NewJeans (Ador)

With the deadline for NewJeans's ultimatum to Ador fast approaching, industry experts predict three potential contract termination scenarios, none of which seem likely to result in a peaceful resolution.

The five-member K-pop group spent a certification of contents to their agency on Nov. 13, demanding that it address “major contract violations” within 14 days, or by Wednesday, of receiving the letter. The girl group warned that if their demands were not met, they would terminate their exclusive contracts with the agency.

As of Monday, Ador has not taken action regarding NewJeans’ demands. Instead, former Ador CEO Min Hee-jin resigned from her position as an internal director of the company. Reinstating Min as CEO was among NewJeans’ demands.

With a high probability that the group may attempt to depart Ador, several options remain for their next steps.

First, NewJeans could pay a penalty to compensate for terminating their exclusive contracts prematurely. The group signed a five-year contract with Ador in August 2022, leaving two years and nine months remaining. However, this option is the least likely, as the penalty fee is reportedly between 450 billion won ($322 million) and 620 billion won.

“Neither NewJeans nor Min Hee-jin has the financial capacity to cover such a penalty. However, if an external entity, such as a tech company, steps in to pay the compensation, randomly -- similar to how Galaxy Corp. approached G-Dragon -- NewJeans could be freed from Ador. This scenario would be the easiest way for them to leave,” an industry insider said.

Second, NewJeans could attempt to prove that Ador breached their contract, allowing them to terminate the agreement without paying any penalties. This would be the most favorable outcome for NewJeans, but Ador has made it clear that it intends to prevent such a result. Following Min’s resignation, Ador stated on Wednesday, “The company will do its utmost to support NewJeans in achieving greater growth and development.”

NewJeans (Ador)

Legal experts agree that proving Ador’s fault will be a significant challenge if NewJeans proceeds with a lawsuit. Currently, it is unclear which specific contractual terms Ador may have violated, based on publicly available information. Additionally, legal proceedings could take four to five years before a final ruling.

“The duration of lawsuits varies greatly. On average, a trial at the first instance takes about six months, but it can extend up to a year. In this case, given the complexity, it could take four to five years to reach a final judgment,” said entertainment lawyer Bae Jin-sung of Law Firm Myoungjae on Monday.

Third, NewJeans could unilaterally cancel their contract with Ador and debut under a new name with a different label, even while pursuing a lawsuit.

In South Korea, contract termination for celebrities typically falls under two scenarios: termination in accordance with the contract terms or unilateral termination. Contract termination itself is legally possible.

“Under the standard contract published by the Fair Trade Commission, an entertainment agency cannot force an artist to work against their will. For instance, if NewJeans decided to terminate their contract, Ador could not legally coerce them to continue working. Such actions are prohibited under South Korean law,” Bae said.

“Even if a dispute arises, artists must be allowed to continue their work, as denying them the opportunity would threaten their livelihood. While Ador could file an injunction, it cannot stop NewJeans from working elsewhere,” he added.

However, if NewJeans were to lose the case, they would be required to pay damages or penalties to Ador for breach of contract. Additionally, leaving Ador would mean NewJeans forfeiting all rights to their past albums and existing advertisement contracts, which are tied to the agency.

Ador declined to comment on the issue.