In a case where Company A, upon entering into a purchase contract with the Public Procurement Service, supplied products to a procuring entity demanding delivery on the national integrated shopping mall website, which is the national integrated electronic procurement system, and the Public Procurement Service notified Company A, pursuant to the provisions of the special condition of the purchase contract for six months under the purchase contract, on the grounds that “the details of the specifications were falsely stated or exaggerated,” the case affirming the lower court’s determination that the suspension of the transaction constitutes an administrative disposition subject to appeal litigation.

Article 2 (1) 1 of the Administrative Litigation Act

Prop Co., Ltd. (Law Firm Apex, Attorneys Kim Hong-soo et al., Counsel for the plaintiff-appellant)

The Administrator of Public Procurement Service

Daejeon High Court Decision 2016Nu11801 decided January 26, 2017

The appeal is dismissed. The costs of appeal are assessed against the defendant.

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.

(1) On August 30, 2013, pursuant to Article 9-2 of the Procurement Act (hereinafter “Planning Act”) and Article 18 of the Enforcement Decree of the same Act, the Defendant designated the term of designation as the product of this case, which is the product of this case produced by the Plaintiff, as the exemplary procurement commodities from August 30 to August 29, 2016, by setting the term of designation from August 30 to August 29, 2013.

(2) As between October 14, 2013 and October 17, 2015, the Plaintiff entered into a contract for the purchase of goods (unit price contract for a third party) under which the Plaintiff actually supplied the instant goods to the relevant end-user institution within the scope of the contract amount and would receive the payment from the said entity (hereinafter “instant contract”). The said contract for the purchase of goods includes the purport that “the Plaintiff faithfully implements the additional special conditions for the purchase of goods (hereinafter “additional conditions”)” and that “the specification of the instant products is the same as the standard for the designation of the excellent goods for the purchase of goods”.

(3) The Defendant registered the instant product in a national integrated shopping mall, which is a national integrated electronic procurement system, and the Plaintiff supplied the instant product to an end-user institution demanding delivery through a national master shopping mall.

(4) Meanwhile, according to Article 22(1) of the Additional Terms and Conditions, the Defendant may suspend transactions on the part of the other party to the contract in a national master shopping mall within the scope of not less than one month but not more than 12 months, where “in the event of a false entry or exaggeration of the information on goods” (Article 22(1) of the Additional Terms and Conditions, or where there exists a breach of contract under the relevant provisions, such as other terms and conditions of the contract. According to the Additional Terms and Conditions [Attachment], in the case of Article 22(1)1 of the Additional Terms and Conditions, the period of suspension of transactions is six months, the name of the object of suspension of transactions, and the subject of suspension

(5) On February 3, 2016, the Defendant notified the Plaintiff on the ground that “the Plaintiff did not produce, transport, and assemble products in the form of nitrot, unlike the specifications, at the factory, and received and assembled raw materials at the site without manufacturing them, and the factory was practically difficult at the time of concluding the contract, and the Defendant falsely stated or distorted the contents in the specifications although it was aware that the method of manufacturing the factory was practically difficult at the time of concluding the contract,” that the transaction in the instant product was suspended in the national master shopping mall for six months pursuant to Article 2(1)1 and 18 of the Additional Conditions (hereinafter “instant suspension of transaction”).

2. The judgment of the court below

The lower court determined that the instant measure was unlawful on the ground that the instant measure was based on additional special conditions or the principle of statutory reservation because it was based on the notice of additional special conditions or the notice of management of the integrated electronic procurement system (amended by the Public Notice of the Procurement Service No. 2016-9, Feb. 16, 2016; hereinafter referred to as “public notice of the operation of shopping mall”), while deeming that the instant measure was an administrative disposition that directly restricts the Plaintiff’s property rights, and thus, constitutes an administrative disposition that is subject to appeal.

3. Judgment of the Supreme Court

A. The term “disposition, etc.”, which is the subject of an appeal litigation, refers to the exercise or refusal of public authority, 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 an act by an administrative agency may be subject to an appeal litigation cannot be determined abstractly and generally. In a specific case, the determination should be made 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 or interested parties related to the act (see, e.g., Supreme Court en banc Decision 2008Du167, Nov.

B. Summary of the relevant statutes and public notice regulations and the main contents of the additional special conditions are as follows:

(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, under the Procurement Act, through the Electronic Procurement System (Article 13(1)), he/she shall use the Electronic Procurement System unless there is any inevitable reason due to a natural disaster or a computer trouble, etc. 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 bid or a negotiated bid, as prescribed by Presidential Decree (Article 7).

