[1] The purport of the former Act on Contracts to Which the State Is a Party that limits the qualification of improper enterprisers to participate in bidding

[2] Whether a disposition to restrict participation in bidding can be imposed on a person who is stipulated as a person in charge by law, not a realistic actor (affirmative)

[3] Whether a party to a contract, bidder, etc. who is not independently responsible for the occurrence of a ground for restriction on participation in bidding pursuant to the proviso to Article 76 (1) of the former Enforcement Decree of the Act on Contracts to Which the State Is a Party is a Party is excluded from the subject of sanctions (affirmative), and whether the above provision is null and void in violation of

[4] Whether “documents concerning contracts” under Article 76(1)8 of the former Enforcement Decree of the Act on Contracts to Which the State Is a Party includes not only documents concerning the conclusion of contracts but also documents related to ensuring the proper performance of contracts (affirmative)

[1] Article 27(1) of the former Act on Contracts to Which the State is a Party (Amended by Act No. 14038, Mar. 2, 2016); Article 76(1) of the former Enforcement Decree of the Act on Contracts to which the State is a Party (Amended by Presidential Decree No. 27475, Sep. 2, 2016; see current Article 76(1) and (2) / [2] Article 27(1) of the former Act on Contracts to which the State is a Party (Amended by Act No. 14038, Mar. 2, 2016; see current Article 76(1) and (2) of the former Enforcement Decree of the Act on Contracts to which the State is a Party (Amended by Presidential Decree No. 27475, Sep. 2, 2016; / [3] Article 76(1) of the former Enforcement Decree of the Act on Contracts to which the State is a Party (Amended by Presidential Decree No. 27475, Mar. 167, 20197)

[1] Supreme Court Decision 2013Du26811 Decided December 11, 2014

Korea Aerospace Industry Co., Ltd. (LLC, Attorneys Kim Nung-hwan et al., Counsel for the defendant-appellant)

The Defense Acquisition Program Administration

Seoul High Court Decision 2016Nu68429 decided March 16, 2017

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

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Interpretation and application of the part concerning “other employees” under Article 76(1) of the Enforcement Decree of the Act on Contracts to Which the State is a Party (ground of appeal Nos. 1 and 4)

A. Whether it goes against the principle of statutory reservation

Article 27(1) of the former Act on Contracts to Which the State Is a Party (amended by Act No. 14038, Mar. 2, 2016; hereinafter “State Contract Act”) provides that a person who is deemed likely to interfere with the fair enforcement of competition or appropriate implementation of contracts, or inappropriate to participate in bidding (hereinafter “unfair businessman”) shall be restricted from participating in bidding for up to two years, as prescribed by Presidential Decree. The main text of Article 76(1) of the former Enforcement Decree of the Act on Contracts to which the State is a Party (amended by Presidential Decree No. 27475, Sept. 2, 2016; hereinafter “Enforcement Decree of this case”) provides that the former Act on Contracts to which the State is a Party (amended by Presidential Decree No. 27475, Mar. 2, 2016; hereinafter “contractor”), an agent, manager or other employee of the other party to the contract, etc., shall be restricted from participating in bidding or other acts falling under any of the following subparagraphs:

The purport of this system that limits the participation of improper enterprisers in bidding is to ensure the faithful performance of contracts entered into by the State by excluding participation in bidding for a certain period of time in a contract in which the State is a party, and to prevent any disadvantage to the State in advance (see Supreme Court Decision 2013Du26811, Dec. 11, 2014).

In order to achieve the above legislative purpose, restrictions on participation in bidding is imposed on objective facts and evaluations that are likely to harm the fair enforcement of competition or appropriate implementation of contracts, or are inappropriate to allow participation in bidding, and thus, it may be imposed on a person who is stipulated as a legal responsible person, not by a real offender. This is also true in that it is reasonable that an improper businessman who uses another person such as a representative, etc. and gains profits from other persons, such as a representative, should be at risk or disadvantage caused thereby.

In the proviso to the provisions of the Enforcement Decree of this case, the term “ considerable attention and supervision to prevent the act” is one’s duty to prevent the occurrence of a cause for restriction on participation in bidding, such as the counter-party to the contract, etc. In accordance with the proviso to the provisions of the Enforcement Decree of this case, the counter-party, etc. who is not independently responsible for

As such, the enforcement decree of this case specifies the requirements for limitation of qualification for participation in bidding in accordance with delegation by the State Contracts Act, and provides that qualification for participation in bidding shall not be limited in cases where it is not recognized as independent responsibility of the counter-party, etc.

B. Whether the Plaintiff’s “employee” can be deemed as a false or altered test report

(1) The lower court determined that the Plaintiff’s collaborative company’s use of the Plaintiff’s performance of its duties constitutes “other employees” under the provisions of the Enforcement Decree of this case, and therefore, the Plaintiff’s collaborative company’s use of and alteration to the test report constitutes a case where the Plaintiff’s employee’s use of and alteration to

(2) The court below held that the Plaintiff’s subcontractor constitutes “other employees” under the Enforcement Decree of the instant case’s provision as follows.

