Hanwha Ocean's KRW 15.3 Billion Penalty Surcharge Reduced to KRW 700 Million as Supreme Court Finalizes Ruling

[Financial News] The KRW 15.3 billion penalty surcharge imposed by the Fair Trade Commission on Hanwha Ocean, formerly Daewoo Shipbuilding & Marine Engineering, has been sharply reduced to KRW 700 million by the Supreme Court of Korea.
According to legal sources on the 30th, the Third Division of the Supreme Court of Korea, with Justice Oh Seok-joon as the presiding justice, recently upheld a lower court ruling that reduced the penalty surcharge imposed by the Fair Trade Commission on Hanwha Ocean from KRW 15.294 billion to KRW 746 million. The final ruling came about six years after the Fair Trade Commission decided to impose the sanction in 2020.
In November 2020, the Fair Trade Commission voted to impose a penalty surcharge and corrective orders on Daewoo Shipbuilding & Marine Engineering over various unfair practices that occurred while the company subcontracted ship and offshore plant manufacturing work. The company challenged the sanctions in court.
Hanwha Ocean was accused of engaging in unfair practices, including arbitrarily canceling or changing contracts and reducing payments after subcontracting parts manufacturing and other work to subcontractors.
In July last year, the Fair Trade Commission canceled about KRW 5.1 billion of the surcharge on its own, reducing the total to KRW 10.2 billion. After subsequent appellate and Supreme Court rulings, only a KRW 700 million surcharge remained.
The Supreme Court explained the reduction by stating, "Because the amount imposed as a percentage-based penalty surcharge was more than 20 times the amount imposed as a fixed-amount penalty surcharge, an imbalance arose that excessively inflated the surcharge." The court also found it improper to impose a surcharge for attributing responsibility to the prime contractor even for contracts canceled because of a subcontractor's financial difficulties or mutual agreement.
Hanwha Ocean also prevailed in a damages lawsuit filed by its subcontractors in 2021 following the Fair Trade Commission's sanctions.
[email protected] Lee Chang-hoon Reporter