EXO’s Baekhyun, Xiumin, and Chen have once again sent a statement through their legal representative regarding their exclusive contracts, the statement has shocked fans!
On June 2, The law firm representing Baekhyun, Xiumin, and Chen released a lengthy statement aiming at refuting the points raised by SM’s statement last night.
Read through each point below!
Table of Contents
<Statement from EXO Members Baekhyun, Xiumin, and Chen (Round 2)>
June 2, 2023
(Round 2)
I am attorney Lee Jae Hak from the law firm L&L, representing EXO members Baekhyun, Xiumin, and Chen. Here, I would like to address the artists’ position regarding the claims made by SM Entertainment (“SM”) on June 1.
Point 1
- SM’s claim of external intervention is nothing more than a fabrication of false facts aimed at avoiding the essence of the artists’ exercise of legitimate rights and manipulating public opinion.
The artists have been deeply saddened upon encountering SM’s official materials insinuating the involvement of a third party. It seems that SM’s perspective on the artists has been fully revealed, and it is even more disheartening. Are they implying the presence of a third party?
Our artists are individuals who clearly think for themselves and can take responsibility for their own decisions. They think and judge independently as autonomous beings. After a decade of having doubts and questions, which they didn’t even dare to voice when they were rookies, they have mustered the courage, despite the fear and difficulties, to address these concerns now.
Our artists have questioned and listened to the opinions of many people around them, including their family, acquaintances, senior and junior artists in the music industry, colleagues, and even staff members who have worked with them. Some have shared worrying stories with us, others have provided warm encouragement, and some have shown support. It is impossible not to question whether all these individuals are third-party forces, impure forces, or negative influences.
Furthermore, our artists are autonomous individuals who can make judgments and take action on their own. Their decision to seek their rights, including the demand for settlement documents, is a result of their long deliberation and struggle, and by no means the intervention of any external force.
Furthermore, SM claims that Baekhyun, Chen, and Xiumin have entered into or attempted to enter into dual contracts, in addition to their existing exclusive contracts with SM. However, the three individuals have neither entered into nor attempted any other exclusive contracts apart from their current contracts with SM. SM must refrain from making false claims.
SM has expressed concerns about providing settlement documents to external forces and stated that they would only allow “inspection” without “provision.” However, when the artists received the settlement documents and consulted not only their legal representative but also accountants and others around them, it was an exercise of their legitimate rights. The exclusive contract does not contain any provision that prohibits the artists from showing the provided materials to others and requires them to review it alone. On the contrary, the contract stipulates that the artists should review the materials received from SM for 30 days and raise objections if necessary. It raises doubts about who is pointing out the wrong in a situation where SM refuses to provide even settlement documents, the legal representative who advises on the unfairness of such a situation, and the celebrities around them.
Once again, it should be emphasized that the consistent request from the artists and their legal representative has been for the provision of settlement documents, and SM’s ultimate refusal leading to the termination of the exclusive contract is the essence and substance of the case.
Point 2
- According to the exclusive contract, the provision of settlement documents is stipulated, not mere “inspection,” so fulfilling the obligation cannot be considered complete with just “inspection.”
The underlying premise of SM’s claim is that by allowing the “inspection” of settlement documents, they have fulfilled their obligation. However, the exclusive contract explicitly states the provision of settlement documents, not just “inspection.”
Therefore, fulfilling the obligation cannot be deemed complete with the mere act of “inspection.”
Article 14, Clause 5 of the exclusive contract between SM and the artists states, “A (SM) must provide the following settlement documents to B (the artist) upon payment of the settlement amount. B may raise objections to excessive deductions or inadequate calculation of B’s income within 30 days from the date of receiving the settlement documents, and A must provide sincere justifications for the settlement.” Thus, the documents must be “provided,” not merely “inspected,” and the 30-day objection period starts from the date of “receiving” the documents, not from the date of “inspection.”
Additionally, SM and the artists entered into an additional “Agreement” around 2014, and Article 4 of that agreement stipulates that “A shall provide supporting documents when making payment of the settlement amount according to Articles 2 and 3 (Clause 1), and A shall provide detailed settlement documents to B once every 6 months according to the exclusive contract, and B may request an explanation from A regarding the documents (Clause 2).” It also states that supporting documents and detailed settlement documents must be “provided.”
There is a significant difference between requiring the provision of documents and allowing only “inspection” in terms of protecting the artists’ rights and property rights. Especially considering that settlement documents are within SM’s domain, it is questionable how one can verify the accuracy of the details by simply looking at them. Furthermore, Article 14, Clause 5 of the exclusive contract grants the artist a 30-day review period from the date of receiving the documents, during which they are expected to thoroughly review the materials and raise objections if necessary. This is the content of the exclusive contract.
The agreement stipulates that the settlement documents should be carefully examined over a 30-day period, so SM’s argument that they have shown the documents and fulfilled their duty seems to be merely an attempt to justify their position. Due to the suspicion of such intentions from SM, we could not compromise by giving up on receiving “provision” and accepting only “inspection.”
For these reasons, even the Fair Trade Commission’s standard contract states, “When B requests it, A shall provide settlement documents to B upon payment of the settlement amount,” clearly stipulating the “provision.”
