Review of Korean secured transaction law in light of the principles in the UNCITRAL Model Law

Abstract This article examines the Korean legal regime on security rights over movables and receivables, focusing on the Act on Security over Movables and Receivables enacted in 2010. The Act introduced a new registration system for security rights on movables and receivables, supplementing existing provisions in the Civil Code. While this legislation aimed to expand financing opportunities, particularly for small and medium-sized enterprises, its utilization has fallen short of expectations. The article evaluates the current Korean legal framework in light of international norms, particularly the UNCITRAL Model Law on Secured Transactions. It analyses key aspects of the Act, including its scope, registration system, rights and obligations of parties, and enforcement mechanisms. The Act’s innovations include a unified security right encompassing movables, receivables, and intellectual property, a new registration system, clear priority rules, and provisions for private enforcement. Despite these advancements, the article identifies several areas for potential improvement: expanding the scope of grantors beyond corporations and individuals with registered business; reconsidering the five-year duration limit on security rights; exploring the possibility of adopting a notice registration system; enhancing mechanisms for preserving collateral value including the use of modern technologies; promoting private enforcement while balancing creditor and debtor interests; and addressing the relationship between the new security rights regime and the traditional security by means of transfer (Yangdodambo). The article concludes that while the Act represents significant progress in modernizing Korea’s secured transactions law, further refinements are necessary to align with international best practices and to meet the evolving needs of Korea’s financial and commercial sectors.