Baekhyun, Chen, and Xiumin have refuted SM Entertainment’s position regarding the termination of their exclusive contracts and have promised to continue their activities as members of EXO.
On the morning of the 2nd, Lawyer Lee Jae-hak of the law firm LIN, representing Baekhyun, Chen, and Xiumin, released a second statement regarding their exclusive contract with SM Entertainment.
On the 1st, Baekhyun, Chen, and Xiumin notified SM Entertainment of their intention to terminate their exclusive contracts. In response, SM Entertainment expressed suspicions of external forces influencing the artists. Baekhyun, Chen, and Xiumin countered by stating that SM Entertainment was evading the essence of providing financial data and attempting to manipulate public opinion.
Additionally, Baekhyun, Chen, and Xiumin have previously claimed that SM Entertainment had engaged in “slave contracts.” However, SM Entertainment argued that there was no coercion during the re-signing process. Baekhyun, Chen, and Xiumin pointed out the automatic renewal clause in the subsequent exclusive contract, which states that “if the minimum specified number of albums is not released, the contract period will be automatically extended until the fulfillment of this condition.”
Baekhyun, Chen, and Xiumin revealed that they are considering filing a complaint with the Fair Trade Commission, citing the unfairness of entering into a subsequent exclusive contract with one year remaining in the current contract period without receiving the contract fee.
Nevertheless, Baekhyun, Chen, and Xiumin have promised to continue their future activities as members of EXO. Even if they terminate their exclusive contracts with SM Entertainment, they have presented a negotiation proposal to continue their activities as EXO. They stated, “Regardless of how the legal issues are resolved in the future, we will continue to work diligently and sincerely as a team called EXO.”
The following is the full text of the second statement from Baekhyun, Xiumin, and Chen, members of the group EXO.
I am Attorney Lee Jae-hak from the law firm LIN, representing Baekhyun, Xiumin, and Chen (Byun Baek-hyun, Kim Min-seok, Kim Jong-dae, hereinafter referred to as “the artists”). Here, as their legal representative, I would like to convey the artists’ position regarding the claims made by SM Entertainment (“SM”) on June 1.
1. SM’s claim of external forces is nothing more than false information aimed at evading the artists’ legitimate exercise of their rights and manipulating public opinion.
The artists’ state of mind upon encountering SM’s official statement implying the involvement of third-party external forces is extremely disheartening. It is dismaying to see SM’s perspective on the artists laid bare, revealing a callous viewpoint.
Are we talking about another third-party influence?
The artists are clearly capable of independent thought and responsible decision-making as adults. They are independent thinkers who have had questions and concerns for over ten years, and even now, they summon the courage to voice these concerns, which they dared not express when they were rookies.
The artists have sought advice and listened to numerous individuals around them to determine what is right and find wise solutions. Among those individuals are their families, acquaintances, senior and junior artists in the music industry, colleagues, and even staff members who have worked with them.
Some expressed concerns, while others offered warm encouragement or support. We cannot help but question whether all these individuals are the so-called third-party forces, impure or malevolent influences.
The artists are capable of making their own judgments and acting independently.
Their decision to seek their rights, including the demand for financial settlement data, is a result of the artists’ long contemplation and struggle, not the influence of any external forces.
Furthermore, SM claims that the artists have signed or attempted to sign dual contracts, but Baekhyun, Xiumin, and Chen have not signed or attempted to sign any other exclusive contracts beyond their existing contracts with SM. SM should refrain from making false claims.
SM has refused to provide the financial settlement data, citing concerns about it being accessed by external forces and only allowing for “review” rather than “provision.” However, it is the artists’ legitimate right to examine the financial settlement data and seek advice not only from their legal representative but also from accounting professionals and others. The artists are not allowed to show the provided data to others, and there is no provision stating that they must review it alone. On the contrary, the contract stipulates that the artists should review the data for 30 days and raise any objections if necessary.
Even in the absence of the provision of financial settlement data, both SM and the artists’ legal representative consistently requested its provision. The refusal by SM to provide the data is the essence and substance of the issue that led to the termination of the exclusive contract.
2. The exclusive contract explicitly states the provision of financial settlement data, so it cannot be considered fulfilled by simply allowing “review.”
The underlying premise of SM’s argument is that providing the opportunity to “review” the financial settlement data fulfills their obligation. However, the exclusive contract specifically stipulates the “provision” of the financial settlement data. Therefore, fulfilling the obligation cannot be justified by merely showing the data for “review.”
Article 14, Clause 5 of the exclusive contract entered into by SM and the artists states, “Upon payment of the settlement amount, Party A (SM) must provide Party B (the artists) with the following financial settlement data. Party B may raise objections to excessive deductions or underestimation of income within 30 days of receiving the settlement data, and Party A must provide sincere justification for the settlement.” Accordingly, the data should be “provided” rather than “reviewed,” and the objection period of 30 days starts from the day the data is “received,” not from the day of “review.”
Furthermore, SM and the artists entered into an additional “agreement” around 2014, and Article 4 of that agreement states, “When Party A pays the settlement amount according to Article 2 and Article 3, Party A must provide supporting documentation. Party A must provide detailed settlement data to Party B once every June according to the exclusive contract, and Party B may request explanations from Party A regarding the data.” Again, it stipulates the “provision” of supporting documentation and detailed settlement data.
There is a significant difference between requiring the data to be “provided” and allowing only “review” in terms of protecting the artists’ rights and property. Especially considering that the financial settlement data is within SM’s domain, it is questionable whether simply looking at it can verify the accuracy of the contents. Moreover, Article 14, Clause 5 of the exclusive contract grants the artists a 30-day review period, during which they are expected to thoroughly examine the data and raise objections if necessary.
