Failure to fulfill the obligation to issue subcontracting documents, this shipyard was sued

Korea’s Ministry of SMEs and Startups (MSS) has asked the Korea Fair Trade Commission (KFTC) to file a lawsuit against Samsung Heavy Industries for violating Korea’s Subcontracting Act, Fair Trading Act and Agency Act.

MSS stated that the department made the decision during the 25th Meeting of the Committee for Reviewing Requests for Compulsory Prosecution, which was held recently. The department may require the KFTC to file a lawsuit in cases of violations where the KFTC has not filed a lawsuit with the prosecutor , taking into account the social impact and the degree of damage to small and medium-sized enterprises.

According to the MSS, between September 2019 and April 2020, Samsung Heavy Industries commissioned subcontractors to fabricate ship electromechanical works, but failed to issue written documents in relation to 10 works contracts even after the end of the work period. In the above cases, Samsung Heavy Industries delayed the issuance of written documents for periods ranging from 1 to 102 days. As a result, KFTC issued a rectification order against Samsung Heavy Industries in June 2023 and imposed a fine of 36 million won.

Normally, when the original contractor commissions a subcontractor, the parties are obliged to issue a document containing contractual details before starting work to prevent unfavorable and subsequent disputes due to unclear subcontracts and to protect subcontractors’ rights and interests.

MSS indicated, “In this case, Samsung Heavy Industries violated its obligation to issue written documents to a subcontractor who is highly dependent on the transaction, and the dispute over non-payment of the price of the work negatively affected the subcontractor’s operations. Samsung Heavy Industries was still found to have repeatedly violated the law after the KFTC took a number of measures against it, including a corrective order, and has yet to improve.”

As a result, MSS decided to file a lawsuit, arguing that strict measures were necessary to protect subcontractors in vulnerable positions and to improve the recurring unfair subcontracting practices.

Yangzijiang Shipbuilding

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