[1] Whether Article 35 of the former Act on the Budgeting and Management of Subsidies applies to indirect subsidy program operators and indirect subsidy program operators who prohibit them from using, transferring, exchanging, lending, or offering as security property acquired or whose utility has increased with a subsidy without approval from the head of a central government agency after completion of a subsidy program (negative), and whether the validity of an indirect subsidy program is not affected even if an indirect subsidy program operator provides property acquired with an indirect subsidy as security (affirmative)

[2] In a case where Article 35(3) of the Act on the Management of Subsidies amended differently from the former Act on the Budgeting and Management of Subsidies applies, whether it is invalid for an indirect subsidy program operator to provide important property acquired with indirect subsidy as a security without obtaining approval from the head of a central government agency (affirmative), and the period of application of the amended provision on the restriction on provision of security by an indirect subsidy program operator under the Act on the Management of Subsidies (=from October 26, 201

[1] Article 35 of the former Subsidy Act (amended by Act No. 10898, Jul. 25, 2011; Article 35 of the former Subsidy Act (hereinafter “former Subsidy Act”) provides that “A subsidy program operator shall not provide any material property acquired with a subsidy as a security for an indirect subsidy program operator,” and Article 2 of the former Subsidy Act does not expressly provide for an indirect subsidy program operator. Article 2 of the former Subsidy Act defines “indirect subsidy, indirect subsidy, indirect subsidy, or indirect subsidy program operator” and “indirect subsidy program operator” and explicitly distinguish between an indirect subsidy program operator and indirect subsidy program operator. Article 35 of the former Subsidy Act does not apply to indirect subsidy program operator and indirect subsidy program operator, taking into account the following factors: (a) the regulatory system and method of the former Subsidy Act; and (b) legislative intent of Article 35 of the former Subsidy Act, including where an indirect subsidy program operator does not provide any property acquired with a subsidy as a security. Therefore, it does not affect the validity of indirect subsidy program operator.

[2] Article 35(3) main text of the Act on the Management of Subsidies (amended by Act No. 13931, Jan. 28, 2016; hereinafter “amended Subsidy Act”) provides that “A subsidy program operator or an indirect subsidy program operator shall not perform any of the following acts with respect to important property without approval from the head of a central government agency even after the completion of the relevant subsidy program,” thereby stipulating that “a subsidy program operator or an indirect subsidy program operator shall not perform any of the following acts without approval from the head of a central government agency,” and also includes a legislatively prohibited indirect subsidy program operator. Therefore, where the amended Subsidy Act (amended by Act No. 10898, Jul. 25, 2011; Amended by Act No. 10898, Jul. 25, 2011; Amended by Act No. 139391, Jan. 28, 2016; Amended by Act No. 110068, Apr. 31, 2019).

[1] Articles 2 (see Article 2 of the current Subsidy Management Act) and 35 (see Article 35 (1) and (3) of the current Subsidy Management Act) of the former Act on the Budgeting and Management of Subsidies (Amended by Act No. 10898, Jul. 25, 201) / [2] Article 35 (3) of the Subsidy Management Act, Article 1 of the Addenda (Amended by Act No. 10898, Jul. 25, 2011)

[1] Supreme Court Decision 2015Da247257 Decided November 15, 2018 (Gong2019Sang, 4)

Jung-gun (Attorney Kim Jae-hwan et al., Counsel for the plaintiff-appellant)

Nong Bank Co., Ltd. and one other (Attorneys Park Jong-ok et al., Counsel for the defendant-appellant)

Gwangju District Court Decision 2017Na58549 Decided January 19, 2018

All appeals are dismissed. The costs of appeal are assessed against the Defendants.

The grounds of appeal are examined.

1. On the grounds indicated in its reasoning, the lower court: (a) premised on the premise that a clean farming association corporation (hereinafter “non-party partnership”) was an indirect subsidy program operator prescribed in the Subsidy Management Act (amended by Act No. 10898, Jan. 28, 2016; and (b) concluded a mortgage contract without approval from the head of a central government agency in violation of Article 35(3) of the Subsidies Act with respect to the instant building, which is an important property acquired with the instant subsidy, by the non-party association; and (c) determined that the establishment of a mortgage contract is null and void; and (d) the establishment of a mortgage is also null and void.

2. Article 35 of the former Subsidy Act (amended by Act No. 10898, Jul. 25, 2011; Article 35 of the former Subsidy Act (hereinafter “former Subsidy Act”) provides that “A subsidy program operator shall not provide any important property acquired with a subsidy as a security for an indirect subsidy program operator.” Article 2 of the former Subsidy Act does not expressly provide for an indirect subsidy program operator. Article 2 of the former Subsidy Act defines “indirect subsidy, indirect subsidy, indirect subsidy, or indirect subsidy program operator” and “indirect subsidy program operator” and explicitly distinguish between an indirect subsidy program operator and indirect subsidy program operator. Article 35 of the former Subsidy Act does not apply to indirect subsidy program operator and indirect subsidy program operator, by comprehensively taking into account the regulatory structure and method of the former Subsidy Act, including where an indirect subsidy program operator does not specify the application of “indirect subsidy” and “indirect subsidy”, and the legislative purport of Article 35 of the former Subsidy Act (see Supreme Court Decision 2015Da27575, Nov. 15, 2018).

3. The main text of Article 35(3) of the amended Subsidy Act provides that “No subsidy program operator or indirect subsidy program operator shall perform any of the following acts with respect to important property without approval from the head of a central government agency even after the completion of the relevant subsidy program,” and provides that “security is provided” under subparagraph 3 of the same Article, which also includes legislative prohibition. Therefore, in cases where the amended Subsidy Act is applied differently from the former Subsidy Act, the provision of important property acquired by indirect subsidy program operator as security without approval from the head of a central government agency is null and void. Article 1 of the Addenda of the amended Subsidy Act provides that this Act shall enter into force three months after the date of its promulgation, and there is no special application or transitional provision with respect to Article 35, and thus, the restriction on provision of security by indirect subsidy program operator applies from October 26, 201, which is three months after the date of its promulgation.

In this case, the non-party association received indirect subsidies from the plaintiff and newly built the building of this case according to its purpose as an indirect subsidy program operator under the revised Subsidy Act. Since the contract to establish a mortgage on the building of this case was concluded on July 1, 201 after October 26, 201, the revised Subsidy Act applies.

4. Examining the foregoing legal doctrine and the record, the lower court did not err in its judgment by misapprehending the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on the amended Subsidy Act’s indirect subsidy program operator and the principle of good

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)