Analysis of Criteria for Distinguishing Sponsorship Funds from Bribery in South Korea

1. Conceptual and Structural Similarities between Sponsorship Funds and Bribery

1.1 Definition of Sponsorship Funds and Bribery

Sponsorship funds and bribery share the common characteristic of being monetary or material benefits arising from transactional relationships that presuppose consideration and counter-consideration. Sponsorship funds refer to money or goods that sponsors provide to sponsored parties while expecting specific counter-consideration, while bribery refers to improper benefits that serve as consideration for a public official’s duties.

The key to determining whether sponsorship funds constitute bribery lies in whether the protected legal interests of bribery crimes—fairness in public officials’ duty performance, social trust, and the incorruptibility of public office—are violated. Particularly when state or local government agencies in South Korea enter into sponsorship contracts with companies and receive sponsorship funds, whether such acts constitute criminal bribery under South Korean law becomes an important legal issue.

1.2 Content of Structural Similarities

The structural similarities between sponsorship funds and bribery manifest in the following aspects. First, the relationship of consideration and counter-consideration. In sponsorship relationships, sponsors provide funds to sponsored parties, and sponsored parties provide counter-consideration (advertising effects, name usage rights, etc.) in return. In bribery crimes, bribe providers offer benefits to public officials, and public officials perform specific official acts as consideration for such benefits.

Second, the existence of consideration relationships. Sponsorship is implemented based on sponsorship contracts, while bribery is based on consideration relationships of consideration and counter-consideration between official acts and improper benefits. Such consideration relationships serve as core elements in both.

Third, the transfer of economic value. Both sponsorship funds and bribes involve structures where benefits of certain economic value are transferred from one party to another.

1.3 Practical Difficulties in Distinction

There are several reasons why distinguishing sponsorship funds from bribery is difficult in practice. First, due to external similarities, it is difficult to distinguish between the two based solely on the provision of funds and counter-consideration. Second, it is often difficult to determine what the parties’ genuine intentions are. Even if the form of a sponsorship contract is adopted, it may actually be a sham act for bribery receipt.

Third, determining the adequacy of counter-consideration is complex. When the counter-consideration provided by the sponsored party is significantly insufficient compared to the consideration provided by the sponsor, the judgment of whether this can be viewed as a legitimate sponsorship relationship becomes complicated.

1.4 Background of Legal Issues

Today, cultural, artistic, sports, and social welfare activities are virtually impossible to realize without support through sponsorship. Not only private events but also state and local government events often rely on corporate financial support. Particularly for local governments in South Korea, private financial support or corporate attraction is necessary to overcome limited financial conditions and solve regional priority projects and employment problems.

The tension between such social necessity and criminal bribery provisions under South Korean law forms the background of legal issues regarding whether sponsorship funds constitute bribery.

2. Legal Meaning of Sponsorship and Sponsorship Funds

2.1 Concept and Characteristics of Sponsorship

Accurately conceptualizing sponsorship is a very difficult task. The term “sponsorship” is sometimes used interchangeably with terms such as donation, support, assistance, development, and fundraising. In South Korea, since the receipt of donated goods is generally prohibited by the Donation Act, neutral terms such as advertising contracts are sometimes used rather than using terms like sponsorship that are similar to donations.

The English designation for sponsorship is “Sponsoring,” which emerged in the 1970s to explain new types of marketing in business administration. Initially, it originated from companies supporting individuals or projects in sports or arts fields while expecting publicity or advertising as counter-consideration.

2.2 Differences between Donation and Sponsorship

The most important difference between donation and sponsorship is the presence or absence of counter-consideration. Donation is essentially one-sided provision of funds without presupposing counter-consideration, while sponsorship is essentially based on consideration and counter-consideration between sponsors and sponsored parties. This difference also has important meaning in legal regulation.

Since South Korea’s Donation Act only regulates funds acquired without counter-consideration, sponsorship funds that presuppose counter-consideration are not subject to the Donation Act. Therefore, sponsorship funds have a different legal status in that they can be received without restrictions under the Donation Act.

2.3 Legal Nature of Sponsorship Contracts

Sponsorship contracts have the nature of bilateral contracts under civil law. Sponsors bear the obligation to provide funds, and sponsored parties bear the obligation to provide counter-consideration (e.g., providing advertising effects, allowing name usage, etc.). Due to this bilateral contractual nature, sponsorship contracts receive different legal treatment from donations.

