[1] Standard for determining whether a business of an individual or organization subject to subsidies from a local government is “business recommended by a local government” under Article 17(1)4 and (2) of the Local Finance Act

[2] In a case where the Seoul Special Metropolitan City Council passed a resolution on the "Ordinance of the Promotion and Support of the City Council, etc." to subsidize project expenses for the projects promoted by the Seoul Special Metropolitan City Council, which is an incorporated association composed of retired public officials of the Seoul Special Metropolitan City and its affiliated organizations, and the Seoul Special Metropolitan City Council, which is an incorporated association composed of the former and incumbent members of the Seoul Special Metropolitan City Council, and the Mayor promulgated it as is, the case holding that

[1] Article 17 of the Local Finance Act prohibits the disbursement of public funds, such as subsidies, to individuals or organizations of local governments, as a matter of principle, permits exceptions from the proviso to paragraph (1). The purpose of the Local Finance Act is to respect the area of autonomous exercise of authority over the financial management of local governments, but its exercise of authority is to set the limitation that does not undermine the welfare of residents or undermine the soundness and efficiency of finance. In light of the legislative intent of Article 17 of the Local Finance Act and the literal meaning of the “right project”, whether a business of an individual or organization, which is the subject of a subsidy of a local government, is a project recommended by a local government” under Article 17(1)4 and (2) of the Local Finance Act ought to be determined by comprehensively taking into account objective factors, such as the nature of an organization that is the subject of a subsidy, the substance of the project to be actually subsidized, the impact of the relevant

[2] In a case where the Seoul Metropolitan Council passed a resolution on the "Ordinance for Promotion and Support of the Seoul Metropolitan Council, which is an incorporated association composed of retired public officials of the Seoul and its affiliated organizations, and the Seoul Metropolitan Council, which is an incorporated association composed of the former and incumbent members of the Seoul Council, to transfer funds to the Mayor of Seoul Metropolitan Government, and the Minister of Public Administration and Security demanded reconsideration on the grounds that the above Ordinance violates Article 17 of the Local Finance Act, but the Mayor of Seoul Metropolitan Government promulgated it as it is, the case held that the above Ordinance was unlawful in violation of Article 17 of the Local Finance Act, on the ground that, in full view of various circumstances such as the fact that the Seoul Metropolitan Government Council and its affiliated organizations, public officials of the former and incumbent Seoul Metropolitan Government Council, and the Seoul Council's members association, which naturally grant membership only with the public service experience of the former and incumbent members of the Seoul Council, can not be deemed as a business recommended by the Seoul Metropolitan Government.

[1] Article 17 (1) 1, 4, and (2) of the Local Finance Act / [2] Article 17 (1) 1, 4, and (2) of the Local Finance Act

The Minister of Public Administration and Security (Law Firm, Attorneys Kim Jong-hwan et al., Counsel for the plaintiff-appellant)

Seoul Special Metropolitan City Council (Attorney Kim Tae-tae, Counsel for defendant-appellant)

October 25, 2012

A resolution made by the defendant on July 9, 2012 on the Ordinance of the Seoul Special Metropolitan City Council, etc. concerning the fostering and support of the City Council, etc. shall not be effective. Litigation costs shall be borne by the defendant.

The same shall apply to the order.

1. Resolution of the Ordinance as to the text and summary thereof;

The following facts are not disputed between the parties, or can be acknowledged by comprehensively taking account of the descriptions of Gap evidence 1, Gap evidence 2-3, Gap evidence 3, 4, 5, 6, Eul evidence 1 and 2, and the whole purport of arguments.

A. On July 9, 2012, the Defendant passed a resolution on the Seoul Special Metropolitan City Ordinance on the Promotion and Support of the City Council, etc. (hereinafter “instant Ordinance”) and passed a resolution on July 10, 2012 to the Seoul Special Metropolitan City Mayor (hereinafter “Seoul City Mayor”). On July 30, 2012, the Plaintiff demanded the head of the competent Ministry to re-examine the instant Ordinance as the authority of the Seoul Special Metropolitan City Mayor on the ground that “The Ordinance of this case violates Article 17 of the Local Finance Act, which prevents local governments from making contributions, subsidies, contributions, or other public funds to individuals or organizations.” However, the Seoul Mayor promulgated the instant Ordinance without complying with the Plaintiff’s request for re-determination on July 30, 2012.

B. According to the proposed ordinances of this case, the purpose of the proposed ordinances of this case is to foster and support each "Seoul City Postal Association", "Seoul City Postal Association", "Seoul Postal Association", which is composed of retirement public officials of Seoul and its affiliated organizations, and "Seoul Postal Association, etc.", respectively, and to contribute to the development of corrective development through participation in correction by fostering and supporting both (Article 1). In order to achieve its purpose, the proposed ordinances of this case shall be ① the development and consultation of policies for corrective development, ② the corrective monitoring and corrective cooperation and public relations activities, ③ the volunteer activities for the promotion of citizens' welfare, ④ the promotion of other projects deemed necessary (Article 2). The Seoul Do Governor shall submit a report on the settlement of accounts to the head of the Seoul Do Postal Association (Article 3(1) of the Seoul Postal Association) and the head of the 2nd fiscal year after submitting a report on the settlement of accounts by the end of each fiscal year.