(2) Meanwhile, Article 2(1)1 of the Public Notice of the Operation of Shopping Districts announced by the Public Procurement Service provides that, pursuant to Article 22 of the Act on Contracts to Which the State is a Party, the Public Procurement Service or a procuring entity has entered into a unit price contract (including a unit price contract for a third party under Article 7 of the Enforcement Decree of the Public Procurement Act and a unit price contract for multiple suppliers under Article 7-2) shall be registered, and an online shopping mall opened in a national market shall be called “comprehensive shopping mall” in order to electronically deal with transactions between a procuring entity and the other party. Article 9(1)1 of the Public Notice of the Operation of Shopping Districts provides that the Defendant may suspend the transaction of goods through a national master shopping mall. Article 10 of the same Act provides that, if the other party raises an objection against the suspension of the transaction of comprehensive shopping mall, the other party may file an objection within ten days from the date the decision is notified of the decision

(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 one month but not more than 12 months if the other party to the contract falls under any of the following subparagraphs. Paragraph (6) of the same Article 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 the suspension of transaction, and other submission deadline, etc. for the suspension of transaction. In addition, Article 22-3(1)1 and Article 22 provides that where a contract is “a contract” subject to the suspension of transaction pursuant to Article 22, a contract related

(4) Article 31(3) of the former Regulations on the Performance of Duties under Contracts with Multiple Suppliers (wholly amended by the Government Procurement Service Directive No. 1723, Nov. 27, 2015) provides that the other party to a contract (title 2) who has received suspension of transactions two times or more for the last one year as of the date of the first announcement of tender based on the name of detailed items, or who has received suspension of transactions for the last two years or more for the last two years, and the other party to a contract (title 3) whose cumulative suspension period for the last two years exceeds six months, shall not enter into a next contract for one year from the date of the next announcement. In addition, Article 8(3) and [Attachment Form 1-17] of the former Regulations on the Designation and Management of Excellent Procurement Commodities of the Government Procurement Service (wholly amended by the Public Procurement Service Directive No. 2016-12, Mar. 8, 2016) provide that where shopping transactions have been suspended within one year from the last date of receipt of the application for designation of exemplary goods.

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 suspension of transactions to be subject to appeal litigation, 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, an administrative agency, which directly affects the Plaintiff’s rights and obligations

(1) An electronic procurement user registered in a national integrated shopping mall, a national integrated electronic procurement system, thereby acquiring the status of an entity participating in a competitive bid, etc. or directly selling goods registered in a national master shopping mall, etc. to a procuring entity. Such status is a direct and specific legal interest protected by the Electronic Procurement Act, the Procurement Act, and the Procurement Act. Therefore, 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 secure good faith by excluding the counter-party to a contract that breaches a purchase contract from a comprehensive shopping mall through a measure of suspending transaction in a national master shopping mall and at the same time to achieve the public interest, such as ensuring the safety, reliability, and fairness of the comprehensive shopping mall that he/she 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 10 of the notice of the operation of an shopping mall provides the procedure of filing an objection; (iv) Article 9(1) of the notice of the operation of an shopping mall based on Article 12 of the Electronic Procurement Act provides the grounds for the Defendant to suspend transactions in a product through a national master shopping mall; and (iv) the procurement company also recognizes that the Defendant’s measure of suspending transactions in a master shopping mall is an administrative disposition and has filed an appeal therefor, it can be deemed that the instant measure of suspending transactions in a foreign master shopping mall is equipped with an external form of 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 relevant contract name pursuant to Article 22-3(1)1 of the Additional Terms and Conditions are subject to the suspension of transactions. In other words, where the other party to a contract has entered into two or more third-party unit price contracts on the items of the same name, even if the grounds for the suspension of transactions are recognized only in relation to one contract, the remaining contracts may be subject to the suspension of transactions. As such, the measure of suspension of transactions may be a significant disadvantage to the other party to the contract. In addition, when the other party to a contract intends to enter into a contract with a multiple supplier or the defendant applies for the suspension of transactions after the lapse of the period of suspension of transactions, the fact that the contract was suspended itself may act disadvantageously on grounds of

D. Therefore, the lower court’s determination that the instant measure constitutes an administrative disposition that is the subject of an appeal litigation is justifiable, and contrary to what is alleged in the grounds of appeal, did not err by misapprehending the legal doctrine regarding the subject of an appeal litigation. [However, even if the instant measure is deemed to fall under the subject of an appeal litigation, if the Plaintiff’s act did not meet the requirements for the issuance of sanctions stipulated in additional special conditions, the instant measure of suspension of transaction can be deemed unlawful. Accordingly, the court may examine whether the Plaintiff’s act constitutes a ground for the measure of suspension of transaction under additional special conditions, whether the contents of additional special conditions, or the relevant measure of suspension of transaction was in violation of the State Contracts Act, or violates the principle of equality, the principle of proportionality, and the principle of protection of trust, etc., and in this respect

4. Conclusion

Therefore, the appeal is 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 Park Jung-hwa (Presiding Justice)