[1] Where a disposition is taken by a disposition that restricts participation of unjust enterprisers in bidding, whether its effect is naturally extended without any separate sanction by another disposition authority pursuant to Article 76(8) of the former Enforcement Decree of the Act on Contracts to which the State is a Party, Article 92(8) of the former Enforcement Decree of the Act on Contracts to which a Local Government is a Party, and Article 15(11) of the former Rules on Contracts Affairs of Public Corporations and Quasi-Governmental Institutions (negative)

[2] Whether Article 27 (1) of the former Act on Contracts to Which the State Is a Party is unconstitutional (negative)

[1] Article 76(8) of the former Enforcement Decree of the Act on Contracts to Which the State Is a Party (amended by Presidential Decree No. 24601, Jun. 17, 2013); Article 92(8) of the former Enforcement Decree of the Act on Contracts to Which a Local Government Is a Party (amended by Presidential Decree No. 26491, Aug. 19, 2015); Article 15(1) of the former Rules on Contract Affairs of Public Corporations and Quasi-Governmental Institutions (amended by Ordinance No. 571, Sept. 12, 2016) provides that the head of each central government agency, the head of each local government, and the head of each public corporation or quasi-government institution may not participate in bidding even in a person subject to a disposition that is subject to a restriction on participation in bidding pursuant to other Acts other than the Act under the jurisdiction of the relevant disposition, and that the relevant disposition authority may not be allowed to participate in bidding on the basis of a new disposition without any restriction on participation in bidding.

[2] Article 27(1) of the former Act on Contracts to Which the State is a Party (amended by Act No. 11547, Dec. 18, 2012) cannot be deemed unconstitutional for the following reasons. Since the above provision directly provides the subject, reasons, period, and method of a disposition, which is an essential element of a disposition, the principle of statutory reservation and the principle of prohibition of comprehensive delegation, it does not go against the principle of statutory reservation. Since the above provision aims to ensure fairness in the conclusion of a State contract and to prevent disadvantages to the State, the legislative purpose is justifiable, and it is deemed necessary to restrict the qualification of participation in all tenders ordered by the State while taking into account the fact that the impact of a State contract upon people's lives is enormous, and the degree of infringement upon public interest in the process of bidding, it is still possible to engage in business activities in the private market even if it is subject to restrictions on participation in bidding, and in light of the fact that the period of sanctions is determined within a maximum of two years, it does not go against the principle of minimum equity, and thus does not violate the law or freedom of disciplinary action.

[1] Article 76(8) of the former Enforcement Decree of the Act on Contracts to which the State is a Party (Amended by Presidential Decree No. 24601, Jun. 17, 2013); Article 92(8) of the former Enforcement Decree of the Act on Contracts to which a Local Government is a Party (Amended by Presidential Decree No. 26491, Aug. 19, 2015); Article 15(1) of the former Rules on Contracts to Public Corporations and Quasi-Governmental Institutions (Amended by Ordinance of the Ministry of Strategy and Finance No. 571, Sept. 12, 2016); Article 11(1), Articles 15, 37(2), and 75 of the Constitution of the Republic of Korea; Article 27(1) of the former Act on Contracts to which the State is a Party (Amended by Presidential Decree No. 11547, Dec. 18, 2012)

[2] Constitutional Court en banc Order 2015HunBa125, 290 Decided June 30, 2016 (HunGong237, 1091)

Korea Stock Company (Attorneys Lee Jae-de et al., Counsel for the plaintiff-appellant)

The Minister of National Defense

Seoul High Court Decision 2014Nu61639 decided August 18, 2015

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

A. Article 27(1) of the former Act on Contracts to Which the State Is a Party (amended by Act No. 11547, Dec. 18, 2012; hereinafter “State Contract Act”) provides that “The head of each central government agency shall restrict participation in bidding within the extent of two years for a person who is deemed likely to undermine the fair enforcement of competition or the proper implementation of contracts, or inappropriate to participate in bidding, as prescribed by Presidential Decree.”

Article 76 of the former Enforcement Decree of the Act on Contracts to Which the State is a Party upon delegation (amended by Presidential Decree No. 24601, Jun. 17, 2013; hereinafter “Enforcement Decree of the State Contract Act”) provides that “where the head of each central government agency or an employee of the other party to the contract or an employee of the other party to the contract constitutes a person who has provided a bribe to a relevant public official in connection with bidding, successful bid, or the conclusion or performance of a contract, the other party to the contract shall be restricted from participating in the contract within the scope of not less than one month but not more than two years without delay after the relevant event occurred pursuant to Article 27 of the Act.” However, the proviso to paragraph (1) provides that “The foregoing shall not apply where the other party to the contract has not been negligent in giving due attention and supervision to prevent the act of the other party to the contract due to

B. The lower court determined that the instant disposition that restricts the Plaintiff’s qualification to participate in bidding for six months pursuant to Article 27(1) of the State Contracts Act cannot be deemed as a deviation from and abuse of discretionary power due to excessive suspicion on the part of the Plaintiff, even though it is difficult to view that the Plaintiff was not negligent in giving due attention and supervision to prevent the Nonparty, who is its employee, from committing the instant offering of bribe.