When sponsorship contracts are validly established under civil law, parties bear legal obligations to perform their respective contractual duties and have the right to demand contract performance from the other party. This becomes an important consideration when determining whether sponsorship funds constitute bribery.

2.4 Types and Scope of Sponsorship Funds

From a criminal law perspective, sponsorship should not be limited to fields such as sports, culture, religion, and academia, but should be understood to include all types of sponsorship fund receipt involving consideration and counter-consideration concluded between state and local government agencies and private parties in South Korea. This is because criminal bribery under South Korean law is judged based on whether such sponsorship funds violate the protected legal interests of bribery crimes, regardless of the type of sponsorship funds or the target of sponsorship.

In reality, case situations included in sponsorship are very diverse with a very broad spectrum. For example, a representative sponsorship case would be a company CEO sponsoring a local museum and having a nameplate with the company representative’s name installed in the museum as consideration. Such cases may constitute permissible fund receipt or punishable bribery crimes depending on specific details or conditions.

3. Current Regulation of Sponsorship Funds under South Korea’s Donation Act

3.1 Regulatory Scope of the Donation Act

South Korea’s current Donation Act aims to foster a mature donation culture, establish a sound donation collection system, and ensure proper use of collected donations by stipulating necessary matters regarding donation collection procedures and usage methods.

The Donation Act historically traces back to the Donation Collection Prohibition Act enacted in 1951, which originally prohibited donation collection in principle while allowing it only exceptionally. Later, the law title was amended to the Donation Collection Regulation Act in 1996, and has been implemented as the current Donation Act since 2006.

The current Donation Act aims to foster a mature donation culture and establish a sound donation collection system, so donation collection is permitted as long as it is not specifically prohibited or is permitted by other laws.

3.2 Classification Based on Presence of Consideration

Article 2, Paragraph 1 of South Korea’s Donation Act defines donated goods as “money or goods acquired without counter-consideration, regardless of designation such as welcome donations, congratulatory donations, or supporting donations.” The key here is the requirement of “without counter-consideration.”

Therefore, sponsorship funds that essentially involve counter-consideration based on sponsorship contracts do not correspond to donated goods as defined in the Donation Act. In other words, sponsorship funds presupposing counter-consideration are clearly not subject to the Donation Act from the beginning.

However, the Donation Act excludes from donated goods such items as membership fees, one-time payments, dues collected from members by corporations, political parties, social organizations, clan associations, social clubs, etc. according to their articles of incorporation, regulations, or bylaws, and funds collected from believers by temples, churches, Confucian schools, and other religious organizations for expenses necessary for their unique activities.

3.3 Restrictions on State Organizations and Local Governments

South Korea’s Donation Act requires those seeking to collect donations of 10 million won or more to register with the Minister of Public Administration and Security or heads of metropolitan local governments. In this regard, the Donation Act generally prohibits donation collection by the state, local governments, their affiliated institutions and public officials, and corporations and organizations established through investment and contribution by the state or local governments.

Additionally, these institutions cannot accept even voluntarily contributed funds unless there are other provisions in relevant laws. Violations of Article 4, Paragraph 1 and Article 5, Paragraph 1 of the Donation Act are subject to criminal punishment.

3.4 Permissible Scope of Sponsorship Fund Receipt

Since South Korea’s Donation Act only regulates funds acquired without counter-consideration, our legal system does not prohibit sponsorship contracts or sponsorship fund receipt that involve counter-consideration. Consequently, it is not prohibited under the Donation Act for state or local governments to enter into sponsorship contracts with companies and receive sponsorship funds based on such contracts.

However, it cannot be definitively concluded that state or local government receipt of sponsorship funds from companies through sponsorship contracts never violates current law. Cases where state or local government officials who receive sponsorship funds secretly receive part of such funds as bribes through hidden agreements with sponsors can certainly be envisioned.

4. Bribery Elements and Criteria for Determining Consideration Relationship

4.1 Evolution of Protected Legal Interests in Bribery Crimes

Regarding the protected legal interests of bribery crimes, academic views are divided between those emphasizing the incorruptibility of official acts and those emphasizing both the incorruptibility of official acts and general trust in them. South Korean precedents have shown changes in this regard.

