00,000 Won-gu, Inc. (Attorney Lee In-bok et al., Counsel for defendant-appellant)

Busan Metropolitan City (Law Firm Gyeong, Attorneys Park Sung-chul et al., Counsel for the plaintiff-appellant)

March 31, 2017

Busan District Court Decision 2016Guhap20037 Decided October 7, 2016

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the court of first instance shall be revoked. The defendant shall revoke the judgment of the court of first instance with respect to KRW 14,447,440,561 among the plaintiff and KRW 1,894,05,300 per annum from December 1, 2015 to the service date of a duplicate of the complaint of this case; KRW 5.77% per annum from December 1, 2015 to the service date of a duplicate of the complaint of this case; KRW 1,320,738,50 per annum from December 1, 2015 to the service date of a duplicate of the complaint of this case; KRW 1,958,225,600 per annum from December 1, 2015 to the service date of a duplicate of the complaint of this case; KRW 4.4% per annum from the 2,672,695,300 per annum to the service date of a duplicate of the complaint of this case; KRW 365% per annum from 251 to the service date of the complaint of this case;

1. Quotation of the first instance judgment

As shown in the Plaintiff’s assertion, it is judged that the amendment to the Corporate Tax Act, which reduces corporate tax rate by taking account of the entries in Gap evidence No. 15 and the testimony of the non-party witness, and all other evidence submitted in the first instance and the trial, constitutes “an amendment to related Acts and subordinate statutes, etc.” under Article 25(2) of the concession agreement of this case. In this regard, despite the occurrence of a cause for adjustment of tolls under Article 25(2) of the concession of this case, even though the reduction of corporate tax rate had a significant impact on the business profitability of this case due to the reduction of corporate tax rate, it was justifiable in the first instance judgment that determined that the Plaintiff’s claim of this case, which was sought financial support based on the amount of tolls reported by the Plaintiff without adjustment of tolls after consultation with the Plaintiff pursuant to Article 23(4) of the concession agreement of this case, is without merit. The reasons for the court’s explanation on this case is the same as the reasons for the judgment of the first instance court other than adding “decision on the Plaintiff’s argument.”

2. Judgment on the Plaintiff’s assertion of the trial

A. The plaintiff's assertion

1) In light of the following circumstances, the judgment of the first instance, which inferred the intent of the parties to adjust tolls due to the amendment of corporate tax rates, on the premise that the parties did not include corporate tax as to operating expenses set forth in the instant concession agreement, is unreasonable. In light of the interpretation of the instant concession agreement, the amendment of corporate tax rate does not constitute grounds for the adjustment of tolls.

(1) A private investment project based on subparagraph 1 of Article 4 of the Act on Private Participation (BTO) is based on the premise that a project implementer creates funds, such as construction costs, for the project during the construction period, and collects the invested funds from net operating income, excluding operating expenses, etc. from operating income during the operation period. The cost to be borne by the project implementer for the project in the future at the stage of determining the conditions for the implementation of the relevant private investment project, and the net profit that the project implementer is able to receive from the relevant project, and then is determined at the same level as the cost and net profit, and reflected in the concession agreement in the concession agreement. In addition, the cost of input and the user fee, etc. so determined are not adjusted unless there are any special reasons stipulated in the statutes or the concession agreement, and it is a principle that the cost of input and the user fee, etc. are not settled, even if the initial estimate and the actual result are different.

② At the time of the conclusion of the instant concession agreement, treatment Co., Ltd. and the Defendant (hereinafter referred to as “parties to the Convention”) determined in advance the profit structure of the instant project by reflecting the costs invested by the concessionaire and the profits derived from the operation of the project in the concession agreement by forecasting the costs incurred by the concessionaire and the profits derived from the operation of the project, and reflecting the project in the concession agreement. In relation to the operating costs, the private investment support center (hereinafter referred to as “private investment support center”) determined in the concession agreement including corporate tax and did not settle ex post facto accounts, according to the review that the “private investment support center”) determined operating costs including corporate tax, and did not settle ex post facto accounts.”

③ Article 19(1) of the instant concession agreement provides that “81,45 million won (excluding corporate tax)” shall mean that the cost of management and operation is KRW 81,45 million and shall not include corporate tax. In addition, Article 19(2) of the first concession agreement provides that “Operational costs, other than corporate tax, shall be determined with approval from the Mayor of Busan Metropolitan City in accordance with the management and operation plan,” but does not include corporate tax under the first provision, it cannot be deemed that it reflects any new agreement between the parties on the ground that the provision provides that operating expenses are excluded from corporate tax. Moreover, it does not include the total operating expenses prescribed in the “cash flow for calculating tolls” table of the instant concession agreement, which does not include operating expenses, KRW 158,489 million (excluding general operating expenses + corporate tax 7,038 million) and the operating expenses of the instant concession agreement, other than corporate tax, are included in the calculation of operating expenses of each of the instant amount after the date of the instant agreement.”

