In a case where Company A entered into a purchase contract with the Public Procurement Service and supplied the goods required through the national integrated electronic procurement system website to an end-user institution, and the Public Procurement Service, as a result of the inspection of the performance of the contract, ordered Company A to suspend transactions in the national complex shopping mall on the grounds that some products are different from the contract specifications, the case holding that the lower court erred by misapprehending the legal doctrine that rejected the lawsuit on the grounds that the said transaction suspension constitutes an administrative disposition subject to appeal litigation, even if it constitutes an administrative disposition subject to appeal litigation.

In a case where Company A entered into a purchase contract with the Public Procurement Service and supplied the products required through the National Integrated Procurement System Internet homepage of Korea, and the Public Procurement Service directly affected the rights and obligations of Company A as a result of the performance inspection of the contract, and the Public Procurement Service took a measure of suspending transactions in the National Open Market for six months against the other party to the contract, the case holding that the court below's measure of suspending transactions in the National Open Market constitutes an act of directly and specifically infringing the other party to the contract under the Electronic Procurement Use and Promotion Act and the Public Procurement Act, which is the direct and specific legal interest of the other party to the contract protected under the Act on Electronic Procurement, or directly restricting or directly infringing the status of the government-invested institution to directly sell the products registered in the National Open Market, which are based on a private contract, which is an additional special condition; however, the Public Procurement Service's exercise of public authority on specific facts conducted by the Public Procurement Service, which is an administrative agency, and thus, constitutes a violation of the principle of proportionality, and thus, constitutes an action of suspending transactions based on the principle of proportionality.

Article 2 (1) 1 of the Administrative Litigation Act

UNCC Co., Ltd. (formerly changed: Petition Industry (Law Firm LLC et al., Counsel for the defendant-appellant)

The Administrator of Public Procurement Service

Seoul High Court Decision 2014Nu71469 decided September 4, 2015

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Case history

The reasoning of the lower judgment and the evidence duly admitted by the lower court reveal the following facts.

A. On December 30, 2010, the Plaintiff designated 13 products produced by the Plaintiff using the patent technology as excellent goods pursuant to Article 9-2 of the former Procurement Business Act (amended by Act No. 13817, Jan. 27, 2016; hereinafter “Planning Business Act”). The Defendant additionally designated 15 products of the mother-and-child block block, the size and model of which are different, as excellent goods for procurement on July 30, 2012, the Defendant additionally designated 15 products of the mother-and-child block block, which are different in terms of the size and model from the foregoing, as excellent goods for procurement of the products until the designated block period of December 24, 2013 (hereinafter “the extended block”).

B. On June 5, 2012, the Plaintiff entered into a purchase contract (unit price contract method for a third party) under which the Plaintiff would actually supply the instant product to the relevant end-user institution within the scope of the contract amount and receive the payment from the said end-user institution. The contract term was from June 5, 2012 to June 4, 2013, and thereafter extended from December 29, 2014. The said purchase contract included the purport that “the Plaintiff shall faithfully implement the additional special conditions for the purchase of goods (hereinafter “additional conditions”)” and that “the specification of the instant product is the same as the specification of the excellent goods for the purchase of mother and child block.”

C. According to the additional special conditions, the Defendant determined that “where there exists a breach of contract under the relevant provisions, such as other terms and conditions of the contract,” the Defendant may suspend transactions in a comprehensive shopping mall for the counter-party to the contract within the scope of not less than one month but not more than 12 months (Article 22(1)16). In this case, the period of suspension of transactions is “six months” and the subject of suspension of transactions is “contract” (attached Table 17

D. The Defendant registered the instant product on the national integrated shopping mall website (hereinafter “Naz integrated shopping mall”). The Plaintiff received a request for the supply of the instant product from Jung-gu Incheon Metropolitan City on April 11, 2013, Jung-gu, Suwon-si, and Suwon-si on September 25, 2013, and Suwon-si on September 25, 2013 (hereinafter “instant supply request entity”).

E. The Plaintiff supplied the instant product to the instant end-user institution, and some of them (23% of the total quantity) did not attach a water network to the sculptures and executed rhythm on the tide surface. On June 13, 2014, the Defendant: (a) taken measures to suspend transactions in comprehensive shopping mall transactions in a national forum for six months against the Plaintiff pursuant to Article 22(1)16 of the Additional Special Conditions on the ground that “the Plaintiff’s inspection of the performance of the contract for the products supplied to the instant end-user institution; and (b) on the ground that “the Plaintiff’s inspection of the performance of the contract for the products supplied to the instant end-user institution, there is any difference in the contractual specifications.”

