[Exclusive] Korea Air Facing 180 Billion Won Fine from Russia for "No Seal" Issue

Russian Supreme Court Finalizes 60 Billion KRW Fine on Korean Air
Local Customs File Additional Lawsuit... "Pay 120 Billion KRW More"

Korean Air is facing a situation where it must pay over 100 billion won in fines to the Russian customs authorities. The airline filed a lawsuit disputing the approximately 60 billion won fine imposed last year, but it was rejected, and it is now being asked to pay an additional fine approaching 120 billion won for non-payment. There are concerns that if the fines are not properly paid, it may become difficult to resume flight routes in the future.

Fine Halved Then Tripled... Now Facing a Bill of 180 Billion Won

According to the Russian legal information portal and industry sources on the 11th, at the end of last month, the Russian Supreme Court upheld the first-instance ruling that Korean Air must pay a fine of 4.158 billion rubles (approximately 58 billion won) imposed by the Moscow Sheremetyevo Airport Customs. Korean Air contested the 8.3 billion ruble fine imposed in 2022 as unfair by filing objections with the Federal Customs Service, the higher administrative authority, and appealed three times to the Moscow Commercial Court and the Russian Supreme Court. However, except for the first-instance court halving the fine, the Russian courts sided with the local customs authorities in all cases.

The lawsuit, which lasted over two years, became a burden. Since the final conclusion had not been reached during the litigation, Korean Air did not pay the fine. Nevertheless, Sheremetyevo Airport Customs requested the local court to impose an additional fine this year for non-payment. The Russian court accepted the customs' request and in August ordered Korean Air to pay an additional 8.3 billion rubles, double the amount of the unpaid fine. From Korean Air’s perspective, the fine that was halved has now tripled. Korean Air immediately filed an appeal, but it was dismissed within a month, and the airline plans to file a further appeal.

Korean Air stated, "We followed Russian regulations and procedures properly and had no illegal intent, but it is regrettable that an excessive fine was confirmed by applying unreasonable laws." They added, "Regarding the additional fine, we will appeal to the appellate court and make effective efforts to mitigate risks through relevant government departments of both countries."

However, even if the fine is finally confirmed, it is uncertain whether it can be safely paid. Due to U.S. sanctions, large-scale remittances to Russia are difficult. There have been cases where contract payments made by an Iranian company, also subject to U.S. sanctions, were frozen for years at a domestic Woori Bank branch. A representative from a commercial bank explained, "Since Russia is included in the U.S. sanctions list, it is practically difficult to remit hundreds of billions of won through commercial banks. Although theoretically possible by using other currencies, routing through small banks, or undergoing recipient identity verification procedures, it would be difficult to actually carry out."

Russia’s Victim in Funding to Evade Western Sanctions

The aviation industry is reacting that Korean Air has become a victim of Russia’s 'nitpicking.' The fine was imposed because on February 22, 2021, cargo flight KE259, departing from Incheon International Airport and transiting Moscow en route to Frankfurt Airport in Germany, took off without receiving the official stamp from Moscow airport customs. At the time, Korean Air explained, "We submitted all documents and data according to Russian regulations, cleared the cargo normally, and received prior approval electronically from customs. Considering that all procedures including the customs stamp were followed, there was no illegal intent, and we explained this multiple times to the airport customs authorities," but this was not accepted.

The date the fine was imposed was February 24, 2022, when Russia began its invasion of Ukraine. This has led to analysis that Russia squeezed foreign companies anticipating that funding would be blocked due to sanctions from the U.S. and others. Last year, the Russian government also seized shares of French dairy company Danone and Danish beer manufacturer Carlsberg’s Russian subsidiaries.

As Western sanctions against Russia are lifted, there may be disadvantages when resuming direct flight routes in the future. Currently, Korean Air has no passenger or cargo flights transiting or flying directly to Russia. However, when operations resume, full payment of fines is expected to be strictly required. An aviation industry official explained, "If fines imposed domestically are not paid, it can be considered delinquency or delay, leading to refusal to resume routes or suspension of already resumed routes. In severe cases, this could escalate into an issue between countries."