④ Even in the case of a flood tunnel private investment project which the Defendant entered into a concession agreement with the competent administrative agency at almost the same time as the instant project, corporate tax was excluded from operating expenses, and the amount of corporate tax was reflected in tolls by concluding a separate agreement. Ultimately, it is irrelevant to whether corporate tax is subject to ex post facto settlement of accounts for the provision on operating expenses of the instant concession agreement.

⑤ Even if the parties agreed to exclude the corporate tax from the operating cost fixed without settling ex post facto accounts, it is limited to the free traffic period, and it cannot be interpreted that the separate provisions of the concession agreement of this case and the separate provisions of the concession agreement of this case are excluded from the subject of the prior determination of operating cost.

6) As alleged by the Defendant, if the tolls could be adjusted by reflecting the reduction of corporate tax rate under the instant concession agreement, the Defendant did not prepare a modified concession agreement to reflect the reduction of corporate tax rate, and even the Board of Audit and Inspection of the Republic of Korea did not indicate that the Defendant would have adjusted the tolls through consultation with the private business operators and would modify the concession agreement. Although the rate of corporate tax rate has been continuously reduced since 2002, the Defendant began to claim that the tolls should be reduced by reflecting the reduction of corporate tax rate that should have been reached in 2010. This is an attitude that could not be said to have been prescribed that the tolls could have been reduced by reflecting the reduction of corporate tax rate at the time of the conclusion of the instant concession agreement.

2) Even if the reduction of corporate tax rate can serve as the ground for adjusting tolls, the rate of return is not changed by more than 10%, and thus, it does not significantly affect profitability, and thus, it cannot be subject to the adjustment of tolls under Article 25(2) of the instant concession agreement.

B. Determination

1) Determination on the assertion

In light of the following facts and circumstances, the Private Investment Center proposed that “the method of entering into a concession agreement including corporate tax and not settling ex post facto accounts” with respect to operating expenses in the second consultation, but the parties to the agreement agreed that “the operating expenses shall be determined at non-distinct price and the corporate tax shall be excluded” in the second consultation, which was reflected and indicated in Article 19 of the concession agreement and the separate sheet, and the Plaintiff whose corporate tax is changed on or around 202, would have been expected to have had a significant impact on the Plaintiff’s amendment of the relevant laws and regulations under Article 25(2) of the Corporate Tax Act, and thus, it would have been assumed that the parties to the agreement would have proposed the adjustment of corporate tax due to the amendment of the relevant Acts and subordinate statutes, such as the Plaintiff’s amendment of the relevant Acts and subordinate statutes and subordinate statutes, which would have a significant impact on the Plaintiff’s future corporate tax rate. Therefore, it would be unreasonable that the amendment of the relevant Acts and subordinate statutes and subordinate statutes, as seen earlier, would have no significant influence on the amendment of the relevant laws and regulations.

(1) The terms of the instant concession agreement and the consultation on operating expenses before the conclusion of the agreement are as follows.

본문내 포함된 표 〈1999. 8. 31. 민간투자지원센터의 백양터널 및 수정산터널 검토의견〉 조항 협약(안) 제시(안) 사유 제20조 운영비용 법인세를 제외한 운영비용은 관리운영계획에 의거하여 부산광역시장의 승인을 받아 확정한다. 단, 수정산터널이 유료화되기 전까지는 실제 집행한 금액으로 정산한다. 운영비용은 “별첨1”에 제시한 1999년 불변가격기준 “ ”억원으로 한다. 운영비용(법인세 포함) 정산금지 및 사전확정 ↓ 〈1999. 10. 11. 주식회사 대우 실시협약(안) 검토의견〉 조항 기 협의(안) 민간투자지원센터제시(안) 최종 협의(안) 사유 제20조 운영비용 법인세를 제외한 운영비용은 관리운영계획에 의거하여 부산광역시장의 승인을 받아 확정한다. 단, 수정산터널이 유료화되기 전까지는 실제 집행한 금액으로 정산한다. 운영비용은 “별첨1”에 제시한 1999년 불변가격기준 “ ”억원으로 한다. 운영비용은 1998년 1월 8일 불변가격기준으로 160,079백만 원으로 한다. 운영비용(법인세 포함) 정산금지 및 사전확정 ↓ 〈1999. 10. 14. 백양터널 실시협약 변경(안) 2차 실무협의 결과보고〉 구분 1차협의내용 민간투자지원센터 의견 2차협의내용 운영비용 수정산터널 유료화 후 : 확정 법인세를 포함하여 실시협약에서 확정하고 사후정산하지 않음 불변가격으로 확정(법인세 제외) ↓ 〈1999. 12. 20. 이 사건 실시협약 제19조 운영비용〉

Operating expenses shall be KRW 81,450,000 (excluding corporate tax) on January 8, 1998, which was presented in “Separate 2”.

