Whether the external effect of Article 15(4) of the former Rules on Contract Affairs of Public Corporations and Quasi-Governmental Institutions, which stipulates that a person whose qualification to participate in bidding is restricted is a corporation or organization, may be recognized as a representative of such corporation or organization (negative)

Article 39(2) of the Act on the Management of Public Institutions (hereinafter “the Act on the Management of Public Institutions”) provides that a person subject to restriction on participation in bidding shall be limited to a person who has participated in the relevant illegal act by prescribing the subject subject to restriction on participation in bidding as “a person, corporation, organization, etc. that is obviously likely to undermine fair competition or appropriate implementation of contracts.” On the other hand, Article 15(4) of the former Rules on Contract Affairs of Public Corporations and Quasi-Governmental Institutions (amended by Ordinance of the Ministry of Strategy and Finance No. 571, Sept. 12, 2016; hereinafter “Rules on Contract Affairs”) provides that where a person whose participation in bidding is restricted is a corporation or organization, the restriction on participation in bidding may also be limited to the representative thereof, regardless of whether the person is involved in the illegal act, and thus, the subject of restriction on participation in bidding may be expanded rather than that prescribed by the Act.

However, delegation to Ministerial Ordinance under Article 39(3) of the Act on the Management of Public Institutions is limited to “matters necessary for the standards, etc. for restricting participation in bidding,” and this cannot be deemed as delegation to a person subject to disposition as to the extent of the period and the degree of increase and decrease in participation in bidding, etc., while restricting participation in bidding in bidding under the language and text of the provision. Therefore, the extension of disposition subject to the above provision is prescribed without delegation of superior laws and regulations, which goes beyond the limit of delegation legislation, and its external effect is not recognized. This legal principle cannot be viewed differently on the ground that Article 2(5) of the Rules on the Management of Public Institutions provides that “The Act on Contracts to Which the State is a Party shall apply mutatis mutandis to matters not prescribed by the Rules on the

Article 39(2) and (3) of the Act on the Management of Public Institutions, Article 15(4) of the former Rules on Contract Affairs of Public Corporations and Quasi-Governmental Institutions (Amended by Ordinance of the Ministry of Strategy and Finance No. 571, Sep. 12, 2016)

Supreme Court Decision 2011Du10584 Decided September 12, 2013 (Gong2013Ha, 1800)

KTC Co., Ltd. (LLC, Kim & Lee LLC, Attorneys Oi-Myeon et al., Counsel for the plaintiff-appellant)

Plaintiff 2

Korea Rail Network Authority (Law Firm Han & Yang LLC, Attorneys Kim Ho-chul et al., Counsel for the plaintiff-appellant)

Daejeon High Court Decision 2016Nu10365 decided August 25, 2016

All appeals are dismissed. The costs of appeal between the Plaintiff 2 and the Defendant are assessed against the Defendant, and the remainder between the Plaintiff and the Defendant are assessed against the Plaintiff.

The grounds of appeal are examined.

1. As to the ground of appeal by Plaintiff Kmat Co., Ltd.

A. As to grounds of appeal Nos. 1 and 2

The court below found that the non-party 1 and the non-party 2, who are the executive officers of the plaintiff corporation KTC (hereinafter "the plaintiff corporation"), committed the act of delivering money and valuables respectively to the defendant's employee during the working design contract period for the railroad line, and determined that the act of delivering money and valuables constitutes the act of offering offering money and valuables recognized as having business relationship instead of simply promoting friendly relations in light of the circumstances, timing, amount, etc., and furthermore, the offering of money and valuables constitutes the act of affecting the fairness of other bids in the future as well as the fulfillment of the pertinent contract, and thus, constitutes "an act that is obviously detrimental to fair competition or the proper implementation of the contract" as stipulated in Article 39 (2) of the Act on the Management of Public Institutions

In light of the relevant legal principles and records, the lower court did not err by misapprehending the legal principles on the offering of bribe and Article 39(2) of the Public Institutions Operation Act, contrary to what is alleged in the grounds of appeal.

