"50 Billion Investment in Legoland to UK Merlin, 'Gangwon Province Penalty of 130 Billion Won'... What About Now?"

Citizen Group Moderate Headquarters Urges 'Choi Munsun Administration to Disclose LegoLand MDA Contract Penalty'
800 Billion Won Limit for Merlin... Unlimited Penalty Compensation Clause for Gangwon-do
Choi Munsun Administration's Contract Includes 'Confidentiality and Non-Disclosure Between Parties' Condition

On the 8th, members of the Moderate Headquarters urged the public disclosure of the LegoLand penalty in front of the Gangwon Provincial Government Office. [Moderate Headquarters]

[Asia Economy Reporter Ra Young-cheol] The Gangwon Province Civic Group Jungdobonbu has called for the full disclosure of the scale and details of the penalty fees under the 'Legoland MDA contract' signed between Gangwon Province and Merlin, the UK-based operator of Legoland, during the tenure of Governor Choi Moon-soon in 2018.

According to the MDA contract, if the project is halted due to Merlin's fault, Gangwon Province can only claim penalty fees up to 80 billion KRW. However, if the project is stopped due to Gangwon Province's fault, there is no limit on the penalty amount, which reportedly includes an unfair clause that could result in astronomical penalty fees.

On the 8th, Jungdobonbu held a press conference at the Gangwon Provincial Office, stating, "In the Legoland MDA signed between Gangwon Province and UK-based Merlin in 2018, there is no limit on the penalty amount Gangwon must pay to Merlin in case of Gangwon's fault, putting us at risk of paying huge damages."

According to Jungdobonbu, if the penalty fee was about 130 billion KRW at the time of the 2018 Legoland MDA contract when Merlin's investment was 5 billion KRW, it is expected to reach trillions of KRW based on the current investment of 220 billion KRW.

Moreover, Merlin can benefit from tax exemptions during the rent-free period (including extensions), allowing them to earn hundreds of billions of KRW annually.

The basis for this information is recorded in a response by Jeon Hong-jin, Director of Gangwon Province's Global Investment and Trade Bureau, on December 13, 2018, just before the Legoland MDA contract was signed, when then-Democratic Party Gangwon Provincial Assemblyman Jo Seong-ho inquired about the penalty fees. Jeon replied, "The penalty fee would be about 130 billion KRW."

If Gangwon Jungdo Development Corporation (GJC) fails to recover and goes bankrupt, the penalty fees that must be paid to Merlin, who leased the project site rent-free for 100 years under the MDA contract, will continue to increase, thereby increasing Gangwon Province's burden.

Gangwon Provincial Council Public Transcript [Jungdo Headquarters]

During a meeting with Jungdobonbu on July 24, 2019, Jeong Man-ho, then Deputy Governor of Gangwon Province and former Blue House Public Communication Secretary under the Moon Jae-in administration, said about the penalty fees, "I don't know how much (Merlin) demands, but that is what happens if such a situation (project suspension) occurs," adding, "We have never calculated it."

On December 3, 2018, Gangwon Province reported to the Provincial Assembly in the 'Consent for Change of Rights and Obligations of Gangwon Province in the Legoland Korea Development Project' on pages 12 to 13, stating, "If LL Development (now Jungdo Development Corporation) goes bankrupt during the overall agreement period, we will compensate Merlin and Legoland Korea for the damages incurred."

Kim Jong-moon, representative of Jungdobonbu, expressed concern, saying, "If damages are claimed based on 100 years of business profits, stock price drops, and corporate image damage in case of project suspension, the amount could range from several trillion to tens of trillions of KRW."

He also stated, "We have inquired multiple times to Gangwon Province about the penalty fees Gangwon must pay if Legoland operations are suspended, but Gangwon Province refused to answer, citing 'confidentiality and non-disclosure between contracting parties.'"

Meanwhile, former Governor Choi Moon-soon was sent to the prosecution on the 7th after being investigated by the police over allegations of bid-rigging in the sale of Pyeongchang Alpensia.

The police reportedly secured evidence and indications that former Governor Choi interfered with the bidding process during the resort sale.

Previously, Gangwon Province invested 1.6 trillion KRW to build Pyeongchang Alpensia for the 2018 Pyeongchang Winter Olympics.

After the Olympics, facing financial difficulties, Gangwon Province attempted to sell Alpensia Resort through its first public auction in 2020 but sold it to KH Gangwon Development, a subsidiary of the KH Group, for about 710 billion KRW last year after four failed attempts.

During this process, both companies participating in the bidding were confirmed to be subsidiaries of the KH Group, raising suspicions of bid-rigging, which led to investigations by the Fair Trade Commission and the police.