels at all times. In addition, local authorities conduct soil contamination investigations where contamination is suspected.

The local authority can enter a site and conduct an investigation if it becomes aware of soil pollution or discovers leakage of soil pollutants. If the local authority discovers any worrying level of soil pollution from an investigation, it can order the polluter to either conduct a soil inspection or decontaminate the contaminated site.

Installation of a designated soil-contaminating facility requires a soil-specialist agency to regularly conduct an inspection of the facility site and adjacent areas for soil contamination. In addition to the regular inspection, the target site is also subject to special inspection in the following cases:

• termination of the use or the closure of the facility;
• ownership transfer of the facility;
• replacement of the facility or change to the soil-contaminating substances stored in the facility; and
• leakage of soil-contaminating substances.

The local authority can order the operator of the facility to address the shortcomings after an inspection.

The Soil Environment Conservation Act imposes two types of liabilities: payment of damages and contamination remediation obligations. The former is a type of strict liability borne by the persons responsible for the soil contamination, whereas the latter is a liability borne by the following persons designated by the law.

The persons liable for soil decontamination are:

• any person who causes soil contamination by discharging, leaking, dumping, or neglecting soil contaminants (or committing other acts);
• the proprietor, occupant or operator of a facility subject to the control of soil contamination constituting a cause for soil contamination at the time soil contamination occurs;
• any person who has acquired the rights and liabilities of either of the foregoing through a merger, inheritance or other reasons; and
• any person who previously owned or currently owns or occupies land on which soil contamination has occurred.

Among these, only the last person listed can be relieved from liability if they were unaware of the soil contamination and were not negligent in preventing soil contamination when they acquired the land on which soil contamination has occurred. Failure to comply with a remediation order constitutes a criminal offence leading to up to two years of imprisonment or KRW20 million.

In cases where more than one party has contributed to the contamination, and if their respective contribution ratios remain uncertain, then all of the parties will be held jointly and severally responsible.

In a civil suit, an individual can bring legal action against the polluter, owner, or occupier of the contaminated land or soil-contaminating facility if the individual suffers damage caused by the contamination. In order to claim compensation for damages, the claimant needs to prove:

• wrongful act;
• damage; and
• causation.

To ensure responsible waste disposal and prevent abandoned waste, waste operators are required to either:

• make a financial contribution to a mutual aid association dedicated to waste treatment businesses; or
• acquire an insurance policy that covers the expenses related to waste treatment.

Waste treatment facility operators are obligated to report the closure of their facilities. For landfill facilities handling waste, the operator must also pass a successful inspection in order to cease operations or close the facility. Landfill facility operators are indeed required to engage in follow-up management activities, including the installation and operation of leachate treatment facilities. Also, landfill facility operators are obliged to deposit the necessary funds for follow-up management, unless they have acquired insurance to guarantee follow-up management or the expenses required for follow-up management are already covered. If a landfill facility for wastes subject to follow-up management is found to be likely to cause a serious hazard to the health or property of residents or its surrounding environment owing to events such as leachate leaks or embankment washouts, the MOE may impose restrictions on the use of the land where the facility is located after the facility’s operation is discontinued or it is closed.

The MOE or local governments have the authority to conduct detailed soil surveys in landfill facility areas. Facility operators are required to allow and co-operate with these surveys. Non-compliance with the obligations of waste operators may result in criminal penalties and/or administrative sanctions.

Soil Contamination

Local authorities must conduct an investigation where soil contamination is likely to occur or soil-contaminating substances have been leaked. The findings of the investigation must be reported to the MOE. If the local authority identifies a significant level of soil pollution during the investigation, it can order the polluter to either conduct a soil inspection or decontaminate the contaminated site.

Chemical Accident

Investigative procedure for chemical accidents is stipulated in the Chemicals Substance Control Act. When a report of a chemical accident is received, the MOE has the authority to dispatch on-site emergency response co-ordinators to the scene of the chemical accident for swift response, situation management, as well as collecting and disseminating accident information.

