Korea's espionage law revision closes one loophole, but opens another for defense exporters

A revision to South Korea's espionage law, due to take effect in September, aims to close a long-criticized loophole that has left sensitive technology inadequately protected. But defense exporters fear the changes could expose employees to espionage charges for routine dealings with overseas customers.

The amended Article 98 of the Criminal Act, passed by the National Assembly on Feb. 26 and taking effect on Sept. 13, expands South Korea’s espionage offense from acts committed for an “enemy country” to those committed for any “foreign country or equivalent organization.”

For the first time in the 73 years since the provision was written in 1953, leaking national secrets to a foreign government, a foreign company or a third-country entity can be prosecuted as espionage rather than treated as a lesser offense. The change lands on an industry that has spent recent years chasing that kind of cross-border business, and defense firms are now asking where legitimate exporting ends and a criminal act begins.

The revision joins a wider tightening of espionage and technology-protection laws worldwide. Britain and China both expanded their counterintelligence statutes in 2023, and the United States has long prosecuted economic espionage as a national security crime, as governments treat technology and supply chains as security assets. Supporters cast the change as catching South Korea up to that shift.

Why the defense industry is uneasy

For arms makers, the worry is not the intent of the law but its edges. The statute turns on the term "national secret," and industry sources say it is unclear which of their technologies, contracts and data qualify, or when a foreign customer or partner counts as a foreign country or equivalent organization.

"The terminology used in the revision is ambiguous," said a source within the industry. "The industry has unique characteristics to take into consideration, so the language should be made clearer." 

Until now, Korea’s espionage law punished spying only when it was carried out for an enemy state, which courts read to mean North Korea alone. That Cold War framing left a wide gap. If a Chinese national walked out with Korean semiconductor technology, or an employee passed sensitive material to a company in an allied country, prosecutors could not charge espionage and had to fall back on lighter statutes.

The revision closes that gap through a new Article 98-2, covering espionage for a foreign country or equivalent organization. It punishes anyone who detects, collects, leaks, delivers or brokers national secrets for such an entity, or who aids those acts, with three years or more in prison. The older Article 98, covering spying for an enemy state, remains and still carries the heavier penalties of death, life imprisonment or at least seven years.

"The people who should be held accountable may ultimately avoid responsibility, while others could end up mired in legal disputes," the source said. "Of course, companies have a duty to prevent such situations from arising in the first place, but there is a sense that the regulations are becoming increasingly restrictive."

The motivations were driven by economic interests as much as security concerns. Lawmakers pointed to a run of leak cases involving semiconductors, batteries, AI and defense. According to data from the Korea Economic Research Institute and the Ministry of Trade, Industry and Energy, 110 cases of industrial technology leaking abroad were recorded between 2020 and the first half of 2025. Among these, 33 cases involved designated national core technologies, resulting in an estimated industrial damage of 23.27 trillion won ($15.7 billion).

The provision drew bipartisan support, but its final passage was messier, bundled with a contentious "law distortion" offense that the opposition People Power Party filibustered before the Feb. 26 vote passed under Democratic Party leadership.

Defense exports are built on sharing exactly the kind of sensitive material the law now guards. At a recent seminar at law firm Yulchon, attorneys described how the business has shifted from delivering finished weapons to bundling goods, technical data, software, local production, maintenance and long-term support — a single frigate deal can involve design data handed to a buyer’s navy and production know-how shared with a local partner.

That sharing already carries criminal exposure under Korea’s export-control regime, before the espionage law is counted. Last December, the Changwon District Court’s Masan branch sentenced a defense firm’s chief executive, a retired Navy officer, to two and a half years in prison, fined his company 15 billion won and ordered about 95 billion won more in confiscation for exporting submarine torpedo-launch-tube design files to Taiwan without approval from the defense-procurement agency.

Taiwan is reported to have used the technology for its first domestically built submarine, launched in 2023, and the court cited the security risk and diplomatic exposure the leak created. The espionage amendment stacks a heavier national-security offense on top of that existing framework. Because espionage is a wiretap-eligible offense under the Protection of Communications Secrets Act, once foreign contact is suspected, investigators also gain earlier surveillance tools.

What tempers the alarm is a limit built into the new offense, which applies only to acts carried out under a foreign entity’s “direction or instigation,” the line separating espionage from an ordinary commercial handover. Even so, exporters cannot treat a signed deal as blanket cover.

"A company should not assume that all technical data may be provided simply because an export contract has been concluded," said Jang Won-joon, an associate professor specializing in the defense industry at Jeonbuk National University. Criminal risk, he said, has to be managed technology by technology, through government approval and internal controls.

Which technologies count

Because the law hinges on the term "national secret," the practical question is which technologies fall under it. Korean courts have used a test set by the Supreme Court in 1997 with three parts: the information must not already be public, its leak must pose a real risk to national security and it must be valuable enough to be worth protecting.

By Yulchon’s reading, some assets are almost certain to count, such as military secrets, defense-industry technology and strategic-item data. Designated national core technologies probably will too, while ordinary trade secrets most likely will not. A disputed group in the middle will be decided case by case.

Set against the industry’s unease is a widely held view that the revision was overdue, closing a gap that let foreign actors take Korean secrets with little consequence as the country’s semiconductor, battery and arms-export industries became richer targets. Choi Gi-il, a professor of military studies at Sangji University, called the tougher law a welcome response to increasingly organized, state-level technology theft, arguing that the deterrent weight of its penalties is the point.

Both scholars, though, see limits the law cannot reach. Jang wants the government to define “national secret," "equivalent organization" and what it means to act "for a foreign country" quickly, so that normal exports and joint development are not chilled.

Choi pointed to a harder ceiling. Korean defense technology is largely government-controlled and transfers already require state approval, he said, but once technology is handed to a buyer nation under a state-to-state agreement, Korea has little power to stop that country from reselling or copying it. Domestic law, he said, cannot bind a foreign state or a foreign firm that does not operate in Korea.

That is the space the September start date leaves unresolved. The penalties are set and the enforcement date is fixed, but the definitions that would tell a shipbuilder or a jet maker exactly where the line falls are still being written. For an industry that turned defense exports into one of Korea’s proudest economic stories, the discomfort is being asked to operate before the line has been finished.

BY KIM MIN-YOUNG [[email protected]]