President Orders Review of License Cancellation, Causing Unrest at Reconstruction and Remodeling Sites

Order to Report Sanction Measures Including License Revocation
Concerns Over Project Delays at Existing Sites
No Legal Impact on Previously Awarded Projects

Following the occurrence of a major accident at POSCO E&C, President Lee Jaemyung ordered a report on all legally available sanctions, including the cancellation of the company's construction license. This directive has caused unrest at maintenance project sites. Reconstruction and remodeling associations that have selected POSCO E&C as their contractor are now trying to determine whether ongoing projects might also be suspended if the license is revoked.

According to the maintenance industry on August 6, Association A for a remodeling project sent an inquiry to POSCO E&C regarding the possibility of disruptions to their project if the company's construction license is canceled. POSCO E&C is reportedly preparing an internal review to respond to this inquiry.

Jeong Heemin, CEO of POSCO E&C, is offering an apology to related parties before delivering a statement on consecutive on-site fatal accidents at the headquarters in Songdo, Incheon, on the 29th. Photo by Yonhap News

A representative of Association A stated, "We have requested an official response because members are anxious," adding, "Some members contacted the association after reading the news this morning, asking about the potential impact on the project if the license is revoked." The representative continued, "Some are worried about how the situation will unfold, searching for news or looking up information online."

Some members have expressed confusion over whether they would be required to return loans to the association if the construction contract is terminated due to license cancellation. Member A of a remodeling association in Songpa-gu, Seoul, said, "I am curious whether we need to return the loan if the contract is terminated due to license cancellation," and added, "Since the fault lies with the construction company, there may be room for dispute if any issues arise."

However, many expect that even if the license is canceled, there will not be any immediate or extreme consequences such as a halt to ongoing construction at existing sites. According to the Framework Act on the Construction Industry, if a contractor signed a contract before being subjected to suspension of business or deregistration, the contractor may continue construction even after the sanction is imposed. However, new project orders will be completely blocked.

POSCO E&C has stated that it will conduct a legal review to determine how both new and existing projects will be affected by a potential license cancellation. A POSCO E&C representative said, "We are currently focusing on investigations by the relevant authorities, so it is too early to comment on whether project orders will be suspended," but also added, "We need to seek legal advice to understand what impact a license cancellation would have on existing projects."

Previously, President Lee Jaemyung instructed that "all legally available measures, including construction license cancellation and public bidding bans, should be thoroughly reviewed and reported" in response to the consecutive serious accidents at POSCO E&C. The Ministry of Land, Infrastructure and Transport, the Ministry of Employment and Labor, and the Ministry of Economy and Finance have begun internal reviews regarding construction license cancellation and public bidding bans. License cancellation is the highest level of disciplinary action under the current Framework Act on the Construction Industry. So far, there have been cases of license deregistration due to major disasters or fatal accidents involving Sampung Construction (Sampung Department Store collapse) and Dong-Ah Construction (Seongsu Bridge collapse).