Constitutional Court: "No Legislative Obligation for State Compensation in Inter-Korean Investment Projects"

Claimant Argues Kaesong Industrial Complex Investment 'Useless' Due to 2010 May 24 Measures
Constitutional Court: "No Legislative Obligation to Compensate Losses in Foreseeable Risk Situations"

Chief Justice Yoo Nam-seok of the Constitutional Court (center) and other justices entered and took their seats in the Constitutional Court courtroom in Jongno-gu, Seoul, where the constitutional complaint and unconstitutionality review were held on the afternoon of the 26th.
[Image source=Yonhap News]

[Asia Economy Reporter Heo Kyung-jun] The Constitutional Court has ruled that even if investors suffer losses due to government measures against North Korea, there is no legislative obligation for the state to provide compensation. The court stated that since investment projects in North Korea were undertaken with foreseeable risks, it is difficult to consider that there is a legislative duty to compensate for losses.

On the 31st, the Constitutional Court announced that it dismissed, with a unanimous opinion of all justices, a lawsuit seeking a declaration of unconstitutionality due to legislative inaction, claiming that the May 24th measures of 2010?which prohibited new investments in North Korea and banned investment expansion?did not provide compensation legislation for economic cooperation operators.

Legislative inaction refers to cases where the legislature fails to enact laws despite the constitution explicitly delegating the enactment of laws to guarantee citizens' fundamental rights. The court’s dismissal means that it cannot recognize a legislative obligation, and thus the constitutional complaint is not valid.

The petitioner, Mr. A, purchased commercial business land within the Kaesong Industrial Complex from the Korea Land Corporation in 2007 to develop real estate projects. However, after the Cheonan warship sank in the West Sea in March 2010 due to an attack by North Korea, the government announced North Korea-related measures on May 24 of the same year, which completely prohibited support projects for North Korea. Even in cases where land use rights were acquired and building permits were obtained within the Kaesong Industrial Complex, the government effectively suppressed construction starts and material imports.

Subsequently, Mr. A filed a constitutional complaint in 2016 after ultimately losing a lawsuit against the state seeking compensation for losses caused by the May 24 measures.

The Constitutional Court judged, "Investments in North Korea inherently carried the possibility of unpredictable losses due to changing inter-Korean relations, and those wishing to engage in economic cooperation projects made decisions under their own responsibility considering these circumstances. It is difficult to see a legislative obligation to compensate for losses that occurred in situations where risks were already anticipated."

In January, the Constitutional Court also ruled on a constitutional complaint regarding the government's 2016 decision to close the Kaesong Industrial Complex, stating that the measure did not violate due process or infringe on property rights.

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