Meanwhile, according to the “virative formula for the calculation of tolls” and “cash flow for the calculation of tolls” in the instant concession agreement, among operating expenses, the corporate tax item is not indicated in the corporate tax item from 1998 to 2005. If the total operating expenses are deducted from the total operating expenses of KRW 158,489 million, the total operating expenses of KRW 77,038 million is almost identical to the total operating expenses of the instant concession agreement.

② In full view of the process of the above consultation and the contents of the instant concession agreement, the Private Investment Center presented its opinion that “the operating expenses include corporate tax and pre-determination thereof,” and accordingly, it appears that the instant concession agreement clearly stated “excluding corporate tax” from the operating expenses that are pre-determined in advance, as the second practical consultation provides that “the operating expenses, other than corporate tax, shall be determined at the dint price.” Ultimately, it is deemed that there was an agreement between the parties to “the possibility of ex post facto settlement of tolls due to changes in corporate tax, excluding corporate tax,” which is “the possibility of ex post facto settlement of tolls” in the instant concession agreement.

③ Upon the reduction of the corporate tax rate in 2002, the Defendant demanded the adjustment of tolls reflecting the factors of the reduction of corporate tax, and on April 11, 2003, sent to the Plaintiff a public notice to the effect that “it constitutes a case of change following the amendment of the relevant Acts and subordinate statutes pursuant to Article 25(2) of the Convention Establishing Corporate Tax, thereby significantly affecting the profitability of the business, thereby complying with the provisions of tax law and the agreement.”

④ Opinions presented by private investment centers in relation to operating expenses are limited to the issue of whether operating expenses should be the project expenses for the period of free passage to the Convention, whether operating expenses should be the expenses, and how to determine the operation expenses for the period of free passage to the Convention and not to settle after the conclusion of the concession agreement including corporate tax, and it is necessary to review the appropriateness of operating expenses for the period of free passage to the Convention. In this regard, upon the second consultation between the parties to the Convention, the operation expenses for the period of free passage to the Convention should be applied as operating expenses not the project expenses, and the appropriateness should be reviewed by the specialized institution, excluding corporate tax from the unexponed price that does not make a settlement after the settlement. As above, the problem during the free passage period is limited to the issue of whether the operating expenses should be the project expenses or operational expenses. It is clear that

⑤ Treatment Co., Ltd and the Defendant appears to have concluded the instant concession agreement through free consultation without being bound by the opinion of the master plan for private investment in 199 or of the 199 Private Investment Support Center. In addition, according to the terms of the instant concession agreement, it can be known that there are cases different from the opinion of the

(6) The concession agreement of this case and the concession agreement of water settlement tunnels are different from the contracting parties, and the contents of the agreement are different, and thus, cannot be seen as same. In particular, the concession agreement of water settlement tunnels is not stipulated under Article 25(2) of the concession agreement of this case.

(7) Prior to the amendment of the basic plan for public-private partnership projects in 2004, the agreement was concluded on May 1998, which reflects the effects of corporate tax fluctuations, such as the concession agreement for public-private partnership projects.

(8) In full view of the contents of the instant concession agreement related to operating expenses before the instant concession agreement was concluded, and the discussions on the adjustment of tolls due to reduction of corporate tax were held in 2003, the intent of the parties to the agreement to determine operating expenses, excluding corporate tax, can be confirmed, in full view of the difference between the concession agreement and the content of the instant concession agreement. In addition, even if there was an agreement between the Plaintiff and the Defendant on the amendment of the agreement for the purpose of adjustment of tolls due to the change of corporate tax rate from around 2009, considering the circumstances surrounding the change of the parties to the agreement following the instant business acquisition, and the discussions on the adjustment of tolls due to the change of corporate tax rate were conducted together with the public-private partnership project, it is difficult to deem that there was an attempt to amend the agreement under the premise that the Corporate Tax Act does not include the “relevant statutes, etc.

9. The draft agreement between the parties to the agreement requested to the Private Investment Center to be reviewed was to adjust operating expenses when changing the corporate tax rate, and the agreement on the agreement on the agreement on the agreement of the fisheries and the fisheries and the fisheries and the fisheries and the fisheries and the corporate tax were to be excluded from the scope of the pre-determination.