The MOE must conduct an impact assessment when necessary in order to identify the causes of chemical accidents and minimising and recovering human health and environmental damages. The MOE may organise and operate a chemical accident investigation squad headed by an on-site emergency response co-ordinator to conduct impact assessments.

South Korea is an active participant in the international community’s collective efforts to fight climate change, having joined the United Nations Framework Convention on Climate Change (UNFCCC) in 1993, ratified the Kyoto Protocol in 2002, and ratified the Paris Agreement in 2016.

South Korea has implemented several key policies and initiatives to address climate change and promote sustainable development. In 2021, the Framework Act on Carbon Neutrality and Green Growth for Coping with Climate Crisis (the “Carbon Neutrality Act”) entered into force on 25 March 2022. It requires the government to achieve carbon neutrality by 2050 and establishes the 2050 Carbon-Neutral Green Growth Committee to deliberate and decide on the government’s key policies, plans, and their implementation for South Korea’s transition to a carbon neutral society. The Carbon Neutrality Act also includes the provision of a fund (the Climate Response Fund) to support the classes, regions and industries vulnerable to the climate crisis, based on the concept of “climate justice”.

As for South Korea’s major energy and climate change policies, the two most notable schemes are the Renewable Energy Portfolio Scheme (RPS) under the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy and the domestic cap-and-trade system, commonly known as the South Korea Emissions Trading Scheme (KETS) under the Act on the Allocation of and Trading of Greenhouse Gas Emission Permits.

However, as the price of new and renewable energy certificates (RECs) under RPS continued to decrease, it was pointed out that the RPS scheme had reached its limit of supply of new and renewable energy; thus, the Clean Hydrogen Portfolio Scheme (CHPS), a newly designed scheme only targeting clean hydrogen energy, was devised in South Korea in 2021. A basis law for the CHPS is the world’s first Hydrogen Act, which was enacted in 2020 and entered into force in 2021. The Hydrogen Act was enacted to promote the implementation of the hydrogen economy and to manage hydrogen safety.

See 21.1 Legal and Regulatory Reforms.

The Asbestos Safety Management Act is the applicable regulatory regime for asbestos in buildings or other materials in South Korea. The manufacture, import, transfer, provision or use of any asbestos or asbestos-containing materials is prohibited, except in limited cases. Anyone wanting to import, manufacture, or use asbestos or asbestos-containing material must inspect and confirm the presence of asbestos directly or indirectly through an asbestos-inspection institution before commencing activities, then record and maintain the inspection result.

The asbestos-inspection institution must successfully pass a test for its ability to conduct asbestos investigations and subsequently be designated by the Minister of Employment and Labour.

The owner of a school, multi-use building or other designated types of buildings must ensure that an asbestos inspection institution inspects the building within one year once the approval for the use of building has been obtained, then record and maintain the inspection result. If asbestos is found during the inspection, the owner must appoint resident(s) of the building as asbestos safety manager(s) and report the appointment to the relevant local authority to comply with the applicable safety standards.

Anyone who intends to demolish a building or a facility must conduct an asbestos inspection. If asbestos is found, they must keep a record of the asbestos. Asbestos must be removed before a building or a facility is demolished. Evidence of removal must be submitted to the Minister of Labour and Employment to confirm that the concentration of asbestos in air is not excessive.

The Wastes Control Act (WCA) is the key legislation governing waste management. It categorises types of waste and regulates its discharge and treatment. In addition, the Framework Act on Resource Circulation (FARC) – enacted in 2018 – regulates the recycling of waste. The Framework Act on Resource Circulation introduced the new concept of “resource circulation” and provides general principles to promote recycling. The Construction Waste Recycling Promotion Act and the Act on Resource Circulation of Electrical and Electronic Equipment and Vehicles regulate the recycling of special types of waste.

Under the WCA, when waste producers transfer waste to another person for treatment or disposal off-site, a waste producer must check the other person’s waste treatment credentials and record the type and amount of waste being transferred and the date of such transfer on the government website. Such measures have been implemented to ensure proper handling of waste and failures thereof may subject the waste producers to orders to take corrective measures, criminal liabilities, and/or administrative fines imposed by relevant authorities. However, if these requirements are fulfilled, waste producers would not retain liabilities even if the transferee goes bankrupt or improperly treats waste.

