Constitutionalism and Rule of Law in the Republic of Korea

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1 Constitutionalism and Rule of Law in the Republic of Korea - Searching for Government Policies Conforming Constitution on Economy, Society and Unification Seog Yeon Lee Minister of Government Legislation 1. Basic Principles of the Constitution of the Republic of Korea and Direction of Unification and Reform Policy (1) The Constitution of the Republic of Korea (hereinafter referred to as "the Constitution") is founded on two basic axes, liberal democracy in terms of political/social sphere and free market economic system in terms of economic sphere, and has adopted rule of law or due process as its means. The supreme value system which the Constitution has pursued based on these principles and means is assuring every citizen's human dignity and worth and the right to pursue happiness. The system which the Constitution is established upon is the best among what the mankind has been searching for with regard to political, economic and social structure, and it is the aim of the system which most national constitutions have adopted and also the limit of constitutional amendment. This point is also expressed in the declaration where it makes clear that the Constitution shall seek peaceful unification as national goal but on the ground of liberal democratic order, that is, liberal democratic structure and market economic system (Article 4 of the Constitution). (2) As the heart of the Constitution lies in the fact that Korea's political, economic and social structure after the unification shall be based on liberal democracy and free market economic system, any other unification policies or arguments are not only unconstitutional in themselves but also contrary to mankind's universal values. Unification is to be a means to achieving liberal democracy, and liberal democracy cannot be made a sacrifice of unification. This is the determined will of the Constitution. 1

2 (3) Viewed from the principles of the Constitution, the direction of Korea's economic and social policy should be a practical reform which will unfetter and enrich people's concrete lives in line with Lee Myung-bak government's objective. Moreover, the reform should seek a gradual progress through widespread participation (equal opportunity of participation) and social unity based on the fundamental values of the Korean society (liberal democracy, free market economy, rule of law), not overabundance or abstract argument of ideologies. The reform policy of Lee Myung-bak's government is also administered under the same constitutional basis. In addition, in order to prevent exclusive exercise of political power (authority) by a particular group or faction, the Constitution requires every citizen to equally participate in the process of forming decision. Only national consensus founded on equal opportunity of participation can ensure constitutional justice and further achieve democratic reform and social unity. 2. Direction of Economic Policy based on Constitutionalism 1) Importance of Rule of Law in conformance with Market Economy (1) The market economy cannot succeed without reliance and predictability, and the conformation of the Constitution's basic principle, namely, free market economic system, lies at the core. Premised on the guarantee of fundamental rights in terms of economic sphere, such as freedom of contract embedded in general freedom of action, freedom of profession, etc., paragraph 1 of Article 119 of the Constitution provides that "the economic order of the Republic of Korea shall be based on a respect for the freedom and creative initiative of enterprises and individuals in economic affairs." This clarifies that free market economic system based on capitalism is the fundamental principle or direction of Korea's economic system or policy. Furthermore, the Constitution declares 'rule of law in conformance with market economy' which anticipates State's intervention in the market economic domain only in exceptional cases according to Acts and due process, by stipulating that if the State is to 2

3 control or administer the management of private enterprises it shall only be in cases as prescribed by Act to meet urgent necessities of national defense or the national economy (Article 126 of the Constitution). (2) However, the Constitution provides revised capitalism or principles of social market economy where State's economic regulation and coordination are allowed on the basis of free market economic system for the purposes of social justice and economic democracy by harmonizing different economic players (paragraph 2 of Article 119 of the Constitution). Nevertheless, it is clear from the structure of the Constitution that various economic systems and policies based on paragraph 2 of Article 119 should remain minimal according to the principles of constitutional state within the scope of the basis of free market economic system, such as assurance of private property right, freedom of corporate business activity, freedom of contract, etc. The constitution makes definite that State's economic regulation and coordination should be an exceptional measure within the boundary of maintaining the basis as it "shall be based on" free market economic system (paragraph 1 of Article 119 of the Constitution). That is to say, the Constitution carefully uses the term 'may' interfere rather than 'shall' interfere even in exceptional cases where State's action regarding economic regulation and coordination are required (paragraph 2 of Article 119 of the Constitution). Hence, views of constitutional scholars who explain that the basis of constitutional economic system is revised capitalism or social market economy have logical leap in terms of usage of terms (paragraph 2 of Article 119 of the Constitution). The Constitutional Court of Korea has also coherently confirmed that the Constitution is 'based on' free market economic system, and has stressed that attainment of objectives aimed at public interests should ultimately be achieved through establishing free market economic system. (3) Examined from this viewpoint, a considerable number of state's Acts and subordinate statutes concerning economic activities administered for the purposes of economic justice and economic democracy are beyond the constitutional limit of economic regulation and coordination, and hence, there remains a possibility of a violation of the Constitution requiring alterations. For example, significant parts of Acts 3

