Lexology - GTDT - Ports and Terminals in South Korea

PORTS &
TERMINALS
South Korea
Consulting editor
HFW
Lexology GTDT - Ports & Terminals
Ports & Terminals

Consulting editors
Alex Kyriakoulis
HFW
Quick reference guide enabling side-by-side comparison of local insights, including into key ports;
reform and port models; state development policy; green ports; legislative framework and regulation;
public procurement and PPP; port development, construction and operation; corporate, finance,
competition and dispute considerations; and recent trends.
Generated 25 January 2022
The information contained in this report is indicative only. Law Business Research is not responsible for any actions (or lack thereof) taken as a result of
relying on or in any way using information contained in this report and in no event shall be liable for any damages resulting from reliance on or use of
this information. © Copyright 2006 - 2022 Law Business Research
© Copyright 2006 - 2021 Law Business Research www.lexology.com/gtdt 1/19

Table of contents
GENERAL
Key ports
Reform and port models
State development policy
Green ports
LEGISLATIVE FRAMEWORK AND REGULATION

Development framework
Regulatory authorities
Harbourmasters
Competition
Tariffs
Public service obligations
Joint ventures
Foreign participation
PUBLIC PROCUREMENT AND PPP

Legislation
Proposal consideration
Joint venture and concession criteria
Model agreement
Approval
Projects
Term length
Fee structures
Exclusivity
Other incentives
PORT DEVELOPMENT AND CONSTRUCTION

Approval
Port construction
PORT OPERATIONS
Approval

Typical services
Access to hinterland
Suspension
Port access and control
Failure to operate and maintain
Transferrable assets
MISCELLANEOUS
Special purpose vehicles
Transferring ownership interests
Granting security
Agreement variation and termination
Contractual breach
Governing law
Disputes
UPDATE AND TRENDS

Key developments of the past year

Contributors
South Korea
Woo Rin Sung
wrsung@draju.com
DR & AJU LLC
Kyu Min Hwang

hwangkm@draju.com
DR & AJU LLC
Young Ho Oh
yhoh@draju.com
DR & AJU LLC

GENERAL
Key ports
Which are the key ports in your jurisdiction and what sort of facilities do they comprise? What is
the primary purpose of the ports?
The ports of Korea consist of 31 trading ports and 29 coastal ports, and representative ports include the Port of Busan,
the Port of Incheon, the Port of Gwangyang and Yeosu, and the Port of Ulsan. The Port of Busan is Korea’s largest port
and the world’s second-largest container hub port in terms of transhipment (sixth in terms of total volume), its annual
handling capacity being 19.14 million 20ft equivalent units (TEUs). The Port of Ulsan is the second-largest port in
Korea, with an annual handling capacity of 1.187 million TEUs. It operates the world’s top three oil hub-level tank
terminals, with the aim of becoming the oil hub port of northeast Asia. The Port of Incheon handles miscellaneous
goods, international goods, lumber and various types of cargo, such as container cargo. The port maintains the largest
lock gate facility in Asia, which makes it possible to overcome tidal differences and accommodate large ships. With
petrochemical industrial complexes developed nearby, the Port of Gwangyang and Yeosu is primarily used to import
raw materials and export products.
Law stated - 01 October 2021
Reform and port models

Describe any port reform that has been undertaken over the past few decades and the principal
port model or models in your jurisdiction.
Since the early 1990s, the government has established national port master plans to expand port functions. To cope
with the continuous shortages of port facilities and rapid increase in marine cargo, the First National Port Master Plan
(1992–2001) established and carried out a plan to specialise by region and secure sufficient port facilities (container
docks, defence against North Korea, West Sea territory, etc). The Second National Port Master Plan (2002–2011), with
the goal of ‘shifting the focus from cargo distribution to fostering a national industry that creates added value’,
continuously promoted autonomisation, privatisation and commercialisation of port operation, and introduced the
concept of eco-friendly waterfronts. The Third National Port Basic Plan (2011–2020) attempted to diversify port
functions to incorporate logistics, manufacturing, commerce, and waterfront and disaster prevention, with the aim of
‘fostering high value-added ports capable of logistics, leisure, and culture’.
State development policy

Is there an overall state policy for the development of ports in your jurisdiction?
Since 2021, South Korea has been planning to ‘realise high value-added smart ports with global competitiveness’ within
10 years, according to the Ministry of Oceans and Fisheries . The main goal is to diversify port functions – through
digitisation, mutual growth, safety, etc – within regions by building:
state-of-the-art, eco-friendly and high value-added digital ports;

specialised ports that lead the industry in terms of port and logistics services;
ports for mutual growth within regions; and
safe ports for protecting citizens, the country and maritime territories, etc.