(10) The amendment of the concession agreement to reflect an increase or decrease in total project cost due to a change in corporate tax rates has been entered into. However, the adjustment provision of tolls in Article 39 of the concession agreement only includes the difference in actual revenues, the cause of force majeure, and the financial support under Article 53 of the Act on Private Participation, and there is controversy as to the failure to stipulate adjustment reasons, such as Article 25(2) of the instant agreement, and thus, it appears that a separate amendment agreement was entered into.

① At the time of conclusion of the concession agreement for a public-private partnership project, the Private Investment Center presented a proposal to include the increase or decrease in corporate tax rates due to the amendment of the Corporate Tax Act in the financial model, and accordingly stipulated “excluding corporate tax” as the instant concession agreement in the provisions on operating expenses of the concession agreement concluded.

(12) Under the Private Investment Act, the conditions for the implementation of the project, such as total project cost, user fee, and free use period, are determined in principle at the time of conclusion of the concession agreement, but opening the possibility of conciliation according to the reasons set out

(13) According to the annual plan in 1999, even if actual corporate tax expenses including corporate tax, including operating expenses, were changed, the risks therefrom were borne by the project implementer. In 2004, it was determined to calculate tolls based on operating expenses, excluding corporate tax, in order to prevent the distort effect of profit-making based on corporate tax effects. While the annual plan in 1999 is applied to the instant concession agreement, the basic direction for the public-private partnership project is presented, the basic direction for the annual plan in 199, but the detailed details thereof can be determined differently

(14) There is no reason to interpret the “revision of the relevant Acts and subordinate statutes, etc.” as meaning only the amendment of the Acts and subordinate statutes directly affecting the toll revenue itself. As seen earlier, there is no reason to exclude the relevant Acts and subordinate statutes under Article 25(2) of the concession agreement of this case from the Corporate Tax Act as long as the amendment of corporate tax

(15) It cannot be deemed that the interpretation of the instant concession agreement has changed since the Board of Audit and Inspection urged the conclusion of the amendment contract, and there is no possibility that the Board of Audit and Inspection attempted to conclude the amendment agreement with the intent of clarifying the effect of corporate tax fluctuations.

Despite the amendment of the Corporate Tax Act that reduces the income tax rate after 2003, the Defendant has been paying the financial support (which does not reflect the reduction of corporate tax) requested by the Plaintiff prior to the instant case. However, in light of the developments and contents of the instant concession agreement as seen earlier, and the fact that the Defendant explicitly demanded to reflect it in the adjustment of tolls on the ground that it falls under the case of significant impact on the business profitability due to the amendment of the relevant laws and regulations under Article 25(2) of the instant concession agreement that the Defendant is a corporate tax rate in 2003, the aforementioned circumstance alone does not change the content of the instant concession agreement.

2) Determination on the assertion

Article 25(1)1 of the instant concession agreement provides that tolls may be adjusted to a considerable amount of less than 10%, i.e., the actual toll revenue estimated in advance due to the causes for adjustment of tolls, i.e., a considerable amount of less than or more than 10%, and thus, it cannot be used as a basis for comparison of the profitability of the business under Article 25(2). Article 25(1) and (2) of the instant concession agreement differs from the content and application of the relevant provision. Therefore, in cases falling under Article 25(2) of the instant concession agreement, the “major impact on profitability” due to the amendment of the relevant statutes should be independently determined. Meanwhile, Article 18 of the instant concession agreement provides that a project implementer is permitted to allow a profitability project using road facilities and reflect the relevant revenue in the adjustment of tolls, and Article 25(1)2 provides that a project implementer may adjust tolls if any loss, cost, etc. occurs due to any cause not attributable to the project implementer. In light of such circumstances, Article 25(1)25(2)1)1)1 cannot be deemed the basis.

According to the overall purport of the statements and arguments in Eul evidence Nos. 1 through 4, 7, 8, and 9, the rate of the financial support fund applied by the plaintiff and the financial support fund calculated by the defendant reflecting the effects of the reduction of corporate tax rate differs from about 51% to 69%. In light of the reduction rate of the financial support fund and its amount, the change of the corporate tax rate shall be deemed to fall under the "case where the change of the corporate tax rate significantly affects the business profitability of this case due to the change of the relevant Acts and subordinate statutes, etc." In addition, since the plaintiff received money exceeding 19 billion won from the defendant since 2010 from the defendant as the financial support fund and additionally claimed money exceeding 1.4 billion won for the same period as the amount reported by the plaintiff, the parties to the Convention shall be deemed to have planned the adjustment of tolls due to the change of corporate tax rate, and as seen earlier, the change of corporate tax rate shall be deemed to fall under the case where

The plaintiff's above 2) argument is not accepted.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed as it is without merit.

Judges Kim Jong-cheon (Presiding Judge) and the Republic of Korea