Supreme Court Confirms Guilt of POSCO E&C for Awarding Contract Without Confirming City Gas Pipeline Before Excavation Work

The Supreme Court has ruled that if excavation work is carried out without prior confirmation of whether underground city gas pipelines are buried in accordance with relevant laws, not only the subcontractor directly responsible for the construction but also the contractor who commissioned and managed the site can be subject to punishment.

According to the legal community on the 20th, the Supreme Court's Third Division (Presiding Justice Lee Heung-gu) upheld the original verdict sentencing POSCO E&C (formerly POSCO Construction) to a fine of 7 million KRW and POSCO E&C employee Kim to a fine of 3 million KRW on charges of violating the City Gas Business Act. The ground investigation company S, which directly performed the excavation work, and its employee Kwon were each fined 10 million KRW.

The court stated, "The lower court found that defendant Kim fell under the category of 'a person who conducted excavation work without requesting confirmation of the city gas pipeline burial status' as stipulated in Article 50, Clause 8 of the City Gas Business Act, and thus judged the charges against POSCO E&C and Kim to be guilty," adding, "There was no error affecting the judgment such as failure to conduct necessary hearings, deviation from the limits of free evaluation of evidence contrary to logic and experience, or misunderstanding of the legal principles regarding the establishment of the offense of violating the City Gas Business Act," thereby dismissing the appeal.

Kim and Kwon were indicted for failing to verify the burial status with the Korea Gas Safety Corporation's Excavation Work Information Support Center while conducting excavation work for ground investigation in the Pohang by-product gas combined power plant installation project in September 2019.

The excavation work involved POSCO E&C as the subcontractor who received the contract from POSCO, and company S as the sub-subcontractor who was contracted by POSCO E&C. Both companies were jointly indicted under the corporate liability provision.

Article 30-3, Paragraph 1 of the City Gas Business Act (Confirmation of City Gas Pipeline Burial Status) stipulates that "A person intending to carry out excavation work in an area where city gas business is permitted must request confirmation from the city gas business operator supplying the area, through the information support center as prescribed by the Ministry of Trade, Industry and Energy, whether city gas pipelines are buried underground on the relevant land before conducting the excavation work."

If excavation work is conducted without following this confirmation procedure, under Article 50, Clause 8 of the City Gas Business Act (Penalties), the offender may be punished by imprisonment for up to two years or a fine of up to 20 million KRW.

Article 50, Clause 8 of the City Gas Business Act targets "a person who conducted excavation work without requesting confirmation of the city gas pipeline burial status as per Article 30-3, Paragraph 1, or a gas supply facility installer other than a city gas business operator" for punishment.

Article 53-3 of the same law (Corporate Liability Provision) stipulates that if a representative or agent of a corporation is punished under Article 50, the corporation shall also be fined.

In the trial, the issue was whether the subcontractor is included in the term "a person intending to carry out excavation work" under Article 30-3, Paragraph 1 of the City Gas Business Act.

The first-instance court ruled that the subcontractor POSCO E&C could not be considered "a person intending to carry out excavation work," sentencing employee Kwon of company S, who directly performed the work, to a fine of 5 million KRW and company S to a fine of 9 million KRW, while acquitting POSCO E&C and employee Kim.

The court reasoned that "the term 'a person who conducted excavation work' in Article 50, Clause 8 of the City Gas Business Act refers, barring special circumstances, to the person who actually performed the excavation work."

The court further explained that under the principle of legality, penal laws must be interpreted strictly, and if there is no special definition in the law, terms should be interpreted according to their dictionary meaning. Since "excavation" linguistically means the act of digging soil or rock, "a person who conducted excavation work" should be limited to those directly involved in the excavation construction.

The court stated, "Punishing the subcontractor in addition to the sub-subcontractor who actually performed the excavation work is inappropriate as it applies civil contractual responsibility to criminal law."

However, the second-instance court's judgment differed. The appellate court held that POSCO E&C and employee Kim were also included in "a person intending to carry out excavation work" under Article 30-3, Paragraph 1 of the City Gas Business Act, overturned the first-instance acquittal, and sentenced POSCO E&C to a fine of 7 million KRW and Kim to a fine of 3 million KRW. The fines for company S and Kwon, who directly performed the excavation, were increased to 10 million KRW each.

The court stated, "Defendant POSCO E&C, as the subcontractor who entrusted the excavation work to defendant S, managed the overall work related to the excavation, including directing and supervising S's operations. Accordingly, defendant Kim, as the site manager for POSCO E&C, bore the obligation to request confirmation of the city gas pipeline burial status under Article 30-3, Paragraph 1 of the City Gas Business Act but failed to fulfill this duty and proceeded with the excavation work, thus falling under the punishable category under Article 50, Clause 8 of the City Gas Business Act. POSCO E&C is also subject to punishment under the corporate liability provision of Article 53-3 of the same law."

The court based this judgment on the following points: ▲ Considering the legislative intent and purpose of the City Gas Business Act, it is reasonable to interpret that the punishable parties under Article 50, Clause 8 include not only those who actually performed the excavation but also subcontractors who specifically directed and supervised the sub-subcontractor's work and managed the overall excavation work; ▲ According to the accident investigation report prepared by the Korea Gas Corporation, defendant S received city gas pipeline maps buried on the construction site from POSCO E&C, indicating that POSCO E&C also bore the obligation to request confirmation of the city gas pipeline burial status under Article 30-3, Paragraph 1; ▲ According to statements from POSCO E&C employee Kim to investigative authorities, the head office design team designated and modified excavation points and communicated related information to defendant S, and according to statements from defendants Kwon and Kim, Kim was present at the excavation site, consulted with Kwon about excavation locations, and instructed on safety management related to the work.

POSCO E&C and others appealed, but the Supreme Court's judgment was consistent with the appellate court's decision.

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