키코계약의 구조와 키코사건의 재조명 - 대법원 판결을 중심으로

Abstract

KIKOs are the over-the-counter derivatives actively sold in Korea during2007 to the companies by the commercial banks in order to hedgeexchange risk. However, the exchange rate of Korean Won was raisedunexpectedly to the buyers of KIKOs, many small and medium sizedcompanies. The buyers could not bear the burden of obligations to payunder the KIKOs and started litigation to avoid the paying obligations. After long period of legal disputes on KIKOs, recently the Supreme Courtof Korea decided four en banc decisions on KIKOs on September 26, 2013. The court gave more clearer direction on the legal issues on KIKO cases. The court denied the unsuitability of hedge, unconscionable contracts,adhesion contracts, and mistake or fraud, which were asserted by the buyersof KIKOs, but only granted the duties of suitability and explanation basedon the facts. The implications of such decisions are that the seller can sellsimilar derivatives only if they do not violate the suitability principle andduty to explain. The decisions are very favorable to the seller since they aremainly based on the self responsibilities of the parties. However, somereasons of the court decisions still need to reexamine. This article reviewedwhat the fundamental problem of selling of KIKOs was and whether thecourt decisions were reasonable and fair to allocate KIKO loss between theparties. This article focuses on the characteristics of the structure of KIKOs asderivatives. KIKOs are designed to function as exchange risk hedge only ifthe buyers’ amount of having foreign currency is exactly twice as put optioncontacts under KIKO. This means KIKO has two variables : It hasexogenous variable, the amount of foreign currency having or expected tohave as well as endogenous variable, change of exchange rate. Thus KIKOs’hedge functions are conditional only when the buyer keeps the designedratio one to two between put option and the retained amount of realforeign currency. Thus all the reasoning needs to based on such designed characteristics ofKIKOs. The court and the parties should have focused on the exactcondition of hedge, instead of general suitability of hedge. When the sellersells KIKOs, he should have explained such characteristics to the buyers onthe functional condition of KIKOs. This is related to the issues on suitabilityprinciple and duty to explain. Thus explaining that buyer can have lossesaccording to the movement of exchange rate is not the suitable explanation. Rather, the seller should explain buyer very clearly to understand the riskwhen buyer do not maintain proper amount of foreign currency asdesigned. All the legal issues need to be interpreted based on the suchKIKO's structural characteristics. KIKO disputes and cases show the typical example of regulation risk. Thelegal standard regarding the selling of derivatives was ambiguous whenKIKO was sold. Financial supervising authorities and banks did notconcerned seriously such regulation risks until the huge financial loss wasoccurred to the buyers and disputes were raised. Thus based on thethorough analysis on the reasons of KIKO cases, improvement of thefinancial and legal standard is required to prevent similar disputes as KIKOs.