GeoLegal Weekly #47 - Martial Law
South Korea demonstrates the unpredictability of politics in 2024 and reminds us to plan for any eventuality. Also - US/China export spat, Hunter Biden, and Drake sues Kendrick Lamar.
Greetings from The Legal Tech Fund Summit in beautiful Miami, where I might be able to relax if I wasn’t terribly worried about the fate of the world. I kid (barely). Give a shout if you’re here and want to connect. I promise I’m not all doom and gloom in person!
Is there a better story that typifies the unruly world we live in than the last day or so in South Korea? I don’t think so. President Yoon Suk Yeol surprised everyone (his staff, the military, the US etc) when he declared martial law on the stated basis of national security threats – but really as a power move against the opposition. He sent the military into the streets, to take over the legislature and to shut down political discourse in the media. Six hours later, the 190 members of the National Assembly who were able to access the parliamentary chamber voted unanimously to reject martial law, which the president subsequently reversed. A bill to impeach Yoon has been introduced with the apparent support of six political parties, essentially all but Yoon’s own People Power Party; it can be voted on as early as Friday. An impeachment could throw the country into weeks of uncertainty.
An oil painting of a battered but resilient South Korea flag, by ChatGPT
All of this might simply be a fascinating spectacle if not for the fact that South Korea is one of the world’s fifteen biggest economies overall and among its largest producers of semiconductors. Its semiconductor capabilities in particular make South Korea a prime alternative to Taiwan and China should geopolitical tensions threaten that supply. Oh yeah, and there’s also an extremely hostile nuclear-capable country to the north that would love a good moment of distraction to flex its muscles and test the resolve of South Korea’s allies to defend it, just as those allies begin to rethink the value of alliances...
There are a few ways to think about what’s just gone down and where we’re headed.
First, we need to be ready for anything in today’s world. Political leaders face deeply divided (and fickle) populaces, and are increasingly willing to use aggressive tactics to cement their control. Often this takes the form of emergency legal powers, which can occur almost spontaneously. I smiled at one description of Yoon, a former prosecutor, as “a lawyer and political neophyte” because the implication is that he may have relied on a legal mechanism at his disposal rather than understanding his political footing.
Second, politics is upstream of law - especially in countries with established democratic cultures. We can obsess over the autocratic notions of some democratically elected leaders, but their authority is real only if the military, the population and (to some extent) the rest of government complies. Had the military rejected the president’s decree, we might have been looking at the risk of a military coup. In this case the military took to the streets but so did protesters. It’s one thing to call the military to the streets and another to ask them to shoot protesters; to some extent, the protesters signalled to the National Assembly the national mood and limited the president’s option set.
It's hard not to see a parallel with voices warning that Donald Trump may try to cling to power in the US after his second term is up in four years. Yet the South Korean example reminds us that such a calculus is not simply about what a leader does and says, but whether the military and the population would allow it. A crisis in the US like that unfolding in South Korea would have a much larger global ramification even if it was quickly contained. But I worry less about it than others because I think US democracy has a breaking point just as the younger South Korean example.
Yet, damage is done to institutions, international standing, and business value regardless of whether rational governance is ultimately restored. This makes it more expensive to operate in the wake of such events, since insurance companies and lending markets reprice risk when the rule of law is weakened. This is true in South Korea, and may become a concern in the US despite obvious differences in economic strength and seigniorage.
So what should companies do?
In the narrow South Korea context, companies need to think about redundancy and supply replacement even more than they did before. On any given day, it’s easy to forget about the hostile power just 50km north of Seoul, but Pyongyang is still there, and a wide range of events could trigger the hermit kingdom to take aggressive action. Space for an opportunistic gambit is only one of them. If you are dependent on South Korean technology and have not run scenario plans around such situations, this should be a wake up call. Such events cause us to take a step back and when we do, we are reminded just how fractious South Korean politics is, as the chart below shows.
Second, there are implications across Asia as a collapse of this government could undermine a Seoul-Tokyo thawing as well as trilateral military ties between Japan, South Korea and the US. This would be a boost to China’s efforts to divide the three. That this comes at a time when the incoming administration in Washington will reconsider the sanctity of its treaty alliances underscores the potential for a shift in regional power dynamics.
In the broader context, this emphasizes the need for companies to build muscles for understanding and responding to a world around them. I’m not a South Korea expert, but to understand what’s going on in the world this week, I had to swiftly become conversational. The expectation will be similar for corporate leaders who are facing government pressure, transition and collapse in a variety of critical places all at once. We’ll be releasing software in the next few weeks that can help you monitor your world in all its complexity (you can join the waitlist here) but none of that will help if you and your team doesn’t adopt an appropriate mindset about the global business environment.
Part of that involves understanding the world for what it is. Corporate leaders and investors have a bias for optimism; after all, they wake up every day tasked with delivering growth. I’ve picked up a sense that as the year closes, many executives feel like the worst political bullets have been dodged in an unprecedented year of global elections—and markets are certainly trading as such. Yet, global politics is not binary: It is messy and companies will get tangled up in the messiness for the foreseeable future.
In Other News
U.S.-China semiconductor supply chain war: On Monday, the Biden administration announced enhanced restrictions on semiconductor-related exports to China and imposed tight restrictions on trade to an additional 140 Chinese and China-related companies by adding them to its “entity list.” On Tuesday, China’s Ministry of Commerce responded by banning the export of certain rare minerals to the US – gallium, germanium, antimony and superhard materials. Both the US and China cited the fact that the firms and technologies in question had dual military and civilian uses. Companies - and their lawyers - in both countries are scrambling to mitigate the supply chain impact of these moves. Effects will be felt not only in China and the U.S., but throughout the rest of the semiconductor ecosystem: the Netherlands, Singapore, Taiwan, Japan and South Korea.
Hunter Biden Pardon: Let me first dismiss the faux outrage: President Biden was obviously going to pardon his son, as I’ve said to anyone who asked me. But my dismissal of the outrage doesn’t preclude the pardon from being consequential. In effect, both parties now openly accuse each other of weaponizing the justice system for witchhunts and both parties have broken the glass on pardoning family members and political cronies. This further weakens Americans’ faith in the justice system. Politically, this is all pain for Democrats because they look like hypocrites in addition to looking like elites that play by their own privileged rules. This is very different from the Trump playbook of fighting to the death, including using pardons as a last resort. But memories are short for these sorts of things. No one talks about Bill Clinton pardoning Roger Clinton. And if anyone was concerned about Donald Trump’s first term pardon of his son-in-law’s father, they can show up in Paris to voice it when Charles Kushner becomes ambassador to France.
Supreme Court Ethics: NYT has a great summary of Supreme Court ethics reforms. Basically toothless but interesting to read the backstory.
If you can’t win, you can always sue: Rapper Drake took a beating when Kendrick Lamar’s eviscerating battle rap “Not Like Us” became the song of the summer last year. Now he’s suing Universal Music claiming that the song’s popularity was engineered.
-SW