The Act on the Promotion of Saving and Recycling of Resources imposes recycling responsibilities on the packaging – a concept known as Extended Producer Responsibility. Producers, importers and sellers (those with recycling obligations) are obligated to recover and recycle certain packaging materials or products using such packaging materials at the end of their life cycles. Alternatively, these obligated producers are required to pay the cost of recovering and recycling their packaging. The fees collected are then distributed to the recycling companies according to the amount of recycling items.

The Act on Resource Circulation of Electrical and Electronic Equipment and Vehicles stipulates recycling obligations for electronic devices. Producers and importers of electrical and electronic equipment are required to collect the equipment released thereby and transfer such waste to a licensed recycling business operator or, alternatively, pay the cost of transferring and recycling.

Facilities operators are required to report environmental incidents that have occurred in their facilities. These incidents include cases of water contamination and air pollution caused by specific hazardous substances. By way of example, anyone who transports or stores petroleum, toxic substances, pesticides or other designated water pollutants must report to the regulators if such substances pollute water under the Water Environment Conservation Act. Moreover, under the Soil Environment Conservation Act, anyone who produces, transports, stores, handles, treats or processes soil pollutants must report to the regulators if soil pollutants were leaked or drained during the process and anyone who owns, occupies, or operates soil-contaminating facilities must report to the relevant regulators if any soil contamination is found in the facilities.

Anyone has a right to request environmental information that is held by a public authority under the Official Information Disclosure Act, which provides a statutory framework for access to a government record. When a public institution decides not to disclose information, it must promptly notify the requester in writing of its non-disclosure decision. Such a decision constitutes an administrative disposition and therefore individuals whose information requests have been denied may file a lawsuit in accordance with the Administrative Litigation Act.

The Act stipulates several grounds for exemptions to information disclosures such as information relating to national security. A public institution must disclose the requested information unless it is exempted by the Official Information Disclosure Act. In addition, partial disclosure is allowed, which means that access may be given to the part of the record that does not contain any information exempted from disclosure.

In South Korea, the obligation to disclose information regarding environmental issues is currently imposed only on certain companies. However, with the growing trend towards mandatory ESG disclosure, it is anticipated that the scope of obligations will gradually expand.

Under the Environmental Technology and Industry Support Act, approximately 1,824 companies and institutions (including central government agencies, local governments, public organisations, state-run universities, local medical facilities, green businesses, and entities subject to greenhouse gas permits allocation) are required to annually disclose key environmental information. As of 2022, corporations with a total asset value exceeding KRW2 trillion are subject to the obligation of disclosing environmental information under the same law.

This disclosure process occurs through the Environmental Information Disclosure Verification System, where essential details such as environmental management systems, goals, achievements in resource and energy conservation, and reduction of environmental pollutants are inputted. Mandatory and voluntary items are categorised based on the specific characteristics of each industry. Failure to meet the required disclosure will be subject to an administrative penalty of up to KRW3 million.

Under the applicable laws and regulations, listed corporations should disclose the amount of penalties and fines imposed on the company when the amount is more than 1% of its equity capital. Larger corporations are subject to this disclosure when the amount of imposed penalties and fines is more than 5% of its equity capital. In those cases, disclosure obligations may extend to the relevant environmental issues.

As part of its efforts in green finance, South Korea supports green investment and implements Environmental Policy Loans.

Green Investment Programme

The Green Investment Programme is based on K-Taxonomy (see 7.5 ESG Requirements) and there are two types of programme ‒ namely, the Korean Green Bonds Issuance Support Programme and the Green Asset Securitisation Support Programme.

The Korean Green Bonds are bonds whose issuing funds are used for green activities, as defined in the K-Taxonomy Guideline, and must be issued in compliance with the Green Bond Guidelines. The Korean Green Bond Issuance Programme is overseen by the MOE, while the Korea Environmental Industry and Technology Institute (KEITI) operates and manages pilot projects, and participating companies engage in advisory and external reviews through registered external review agencies for green bonds. The programme supports a portion of the interest generated from the issuance of Korean green bonds.

