New Export Star 'K-Construction' Also at Risk... Concerns Over Serious Accident Punishment Act

Enforcement of Serious Accident Punishment Act Begins Today
Confusion Expected Due to Local Legal Systems
Overseas Construction Companies Also Concerned

On the first day of the Serious Accidents Punishment Act enforcement, which allows for the punishment of management officials when serious accidents such as worker fatalities occur, a construction site of an apartment in Gyeonggi-do on the 27th. Photo by Hyunmin Kim kimhyun81@

On the 27th, the Serious Accidents Punishment Act (Serious Accidents Act) was enforced, and it appears that it will be applied without exception to overseas sites of domestic construction companies, throwing the industry into confusion. There are concerns that it will act as an obstacle to the growth of overseas construction, which has become a key export driver. A major issue is that there is no shared standard on when the law applies. A representative from the Overseas Construction Association said, "There are differing opinions even among experts on whether it applies to overseas sites or not," adding, "However, the general interpretation is that if an accident occurs abroad in any way, it is difficult for the domestic headquarters to avoid responsibility."

◇Likely applied to overseas sites following the principle of nationality= The legal community explained, "It should be noted that the Serious Accidents Act adopts the principle of nationality (‘soginjuui’) according to the general provisions of criminal law." Lawyer Park Seong-geun of Barun Law Firm said, "Overseas construction sites are basically subject to foreign laws, but Korea follows the principle of nationality," adding, "If a person who suffers an industrial accident at an overseas construction site is Korean, it is the principle to apply Korean law (Serious Accidents Act)."

At overseas construction sites, Koreans mostly hold supervisory positions, while local workers are often locals. Even if an accident occurs, the probability is high that the victim is a foreigner. Lawyer Park Young-man of Yulchon Law Firm said, "It will become complicated when foreign workers are injured at foreign sites," adding, "In this case, confusion is expected over which standards to apply depending on the site situation and local legal system." Park added, "Looking at standards for guaranteeing industrial safety management costs, Korea requires a 3% budget for industrial safety management, but many other countries have 2%. How to apply these differences will also be controversial."

◇Could hamper the $1 trillion overseas construction market= Construction companies actively engaged in overseas projects are deeply concerned about safety management levels and standards. The biggest worry is the weakening of the competitiveness of ‘K-Construction,’ which is showing signs of recovery. As of the 25th, the cumulative overseas construction orders of Korean construction companies surpassed $900 billion. It has been 57 years since Korean construction first entered overseas markets with the Thailand road project in 1965. Overseas construction is also one of Korea’s representative export products. Last year, overseas construction orders amounted to $30.62 billion, exceeding ship exports ($23 billion), one of the main export products. Thanks to these achievements, Korea re-entered the ‘top 5 global overseas construction powers’ last year.

An industry official said, "Despite construction stoppages and labor shortages due to COVID-19, overseas construction continued to perform well," adding, "This was because construction sites could simultaneously ensure safety and shorten construction periods." He expressed concern that "legal risks could lead to weakened competitiveness amid ongoing low-price competition from Chinese construction companies." There have been many cases where excessive penalties on domestic construction companies led to weakened order competitiveness. When domestic construction companies were restricted from bidding in 2015 due to bid-rigging allegations related to the Four Major Rivers Project, they faced serious difficulties in securing overseas projects such as the UAE nuclear power plant and the Oslo tunnel project in Norway.

On the first day of the Serious Accidents Punishment Act enforcement, which allows for the punishment of management officials when serious accidents such as worker fatalities occur, managers are conducting a safety inspection at an apartment construction site in Gyeonggi-do on the 27th. Photo by Kim Hyun-min kimhyun81@

◇"Lawsuits to surge"... Industry anxiety intensifies= The confusion caused by ambiguous regulations is not limited to overseas sites. Although the Ministry of Employment and Labor, the competent authority, recently encouraged compliance by stating, "If safety obligations are fully met, there will be no punishment," the general industry view is that related lawsuits will inevitably flood in the future. Lawyer Kim Seong-geun, a specialist in serious accident cases at Dongin Law Firm, said, "The Ministry of Employment and Labor says that if all nine safety obligations in the enforcement decree are fulfilled, there will be no punishment, but this is ineffective," adding, "If you look into details, the number of specific obligations can exceed 100 or 200, making it impossible to fully comply."

For example, the enforcement decree stipulates that management must allocate the necessary budget for safety assurance and execute it appropriately, but there are many ambiguous parts such as appropriate budget standards and execution methods, leaving room for arbitrary judgments by the Ministry of Employment and Labor and prosecutors. An executive A of a mid-sized construction company pointed out, "Even if we want to comply with the law, we have no idea what exactly and to what extent we must do to avoid punishment." Lawyer Kim said, "Lawsuits will definitely increase in the future," adding, "There needs to be improvements that can enhance corporate predictability."

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