B. Ground of appeal No. 3

Article 15(6) and (7) (hereinafter “instant provision”) of the former Rules on Contract Affairs of Public Corporations and Quasi-Governmental Institutions (amended by Ordinance of the Ministry of Strategy and Finance No. 571, Sept. 12, 2016; hereinafter “Contract Affairs Rules”) asserts that Article 15(6) and (7) of the former Rules on Electronic Procurement System (hereinafter “instant provision”) extend the effect of the Defendant’s restriction on participation in bidding to other agencies without any legal basis, which violates the principle of statutory reservation and is null and void. Accordingly, the Plaintiff’s disposition against the Plaintiff company based on the instant provision is also unlawful.

However, the instant provision is merely a provision that provides a subsequent procedure on the premise that a public institution’s restriction on participation in bidding is imposed, and it does not extend the validity of the first restriction on participation in bidding as a matter of course to a State agency, local government, or other public institution under the said provision. Thus, it cannot be deemed that the legality or validity of the first restriction on participation in bidding is affected by the relevant provision, depending on the unconstitutional and unlawful nature of the said provision (see Supreme Court Decision 2015Du3928, Apr. 26, 2017

Therefore, we cannot accept the Plaintiff’s assertion on the premise that the instant provision is expanding its effect to another institution without any legal basis.

To the same purport, the lower court did not err by misapprehending the principle of statutory reservation, etc., contrary to what is alleged in the grounds of appeal.

C. Regarding ground of appeal No. 4

In light of the fact that the offering of a bribe is a typical act detrimental to fair competition or appropriate implementation of a contract, the period of sanctions within the scope of the disposition standards stipulated by the law, and the motive, content, amount, etc. of the offering of a bribe, the lower court determined that the restriction on the participation in the bidding of the instant case is not recognized as deviation or abuse of discretion

In light of the relevant legal principles, the lower court cannot be deemed to have erred by misapprehending the legal doctrine on deviation and abuse of discretionary power, contrary to what is alleged in the grounds of appeal.

2. As to the Defendant’s ground of appeal

Article 39(2) of the Act on the Operation of Public Institutions provides that the subject of limitation on participation in bidding shall be “a person, corporation, organization, etc. deemed clear to undermine fair competition or appropriate implementation of contracts” and limits the subject of limitation on participation in bidding to the person involved in the relevant wrongful act. On the other hand, Article 15(4) of the Rules on Contract Affairs (hereinafter “instant rule clause”) provides that a person whose participation in bidding is restricted may be restricted to participation in bidding if he/she is a corporation or organization, and provides that the subject of limitation on participation in bidding may be subject to restriction on participation in bidding just because he/she is in the position of representative of a corporation, etc. regardless of whether he/she is involved in the wrongful act.”

However, delegation to Ministerial Ordinance under Article 39(3) of the Act on the Management of Public Institutions is merely “necessary matters concerning the criteria for restriction on participation in bidding, etc.,” and it does not mean that the restriction on participation in bidding, which means the extent of the period and the degree of aggravation and mitigation, etc., and does not mean that the restriction on participation in bidding, and does not mean that the restriction on participation in bidding, is delegated to a disposition subject to disposition. Therefore, the extension of disposition subject to the foregoing provision is prescribed without delegation of superior statutes. Therefore, this is beyond the limit of delegation legislation and its external effect is not recognized (see Supreme Court Decision 2011Du10584, Sept. 12, 2013). This legal doctrine cannot be deemed different on the ground that Article 2(5) of the Rules on the Management of Contract Affairs provides that “The Act on Contracts to which the State is a Party shall apply mutatis mutandis to matters not prescribed by the Rules

The court below determined that the above provision cannot be a basis for the restriction of qualification for participation in bidding against Plaintiff 2, the representative of the Plaintiff company, and further, the Defendant’s disposition against Plaintiff 2 based on Article 39(2) of the Public Institution Operation Act cannot be deemed as a direct basis. Thus, the court below determined that the disposition against Plaintiff 2 was unlawful on the ground that there was no ground for such disposition.

Examining the relevant statutes and the aforementioned legal principles in light of the foregoing, the lower court did not err in its judgment by misapprehending the legal doctrine on the existence of delegation delegation provisions and Article 39(2) and (3) of the Public Institutions Operation Act, contrary to what is alleged in the grounds of appeal.

3. Conclusion

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 Lee Ki-taik (Presiding Justice)