(A) “Other employees” under the provision of the Enforcement Decree of the instant case does not necessarily include those subject to direct command and supervision as to overall affairs, such as concluding employment contracts with the improper businessman, but include those who entrust a third party with the tasks that should be handled by the improper businessman himself/herself, thereby treating the tasks on behalf of the improper businessman under his/her responsibility.

(B) The Plaintiff is a party to each of the contracts in this case with the Defendant, who bears the obligations imposed on each of the contracts in this case, and the Plaintiff’s partner is not a person who bears the said obligations against the Defendant.

(C) The Plaintiff had a subcontractor selected by himself produce and supply goods for the implementation of each of the instant contracts. As such, the above subcontractor may be deemed within the scope of the Plaintiff’s territory and responsibility.

(D) The Plaintiff, despite having been able to perform the contractual quality guarantee obligation under the contract for the Defendant by directly conducting a test for the items supplied by the subcontractor or by requesting a certified testing institution to conduct a test for the items, selected a method of submitting the test report to the Defendant by receiving the test report from the subcontractor.

(3) In addition to the following circumstances cited by the lower court based on the records, namely, the Plaintiff, prior to the instant disposition, confirmed the authenticity of the test report with respect to the partial supply of goods by domestic and foreign collaborative companies, and asserted that the Defendant was responsible for the management and supervision of quality review and product inspection by visiting the collaborative company directly, etc., the Plaintiff’s collaborative company in the instant case can be seen as under the Plaintiff’s supervision with respect to the supply of raw materials and the submission of test report.

(4) Therefore, the lower court did not err by misapprehending the legal doctrine on the interpretation and application of “other employees” under the Enforcement Decree of the instant case’s provision, thereby adversely affecting the conclusion of the judgment that the Plaintiff’s partner constitutes “other employees.”

2. Interpretation and application of the part concerning “documents concerning contracts” under subparagraph 8 of the Enforcement Decree of the instant case (ground of appeal Nos. 2 and 3)

Article 8 subparag. 8 of the Enforcement Decree of the instant case provides that “a person who forges, alters, or wrongfully uses documents concerning tendering or contract, or submits false documents,” as grounds for restriction on participation in bidding. Other provisions of the Enforcement Decree of the instant case clearly distinguish “Conclusion or performance of a contract” (Articles 6, 7, 10, 12, and 17) and “performance of a contract” (Article 1 and 5). However, subparagraph 8 comprehensively provides that “documents concerning contract” is “documents concerning contract.” In order to ensure the proper performance of a contract, not only documents concerning the conclusion of a contract but also documents concerning the performance of a contract need to be punished. In light of the ordinary meaning of the text, it is difficult to deem “documents concerning a contract” as limited to “documents concerning the conclusion of a contract” or “documents requiring submission of documents under a contract.”

Therefore, the phrase “documents concerning contracts” under subparagraph 8 of the Enforcement Decree of this case should be deemed to include not only documents concerning the conclusion of contracts but also documents related to ensuring the proper performance of contracts.

The lower court determined as follows: (a) where the Plaintiff or the Plaintiff’s subcontractor submitted the instant test report as objective evidence to support the fact that the parts subject to each contract of this case are deemed to have adequate performance, etc. required for the contract as a result of quality inspection, the lower court determined as constituting “documents concerning contracts” under Article 8 of the Enforcement Decree of the instant Act, as documents concerning the performance of the contract submitted by the Plaintiff to prove that the test report of this case was appropriately performing its contractual obligations.

Examining the foregoing legal doctrine and the record, the lower court did not err in its judgment by misapprehending the legal doctrine on the interpretation and application of subparagraph 8 of the Enforcement Decree of this case.

3. Whether exemption and sanction under the proviso of the Enforcement Decree of the instant case is necessary (ground of appeal Nos. 5 and 6)

The lower court determined that it is difficult to view that the Plaintiff had exercised due care and supervision in order to prevent the act of forgery or alteration of the collaborative company’s test report on the ground that the Plaintiff had been guaranteed the appropriate performance of quality assurance from the collaborative company, on the sole basis of the fact that the Plaintiff believed the test report submitted by the collaborative company, which was submitted by the collaborative company, was not negligent in performing the duty of due care and supervision to the collaborative company, or that it was insufficient to deem the Plaintiff to have fulfilled the duty of due care necessary for the submission of the test report.

In light of the relevant legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine regarding the interpretation and application of the proviso of Article 27(1) of the State Contracts Act and the proviso of the Enforcement Decree of this case, or by exceeding the bounds of

4. Whether there is a misapprehension of the legal principle as to deviation and abuse of discretionary power (ground of appeal No. 7)

The lower court determined that the instant disposition did not constitute an unlawful deviation or abuse of discretionary authority, on the grounds that the Defendant appears to have rendered the instant disposition, taking into account all the circumstances alleged by the Plaintiff, and that the purport of restricting the participation of unjust enterprisers in bidding, and that the neglect of any act likely to undermine the proper implementation of the contract may cause enormous losses or risks to the State

Examining the relevant legal principles and records, the lower court did not err by misapprehending the legal doctrine on deviation and abuse of discretion.

5. 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 Min You-sook (Presiding Justice)