Traditional precedents viewed the protected legal interests of bribery crimes as lying in the incorruptibility of official acts (Supreme Court of South Korea, May 31, 1965, Decision 64Do723). However, later precedents revised their position by stating that “bribery crimes have as their direct protected legal interests the incorruptibility of official acts based on fairness in duty performance and social trust therein” (Supreme Court of South Korea, August 14, 1984, Decision 84Do1139; January 23, 1996, Decision 94Do3022; October 12, 2001, Decision 2001Do3579; June 13, 2003, Decision 2003Do1060; November 28, 2013, Decision 2013Do9003).

This change has important implications for the scope and interpretation of bribery crimes. Since viewing only the incorruptibility of official acts as the protected legal interest would limit recognition of bribery crime establishment only to cases where bribes are directly linked to duties, it is appropriate to understand it in a broader sense as in the revised precedent approach.

4.2 Elements of Simple Bribery

Simple bribery (Article 129, Paragraph 1 of South Korea’s Criminal Act) is established when a public official or arbitrator receives, demands, or promises bribes in relation to their duties. The key elements here are as follows.

First, the subject must be a public official or arbitrator. Since Article 129 of the Criminal Act does not separately define public officials, it is generally interpreted according to the concept of public officials in the general provisions of the Criminal Act.

Second, there must be job-relatedness. The requirement “in relation to their duties” means there must be a relationship between the bribe and the public official’s duties. This is closely related to the consideration relationship, which is a core element of bribery crimes.

Third, bribes must be received, demanded, or promised. Here, bribes mean improper benefits as consideration for public officials’ duties, and need not necessarily have monetary value but include non-pecuniary benefits and all tangible and intangible benefits.

4.3 Elements of Third-Party Bribery

Third-party bribery (Article 130 of South Korea’s Criminal Act) is established when a public official or arbitrator receives improper solicitation regarding their duties and causes, demands, or promises bribes to be given to a third party. Among the elements of this crime, “improper solicitation” is particularly noteworthy.

South Korea’s Supreme Court has broadly interpreted “improper solicitation” by stating that “‘improper solicitation’ includes not only cases where solicitation involves illegal or improper duty performance, but also cases where, even if the duty performance that is the target of solicitation is not itself illegal or improper, the duty performance is connected to some consideration relationship and involves the delivery of consideration for duty performance” (Supreme Court of South Korea, August 29, 2019, En Banc Decision 2018Do13792).

This interpretation means that even if duty performance itself is not illegal, merely connecting duty performance to a consideration relationship can constitute improper solicitation, which has important implications for sponsorship fund-related cases.

4.4 Criteria for Recognizing Consideration Relationship

Whether in simple bribery or third-party bribery, the core element is “bribery,” which refers to improper benefits as consideration for public officials’ duties. Since bribes must be improper benefits related to duties, there must be a consideration relationship of consideration and counter-consideration between public officials’ official acts and improper benefits.

In recognizing consideration relationships, temporal sequence is not necessarily required. That is, consideration relationships can be recognized both when bribes are received first and duties performed later, and when duties are performed first and bribes received later.

Additionally, consideration relationships need not be explicit and can be recognized through implicit agreements. Even if parties did not explicitly agree on consideration relationships, bribery crimes can be established if consideration relationships are recognized by comprehensively considering all circumstances.

4.5 Comprehensive Consideration Relationship Doctrine

South Korean precedents recognize comprehensive consideration relationships, holding that bribery can be established if a public official’s duties and received benefits are in an overall consideration relationship, without requiring individual official acts to be specified (Supreme Court of South Korea, December 26, 1997, Decision 97Do2609).

This has had the effect of broadening the scope of bribery crime application and has important implications for sponsorship fund-related cases. Even if there is no one-to-one correspondence between specific official acts and sponsorship funds, bribery crimes can be established if a consideration relationship is recognized between public officials’ duties and sponsorship funds overall.

However, public officials’ receipt of benefits does not always lead to bribery crimes. Particularly, even if consideration relationships are recognized between benefits and official acts, consideration relationships can be negated if certain criteria are met. This means that consideration relationships in bribery crimes can be negated if certain reasons apply where the protected legal interests of bribery crimes are not violated.