2. The judgment of the court below

The court below rejected the lawsuit of this case on the grounds that (i) Article 22(1)16 of the Additional Special Conditions, etc., as part of the contract, are binding only between the parties only if the plaintiff consented to its application, and there is no legal effect as a law, and thus, it shall be deemed that the measure of this case is based on the contract, not the law; (ii) there is no substantial difference from exercising the right in accordance with the terms and conditions added to the contract in the general shopping mall of the private sector, and (iii) the document sent by the defendant to the plaintiff in the course of taking the measure of suspending the transaction of this case merely states that the suspension of transaction of this case must be based on the contract violation; and (iv) the document sent by the defendant to the plaintiff in the course of taking the measure of suspending the transaction of this case,

3. Judgment of the Supreme Court

A. The term “disposition”, which is the subject of an appeal litigation, means “the exercise or refusal of public power as an enforcement of law with respect to a specific fact by an administrative agency, and other corresponding administrative actions” (Article 2(1)1 of the Administrative Litigation Act). Whether a certain act by an administrative agency may be subject to an appeal litigation cannot be determined abstractly and generally, and it shall be determined individually by taking into account the content and purport of the relevant Act and subordinate statutes, the subject, content, form, and procedure of the act, the substantial relation between the act and the disadvantage suffered by interested parties such as the other party, and the principle of administration by the rule of law and the attitude of the administrative agency and interested parties related to the act (see, e.g., Supreme Court en banc Decision 2008Du167, Nov. 18, 2010)

(b) Main details of the relevant statutes, public notice and additional special conditions;

(1) According to the Electronic Procurement Use and Promotion Act (hereinafter “Electronic Procurement Act”), the Administrator of the Public Procurement Service shall establish the Electronic Procurement System to electronically perform its procurement affairs, and may determine and publicly notify standards for the establishment and operation of the Electronic Procurement System (Article 12(1) and (3)). The head of a procuring entity shall endeavor to electronically perform its procurement affairs using the Electronic Procurement System (Article 5(1)), and shall publicly announce the bid matters through the Electronic Procurement System if he/she intends to electronically process a competitive bid (Article 6(1)). In addition, where the head of a procuring entity intends to request the Administrator of the Public Procurement Service to conclude a contract, such as purchase of procurement commodities, pursuant to the Procurement Act, unless there is any inevitable reason due to a natural disaster or a computer disorder (Article 13(1)). Furthermore, a person who intends to electronically enter into a contract with an entity, etc. using the Electronic Procurement System, etc., using the Electronic Procurement System, shall file a user registration with the Electronic Procurement System, as prescribed by Presidential Decree (Article 17(1)).

(2) Meanwhile, Article 2(1)1 of the former Regulations on the Operation of Comprehensive Electronic Procurement System (amended by the Public Notice of the Procurement Service No. 2016-9, Feb. 16, 2016; hereinafter “Public Notice of Operation of Shopping Markets”) which is the Public Notice of the Public Procurement Service provides that, pursuant to Article 22 of the Act on Contracts to Which the State is a Party (hereinafter “State Contract Act”), the Public Procurement Service or a procuring entity shall provide that, in order to register information on the goods of the other party and electronically process transactions with the procuring entity, an online shopping mall established at the national headquarters shall be called “comprehensive shopping mall” in order to electronically register the goods information of the other party and to electronically process the transaction between the procuring entity and the other party. Article 9(1)1 of the Public Notice of Operation of Shopping Markets provides that the Defendant may suspend the transaction of goods through a national master shopping mall, and Article 10 of the same Act provides that, if the other party is notified of the suspension of comprehensive shopping mall, the decision may be made within 10 days.

(3) Article 22(1) of the Additional Special Conditions provides that a transaction may be suspended in a comprehensive shopping mall within the scope of not less than a month but not more than 12 months if the other party to the contract falls under any of the following subparagraphs. Article 22(6) provides that where the grounds for the suspension of transaction arise, a contracting officer shall notify the relevant other party of the grounds for the suspension of transaction, the maximum period of suspension of transaction, and other submission deadline, etc. for the suspension of transaction. In addition, Article 22-3 subparag. 1 and Article 22 provides that where the transaction is “contract” subject to the suspension of transaction pursuant to Article 22, a contract related

(4) Furthermore, Article 33(3) of the former Regulations on the Management of Excellent Procurement Commodities (wholly amended by the Public Procurement Service Directive No. 1683, Feb. 17, 2015) provides that the other party to a contract (the main sentence of subparagraph 2) who has received transaction suspension two times or more during the last one year as of the date of the first announcement of tender based on the name of detailed items, and the other party to a contract (the other party subparagraph 3) whose cumulative transaction suspension period for the last two years exceeds six months shall not enter into the next one year from the date of the next announcement. In addition, Article 8(3) and attached Form 1-17 of the former Regulations on the Management of Excellent Procurement Commodities for the Designation of Excellent Procurement Commodities (amended by the Public Procurement Service Ordinance No. 2014-13, Jun. 16, 2014) provide that where a shopping mall is suspended within one year from the closing date of receipt of the application for the designation of the excellent procurement goods, the grounds