Green Asset Securitisation Bonds refer to securities issued by selecting assets within corporate bonds that comply with the K-Taxonomy, thereby securitising green assets. The Green Asset Securitisation Support Programme supports a portion of the interest generated from the issuance of these securities. As with the Green Bond Issuance Programme, the MOE, external agencies and KEITI execute the programme, whereas financial institutions issue the securities.

Environmental Policy Loans

There are financing programmes that provide low-interest loans for the installation of eco-friendly facilities such as pollution prevention facilities and greenhouse gas emission reduction equipment. Furthermore, there is a programme that provides funding support to environmentally friendly SMEs with excellent technologies.

Scope

Environmental due diligence is common for large-scale transactions and transactions that concern environmentally sensitive assets or industry.

Environmental due diligence generally covers:

• compliance with environmental law and regulations;
• potential environmental liability; and
• pending or potential environmental disputes.

Types of Assessment

Environmental due diligence generally investigates the target’s records, documents, and employee interviews to determine compliance with environmental laws and regulations, as well as potential environmental liabilities and disputes. Another type of environmental due diligence is more technical (rather than legal) in nature, involving more in-depth on-site inspection and analysis (such as inspection for soil contamination or asbestos presence).

Environmental Consultants

In practice, environmental consultants are more likely to be involved in the transaction of assets that are environmentally sensitive than in general environmental due diligence.

In the engagement letter, it is generally recommended that indemnification provisions relating to soil environmental impact assessment (that is, the legal implications of the objective, scope and analysis of the impact assessment) ‒ as well as those relating to confidentiality ‒ are included.

Disclosure of environmental information is not mandatory by law in the sale/purchase agreement. However, if a non-disclosed environmental matter would be an important consideration for a reasonable buyer, such non-disclosure can constitute criminal fraud or be a ground for the buyer to revoke the asset purchase. Despite this, environmental risks are generally disclosed/discovered during due diligence and are covered by warranties and/or indemnities clauses in the sale/purchase agreement.

See 7.2 Environmental Taxes.

Environmental disputes such as disagreements related to environmental damage and conflicts regarding the installation or management of environmental facilities can be resolved by civil suit, administrative proceedings, and environmental dispute mediation.

In cases where environmental disputes are filed through civil litigation, the victim is required to prove the causal relationship between the harmful act and the resulting damage. In this process, ordinary individuals without legal knowledge often have to incur significant costs to seek assistance from lawyers. However, when utilising the environmental dispute resolution system under Environment Dispute Mediation Act, the Environmental Dispute Resolution Committee takes over the burden of proving the facts of the damage at a lower cost and the process is simpler than litigation.

South Korea has long taken the importance of responding to climate change seriously and has strengthened its domestic reduction ambition to implement the Paris Agreement. In pursuit of 2050 carbon neutrality, the Carbon Neutrality Act was legislated in 2021, stipulating that the South Korean nationally determined contribution (NDC) should be at least 35% compared to 2018. Then, at COP26, South Korea submitted its goal of a 40% reduction from the 2018 level as the first renewed NDC. Also, the Carbon Neutrality Act came into force on 25 March 2022.

As for the voluntary renewable energy market, the South Korean government introduced the South Korean RE100 (K-RE100) system allowing companies to selectively purchase and sell electricity generated from renewables. K-RE100 is intended to promote domestic companies’ participation in the global RE100 initiative, which invites companies to source their operations with 100% renewable energy. Among the participation methods for K-RE100, Renewable Energy Credit (REC) purchase is praised for linking the pre-existing RPS and KETS systems. This was possible by granting companies with carbon emission reduction credits in the amount equivalent to the REC purchase amount. Thanks to this regulatory change, a company voluntarily participating in K-RE100 by purchasing RECs in the RPS market will also gain carbon emission reduction benefits from the government.

As noted in 14.1 Key Policies, Principles and Laws, South Korea’s environmental laws and policies (including KETS, RPS, and K-RE100) have been evolving for the past three years and are expected to complement each other in time and help the nation cope with climate change.