Green ports
What ‘green port’ principles are proposed or required for ports and terminals in your jurisdiction?
In 2010, the Korean government established the Comprehensive Green Port Construction Plan to carry out various
activities such as:
the establishment of a low-carbon port hinterland transportation system, by expanding the use of rail and coastal
shipping for cargo transportation in the ports;
the conversion to low-carbon, energy-efficient ports by reducing port carbon emissions, improving the power
system for the cargo handling system, adopting new and renewable energy, etc; and
the establishment of a resource recycling port system for eco-friendly treatment and recycling of marine waste,
such as dredged soil.
Since 2017, 89 per cent of cargo handling equipment in domestic container ports has been converted into eco-friendly
equipment with the government’s financial support. Also, the Comprehensive Plan for Port Air Quality is currently being
established in line with the enactment of the Special Act on the Improvement of Air Quality in Port Areas and local
economies are being revitalised through the redevelopment of idle ports.
LEGISLATIVE FRAMEWORK AND REGULATION

Development framework
Is there a legislative framework for port development or operations in your jurisdiction?
The Harbour Act , enacted in 1967, aims to promote port development projects. It also aims to efficiently manage and
operate ports by stipulating matters related to the designation, development, management, and use of ports. In
addition, port privatisation and public–private partnerships in the port sector are mainly carried out under the general
authority of the government. Specific to ports, as in other countries, the government generally has control over, among
others, basic infrastructure construction, regulation and safety, fair competition and pricing, and protection measures,
which are classed as public goods.
Regulatory authorities
Is there a regulatory authority for each port or for all ports in your jurisdiction?
According to the Harbour Act, for each port in Korea, the Ministry of Oceans and Fisheries’ Central Port Policy Review
Committee deliberates:
the establishment and change of the port master plan;

the comprehensive port hinterland complex development plan;
the designation and clearing of port hinterland complexes; and

the establishment and operation of port facility technology standards.
In addition, for nationally managed trade ports and coastal ports, the Minister of Oceans and Fisheries acts as the
management agency. In the case of regionally managed trade ports and coastal ports, the mayor, special metropolitan
city mayor, governor or special self-governing province governor acts as the management agency.
What are the key competences and powers of the port regulatory authority in your jurisdiction?
Following the Harbour Act, the Ministry of Oceans and Fisheries’ Central Port Policy Review Committee deliberates,
among others:
the port master plans, including the port management and operation plans;
the supply of port facilities;
the use, functional improvement and maintenance of port facilities; and
the establishment of port-linked transportation networks.
In addition, the management agency – conducted by the Minister of Oceans and Fisheries, the mayor, special
metropolitan city mayor, governor or special self-governing province governor – manages the port facilities of trade and
coastal ports, the integrated port logistics information system, and the integrated port construction information
system, among others.
Harbourmasters
How is a harbourmaster for a port in your jurisdiction appointed?
According to the International Ship and Port Facility Security Act , a port facility owner shall designate a person with
qualifications – such as the expertise prescribed by the Ordinance of the Ministry of Oceans and Fisheries – for the
efficient conduct of port facility security tasks as the harbourmaster. In this case, if deemed necessary according to the
structure and function of the port facility, one harbourmaster may be designated for two or more port facilities, or two
or more harbourmasters may be designated for one port facility.
Competition
Are ports in your jurisdiction subject to specific national competition rules?
The port industry is traditionally seen as an industry with a high possibility of unfair trade due to differences in
bargaining power between shipowners, tug businesses, charterers, stevedoring companies, ship service companies
and other businesses. In the case of unfair trade between the constituent entities of a Korean port, the Korea Fair Trade
Commission applies the specific national competition rules, the Monopoly Regulation and Fair Trade Act , to regulate
such trade.