4 enacted for controlling and regulating economic activities as well as various Acts for fostering, supporting and promoting establishment and management of an enterprise provide a ground for government intervention in individual and corporate economic activities. This goes against the principles of free market economy and demands amendments. (4) There are instances where diverse regulations on corporate activities allow delegation of important contents to subordinate Acts and statutes, such as enforcement decrees, enforcement rules (regulation order) and directive, established rule, public notification, etc. (administrative rule), and consequently resulting in a contravention to rule of law in conformance with market economy (infringement of prohibition of blanket delegation principle provided in Article 75 and 95 of the Constitution) By delegating details of an indefinite and vague Act to subordinate Acts and statutes, public officials may exercise discretionary power to interpret laws arbitrarily causing, namely, discretionary wilderness. This has an effect of determining citizen rights and duties through administrative legislation, leading to an infringement of substantial rule of law and illegality/corruption and abuse of power by public officials. 2) Market Intervention by Government and Government Failure 'State regulation and coordination' regarding the economy provided in paragraph 2 of Article 119 of the Constitution take the form of 'market intervention by government' in terms of economics. In reviewing Korean governments's past operating process of the economy, what should have been an exceptional and supplementary function was justified under necessity of public interest, equality and distributive justice. Moreover, in many cases, it was done obscurely through unfair measures of regulation and interference, often in an expansive manner. It is assumed that the late 1990s IMF situation was due to inoperative market brought about by excessive government intervention, not minimal intervention. That is, insolvent companies were not liquidated at the right moment and self-regulating financial system was not established. To rephrase it, improper establishment of rule of law in conformance with market economy was one of the reasons to the economic crisis. 4

5 In February 14, 2006, the IMF made critical remarks about the Korean bureaucrat's 'ubiquitous hand' which is holding back the recovery of the Korean economy. That is, the IMF pointed out that bureaucrats indulged in all-around government have impeded the recovery by interfering in markets as if ubiquitous computing can be accessed from anywhere and at any time. This is a point which requires careful attention. As a consequence, the government should endeavor to provide structural solutions, such as forming the framework for fair competition which lies at the core of market economy, rather than directly settling individual cases since it would only incur government failure and infringement of constitutional economic order. 3) Economic Policy based on Rule of Law in conformance with Market Economy The Constitution, as it was examined beforehand, makes clear that control of private enterprises' management can only be carried out to meet urgent necessities of national defense or the national economy, and only as prescribed by Acts (Article 126 of the Constitution). Consequently, government policy on private enterprises' economic activities which disregard such procedures is an act ultra vires and a violation of the Constitution. A measure overlooking due process is an abuse of public authority and arbitrariness. This means that in establishing and enforcing diverse economic policies, harmony with fundamental principles of the Constitution, namely, free market economic system and rule of law in conformance with market economy, is required. Furthermore, now is the time to highlight the demand for transparency and responsibility of corporate management together with constitutional and legal concurrence, transparency and responsibility of process of exercise of authority. That is, improvements in government governance corresponding to improvements in corporate governance are needed. 3. Direction of Social and Welfare Policy based on Constitutionalism 1) Equality within Freedom 5

6 (1) The Constitution has adopted 'the principle of social state' which tries to actualize substantial freedom and equality through ensuring social fundamental rights or existence fundamental rights, such as right to live a decent life, right to work, minimum wage, right to work to enhance the status of workers, protection of female and minor workers, etc. However, the principle of social state adopted by the Constitution anticipates the formation of structural frame of social foundation where substantial freedom and equality can be materialized by voluntary life planning of each citizen. Moreover, the ideology of social welfare state assumed by the Constitution aims at upward coordination of national living premised on diversity of living relationship. Also, right to equality provided in paragraph 1 of Article 11 of the Constitution is relative equality, not in the sense of absolute or numerical. It is based on distributive justice achieved by "treating the same things equally, and treating different things differently". Equality can retain its meaning only when it is founded on freedom. That is, it should be 'equality within freedom', and 'equality instead of freedom' has no meaning. The Constitution pursues 'equality within freedom', not 'equality instead of freedom'. (2) Guarantee and respect for the earnings of a hard-working person or company is the very basic principle of capitalist market economy. The atmosphere of devaluating and singling out as the subject of reform just because someone is well-off or established will damage the dynamic of the society. Viewed in this light, education policy heading towards uniform downward equality, disregarding innate ability and individuality or aptitude is also unconstitutional. When equality is compelled within the economic domain, market economy can only lose the motive for growth. Whereas political democracy seeks for absolute equality providing 'one man one vote', market economy established upon distinction is not a subject for democratization. Under mankind's universal value of capitalist market economy system, equal opportunity is something that should be guaranteed but inequality of results is inevitable. It is the function of the government to uplift the group of people left behind in competition. Subsequently, the basis of government equality or distribution policy should not be a downward leveling, adjusting big trees to the small ones by cutting them off. Rather, it should be an upward coordination fertilizing the small trees. Political approach to relieve the majority's jealousy by degrading the 6

