[Exclusive] Court Dismisses HD Hyundai Heavy Industries' KDDX Injunction Request

Industry Speculates: "Strategic Delay to Enter Bidding After Penalty Period Expires"

The provisional injunction filed by HD Hyundai Heavy Industries against the Defense Acquisition Program Administration (DAPA) to prohibit the infringement of trade secrets has been dismissed. As a result, HD Hyundai Heavy Industries' likelihood of winning the contract for the Korean Next-Generation Destroyer (KDDX) project has significantly diminished.

According to the defense industry on May 8, the Civil Division 60 of the Seoul Central District Court (Presiding Judge Kim Mikyung) held the second hearing and concluded the examination on April 22 for the provisional injunction case filed by HD Hyundai Heavy Industries against DAPA to prohibit trade secret infringement. On this day, the court dismissed the final provisional injunction request.

Yonhap News Agency

HD Hyundai Heavy Industries and Hanwha Ocean, the two dominant players in the domestic special shipbuilding sector, have been competing for the KDDX project contract.

Hanwha Ocean was responsible for the conceptual design, while HD Hyundai Heavy Industries handled the basic design. Although it is customary for the company in charge of the basic design to win the contract for the lead ship and related work, controversy arose after employees of HD Hyundai Heavy Industries were convicted of photographing and leaking Hanwha Ocean’s conceptual designs. Consequently, in December last year, DAPA decided to select the project contractor through a competitive bidding process.

Initially, DAPA planned to distribute the KDDX basic design request for proposal (RFP) to the designated competitors, HD Hyundai Heavy Industries and Hanwha Ocean. However, HD Hyundai Heavy Industries filed a lawsuit on April 24, claiming that 12 out of the 170 basic design data items attached to the RFP distributed by DAPA contained trade secrets and thus could not be disclosed. During the proceedings, the number of items considered non-disclosable was expanded to 14.

Within the industry, there has been speculation that HD Hyundai Heavy Industries engaged in litigation with DAPA regarding the KDDX project as a strategic move to delay the process, so that the penalty period would expire before the full-fledged bidding competition began.

DAPA stated that it would continue to proceed with the project in accordance with due process following the court’s ruling.

A DAPA official said, "We respect the court's decision," adding, "This decision is highly significant as the court recognized the procedural legality and fairness in the process of providing government-owned materials for the efficient research and development of weapon systems." The official also stated, "DAPA will continue to implement the KDDX project fairly and lawfully in accordance with relevant laws and procedures."

The KDDX project aims to build six 6,000-ton-class Korean Aegis destroyers by the 2030s at a cost of approximately 7.8 trillion won. HD Hyundai Heavy Industries and Hanwha Ocean are currently competing through a designated bidding process for the detailed design and the construction of the lead ship.

Nine employees of HD Hyundai Heavy Industries were tried for secretly photographing and sharing classified military information, including the KDDX conceptual design by Daewoo Shipbuilding & Marine Engineering in 2015. Eight were convicted in November 2022, and the remaining one was found guilty in December 2023.

Last year, DAPA revised its policy after an internal legal review, deciding to separate the 2022 and 2023 confirmed cases when applying penalty points. Whether a security penalty will be applied is expected to be determined during the full proposal evaluation phase. Initially, the security penalty period for HD Hyundai Heavy Industries was until November last year, but if calculated based on the final conviction in December 2023, the penalty period will extend until December 6 of this year.

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