Tariffs
Are there regulations in relation to the tariffs that are imposed on ports and terminals users in
your jurisdictions and how are tariffs collected?
There are no tariffs imposed on port and terminal users in Korea. In other words, the use of ports and terminals within
Korea does not mean that separate tariffs are collected from such use. However, if an importer brings foreign goods
into Korea through a Korean port, the Korean government will collect tariffs according to the tax rate of each imported
good stipulated in the Customs Act .
Are there restrictions relating to the currency applied to the tariffs or to any fees that are payable
by a port operator to the government or port authority? Are any specific currency conditions
imposed on port operators more generally?
There are no specific restrictions on currencies applied to tariffs or fees imposed by the government or port facility
operators. However, like other countries, Korea operates bonded areas that allow storage, manufacturing, processing,
construction, sales and display without having to pay tariffs or other taxes in the port.
Public service obligations

Does the state have any public service obligations in relation to port access or services? Can it
satisfy these obligations through a contract with a private party?
The Harbour Act stipulates ’harbour-related business facilities for providing public services and facility management'
as one of the port support facilities. In other words, this covers not only port facilities in a unique sense such as routes,
breakwaters and inner walls, but facilities that can provide public services in the port area are also regarded as
facilities owned and managed by the management agency (ie, the state) or port facility operator (generally a port
authority). Under the Harbour Act, the management agency or port facility operator may fulfil the above obligations by
signing contracts under private law, such as lease contracts, with individual parties that wish to operate support
facilities.
Joint ventures
Can a state entity enter into a joint venture with a port operator for the development or operation
of a port in your jurisdiction? Is the state’s stake in the venture subject to any percentage
threshold?
Under the Act on Public–Private Partnerships in Infrastructure , a private business operator may construct a port
facility belonging to the state in accordance with an implementation agreement with the competent authority and use
the facility free of charge for a certain period. In other words, private businesses and competent authorities can jointly
develop or operate ports according to the contract method. Korean law does not specifically restrict the state’s stake in
joint ventures.

Foreign participation
Are there restrictions on foreign participation in port projects?
As port facilities generally correspond to infrastructure that supports the country, there are restrictions on foreign
participation, as there is in other countries. However, in the case of free trade zones under the Act on Designation and
Management of Free Trade Zones in some port areas, support is provided to foreigners to attract region-leading
foreign investment companies in accordance with the industry trend towards regional economic revitalisation. As for
free trade zones under the Special Act on Designation and Management of Free Economic Zones in some port areas,
support is provided to foreigners for the purpose of improving their living conditions, with a focus on securing living
convenience facilities for foreign companies.
PUBLIC PROCUREMENT AND PPP

Legislation
Is the legislation governing procurement and PPP general or specific?
The governing of procurement and public–private partnerships (PPPs) for ports in Korea is classified into two
methods. There is the method of a private business operator (non-management agency) constructing a government-
owned or unowned port facility after receiving the approval of the competent authority and using it free of charge for a
certain period of time, under article 9(2) of the Harbour Act. The second method is to construct a port facility owned by
the state following the implementation agreement with the competent authority and using it free of charge for a certain
period of time in accordance with the Act on Public–Private Partnerships in Infrastructure. These two acts specifically
stipulate the procedures for implementing each method, terms for attribution of ownership and duration of use.
Proposal consideration
May the government or relevant port authority consider proposals for port privatisation/PPP
other than as part of a formal tender?
For businesses formed under the Harbour Act, in principle, the private company (or non-management agency)
proposes a project and the management agency reviews the project plan, then approves it. For businesses formed
under the Act on Public–Private Partnerships in Infrastructure, the government takes the lead by designating and
announcing projects (including port development projects) for private investment. The government has adopted a
method of publicly offering private businesses by designating and notifying private investment target projects, and
recruiting private companies.
Joint venture and concession criteria

