Incheon International Airport Corporation Wins Final Lawsuit Against Sky72... Supreme Court Rejects Appeal

On April 1st last year, Kim Kyung-wook, President of Incheon International Airport Corporation, along with executives and employees, held a press conference condemning the unauthorized occupation of the Sky72 Golf Course in front of the Sky72 Sea Course Golf Course in Yeongjongdo, Incheon.

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] Incheon International Airport Corporation (hereinafter referred to as the Corporation) has won the final victory in the lawsuit demanding the return of the land of Sky72 Golf Course.

On the 1st, the Supreme Court's 2nd Division (Presiding Justice Cho Jae-yeon) upheld the lower court's ruling in favor of the Corporation in the appeal trial of the lawsuit filed by the Corporation against Sky Chilship-i Co., Ltd. (hereinafter Sky72), the operator of Sky72 Golf Course, for real estate delivery and others. The Supreme Court also confirmed the lower court's dismissal of Sky72's counterclaim for reimbursement of beneficial expenses.

The court stated, "There is no error in the lower court's judgment that failed to conduct necessary hearings, violated the rules of logic and experience, exceeded the limits of free evaluation of evidence, or misinterpreted the legal nature of the implementation agreement in this case, the interpretation of the contract, and other legal principles affecting the judgment."

In December 2001, the Corporation announced a public recruitment for private investment development project implementers for idle land related to the international airport runway, and in 2002, it signed an implementation agreement for a private investment development project with Sky72 for land including the planned site of Incheon Airport's 5th runway.

The project implementer, Sky72, was to build a golf course and operate it until December 31, 2020, paying land usage fees to the Corporation, and upon expiration of the land usage period, either donate the facilities free of charge or dismantle them under the BOT (Build-Operate-Transfer) method.

Regarding buildings such as the clubhouse, ownership preservation registration was made in Sky72's name in 2007, but a donation contract was signed between the two parties to donate the ownership free of charge to the Corporation, with the effect of the donation to take place from January 1, 2021, and a provisional registration was also completed.

However, problems arose as the construction of the 5th runway was delayed.

The Corporation claimed that since the land usage period stipulated in the implementation agreement between the parties expired on December 31, 2020, Sky72 should deliver the golf course site and transfer ownership registration and delivery of the buildings and other facilities on the land.

Sky72, however, argued that due to the change in circumstances caused by the non-construction of the 5th runway, the Corporation had an obligation to negotiate an extension of the land usage period, and thus refused to deliver the golf course site. They also claimed simultaneous performance of the right to purchase buildings under lease contracts and the right to reimbursement of beneficial expenses under civil law.

The trial focused on issues such as ▲ the legal nature of the implementation agreement between the two parties (whether it is a public law contract or a private law contract), ▲ whether the land usage period had ended (whether the obligation to negotiate an extension was recognized), and ▲ whether Sky72's claims for the right to purchase buildings and reimbursement of beneficial expenses were valid.

In the first trial, all of Sky72's claims were rejected, and the Corporation was favored.

The court ruled that the implementation agreement had the nature of a public law contract, and since there was no separate provision for extension, the land usage period should be considered expired after the agreed period.

Regarding the obligation to negotiate claimed by Sky72, even if recognized, it was concluded that it was only a procedural obligation for the Corporation to respond to negotiations, and there was no obligation to extend the contract according to Sky72's wishes.

Furthermore, since the nature of the contract differed from a general lease contract, the rights to purchase buildings and reimbursement of beneficial expenses were not recognized.

The court reasoned that ▲ the facilities in question are part of airport facilities, which are social infrastructure, ▲ when there are ambiguities in the agreement, the Metropolitan New Airport Act or Aviation Act takes precedence over the agreement, and ▲ the Corporation has supervisory authority over the construction and operation of the golf course, the implementation agreement is considered to have the characteristics of a public law contract in substance.

Sky72's claim that the land usage period should be extended due to the delay in the 5th runway construction was rejected based on ▲ the implementation agreement clearly stating the land usage period until December 31, 2020, and while it stipulates cases where the land usage period may be shortened, it contains no explicit provisions on extension or automatic renewal, ▲ the business plan of Sky72, which is the basis for interpreting the agreement, also states that the land usage period ends on December 31, 2020, ▲ the fact that the Corporation did not fulfill its obligation to negotiate does not mean the land usage period is extended, ▲ there is insufficient evidence that the 5th runway was conditioned to start construction in 2021 when the implementation agreement was signed, and ▲ the implementation agreement only imposes a procedural obligation to respond to negotiations and does not obligate the Corporation to change the agreement based on Sky72's proposals.

Regarding Sky72's claims for the right to purchase buildings and reimbursement of beneficial expenses, the court stated, "The implementation agreement in this case is a kind of investment project contract, so-called BOT method, which is a public law contract, where the plaintiff provides the project site to the defendant, the project implementer, who develops the site at their own expense, constructs facilities, owns and operates them during the land usage period to recover investment costs, and upon expiration of the operation period, transfers the facilities free of charge to the plaintiff."

It continued, "Therefore, the fact that the defendant pays land usage fees to the plaintiff cannot be equated with a land lease contract, and the provisions of the Civil Act on lease contracts cannot be applied or analogously applied."

Furthermore, the court added, "Even if the provisions of the Civil Act on lease contracts are applied or analogously applied, considering the implementation agreement and donation contract comprehensively, it is recognized that the defendant has waived both the right to reimbursement of beneficial expenses and the right to purchase buildings related to the golf course and its facilities, and this cannot be deemed invalid for violating mandatory provisions."

The second trial also reached the same conclusion as the first trial.

On this day, the Supreme Court accepted all factual findings and legal judgments of the second trial.

The court held that the change in circumstances claimed by Sky72 regarding the change in the 5th runway construction plan does not create an obligation for the Corporation to negotiate an extension of the period.

Therefore, since the land usage period had already ended on December 31, 2020, Sky72 has the obligation to deliver the land and facilities.

Also, since the implementation agreement between the parties is a kind of public law contract, the rights to reimbursement of beneficial expenses and purchase of buildings recognized under civil law lease contracts cannot be recognized, and even if recognized, they should be considered waived.

Previously, based on the first and second trial victories, the Corporation attempted provisional execution for real estate delivery, but Sky72 filed a suspension of execution with a deposit of several hundred billion won, which failed.

With the Supreme Court's final confirmed ruling, the Corporation is expected to soon proceed with compulsory execution to deliver the subject real estate.