7 well-offs and the middle class will harm the economy and deprive of society's hope at the end. (3) The Nobel Prize winning economist Milton Friedman had once said that it is just a myth that the government has provided benefits to the poor by sacrificing the rich. The government regulates the market and forms welfare policy in order to protect the poor, the socially disadvantaged and medium/small enterprises. Nevertheless, the government left them facing worsened and more painful situation. He pointed out that the government expanded its power only to satisfy power and greed. 2) Growth and Distribution are Sequential, not Selective (1) Certain investment in social policy is inevitable if government's social and welfare policy are to show results, and since this requires support from state's financial strength, the achievement of a social welfare state ultimately depends on national economic power. As a consequence, tax system driven only to expand national revenue that it disregards individual tax-bearing capacity or state's excessive interference in corporate activities that it reduces the desire to voluntarily invest will bring about a slowdown of economic growth, and hence, become economic policies running counter to social welfare. Therefore, tax system which will encourage the desire to work and to produce or devising rational economic policy are the prerequisites to an effective welfare policy since they promote economic growth as well as assure the necessary resources for social investment. (2) Only what is produced through economic growth can be distributed. 'Growth' is not one of various goals which can be abandoned, but an indispensable goal which shall be attained. In this manner, 'growth' and 'distribution' are sequential concept rather than selective. Of course, the Constitution does not provide whether growth and distribution are in a sequential relationship or a selective one. However, as it was seen above, considering the facts that, first, free market economic system is the basic principle of the 7

8 Constitution and state's economic regulation and coordination should be an exceptional supplementary principle, second, constitutional principle of social state shapes the structural frame of social foundation so that substantial freedom and equality can be materialized by voluntary life planning of each citizen, and lastly, the Constitution's position concerning freedom and equality, in particular, the position concerning the theory of relative equality, it can be assumed that the Constitution basically adopts the sequential relationship between growth and distribution. As a result, insisting on welfare and distribution oriented social policy while ignoring the concept of economic growth or neglecting the guarantee of conditions required for individual and corporate economic activities is contradictory to constitutionalism, and it demands caution as it may more or less lead to irresponsible vote-catching policy or political slogan. 4. Conclusion The Constitution is the supreme norm of the state, living norm of the citizens and at the same time the political norm regulating and restricting exercise of power. Hence, national systems, Acts and subordinate statutes, policies, etc. which run counter to the Constitution are merely invalid measures unavailable to receive national justification whatever grounds are provided. This means that they cannot regulate people's lives as a national policy. Various policies, systems, etc. which go against the Constitution now demand alterations and abolitions according to the fundamentals of the Constitution. Every Act and policy of the state should clearly recognize and reflect the fundamentals and ideologies of the Constitution, as it was discussed earlier. It should again be underlined that the direction of reform policy of the government should be a practical reform which will unfetter and enrich people's concrete lives, and such reform should be achieved based on national unity through widespread participation of citizens. The Constitution should act as a compass of national unity. Stressing once again, rational economic policy guaranteeing liberal and creative economic activities to each citizen and enterprise is indeed the best social and welfare policy as well as a shortcut to economic justice and economic democracy. At the same time, it is the way to fulfilling constitutionalism. 8

The Japanese rule on cross-border insolvency had been severely criticized by many foreign lawyers 1, because it

The Japanese rule on cross-border insolvency had been severely criticized by many foreign lawyers 1, because it New Japanese Legislation on Cross-border Insolvency As compared with the UNCITRAL Model Law Kazuhiko Yamamoto Professor of Law, Hitotsubashi University 1. Summary on the New Japanese Legislation (1) History