2. Whether the Ordinance of this case is unlawful

A. Relevant statutes

Article 17(1) of the Local Finance Act provides, “No local government shall make contributions, subsidies, contributions, or other public funds to individuals or organizations: Provided, That this shall not apply to cases falling under any of the following subparagraphs in connection with the affairs under the jurisdiction of the local government, and to cases where public institutions are disbursed.” Article 17(1) of the Local Finance Act provides, “Where there is a provision in the Act, 1.0, 2.00, which is designated by the State, 3.0, by means of the financial resources from the State, 4.0, where it is deemed necessary for a project recommended by the local government if it is impossible to do so without subsidies.” Article 17(2) provides, “The term “public institution” under the proviso to paragraph (1) refers to any of the following institutions which are recommended by the local government in connection with the affairs under the jurisdiction of the local government,” and stipulates, “1. Its purpose and establishment is an institution prescribed by the Act and subordinate statutes or the Ordinance of the local government, and a public corporation whose members

B. The parties' assertion

The Plaintiff asserted that Article 17(1) of the Local Finance Act provides that the provision on the payment of subsidies to the Seoul City Postal Association, etc. under Article 3 of the Ordinance constitutes a public fund disbursement to an organization of a local government prohibited by the main sentence of Article 17(1) of the Local Finance Act, and thus, the above provision is invalid in violation of the Local Finance Act. The Defendant asserted that the Seoul City Postal Association, etc. falls under the “public institution that carries on business recommended by a local government in connection with affairs under the jurisdiction of a local government” under Article 17(2)1 of the Local Finance Act or, even if not, it is deemed necessary to carry on a business recommended by a local government” under Article 17(1)4 of the Local Finance Act, and that the disbursement of public funds

C. Determination

First of all, we examine whether a project promoted by the Seoul City City Postal Association, etc. according to the Ordinance of this case constitutes a "project recommended by a local government," which is a common requirement for the exception of this case.

The purpose of the Local Finance Act is to ensure the sound and transparent operation and autonomy of local government finance (Article 1), and local governments shall operate the finance in a sound and efficient manner to promote residents' welfare (Article 3(1)).

Article 17 of the Local Finance Act prohibits local governments from paying subsidies or other public funds to individuals or organizations in principle, and permits such exceptions to the above-mentioned reasons are to respect the territory of autonomous exercise of power over financial management of local governments, but the exercise of power does not violate the welfare of residents or undermine the soundness and efficiency of financial affairs.

In light of the legislative intent of Article 17 of the Local Finance Act and the literal meaning of the “authorized project”, whether a project of an individual or organization that is the object of a subsidy from a local government is “project recommended by a local government” under Article 17(1)4 and (2) of the Local Finance Act shall be determined by comprehensively taking into account objective factors such as the nature of an organization that is subject to a subsidy, the substance of the project that is to be actually subsidized, the impact of the project on the local finance, and the general perception of the residents of the local government

According to the above legal principles, the following circumstances revealed by the evidence adopted and examined at the argument of this case, namely, ① public officials of the former Seoul Metropolitan Government and its affiliated organizations, and the Seoul Council's work experience as members of the former and incumbent Seoul Metropolitan Government Council, are organizations whose primary purpose is to promote friendship among its members, etc.; ② The Ordinance of this case widely lists comprehensive contents such as development, consultation, investigation, research, monitoring, public relations, volunteer activities, etc. with regard to the general public as corrective implementation projects of the Seoul City Council, and thus it is difficult to predict whether specific project prospects or implementation effects will occur. ③ The Ordinance of this case's "project close to the correction of the residents" as provided by the Ordinance of this case can not be seen as restricting the substantial scope of the project; ③ The Ordinance of this case's general budget formation and approval of the project plan of this case can not be seen as being in violation of the Ordinance's general budget formation and approval of the Seoul Metropolitan Government Council's project plan. ④ The Ordinance of this case's general budget formation and approval of the Seoul Metropolitan Government Council's project plan.

Therefore, as long as it does not meet the above requirements, without further examining the remainder of the reasons for the exception of this case, the Seoul City Postal Association, etc. does not fall under the reasons prescribed in Article 17(2)1 of the Local Finance Act or Article 17(1)4 of the Local Finance Act, and it does not constitute other exceptions prescribed in Article 17 of the Local Finance Act. Thus, Article 3 of the Ordinance of this case is unlawful in violation of Article 17 of the Local Finance Act.

3. Conclusion

Therefore, as long as part of the Ordinance of this case is unlawful, the resolution of this case should be denied in its entirety. Thus, the plaintiff's claim of this case seeking the exclusion of validity of the resolution is justified, and litigation costs shall be borne by the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-dae (Presiding Justice)