'Participation in Defense IT Project' LG CNS, Partial Victory in KCTC Delay Penalty Lawsuit

On the 2nd, reservists are conducting VR simulated tactical shooting training at the Science Reserve Forces Training Center in Seocho-gu, Seoul, where reserve forces training, which had been suspended since December 2019 due to the COVID-19 pandemic, has resumed. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kim Daehyun] LG CNS, which participated in a defense IT (information and communication) project worth several hundred billion won, partially won the first trial of a lawsuit related to liquidated damages imposed by the state.

According to the court on the 7th, the Civil Division 17 of the Seoul Central District Court (Presiding Judge Kim Seongwon) recently ruled in the first trial of LG CNS's lawsuit against the state demanding payment of service fees worth around 10 billion won, stating, "The defendant shall pay the plaintiff approximately 1.26559 billion won."

Earlier, LG CNS won the contract for the approximately 200 billion won 'Army Science Combat Training Corps (KCTC) Central Control Equipment System Development Project' ordered by the Defense Acquisition Program Administration in 2010. The contract deadline was until December 2014. However, the construction was delayed as the Defense Acquisition Program Administration's cooperating company, responsible for completing the tactical road for installing base stations and optical cables, went bankrupt, and the contract deadline was extended to November 2015.

However, the construction was completed in 2018, exceeding the contract deadline again. During this process, a revised contract reducing the project scale was made, and the contract amount was reduced by about 12 billion won.

Subsequently, the state imposed liquidated damages worth over 100 billion won on LG CNS, claiming that the project was delayed by a total of 956 days even after the contract period extension. However, LG CNS won a lawsuit in 2019, which it had filed before the project ended, requesting an extension of the contract deadline to October 2016, thus avoiding the risk of having to pay a huge amount of liquidated damages. At that time, the court recognized that the Defense Acquisition Program Administration was also responsible for the delay and ordered the contract period to be extended by a total of 325 days.

After paying liquidated damages adjusted to about 8 billion won, LG CNS filed a lawsuit against the state in 2020 demanding payment of service fees. They argued, "This project is a research and development project with limited available resources and high technical risks, but the defendant unilaterally reduced the contract amount." Additionally, they provisionally claimed that "If the revised contract amount is valid, liquidated damages of about 7 billion won should have been imposed, but 8 billion won was imposed without deducting the reduced contract amount," and thus the excessively imposed amount should be paid.

The court judged that the revised contract itself was valid as it was concluded by mutual agreement between both parties, so the total contract amount reduced by this contract is valid. However, the court acknowledged that the liquidated damages were excessively imposed and accepted the provisional claim.

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