Republic of Korea (Law Firm Namsan, Attorneys Lee Chang-soo et al., Counsel for the plaintiff-appellant)

Korean Bank (Law Firm Square, Attorneys Gyeong-chul et al., Counsel for the plaintiff-appellant)

May 23, 2012

1. The plaintiff's claim is dismissed.

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

The defendant shall pay to the plaintiff 3,597,988.21 US dollars, 729,125,849, and 20% interest per annum from the day following the delivery date of a copy of the complaint of this case to the day of complete payment.

1. Basic facts

The following facts are not disputed between the parties, or can be acknowledged in full view of the purport of the whole pleadings in each entry of Gap evidence Nos. 1, 2, 4-1, 2, 3, 6-1 through 11, 1 through 8-2, 13 through 20-2, and 13-2.

A. Status of the parties

(1) City/Do Kagro Services (CCS) had a domestic office on the fifth floor of Seocho-gu Seoul ( Address omitted), a Hong Kong registered corporation, and operated an ocean-going cargo transport business.

SheCCS opened a deposit account at Defendant Hong Kong Branch on December 29, 2005, and around 2011, the deposit amount of the CCCS was USD 33,597,98.21, Japan’s currency 729,125,849, respectively (hereinafter “instant deposit”).

B. Tax claims and delinquent disposition on the Plaintiff’s CCCS

(1) On April 13, 2011, the head of Seocho District Tax Office notified the Seoul Regional Tax Office that CCC shall pay the total amount of 132,784,342,570 won of corporate tax and value-added tax (hereinafter “the national tax of this case”) for the period from April 25, 201 to April 30, 201. The head of Seocho District Tax Office issued an order to collect the tax before the due date under Article 14 Section 1 of the National Tax Collection Act as to CCC on the same day by changing the due date for payment of the national tax of this case to the CCC on April 25, 2011.

[Attachment] CCCS failed to pay the national tax of this case by the due date of its change, and the head of Seocho District Tax Office attached the amount up to KRW 136,767,872,790, out of the deposit claim against the principal office of the Defendant, and around April 26, 201, the amount up to KRW 136,767,872,790, out of the deposit claim against the principal office of the Defendant. Around that time, the notice of attachment was sent by mail to the principal office of the Defendant. ② Around that time, the amount up to KRW 136,767,872,790, out of the deposit claim for the deposit claim against the principal office of the Defendant Hong Kong branch, and then sent the notice of attachment by facsimile to the Defendant Hong Kong branch by facsimile. On April 29, 2011, the notice of attachment was sent by international mail to the Defendant Hong Kong branch (hereinafter “instant attachment”).

Article 22(1) of the Civil Procedure Act provides that “The tax items and tax amounts of the national tax of this case shall be specified as follows:

206,506,508, 2074, 206, 2074, 205, 206, 305, 2074, 205, 2074, 2075, 2074, 2067, 2074, 2078, 367, 2074, 205, 2074, 3697, 2067, 2074, 367, 205, 2074, 367, 2074, 205, 367, 208, 205, 367, 204, 367, 205, 367, 206, 306, 205, 206, 355, 4200, 2009, 3083, 794, 371394

(c) Filing a lawsuit with the Hong Kong Special Administrative Region high court, and recognition and application of the Hong Kong Special Administrative Region high court;

(1) On May 24, 201, Defendant Hong Kong Branch attempted to withdraw the instant deposit at Defendant Hong Kong Branch. However, Defendant Hong Kong Branch refused payment on the grounds of the instant attachment disposition by the head of Seocho Tax Office, the first instance court of the Hong Kong Special Administrative Region (hereinafter “ Hong Kong”) at the High Court of the first instance (hereinafter “Seoul Kong”) of the Hong Kong Special Administrative Region of the same day (hereinafter “Seoul High Court”) filed a claim against Defendant Hong Kong Branch for damages arising out of the instant deposit transaction agreement, and at the same time sought recognition of the instant deposit agreement with Defendant Hong Kong Branch of the first instance court of the Hong Kong Special Administrative Region of the Republic of Korea (hereinafter “Seoul High Court”) to order Defendant Hong Kong Branch to withdraw the instant deposit in accordance with the terms of the instant deposit agreement entered into with Defendant Hong Kong Branch of the Republic of Korea.

around June 7, 2011, Defendant Hong Kong Branch asserted that the head of Seocho District Tax Office under his jurisdiction attached the instant deposit claim in the Hong Kong court, and sought a creditor confirmation procedure in the course of disputing the claim of the CCS. The Hong Kong court issued a writ of summons demanding the head of Seocho District Tax Office to attend on June 14, 2011, and received the said notice of attendance on June 9, 201, but the said notice of attendance was received on the Seocho Tax Office, but the head of Seocho District Tax Office was absent on the said date without submitting any written statement.

Secondly, after completing the hearing on June 14, 201, the Hong Kong court issued to Defendant Hong Kong Branch a trust agreement to prohibit Defendant Hong Kong from carrying out the instant deposit account or from withdrawing the instant deposit (hereinafter “instant order”).

(d) Request by the director of the Seocho District Tax Office for the collection of the instant deposit claim, and payment of the instant deposit to Defendant Hong Kong Branch’s CCCS

(1) On the other hand, on May 30, 201, the head of Seocho District Tax Office sent a written request for the collection of deposit claims to the Defendant and the Defendant Hong Kong Branch and demanded the payment of the deposit of this case before the attachment. However, Defendant Hong Kong Branch refused the payment on the ground of a lawsuit pending in the Hong Kong court.

on June 15, 2011, Luxembourg demanded that the instant deposit be immediately paid to Defendant Hong Kong Branch in accordance with the instant order. On June 16, 2011, Defendant Hong Kong Branch notified that the instant legal measure will be taken unless the full deposit amount is paid by 15:30 on the same day.

