Son Kyung-shik, Chairman of the Korea Employers Federation (KEF), holds an emergency press conference regarding the Trade Union Act at the KEF in Mapo-gu, Seoul, on July 31. 2025.7.31 Yonhap News

Foreign companies are increasingly protesting the so-called 'Yellow Envelope Act,' which the Lee Jae-myung administration is pushing forward aggressively.

This bill, composed of amendments to the Trade Union and Labor Relations Adjustment Act and the Commercial Act, has drawn opposition not only from the business community but also from corporate organizations in major investing countries, including European and American chambers of commerce. Actual investment indicators have shifted to a declining trend, and some multinational corporations are reportedly considering withdrawing from South Korea.

While not an official legal term, 'Yellow Envelope Act' is used as a symbolic expression for these two legislative proposals. The amendment to the Trade Union Act grants direct bargaining rights to indirect employment workers and limits claims for damages incurred during strikes.

The amendment to the Commercial Act mandates the cumulative voting system for listed companies with assets exceeding 2 trillion won, and stipulates the separate election of auditors and restrictions on the incineration of treasury shares. Businesses are concerned that the combination of these bills could destabilize their management rights and overall responsibility structures.

Foreign business organizations are concerned about the increased uncertainty in South Korea's investment environment. In a recent statement, the European Chamber of Commerce in Korea (ECCK) stated that the proposed legislation exposes legitimate management decisions by businesspeople to criminal liability risks, and that some member companies are considering withdrawing from the South Korean market.

"The Yellow Envelope Act blurs the scope of employers' legal liability, and business decisions by executives can lead to civil and criminal risks. This goes beyond a mere change in regulations and threatens the core values of corporate activities. Some member companies are considering withdrawing their business from South Korea."

The American Chamber of Commerce in Korea (AMCHAM) also pointed out around the same time that "the predictability of the legal system is rapidly decreasing," and that global headquarters are considering reducing their investment in South Korea.

"The bills are designed to reduce the stability and predictability of investment in South Korea. Many global headquarters are considering expanding production bases in Southeast Asia and within the United States rather than in South Korea, and the proportion of South Korea in long-term investment plans at the headquarters level is decreasing."

Actual indicators are corroborating these concerns. According to the Bank of Korea, net inflows of foreign direct investment (FDI) in the fourth quarter of 2024 recorded a negative $1.178 billion, marking the first quarterly deficit in 12 years. During the same period, capital outflows exceeded $83.6 billion, a more than fourfold increase compared to the same period last year.

The trend did not reverse in the first quarter of 2025 statistics released by the Ministry of Trade, Industry and Energy. Foreign direct investment on a reported basis decreased by 9.2% year-on-year to $6.41 billion. While investment on a received basis increased by 26.4% to $3.51 billion, this is analyzed to be largely due to the execution of previously planned investments.

Amidst this situation, the Democratic Party of Korea launched a '3 Special Prosecutor Response TF' on July 30. This formalized political and legislative support for ongoing investigations and trials concerning allegations of stock manipulation by First Lady Kim Keon-hee, former President Yoon Suk-yeol's alleged sedition, and the death of Private First Class Chae. The opposition party is strongly protesting this, labeling it as "obstruction of justice through the exercise of legislative power."

A source from the business community stated, "The simultaneous occurrence of labor's political interests and legislative intervention in judicial institutions is enough to make foreign investors perceive South Korea as an unstable country," adding that "the trend of 'de-Korea' is not a warning but a reality."

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