5. Concept of Benefits in Sponsorship Funds and Bribery Crimes

5.1 Concept and Scope of Benefits in Bribery Crimes

Bribes refer to improper benefits for duties. Benefits constituting the content of bribes need not necessarily have monetary value as long as they have sufficient value to influence official acts, and include non-pecuniary benefits and all tangible and intangible benefits.

South Korean precedents define bribes in bribery crimes as “all tangible and intangible benefits sufficient to satisfy human needs and desires, including money, goods, and other pecuniary benefits.” Therefore, so-called premiums attached to apartment association membership rights are also held to constitute bribes (Supreme Court of South Korea, December 22, 1992, Decision 92Do1762).

5.2 Pecuniary and Non-Pecuniary Benefits

According to the precedent rationale, financial privileges such as low-interest loans, intimate relationships, cheap real estate sales, large congratulatory or condolence money, golf course or health club memberships, and opportunities to participate in speculative businesses also constitute benefits in bribery crimes.

Particularly regarding speculative business participation opportunities, South Korea’s Supreme Court has stated that “when a public official receives an opportunity to participate in a speculative business as a bribe, the completion time of the bribery crime should be viewed as when the act of participating in the speculative business ends, and even if no profit is obtained from the business participation contrary to initial expectations due to changes in economic conditions after the act ends, this does not affect the establishment of the bribery crime” (Supreme Court of South Korea, November 26, 2002, Decision 2002Do3539).

This means that benefits referred to in bribery crimes can be recognized by the mere provision of opportunities, regardless of whether actual economic gains are realized.

5.3 Public Purpose Use and Bribery Nature

Since bribes are sufficient if they are illegal compensation or improper benefits, even when public officials arrange for pecuniary benefits in consideration relationships with official acts to be donated to orphanages or social public institutions out of charitable motives, this can constitute bribery. South Korea’s Supreme Court states that “even if a public official who received money and goods consumed them for subordinate staff rather than taking personal gain, the bribery nature is not denied” (Supreme Court of South Korea, June 14, 1996, Decision 96Do865).

As a specific example, when the Fair Trade Commission Chairperson received a request for leniency in corporate merger review from the restructuring headquarters head of a group including a mobile communication company and requested temple donations, thus causing donation money to be provided, such donation money constitutes improper benefits as bribes (Supreme Court of South Korea, June 15, 2006, Decision 2004Do3424).

5.4 Determination of Abuse of Authority

What is important in the above case is that the Fair Trade Commission Chairperson’s abuse of authority is clear. Bribery nature was recognized because there was abuse of authority by the Fair Trade Commission Chairperson against private parties who had no obligation to provide donation money.

However, when relevant benefits are used for public purposes without abuse of authority by public officials, they should not easily be determined as bribes. Additionally, non-pecuniary benefits that satisfy honor-seeking or vanity are generally viewed as difficult to consider as benefits in bribery crimes because they are difficult to measure objectively.

Such distinctions also serve as important criteria when determining whether sponsorship funds constitute bribery. Cases where public officials receive sponsorship funds for public purposes within their legitimate authority should be distinguished from cases where they abuse authority to pursue private interests.

6. Legal Effect of Civilly Valid Sponsorship Contracts

6.1 Determination of Sponsorship Contract Validity

Sponsorship contracts and the receipt of sponsorship funds and performance of counter-consideration based thereon are closely related to public officials’ legal rights to sponsorship funds. When sponsorship contracts and their performance that are externally in consideration and counter-consideration relationships are based on civilly valid contracts, whether such consideration or counter-consideration can be viewed as bribes becomes an important issue.

The validity of contracts under civil law is determined based on criteria such as agreement of expressions of intent, parties’ capacity to act, and legality of contract content. These general contract validity determination criteria also apply to sponsorship contracts.

Particularly for sponsorship contracts concluded by public officials or public offices in South Korea, important judgment factors include whether procedural requirements under relevant laws were observed, whether those with contract conclusion authority concluded the contracts, and whether contract content does not violate laws.

6.2 Existence of Legal Rights and Claims

When funds provided by individuals or companies to public officials are in consideration relationships with obligations that public officials must perform, and such funds and obligations are contractually agreed content, such funds should be viewed as not corresponding to benefits that meet the elements of bribery crimes.