Secondly, around 17:00 on June 16, 201, Defendant Hong Kong Branch paid the full deposit of this case to CCCS.

2. The parties' assertion

A. The plaintiff's assertion

The director of the Seocho District Tax Office attached the deposit claim of this case to the disposition on default against CCS, and the defendant cannot set up against the plaintiff due to the payment of the deposit of this case to CCS. Thus, the defendant, the deposit obligor of this case, is liable to pay the deposit of this case and the damages for delay thereof to the plaintiff, the collection right holder, pursuant to Article 41(2) of the National Tax Collection Act.

B. Defendant’s assertion

(1) The Plaintiff did not verify the objective facts of the CCCS’s tax evasion in the course of the disposition on default on the instant deposit. As such, the instant attachment is invalid.

Luxembourg The Plaintiff’s instant deposit claim is not subject to seizure under the National Tax Collection Act with property outside the territory of the Republic of Korea, but by mail, without seeking cooperation or consent from the Hong Kong Government, and thus, it is not effective to seize Defendant Hong Kong Branch as it served the instant notice of seizure as well as domestic property. The instant deposit obligor under the Hong Kong Hong Kong Act is only Defendant Hong Kong Branch, an independent entity, and is not the Defendant, and thus there is no effect of seizure of Defendant’s headquarters’s deposit.

Fidelity, even if the seizure of this case is valid, the defendant's returning of the deposit of this case was forced by the order of the Hong Kong court, not by voluntary payment. Thus, the defendant can oppose the plaintiff due to the fact of returning the deposit of this case.

3. Determination

A. Determination as to whether a disposition on default complies with the formal procedures of the disposition on default

(1) In principle, a disposition on default shall be issued on a tax payment notice and demand procedure at the preceding stage (Article 23(1) and (2) of the National Tax Collection Act) or, if there are grounds provided in each subparagraph of Article 14(1) of the National Tax Collection Act, a notice of payment before the due date shall be issued, and a seizure may be conducted against a debtor who fails to pay in full by the designated due date without demanding procedures (Articles 24(1)2 and 14(1) of the National Tax Collection Act).

In light of the aforementioned circumstances, the Seoul National Tax Service’s head of the Seoul National Tax Service, upon considering the following facts: (a) the Plaintiff’s findings were examined as to the instant case; (b) the Plaintiff’s head of the Seoul National Tax Service failed to pay the national tax of KRW 132,784,342,570 due to the Nonparty’s failure to perform his corporate tax and value-added tax return, while having received a large amount of operating income from from 206 to 2009; and (c) the Nonparty, the representative director of the CCCS, established the CCCS in Hong Kong where no tax treaty has been entered into between the Republic of Korea and the Republic of Korea, did not pay the total income tax of KRW 277,40,260,080 when operating the relevant business; and (d) the Nonparty, who is the representative director of the CCCS, was in arrears with the income tax amount of KRW 277,400,260,080.

B. Determination on the legality of the seizure of the instant deposit claim

(1) Generally accepted international law has the same effect as domestic law (Article 6(1) of the Constitution of the Republic of Korea); the enforcement authority of a certain country is limited to its territory, etc.; the enforcement authority of a certain country is limited to a treaty or the other country’s consent is required to exercise compulsory execution right with respect to property located in a foreign country; and it is generally recognized international customary law that it is unreasonable to exercise compulsory execution right without the other country’s permission on the property located in a foreign country under the premise of sovereignty without the other country’s permission. Meanwhile, the general rule of the National Tax Collection Act states that the property subject to seizure should be within the area where the National Tax Collection Act has its effect. Considering these, it is reasonable to deem that the Plaintiff’s right to collect delinquent taxes shall be limited to the property located in the territory, etc. of the Republic of Korea, etc. of the Republic of Korea. Accordingly, it is possible

D. The Plaintiff asserts that the instant deposit claim at Defendant Hong Kong Branch is domestically owned by the Plaintiff’s corporate entity identical to the Defendant. However, in light of the above circumstances acknowledged by the evidence, etc., ① General Rules of the National Tax Collection Act provides that property subject to seizure as above shall be within an area with the effect of this Act; ② Article 5(1)8 of the Inheritance Tax and Gift Tax Act provides that financial assets other than those handled by the person operating a trust business governed by the Financial Investment Services and Capital Markets Act shall be the location of inherited property, etc. ② Article 5(1)8 of the Inheritance Tax and Gift Tax Act provides that the financial assets of this case other than the money trust business governed by the Financial Investment Services and Capital Markets Act shall be the location of the financial institution’s business purpose; ③ Even if it is difficult to recognize the legal nature of the Plaintiff’s basic rules of the National Tax Collection Act as the financial assets of this case, it is difficult to see that the instant deposit account claim at Hong Kong Branch constitutes an unfair outcome even if it appears to be subject to the application of this case’s insurance policy to determine its location.

4. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

Judges Western Chang-won (Presiding Judge) (Presiding Judge)

(1) If a taxpayer falls under any of the following subparagraphs, the head of a tax office may collect the determined national tax from him/her even before the due date;

(2) Upon receipt of the notification under paragraph (1), the head of a tax office shall subrogate the obligee who is a delinquent taxpayer to the extent of the delinquent amount.

Note 3) Inter-mandory’s final application, including inter-mandorn’s interim application, and inter-inter-conceptic recognition (Evidence No. 4)

Note 4) (General Rule 24-0.4 of the National Tax Collection Act) (1), the existence of the legal nature thereof shall be as follows.

Note 5) General Rule 24-0.41, 2