C. In full view of the aforementioned relevant statutes and public notice, the reasoning of the lower judgment and the following circumstances revealed by the evidence duly admitted by the lower court along with the provisions on additional special conditions, it is reasonable to deem the instant measure to be subject to appeal, even though it is based on a judicial contract, which is an additional special condition, but is the exercise of public authority as a law enforcement on specific facts by the Defendant, which is an administrative agency, and directly affects the Plaintiff’s rights and obligations, which

(1) An electronic procurement user registered in a national master electronic procurement market, thereby acquiring the status of a procuring entity to participate in an electronic bid through a national master market or to directly sell goods registered in a national master shopping mall to a procuring entity. Such status is a direct and specific legal interest protected by electronic procurement law, procurement business law, etc. Accordingly, the Defendant’s measure of suspending transactions in a national master shopping mall to the counter-party constitutes an act of directly restricting or infringing the legal interest of the counter-party.

(2) If the Defendant concludes a third party unit price contract or multiple suppliers contract for demand commodities commonly required by each end-user institution, and registers it in the national master shopping mall, an end-user institution can directly select and purchase necessary goods in the national master shopping mall. However, if the Defendant takes measures to suspend transactions in general shopping mall, the counter-party to the contract would be at a disadvantage that the transaction with the State agency, local government, and public institution, which are the end-user institution, will be suspended in addition to the transaction with the Defendant.

(3) The Defendant is able to achieve the public interest of securing the faithful performance of the contract by excluding the counter-party to the contract who violated the purchase contract from the comprehensive shopping mall through the suspension of transaction, and at the same time securing the safety, reliability, and fairness of the comprehensive shopping mall that it establishes and operates.

(4) The document that the Defendant sent to the Plaintiff while taking the instant measure of suspending transactions is without a statement that it can be deemed an administrative disposition. However, considering the following: (i) the Defendant’s administrative agency taking the instant measure of suspending transactions in a national master shopping mall; (ii) the prior notice procedure of a disposition similar to Article 21 of the Administrative Procedures Act; and (iii) Article 22(6) of the additional special condition provides for the filing procedure of an objection; and (iv) the Defendant issued a notice of submission of the opinion stated in Article 21(1) of the Administrative Procedures Act to the party to the measure of suspending transactions; (iii) Article 9(1) of the Electronic Procurement Act provides for the grounds that the Defendant may suspend transactions in a foreign master shopping mall; and (iv) considering the fact that the Defendant’s country master shopping mall is aware that the measure of suspending transactions in a comprehensive shopping mall constitutes an administrative disposition, it can be deemed that the instant measure of suspending transactions constitutes an administrative disposition.

(5) Where a contract is subject to the suspension of transactions in a national master shopping mall, all forms of contracts that include the name of the relevant contract pursuant to Article 22-3 subparag. 1 of the Additional Terms and Conditions are subject to the suspension of transactions. In other words, where two or more third-party unit price contracts are concluded on several items of the same name, even if the grounds for the suspension of transactions are recognized only as relevant to one contract, the remaining contracts may be subject to the suspension of transactions. Thus, the measure of suspension of transactions may be a serious disadvantage to the other party. In addition, when the other party intends to enter into a new supplier contract with the defendant after the lapse of the period of suspension of transactions, or when the defendant applies for the suspension of transactions with the defendant, the fact that the transaction was suspended itself may act disadvantageously as the grounds for refusal of

D. As such, a comprehensive shopping mall transaction suspension measure that takes place on the basis of the additional special conditions is one of the representative unfavorable measures imposed by the Defendant on the counter-party and has a significant impact on the counter-party, the instant measure constitutes an administrative disposition that is subject to appeal litigation. However, if the Plaintiff’s act fails to meet the requirements for the issuance of sanctions under the additional special conditions, the instant measure can be deemed unlawful. Therefore, the lower court should further examine whether the Plaintiff’s act constitutes grounds for the suspension of transaction under the additional special conditions, whether the contents of the additional special conditions, or the relevant special conditions violates the State Contracts Act, or violates the principle of equality, the proportionality, and the principle of trust protection.

E. Nevertheless, the lower court rejected the instant lawsuit based on the determination that the instant disposition was merely an expression of intent based on a private contract and cannot be deemed an administrative disposition subject to an appeal litigation. In so determining, the lower court erred by misapprehending the legal doctrine on a disposition subject to an appeal litigation, thereby adversely affecting the conclusion of the

4. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Noh Jeong-hee (Presiding Justice)