Therefore, if public officials possess legitimate rights or claims, such funds should not be viewed as benefits constituting the content of bribes. Ultimately, whether funds received by public officials through bilateral contracts can be viewed as bribes depends on whether contracts concluded between private parties and public officials are legitimate.

This serves as an important basis for negating the bribery nature of sponsorship funds. When public officials or public offices have legitimate legal rights to sponsorship funds based on civilly valid sponsorship contracts, this cannot be viewed as improper benefits.

6.3 Sham Acts and Genuine Intent

When the genuine intent between sponsorship contract parties is not in bilateral contract relationships but is merely sham acts to cover other improper acts, public officials lack the basis for legally approved rights, so this should be viewed as corresponding to benefits presupposed by bribery crimes.

In this regard, it is important to interpret and investigate contracts to determine the actual content and performance of sponsorship contracts. The mere fact that sponsorship contract documents were prepared is not sufficient; the substantial content of contracts and what the parties’ genuine intentions are must be grasped.

Criteria for determining whether acts are sham include comprehensively considering contract conclusion circumstances, balance of consideration and counter-consideration, actual contract performance, and parties’ perceptions.

6.4 Practical Standards for Contract Interpretation

In interpreting sponsorship contracts, the following practical standards are important. First, the language of contracts must be considered primarily. The content of consideration and counter-consideration specified in contracts, performance methods, performance timing, etc. must be specifically reviewed.

Second, the actual process of contract conclusion and performance must be examined. Whether contract content and actual performance content match, whether counter-consideration was actually provided, etc. must be confirmed.

Third, parties’ subjective perceptions must be considered. Whether parties genuinely perceived themselves to be in bilateral contract relationships, or whether they simply prepared contract documents as a means to conceal bribery receipt must be determined.

7. Determining Adequacy of Consideration and Counter-Consideration

7.1 Debate on the Necessity of Adequacy Requirements

Even when public officials and companies conclude sponsorship contracts, views are divided on whether consideration and counter-consideration must be in adequate relationships for bribery crime benefits to be negated.

Some academic views argue that consideration provided by private parties and counter-consideration by public officials must be in adequate relationships to not correspond to benefits in bribery crimes. In this case, adequacy should be determined by comprehensively considering economic circumstances, public officials’ positions, experience, scope and duration of consideration, market prices, etc.

Conversely, other views argue that quantitative adequacy relationships are not valid because the basis of consideration and counter-consideration lies in bilateral contracts. They particularly point out that adequacy determination is difficult for sponsorship contract-related advertising, and if what seemed adequate beforehand turns out to be inadequate later, this could lead to the possibility of bribery crime establishment.

7.2 Principle of Economic Efficiency

It should be viewed that adequacy or appropriateness between consideration and counter-consideration is not important if the content of relevant sponsorship contracts is within civilly valid ranges. Unless there are cases where invalidity can be claimed due to severe imbalance in civil litigation, precise adequacy examination is not appropriate.

Since public officials or public offices must pursue maximum utility with minimum input, requiring strict adequacy between consideration and counter-consideration may rather impede public administration efficiency. For example, even if consideration and counter-consideration do not achieve complete balance, if this contributes to public interest and helps efficient resource allocation, it should be viewed as legitimate.

7.3 Difficulties in Adequacy Determination

Determining the adequacy of consideration and counter-consideration in sponsorship contracts is actually a very difficult task. First, it is difficult to accurately calculate the economic value of intangible counter-consideration such as advertising effects or promotional effects.

Second, when similar transactions are not active in the market, it is difficult to find comparison standards. Particularly since sponsorship contracts between public institutions and private companies have different characteristics from general commercial transactions, it is difficult to determine adequacy based simply on market prices.

Third, there is the issue of adequacy determination timing. When contracts seemed adequate at the time of conclusion but became inadequate later due to changes in economic conditions, problems arise regarding how to evaluate this.

7.4 Practical Application Standards

In practice, it is desirable to determine adequacy by comprehensively considering the following standards. First, examine whether there is serious imbalance to the extent that contract validity would be negated due to significant imbalance under civil law.

Second, consider objective circumstances and parties’ perceptions at the time of sponsorship contract conclusion. Determine whether this was a transaction at a level that reasonable parties would have accepted at the time of contract conclusion.