The commitment was made to carefully scrutinize the data over a period of 30 days, so SM’s argument that they have fulfilled their duty by merely showing the data and saying, “We have done our part by showing it to you, haven’t we?” is ultimately a pretext to build a justification. Considering the inferred intentions of SM, we could not compromise by giving up the right to “provision” and accepting only “review.”
For these reasons, even the standard contract template provided by the Fair Trade Commission states, “When Party A has a request from Party B, Party A must provide Party B with the financial settlement data upon payment of the settlement amount.” It explicitly stipulates the “provision” of the data.
Fundamentally, refusing to provide the requested data regarding the achievements that the artists themselves have contributed to while invoking trade secret infringement is an unjustifiable act that violates the exclusive contract.
3. Artists and their legal representative have consistently requested the provision of financial settlement data. SM’s ultimate refusal and subsequent notification of contract termination are the core and substance of the matter.
SM argues that, based on the premise that allowing “review” of the financial settlement data is sufficient, the artists suddenly demanded the provision of the data after appointing a new legal representative, leading to the abrupt notice of contract termination.
The artists’ request for the provision of financial settlement data is their legitimate right according to the exclusive contract. And SM’s claim that “the artists started making claims only after changing their legal representative” can be interpreted as a demand to refrain from exercising their legitimate rights. Moreover, it disregards the artists’ strong sense of rights and discernment. Their legal representative has recognized the artists’ strong sense of rights and high level of understanding regarding the realization of their rights throughout the discussions.
As evidenced by the record of the request for documentary proof, both the artists and their legal representative consistently demanded the “provision” of financial settlement data from the beginning. SM, on the other hand, took the stance that allowing the “review” of the data should be sufficient. However, as seen earlier, SM’s argument is not in line with the exclusive contract and was not acceptable to us. With no resolution in sight, the artists and their legal representative decided to terminate the exclusive contract in accordance with the legal precedent.
Referring to legal precedents, an exclusive contract is based on a high level of trust, and when the agency fails to fulfill its obligation to provide financial settlement data, the entertainer is deprived of the right to properly review and raise objections regarding profit settlements, making the failure to provide the financial settlement data a valid reason for contract termination (Seoul High Court Decision 2019Na2034976, January 31, 2020). In other words, financial settlement data must be “provided.”
This is the course of events between the artists and SM regarding the financial settlement data. However, the claim that the artists or their legal representative have constantly changed their stance is an inaccurate assertion that distorts the core and substance of the matter, deceiving and misleading.
4. The problem of the excessively disadvantageous initial exclusive contract period for artists beyond a reasonable minimum level
As stated in today’s press release, the artists have previously entered into exclusive contracts with SM for an astonishing period of over 12 to 13 years. This greatly deviates from the standard exclusive contract for public culture and arts professionals (with a focus on singers) set by the Fair Trade Commission, which stipulates a contract period of 7 years, and it goes far beyond a reasonable minimum level, placing the artists at a unilateral disadvantage.
Furthermore, SM, not satisfied with the 12 to 13-year exclusive contract period, is attempting to argue for subsequent exclusive contracts that would require the artists to sign for a minimum of 17 or 18 years.
This act of entering into subsequent exclusive contracts constitutes a violation of Article 45, Paragraph 1, Subparagraph 6 of the Monopoly Regulation and Fair Trade Act, which refers to “engaging in transactions with the counterparty by unfairly using their trading position.” In other words, imposing long-term obligations through subsequent exclusive contracts falls under the provisions of “compulsory provision of benefits” or “setting unfavorable conditions (conditions that result in disadvantages)” as specified in Annex 2 of the Enforcement Decree of the same law.
In response to this, SM argues that there was a prominent law firm acting as the artists’ legal representative at the time of entering into subsequent exclusive contracts, and it claims that it is not valid to suddenly argue the unfairness of the subsequent exclusive contracts after a change in the legal representative.
However, claiming that the appointment of a legal representative makes it invalid to assert the unfairness of a contract that objectively appears unfair is obscuring the essence of the issue.
Article 5, Paragraph 1 of the subsequent exclusive contract states, “This contract shall be valid for a period of five years from… However, if the minimum quantity of albums specified in Article 4, Paragraph 4 is not released within this period, the contract period shall be automatically extended until such performance is fulfilled.” There is no limit to the duration of the automatic extension.
The provision that the contract period is automatically extended without any limit until the minimum album release quantity is fulfilled is clearly a form of indentured servitude, as pointed out by the legal representative, and the artists also share the same understanding.
Moreover, entering into a subsequent exclusive contract that is both long-term and without a limit to the duration, when the original exclusive contract still has over a year remaining, with the intention to “bind” the artists, cannot be considered justified. SM has not even paid the artists any contract fees for the subsequent exclusive contracts.
Considering the long-term nature of the existing exclusive contract and the unfair act of entering into subsequent exclusive contracts, Baekhyun, Xiumin, and Chen are seriously considering filing a complaint with the Fair Trade Commission.
5. Regarding Future EXO Activities
Even if our artists terminate their exclusive contracts with SM, they are actively exploring ways to continue their EXO activities sincerely with other EXO members. In fact, even before the termination of the exclusive contracts, during the negotiation process with SM, Baekhyun, Chen, and Xiumin preemptively proposed a negotiation plan to continue EXO activities together, even if they were to leave SM.
Separate from the legal issues concerning their relationship with SM, our artists would like to express their heartfelt gratitude for the immense love and support that fans have shown to EXO over the years. Regardless of how the legal matters are resolved in the future, we will continue to work hard and sincerely as a team under the name of EXO.
Source : Xportsnews
Photo : Xportsnews DB
Edited by JW
