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Jipyong Successfully Represents Korea Electric Power Corporation in Supreme Court Appeal Against Gimhae City Government in Connection with Claim Seeking for Payment of Settlement Fees for the Project to Relocate Overhead Power Lines, etc. Underground

2020.09.03

Jipyong represented Korea Electric Power Corporation (“KEPCO”) in a claim seeking for payment of the settlement fees for the project to relocate overhead power lines, etc. underground filed against the Gimhae City Government and won a Supreme Court Decision to quash and remand the case.

KEPCO is carrying out projects to relocate overhead power lines underground, which are generally funded by the local governments and KEPCO. In this case, KEPCO entered into an agreement for the project to relocate overhead power lines in Gimhae City and the Gimhae City Government Office underground, and the two institutions agreed to enter into a construction agreement with a local contractor to carry out the construction. After then, KEPCO and the Gimhae City Government executed an agreement on sharing of the project costs under which the Gimhae City Government has paid its share to KEPCO. During the project, however, a change of design caused an additional cost of KRW 1.47 billion. The Gimhae City Government refused to pay the additional cost, and KEPCO filed a claim against the Gimhae city government for payment of the settlement fees.

Both the district court and the high court dismissed the claim filed by KEPCO. The High Court found that the claim for settlement fees had the legal nature of the ‘claim for construction costs’ and thus subject to three-year short-term statute of limitation. Since the KEPCO’s claim was filed after expiration of the term, the court determined that it constitutes extinctive prescription.

Jipyong represented KEPCO in the Supreme Court appeal and claimed that the ‘claims of contractors in connection with construction’ under Item 3 of Article 163 of the Civil Act do not mean ‘all the claims related to construction’ but the claims related to construction ‘held by contractors as creditors’ against the contractees. In particular, Jipyong claimed that the three-year short-term statute of limitation shall not apply to the claims project settlement fee between KEPCO and a local government on the grounds of the facts that they do not constitute actual claims under the construction agreement in light of the intention of the project to relocate overhead power lines underground specified in the Electric Utility Act and other applicable laws and the Supreme Court precedent which ruled that the settlement fee claims between joint contractees are not subject to the three-year short-term statute of limitation (Supreme Court Decision 2015Da5811 dated August 29, 2016, etc.).

The Supreme Court acknowledged Jipyong’s claims and issued a decision in favor of KEPCO to quash and remand the case, finding that the three-year short-term statute of limitation did not apply to the claims because it could not be deemed that the agreement to share the project fees (construction fees) between KEPCO and the local government constituted a construction agreement (an agreement under which performance obligations related to construction are borne by a party in accordance with itss obligations under a bilateral agreement) as KEPCO and the local government entered into the agreement due to the principle of bearing the cost by a party who caused the cost prescribed in the electric utility act.

The Supreme Court Decision is meaningful as it reversed the lower courts’ decision regarding the nature of the agreement to share the project fees entered into by and between KEPCO and the local government. In particular, the Court has clearly confirmed that the short-term statute of limitation under Item 3 of Article 163 of the Civil Act shall not apply to the claims not created by a construction agreement (an agreement under which performance obligations related to construction are borne by a party in accordance with its obligations under a bilateral agreement) even if they have legal characteristics of the claims related to construction.

Awards & Commissions Jipyong and Duroo were Honored with “Public Interest Award” at the 6th Korea Legal Awards 2023.12.12

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