"Honam High-Speed Railway Colluding Construction Companies Must Pay 67.9 Billion Won in Compensation"

Court Rules Partially in Favor of Korea Rail Network Authority

[Asia Economy Reporter Seongpil Cho] Major domestic construction companies such as Lotte Construction and Samsung C&T, which engaged in collusion during the bidding process for the Honam High-Speed Railway construction project, have been ordered to pay compensation amounting to 70 billion KRW.

According to the legal community on the 31st, the Seoul Central District Court Civil Division 16 (Presiding Judge Ki-hwan Lim) ruled partially in favor of the plaintiff in a damages lawsuit filed by the Korea Rail Network Authority against 28 construction companies including Lotte Construction. The court ordered "20 construction companies including Lotte Construction to jointly pay the Authority approximately 67.935 billion KRW plus delayed interest." For Sambu Construction, the court confirmed a rehabilitation claim of about 1.2 billion KRW. However, the lawsuits against three companies?Samwhan Enterprise, Geukdong Construction, and Namgwang Construction?were dismissed as rehabilitation proceedings had already commenced before the lawsuit was filed. The lawsuits against four other companies?Ssangyong Construction, Dongbu Construction, Gyeongnam Enterprise, and Poonglim Industry?were withdrawn following a court-recommended settlement during the litigation.

The Honam High-Speed Railway construction project involves building a high-speed rail network spanning a total length of 184.534 km connecting Osong, Gongju, Iksan, Jeongeup, and Gwangju Songjeong. It is a large-scale national project with a total budget of 8.3529 trillion KRW. During the bidding process for 13 sections of the Honam High-Speed Railway construction project ordered by the Authority in 2009, these construction companies engaged in collusion to ensure a specific company won the bid, as revealed during an investigation by the Fair Trade Commission. Led by Doosan Construction, POSCO Construction, Korea Development, Gyeryong Construction Industry, and Hanshin Engineering & Construction, the companies divided into three groups to pre-select winning bidders for each section and used stand-ins.

Due to this collusion, Lotte Construction, Samsung C&T, Hyundai Development Company, and GS Construction were selected as winning bidders for each section of the Honam High-Speed Railway construction project. Subsequently, the Authority paid these winning bidders a total of 2.8611 trillion KRW in construction costs. However, during the Fair Trade Commission’s investigation, it was confirmed that the bid amounts were inflated due to the collusion among these construction companies, leading the Authority to file a damages lawsuit worth 91.4 billion KRW in May 2015.

The construction companies argued in court that the damage amount was excessively calculated, but the court rejected this claim, stating, "It is difficult to see any significant error in the appraisal." However, the court noted, "It cannot be concluded that the damage calculation method is entirely reasonable, and such statistical estimation methods inherently contain imperfections," limiting the construction companies' compensation liability to approximately 80% of the damage amount.

This content was produced with the assistance of AI translation services.