[Exclusive] "Delay in World Cup Bridge Construction Costs"… Samsung C&T Loses in First Trial

Seoul City Files Lawsuit for Construction Payment Dispute

World Cup Bridge

[Asia Economy Reporter Seongpil Cho] Samsung C&T, the contractor for the 31st bridge over the Han River, the 'World Cup Bridge,' filed a lawsuit against the Seoul Metropolitan Government demanding indirect construction costs due to construction delays but was recently confirmed to have lost in the first trial. The court ruled that Samsung C&T was not responsible for the extension of the construction period but sided with the Seoul Metropolitan Government. The presiding court found that Samsung C&T's application for contract amount adjustment in the installment contract was not validly made.

Lawsuit worth 1.7 billion KRW... Court dismisses claim

According to the legal community on the 26th, the Civil Division 34 of the Seoul Central District Court (Chief Judge Yangho Kim) ruled against Samsung C&T and others in a lawsuit filed against the Seoul Metropolitan Government for construction payment. The court stated, "There was no lawful and valid application for contract amount adjustment regarding the extension of the construction period," and "All claims by Samsung C&T and others are dismissed." If this ruling is finalized, Samsung C&T and others will not receive any indirect construction costs incurred due to the extension of the construction period. Indirect construction costs refer to various facility expenses and labor costs that construction companies invest to preserve and maintain the site.

Earlier, Samsung C&T and others won the contract for the World Cup Bridge construction in 2010. The project involved building a 1,980-meter-long, 31.4-meter-wide six-lane bridge over the Han River connecting Sangam-dong in Mapo-gu and Yangpyeong-dong in Yeongdeungpo-gu, Seoul. Samsung C&T entered the construction in March 2010 with a 70% stake, along with Samsung Engineering (20%) and Ewha Construction. The construction was originally scheduled to be completed by August 2015. However, the actual completion period is December next year, and construction is still ongoing. The construction period was extended by more than seven years due to overlapping reasons such as budget shortages from the Seoul Metropolitan Government, which bears the construction costs.

During the construction process, the Seoul Metropolitan Government and Samsung C&T changed the installment contracts several times. Large-scale public construction projects involve both a master contract and installment contracts signed simultaneously, with installment contracts reflecting progress on an annual basis. For example, the 10th installment contract signed in 2018 extended the construction period from January 1 to December 31 of that year to April 30 of the following year, extending it by 120 days. Samsung C&T and others filed a lawsuit claiming that the Seoul Metropolitan Government should pay 1,715,980,000 KRW in indirect construction costs incurred due to the extension of the construction period under this 10th installment contract.

World Cup Bridge under construction

Criticism of the adjustment application’s inadequacy... "Amount not specified"

The court ruled that Samsung C&T's application for payment adjustment to the Seoul Metropolitan Government regarding the extension of the construction period under the 10th contract was not lawful and dismissed the claim. The court stated, "It is acknowledged that Samsung C&T applied for adjustment to the Seoul Metropolitan Government before receiving the completion payment for the 10th contract," but added, "It is difficult to regard this adjustment application as a contract amount adjustment application for the extension of the construction period under the 10th installment contract."

The adjustment application pointed out by the court is a letter Samsung C&T sent to the Seoul Metropolitan Government in May 2019. The letter states in paragraph 2, "Regarding the implementation of the 10th construction installment (contract signed in 2018), we hereby apply for contract amount adjustment due to the need for changes in contract content such as construction period changes according to the general conditions of local government construction contracts, as attached. Please review and take appropriate action." The attached content is as follows.

[Overview of Contract Amount Adjustment Due to Construction Period Change (2018)]

1. Site Overview

- Contract Signing Date: March 18, 2010 (Master Contract)

- Construction Start Date: March 2, 2010

- Original Completion Date: August 22, 2015

- Installment Completion Date: April 30, 2019

- Revised Completion Date: August 31, 2020

→ 15.945 months (485 days extension)

4. Additional Construction Costs Expected Due to Extension of Construction Period [Based on 15.945 months (485 days) extension]

→ 6,412,933,000 KRW

The court commented on this content, "In the overall context, it is more consistent with commercial customs and experience to understand that the claim for indirect costs was made for the entire construction period of the installment contract, not just the 120-day extension of the 10th installment contract." It also pointed out, "The amount of indirect construction costs incurred during the 120-day extension period of the 10th installment contract (January 1 to April 30, 2019) was not specified."

BTS Presents 'Butter' at World Cup Bridge
[Image Source=Yonhap News]

Strategy based on Supreme Court plenary ruling... Ends in defeat

Samsung C&T and others claimed indirect costs only for the 120-day extension period under the 10th installment contract change, not for the entire extended construction period in this lawsuit. This was a strategy based on the Supreme Court plenary session ruling in October 2018. At that time, the plenary session ruled, "Even if the construction period stipulated in the master contract is extended, it is not lawful to claim additional indirect costs." This was effectively a ruling that did not recognize the binding force of the master contract and was the Supreme Court's first explicit judgment on whether contract amount adjustment is allowed due to construction period extension. However, the plenary session did not clarify the scope of contract amount adjustment applications based on construction period extensions due to installment contract changes.

Samsung C&T and others argued based on this plenary ruling that "additional indirect construction costs incurred due to construction period extensions under installment contracts concluded after the original master contract completion deadline can be claimed." However, the court rejected this, stating, "Ultimately, this is a claim that contract amount adjustment is necessary for all periods extended beyond the original total construction period of the master contract," which is no different from recognizing the binding force of the master contract.

Meanwhile, the World Cup Bridge opened on the 1st after 11 years since construction began. It is the 31st bridge connecting the north and south of the Han River and the first Han River bridge constructed under the Samsung brand. The height of the main tower is 100 meters, taller than the Olympic Bridge (88 meters). The bridge span (distance between pillars) is 225 meters, the widest among bridges installed over the Han River. Recently, BTS filmed their 'Butter' music video with the World Cup Bridge as the background.