Fundamentally, refusing to provide documents in response to the artists’ legitimate request for information about the achievements they themselves contributed to, while claiming infringement of trade secrets, cannot justify violating the exclusive contract.
Point 3
- The artists and their legal representatives consistently requested the provision of settlement documents. In response, SM consistently refused, leading to the notification of termination of the exclusive contract. This is the core issue and substance of the case.
As you have seen before, SM argues that it is sufficient to allow only “inspection” of the settlement documents, assuming that the artists had not raised any issues regarding the documents in the past but suddenly demanded their provision after appointing new legal representatives. SM claims that the change in legal representation led to the artists’ sudden assertions.
The artists’ demand for the provision of settlement documents is their legitimate right. Moreover, SM’s argument that the artists started making claims suddenly because their legal representation changed is essentially a plea to stop exercising their legitimate rights. It is a disrespectful approach that disregards the artists’ high sense of rights and discernment. The legal representatives have recognized the artists’ strong sense of rights and their keen understanding of exercising their rights throughout the negotiation process.
As evidenced by the records of requests for documentary evidence, the artists and their legal representatives consistently demanded the “provision” of settlement documents from the beginning. SM, on the other hand, insisted that “inspection” of the settlement documents was sufficient. However, as mentioned earlier, SM’s argument is inconsistent with the provisions of the exclusive contract, and we could not accept it. As both sides’ positions did not converge, the artists and their legal representatives resorted to the termination of the exclusive contract according to legal precedents.
Referring to legal precedents again, an exclusive contract is based on a high level of trust. If an agency fails to fulfill its obligation to provide settlement documents, the entertainer is unable to properly exercise their rights under the exclusive contract, including reviewing the profits and raising objections to the agency. Thus, the failure to provide settlement documents constitutes a ground for termination of the exclusive contract (Seoul High Court Judgment, January 31, 2020, Case No. 2019NA2034976, reference). In other words, settlement documents must be “provided.”
This is the course of events between the artists and SM regarding the settlement documents. Contrary to this, claiming that the artists or their legal representatives have changed their positions repeatedly is a distorted and deceptive argument that deviates from the truth and distorts the core and substance of the case.
Point 4
- The problem of excessively disadvantageous long-term exclusive contract periods that go beyond the minimum reasonable limit for the artists.
As mentioned in today’s first press release, the artists have previously entered into exclusive contracts with SM that lasted for an astonishing 12 to 13 years. This greatly deviates from the standard exclusive contract period of 7 years set by the Fair Trade Commission in the Standard Exclusive Contract for Public Culture and Arts Professionals (with a focus on singers) and goes beyond the minimum reasonable limit, resulting in unilateral disadvantages for the artists.
Furthermore, SM is attempting to claim even longer contract periods for the artists by having them sign subsequent exclusive contracts that exceed the already excessive 12 to 13 years.
Such actions of signing subsequent exclusive contracts constitute the act of “unfairly utilizing a superior bargaining position to engage in transactions with the other party” under Article 45(1)(6) of the Monopoly Regulation and Fair Trade Act. In other words, the imposition of long-term periods through subsequent exclusive contracts falls under the separate categories of “mandatory provision of benefits” or “imposition of disadvantages (setting conditions that become disadvantages in the transaction)” specified in Appendix 2 of the Enforcement Decree of the same law.
In response to this, SM argues that there were legal representatives from large law firms present when the artists signed the subsequent exclusive contracts, and it is unreasonable to suddenly claim the unfairness of those contracts after a change in legal representation.
However, it is misleading to claim that the appointment of new legal representatives makes it invalid to assert the unfairness of objectively unfair contracts. The essence of the issue should not be obscured by such an argument.
Article 5(1) of the subsequent exclusive contract states, “This Agreement shall be valid for a period of five years from… However, if the minimum quantity of albums specified in Article 4(4) is not released within this period, the duration of this Agreement shall be automatically extended until the point of fulfillment.” There is no upper limit to the duration of automatic extension.
This provision, which allows the contract period to be automatically extended indefinitely until the fulfillment of the specified album quantity, is clearly a form of indentured servitude. The legal representatives of the artists have rightly pointed out that it falls under the act of “unfairly utilizing a superior bargaining position to engage in transactions with the other party,” and the artists share the same view.
Moreover, signing subsequent exclusive contracts that are not only long-term but also without an upper limit on the duration, when the original exclusive contract still has over a year remaining, cannot be deemed justifiable. SM has not even paid any contract fees for the subsequent exclusive contracts to the artists.
In light of these excessively long-term existing exclusive contracts and unfair subsequent exclusive contracts, Baekhyun, Xiumin, and Chen are seriously considering filing a complaint with the Fair Trade Commission.
Point 5
- Regarding future EXO activities
Our artists are actively exploring ways to continue EXO activities sincerely even if they terminate their exclusive contracts with SM. In fact, during the process of negotiating with SM before the termination of the exclusive contracts, Baekhyun, Chen, and Xiumin preemptively proposed a negotiation plan to continue EXO activities together even if they leave SM.
Separate from the legal issues concerning the dissolution of the contractual relationship with SM, our artists sincerely appreciate the immense love and support that fans have shown to EXO over the years.
Regardless of how the legal issues are resolved in the future, we will continue to work diligently and sincerely as the team EXO.
Source: (A)
