Shilla, Shinsegae Duty Free vs. Incheon Airport: Rent Adjustment Talks Collapse... Facing Lawsuit or Withdrawal
Second Mediation Session Missed by Incheon Airport
Court to Present Compulsory Mediation Proposal
Shilla Duty Free and Shinsegae Duty Free, citing the burden caused by sluggish market conditions, requested a reduction in rent for duty-free shops located at Incheon International Airport. However, negotiations for an adjustment have broken down.
On August 28, at the second mediation session held at the Incheon District Court, Incheon International Airport Corporation did not attend. As a result, the court concluded that voluntary mediation based on mutual agreement was not possible. The court stated that it would carefully consider both parties' positions and present a compulsory mediation proposal. Industry insiders expect that it will take more than two weeks for a specific proposal to be presented. However, even if the court issues a compulsory mediation proposal, it does not carry legal force. If Incheon Airport does not accept it, the mediation will not be established.
Incheon International Airport Corporation maintains that lowering the rent determined through international bidding could constitute a breach of trust, and therefore insists that rent adjustment is not possible. Unless the corporation changes its stance, it is expected that, after the two-week objection period, the mediation will ultimately not be finalized.
The strategies available to Shilla Duty Free and Shinsegae Duty Free are to continue demanding a reduction in fees through litigation or to withdraw from Incheon Airport. If they terminate their business, each duty-free shop would have to pay a penalty of approximately 190 billion won. If Shilla Duty Free and Shinsegae Duty Free withdraw, there is speculation that Lotte Duty Free or China Duty Free Group (CDFG) could enter Incheon Airport.
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Previously, Shilla Duty Free and Shinsegae Duty Free, citing the heavy burden of rent as business conditions failed to recover after COVID-19, requested a 40% rent reduction. The corporation has maintained that the amount was autonomously determined by the operators through competitive bidding and has refused to adjust it. Right before the second mediation, the duty-free shops submitted a revised proposal lowering the requested rent reduction rate from 40% to 30-35% in an effort to reach an agreement, but the corporation did not respond. The corporation has not participated in the mediation, viewing a rent reduction as potentially leading to a breach of trust controversy.
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