COVID-19 Mask Export Ban Causes 2.5 Billion Loss...Court Rules Government Not Liable for Compensation

Government Imposed Export Restrictions Amid 'Mask Crisis'... Court Rules "No Obligation for Compensation"

The court rejected the claim of an export company seeking compensation for damages caused by the government's mask export restrictions implemented to curb the spread of COVID-19.

According to the legal community on the 12th, the Seoul Administrative Court, Administrative Division 11 (Presiding Judge Kim Jun-young) ruled against plaintiff company A, which had filed a lawsuit against the state demanding 500 million won in compensation for losses. In December 2019, company A contracted to export 5 million masks to Hong Kong for 4.5 million dollars (52.317 billion won based on the exchange rate at the time), and planned to procure these masks from another corporation for 2.5 billion won.

An elderly person wearing a mask visits a pharmacy street in Jongno-gu, Seoul, on the 1st, when the COVID-19 crisis alert level was downgraded from "Severe" to "Alert." Photo by Dongju Yoon doso7@

However, as COVID-19 rapidly spread and a mask shortage occurred, the situation changed. In February 2020, the Ministry of Food and Drug Safety implemented an 'Emergency Supply and Demand Adjustment Measure' restricting mask exports exclusively to mask manufacturers. Company A, which did not produce masks directly, had its contract canceled the following month. Company A filed the lawsuit claiming, "The government enforced the measure without devising compensation plans, causing losses from being unable to export masks," and argued that "this constitutes a special sacrifice exceeding the limits of socially acceptable restrictions." They cited Article 23, Paragraph 3 of the Constitution, which states, 'The expropriation, use, or restriction of property rights for public necessity and compensation therefor shall be prescribed by law, and just compensation shall be paid.'

However, the court ruled that the government's measure at the time was based on Article 6 of the Price Stabilization Act and did not fall under the scope of Article 23, Paragraph 3 of the Constitution. Article 6 of the Price Stabilization Act stipulates that when there is a risk of significantly harming the stability of citizens' lives or the smooth operation of the national economy, measures such as controlling exports and imports may be taken.

The court held that this should be regarded as a 'social restriction according to laws defining the content and limits of property rights' as prescribed in Article 23, Paragraphs 1 and 2 of the Constitution. The court stated, "Even if Article 23, Paragraph 3 of the Constitution were applied as the plaintiff claims, this provision reserves the basis, standards, and methods for compensation claims to statutory regulations, so it cannot be directly recognized as a legal basis for the obligation to pay compensation for losses."