Third, consider public interest and transparency. When sponsorship contracts contribute to public interest and are transparently disclosed, adequacy can be recognized even if there is some imbalance.

Fourth, consider parties’ negotiating power and information access capabilities. If public officials or public offices freely negotiated based on sufficient information, their results should be respected.

8. Practical Standards for Determining Whether Sponsorship Funds Constitute Bribery

8.1 Establishment of Key Judgment Criteria

When contracts between sponsors (companies) and sponsored parties (public officials, public offices) are civilly valid, sponsored party public officials have legal rights to sponsorship funds, so sponsorship funds in such cases cannot constitute benefits referred to in bribery crimes.

The core criterion for distinguishing sponsorship funds from bribery is that consideration relationships in bribery crimes should be negated in cases where the protected legal interests of bribery crimes—fairness in public officials’ duty performance, social trust, and incorruptibility of official acts—appear not to be violated. The specific criterion corresponding to this is whether state institutions or local governments complied with relevant laws and administrative procedures when procuring sponsorship funds or funding.

8.2 Transparency and Procedural Legality

Making administrative acts by state institutions or local governments in South Korea that complied with relevant laws and procedures subject to criminal punishment constitutes value contradiction. Therefore, regarding administrative acts by state institutions or local governments that are not illegal under administrative law, it is appropriate for criminal law not to intervene in light of the subsidiarity principle of criminal law.

Ensuring transparency is an important factor in negating the bribery nature of sponsorship funds. If the process and content of sponsorship contract conclusion are disclosed and relevant stakeholders can know about them, it can be viewed that the protected legal interest of bribery crimes—social trust in public office—is not violated.

Procedural legality is also an important judgment criterion. If sponsorship contracts were concluded and performed in compliance with procedures stipulated in relevant laws, this becomes strong grounds for negating the applicability of bribery crime elements.

8.3 Existence of Criminal Intent

Even if externally normal sponsorship contracts are concluded between state institutions or local governments and companies, bribery nature can be recognized when public officials responsible for sponsorship or funding have hidden criminal motives unrelated to sponsorship.

The existence of criminal motives should be determined by comprehensively considering the following factors. First, whether public officials provided special conveniences during sponsorship contract conclusion processes. Second, whether public officials obtained personal benefits separate from sponsorship contracts. Third, whether there were changes in public officials’ official acts before and after sponsorship contract conclusion.

8.4 Specific Cases and Precedent Analysis

An actual case involves a national university professor receiving consulting fees. In this case, the issue was whether a national university professor receiving separate consulting fees while conducting research on humidifier disinfectant constituted bribery.

Seoul High Court ruled that consulting fees did not constitute bribery (Seoul High Court, April 28, 2017, Decision 2016No3175). The grounds included: first, the consulting contract was separate from the research contract; second, actual consulting was performed; third, it was difficult to definitively conclude that consulting fees were excessive; fourth, the company had reasons to pay research-related consideration as research funds; fifth, the professor reported consulting fees and paid taxes.

South Korea’s Supreme Court also viewed the lower court’s judgment as proper and confirmed it (Supreme Court of South Korea, April 29, 2021, Decision 2017Do7138). This case is an important precedent showing cases where funds of similar nature to sponsorship funds may not constitute bribery.

If sponsoring companies provided sponsorship funds to public officials or public offices non-transparently, and general citizens or relevant persons did not know about sponsorship contracts, this does not meet the criteria for negating benefits in bribery crimes. Rather, such cases should be investigated in detail from the perspective of bribery crimes.

In conclusion, whether sponsorship funds constitute bribery should be determined by comprehensively considering: ①civil validity of sponsorship contracts, ②procedural legality and transparency, ③existence of public officials’ legal rights, ④absence of criminal motives, and ⑤use for public purposes.

K&P Law Firm has experience successfully obtaining not-guilty verdicts in recent cases where members of the National Assembly of South Korea received donations from business persons by clearly presenting criteria for distinguishing sponsorship funds from bribery crimes. Particularly, we have practical experience in successfully negating the applicability of bribery crime elements by comprehensively proving the legality and transparency of sponsorship contracts, existence of counter-consideration, and procedural legality. Based on this experience, we can provide effective legal response strategies for similar cases.