What criteria are considered when awarding port concessions and port joint venture agreements?
For port facilities targeted for private-owned port construction under the Harbour Act, construction must be directly

related to the exclusive new utilisation of such port facilities by non-management agencies, including:
the construction of ports that are state-owned facilities that are eligible for exclusive new use by non-
management agencies;
dredging construction with more than 3 billion won in development project costs; and
other silo installation constructions, etc.
The target port construction projects that can be undertaken through the private investment method under the Act on
Public–Private Partnerships in Infrastructure:
shall be in accordance with the mid- to long-term plans related to social infrastructure and the priorities of the
national investment project;
shall be profitable enough to make participation by the private sector possible; and
for projects with total costs of 200 billion won or more, shall be deliberated by the Private Investment Project
Review Committee.
Model agreement
Is there a model PPP agreement that is used for port projects? To what extent can the public
body deviate from its terms?
There is no separately stipulated model PPP arrangement. However, PPP contracts are inevitably bound by either the
Harbour Act or the Act on Public–Private Partnerships in Infrastructure as both of these acts stipulate very specific
terms and conditions for such contracts.
Approval
What government approvals are required for the implementation of a port PPP agreement in your
jurisdiction? Must any specific law be passed in your jurisdiction for this?
The project implementation procedure under the Harbour Act consists of a public announcement of the target project,
the selection of construction contractors, project authorisation and approval of the implementation plan. As the work
related to permissions and approvals is carried out by the competent authority, if there is competition between the
applicants for approval, a separate review committee is formed to select the construction contractors based on their
scores and give final approval.
In principle, the project operators in the method under the Act on Public–Private Partnerships in Infrastructure are
selected based on competition. The procedure consists of:
the designation of a target project;

the establishment and notice of the master plan for facility projects;
the submission of project plans;
the review and evaluation of project plans;

the execution of an implementation agreement;

the designation of the project operator;
an application for approval of the implementation plan and approval thereof;
the implementation of construction; and
verification of construction completion.
The government has the Private Investment Project Review Committee and the Public Investment Management Centre
to give approvals through fair procedures.
Projects
On what basis are port projects in your jurisdiction typically implemented?
The Harbour Act allows private business operators to use port facilities free of charge until their income from port
facility usage fees reaches the total amount of construction costs fixed on the date that completion of the port facility
construction is verified. In other words, it is a unique method that does not belong to any of the general build–transfer–
operate (BTO), build–operate–transfer (BOT) or build–own–operate–transfer (BOOT) bases. According to the Act on
Public–Private Partnerships in Infrastructure, projects can progress in various ways, including under BTO, BOT or BOOT
agreements. In reality, however, private investment companies mostly use the BTO method, in which they raise funds
from investors and financial institutions as the project operators, then donate ownership of facilities to the government
after constructing the port facility. In this way, private investment companies realise investment principal and profits by
receiving the rights to manage and operate the port for a fixed period of time.
Term length
Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average
term?
The method detailed in the Harbour Act has no period limit, but for the method under the Act on Public–Private
Partnerships in Infrastructure, the period of free use, ownership and profit is restricted to a maximum of 50 years. The
average seems to be approximately 30 years.
On what basis can the term be extended?
The period of free use, ownership and profit under the Act on Public–Private Partnerships in Infrastructure is up to 50
years. If necessary for the public interest, such as rate cuts, this period may be extended.
Fee structures

What fee structures are used in your jurisdiction? Are they subject to indexation?
In the Harbour Act method, the total project cost is the sum of the expenses related to the port construction based on
the date of verification of the completion of port construction. The total construction cost includes survey costs, design
costs, construction costs, compensation costs, incidental costs, construction interest and value added tax profit. The
total project cost for the method under the Act on Public–Private Partnerships in Infrastructure is the sum of the costs
required for the establishment, expansion or improvement of the social infrastructure attributable to the state or local
government. Total project costs include survey costs, design costs, construction costs, compensation costs, incidental
costs, operating equipment costs, tax and utility bills, and operating reserves. It is important to note that the total
project cost prescribed by the implementation agreement cannot be changed, except in the case of adjustments to the
total project cost due to changes in construction costs that significantly exceed or fall below the inflation rate during
the construction period.
Exclusivity
Does the government provide guarantees in relation to port PPPs or grant the port operator
exclusivity?
Whether the method used is under the Harbour Act or the Act on Public–Private Partnerships in Infrastructure, in
principle, land and port facilities created and installed through the port construction of private businesses belong to the
state or local government upon completion. However, regardless of ownership attribution, the state or local
government guarantees port operators the right to free and exclusive use of the port facilities within the scope of the
total project cost.
Other incentives
Does the government or the port authority provide any other incentives to investors in ports?
Since the method under the Act on Public–Private Partnerships in Infrastructure predetermines the earning of total
project costs and port facility usage fees when signing an implementation agreement, the risk for private businesses is
higher than that of the private investment method under the Harbour Act. However, to compensate for this, the
government provides various forms of support, such as tax and levy reduction benefits. In particular, the Act on Public–
Private Partnerships in Infrastructure has systems – such as minimum operating income guarantees for project
operator profits and recovery of excess income, sharing of currency exchange risks, termination of purchase claims
and agreements, financial assistance, and loan support – in place to manage risk. The private investment method in
the Harbour Act also has support for the tax system regarding the issuing of cargo handling licences.
PORT DEVELOPMENT AND CONSTRUCTION

