LS Affiliate Sunwoo Sanctioned by Fair Trade Commission for Issuing Deficient Subcontracting Contracts

Sunwoo, an affiliate of the LS corporate group, received sanctions from the Korea Fair Trade Commission for issuing deficient subcontracting contracts when outsourcing construction work to subcontractors.

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On April 2, the Korea Fair Trade Commission announced that it had decided to issue a corrective order regarding Sunwoo's act of issuing deficient subcontracting contracts when outsourcing electrical and instrumentation work to subcontractors from February 2021 to June 2022. Sunwoo is a company based in Ulju-gun, Ulsan, specializing in the construction of refining and petrochemical plants as well as the maintenance of industrial facilities.

According to the Korea Fair Trade Commission, Sunwoo outsourced a total of 54 electrical and instrumentation projects at seven sites of the LS MnM Ulsan plant. In this process, Sunwoo failed to specify the details and work locations for the main project at one site and 47 additional projects at seven sites, and issued documents that lacked the signatures or seals of both parties.

Such actions violate Article 3 of the Subcontracting Act, which requires that a written contract containing essential items be signed or sealed by both the prime contractor and the subcontractor and issued before the commencement of work. This provision is designed to clarify contract details to prevent future disputes and to protect the rights of subcontractors by preventing prime contractors, who are in a superior bargaining position, from unilaterally determining contract terms.

The Korea Fair Trade Commission ordered Sunwoo to take measures to prevent the recurrence of such unfair subcontracting practices in the future.

An official from the Korea Fair Trade Commission stated, "This measure is significant in that it confirms and sanctions the practice of issuing deficient documents at construction sites infringes upon the rights and interests of subcontractors, thereby raising awareness among prime contractors. In particular, it serves as an opportunity for Sunwoo, a large corporate affiliate, to recognize its responsibility to comply with the law when dealing with small and medium-sized subcontractors."

The Korea Fair Trade Commission plans to continue monitoring unfair subcontracting practices by prime contractors and will impose strict sanctions upon detecting legal violations.

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