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, such determination by the lower court is justifiable. In so determining, the lower court did not err by misapprehending the legal doctrine on the exemption from liability prescribed in the proviso of Article 76(1) of the Enforcement Decree

2. Regarding ground of appeal No. 3

(1) Article 76 (8) of the Enforcement Decree of the State Contracts Act provides that “The head of each central government agency may be notified of the fact that he/she has restricted participation in bidding under the Act on Contracts to Which a Local Government Is a Party or the Act on the Management of Public Institutions, or may not participate in bidding even to persons inserted in the designated information processing unit: Provided, That any person subject to restriction on participation in bidding due to reasons prescribed in subparagraphs 1 through 5, 7, 8 and 10 of paragraph (1) shall be strictly restricted.” (2) Article 92 (8) of the former Enforcement Decree of the Act on Contracts to Which a Local Government Is a Party (amended by Presidential Decree No. 26491, Aug. 19, 2015) provides that “the head of each local government shall be prohibited from participating in bidding even to persons declared in the designated information processing unit: Provided, That Article 92 (1) 1 through 5, 7, 8 and 10 of the Enforcement Decree of the Act on Contracts to Which a Local Government Is a Party shall be notified of participation in bidding.”

B. In the final appeal, the Plaintiff’s provision on the extension of the instant disposition directly expands the validity of the instant disposition to another State agency or public agency without involvement in other dispositions. Thus, the Plaintiff’s provision on the extension of the instant disposition is premised on the ground that it constitutes a ground provision for the instant disposition. The said provision on the extension of the disposition is an expansion of the effect without any legal basis, and thus is null and void in violation of the principle of statutory reservation, and thus, the instant disposition based on the said

However, the provision on the extension restriction of this case provides that each central government agency, the head of a local government, and the head of a public corporation or quasi-government agency may be prohibited from participating in bidding conducted by the relevant disposition agency, except in exceptional cases where participation in bidding should not be allowed. In other words, the provision on the extension restriction of this case does not apply directly to the disposition on the restriction on participation in bidding, but is merely a ground provision for another disposition agency to impose new sanctions based on the disposition after the restriction on participation in bidding was imposed. Accordingly, where a disposition agency restricts participation in bidding by an improper businessman, its effect does not naturally extend without any separate sanctions by another disposition agency pursuant to the extension restriction provision of this case.

The provision on the basis of the instant disposition is Article 27(1) of the State Contracts Act, as seen in the foregoing 1. The provision on the instant disposition is not a basis for the instant disposition. The disposition agency ought to be deemed to be able to take the disposition in accordance with Article 27(1) of the State Contracts Act, which is the basis provision directly applicable to the instant disposition, regardless of whether the said provision on the expanded restriction is unconstitutional or unlawful. Therefore, it cannot be deemed that the unconstitutional and unlawful nature of the instant provision on the expanded restriction constitutes a defect in the instant disposition, or that the instant disposition itself is unconstitutional or unlawful, or that the said expanded restriction provision itself is affected by the unconstitutional

Ultimately, the grounds of appeal on different premise with respect to the instant extension restriction provision are without merit, without further examining.

3. Regarding ground of appeal No. 4

Article 27(1) of the State Contracts Act cannot be deemed as unconstitutional for the following reasons. ① The foregoing provision directly provides for the subject, reason, period, and method of a disposition, which is an essential element of a disciplinary measure, so it does not go against the principle of statutory reservation and the principle of prohibition of comprehensive delegation. ② The above provision aims to ensure fairness in the conclusion of a State contract and to prevent any disadvantage that the State will suffer, and its legislative purpose is justifiable, and it is deemed necessary to restrict qualification for participation in all tenders ordered by the State while taking necessary sanctions in light of the fact that the impact of the State contract on the people's lives is very large. ③ Even if the qualification for participation in bidding is restricted, it is still possible to conduct business in the private market, and the period of sanctions is determined within a maximum of two years depending on the form and degree of punishment, illegality, and responsibility, the above provision does not violate the minimum principle of infringement, and thus, it does not infringe the freedom of occupation. ④ Since the restriction system and the purpose of disciplinary measure are completely different, it does not go against the principle of statutory suspension or equality.

The judgment of the court below to the same purport is just and did not err by misapprehending the legal principles on the principle of statutory reservation, the principle of prohibition of comprehensive delegation, the principle of excessive prohibition of restriction on freedom of occupation, and the principle of equality.

4. Conclusion

The Plaintiff’s appeal is dismissed as it is without merit, 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 Poe-young (Presiding Justice)