Approval

What government approvals are required for a port operator to commence construction at the
relevant port? How long does it typically take to obtain approvals?
According to the Harbour Act, to develop a port, a private port operator must prepare a port development project plan,
obtain authorisation for port construction and obtain the approval of the implementation plan from the management
agency. In the case of trade ports and coastal ports managed by the state, the authorisation of the Minister of Oceans
and Fisheries must be obtained. In the case of trade ports and coastal ports managed by local governments, the
authorisation of the mayor or governor, as applicable, must be obtained. The port construction authorisation and the
implementation plan approval by the management agency are usually made within 20 days of receipt.
Port construction
Does the government or relevant port authority typically undertake any part of the port
construction?
In some cases, the government or port authority directly conducts port construction. In others, the port authority makes
a port construction order for private companies to participate in the bidding process for carrying out the development
project. In such a case, the government or port authority only supervises the construction work as the contracting
agency.
Does the port operator have to adhere to any specific construction standards, and may it engage
any contractor it wishes?
The project operator who performs port construction must comply with port and fishing port design standards,
standard construction specifications, specialised construction specifications and construction design standards. Such
standards include not only regular design standards but also various statutory requirements to be observed during
construction, such as environmental management and marine ground surveys. In addition, project operators
performing port construction are selected through bidding and the company must be eligible to participate in bidding
under the Act on Contracts to Which the State Is a Party.
What remedies are available for delays and defects in the construction of the port?
The port authority or operator may claim compensation for delay or damages from the facility company, the
manufacturer or the contractor if the port construction is delayed or defective. For example, when the Port of Busan
crane collapsed due to Typhoon Maemi in 2003, the pier operator filed a lawsuit against the construction company and
crane manufacturer for damages. In 2016, the pier operator was compensated for the construction costs and operating
loss.

PORT OPERATIONS
Approval
What government approvals are required in your jurisdiction for a port operator to commence
operations following construction? How long does it typically take to obtain approvals?
According to the Harbour Act, port operators must apply for verification of construction completion from the Minister
of Oceans and Fisheries, or the mayor or governor (as applicable) after constructing port facilities and may use the port
facility after the issuance of a completion certificate once an inspection of construction completion is carried out. Such
verification of completion is usually done within 20 days of receipt.
Typical services
What services does a port operator and what services does the port authority typically provide in
your jurisdiction? Do the port authorities typically charge the port operator for any services?
The management agency, port facility operator or rental contractor establishes and operates an integrated port
logistics information system that manages information regarding port logistics for port facility users and handles civil
petitions. The management agency, port facility operator or rental contractor also establishes and operates an
integrated port construction information system that manages information related to the management and operation
of port facilities, and handles civil petitions. The management agency charges port operators, etc, warehouse and yard
usage fees, building and site usage fees, silo and special warehouse usage fees, apron usage fees, profit occupancy
fees, and collective exclusive usage fees, among other fees.
Access to hinterland
Does the government or relevant port authority typically give any commitments in relation to
access to the hinterland? To what extent does it require the operator to finance development of
access routes or interconnections?
According to the Harbour Act, the state and local governments are obligated to preferentially support the installation of
infrastructure such as roads, railroads and water facilities necessary for project operators developing port hinterland
complexes. The government may subsidise or lend for:
construction costs of arterial roads;

construction costs of green areas;
relocation project costs;
construction and purchase costs of port facility sites; and
installation costs for facilities for infrastructure such as roads and communication facilities, which are not
suitable to be borne by the project operator.

Suspension
How do port authorities in your jurisdiction oversee terminal operations and in what
circumstances may a port authority require the operator to suspend them?
According to the Harbour Act, the government may conduct an environmental survey on port areas to manage and
operate ports in an environmentally friendly manner. In addition, the management agency receives a report in advance
if a person who uses or manages gates, canals, cargo handling equipment or other port facilities that require operation
intends to install or remove the facility equipment. To prevent safety accidents in the port area, the Minister of Oceans
and Fisheries may control access to port areas where human accidents occur frequently or are likely to occur, such as
breakwaters, shorelines, coastal areas and other such areas directly affected by waves, as well as access to areas
where safety accidents frequently occur, such as places where cargo vehicles and cargo handling equipment are
transported or operated.
Port access and control

In what circumstances may the port authorities in your jurisdiction access the port area or take
over port operations?
According to the Harbour Act, land and port facilities created or installed as port development projects belong to the
state or the city or province upon completion. Therefore, in principle, the state or the city or province may request the
return of land and port facilities whose use or loan period has ended. Specifically, the state may grant permissions or
loans to the project operator for the use of the state-owned property in port facilities and port hinterland complexes for
up to 20 years. The state may also take over the operation of port and port hinterland complexes at the end of this 20-
year period unless otherwise renewed.
Failure to operate and maintain

What remedies are available to the port authority or government against a port operator that fails
to operate and maintain the port as agreed?
According to the Harbour Act, the following actions, among others, are subject to remedies by the relevant authority:
obtaining permission, approval or designation through fraud or other improper means;

violating any content of the permission granted to implement a harbour development project;
violating any content of approval of an implementation plan for a harbour development project, a report on
modification or a report on formulation of an implementation plan for a harbour development project;
failing to commence a harbour development project within one year of the date of application;
exempting oneself from a regular inspection by fraud or other improper means;
violating any content of the permission granted to use a harbour facility; and
failing to pay user fees for a harbour facility within the deadline.
To remedy the above actions, the Minister of Oceans and Fisheries, the mayor or the governor may:

revoke the permission, designation or approval;

issue an order to suspend or alter construction works;
issue an order to renovate, alter, relocate, remove or reinstate facilities or things;
issue an order to suspend the use of facilities and equipment; or
make any other orders to take necessary remedial measures.
Transferrable assets
What assets must port operators transfer to the relevant port authority on termination of a
concession? Must port authorities pay any compensation for transferred assets?
If a port operator receives permissions or loans for the use of port facilities and port hinterland complexes, at the end
of the period of use or loan, the port operator shall return or donate not only the port facilities and port hinterland
complexes but also the permanent facilities installed by the port operator to the state. According to the Harbour Act,
land and port facilities created or installed as port development projects belong to the state or the relevant city or
province upon completion. Therefore, in principle, the state or local government does not have to pay additional
compensation.
MISCELLANEOUS
Special purpose vehicles
Is a port operator that is to construct or operate a port in your jurisdiction permitted (or required)
to do so via a special purpose vehicle (SPV)? Must it be incorporated in your jurisdiction?
According to the Harbour Act and other related laws and regulations, it is not necessary to build or operate a port
through a special purpose vehicle (SPV). However, it is possible to operate the port through an SPV for the purpose of
reducing taxes, to the extent that it does not violate Korean tax law.
Transferring ownership interests

Are ownership interests in the port operator freely transferable?
Under the Harbour Act, the transfer of land and port facilities acquired by those who are not the Minister of Oceans and
Fisheries, such as private development operators (non-management agencies), will be restricted to 10 years. However,
in the case of transfers through successions, corporate mergers or demergers, declarations of bankruptcy, corporate
restructuring, or transfer of individual businesses through corporate conversion (in-kind investment), etc, corporate
management is made not to interfere so as to allow for such transfers. In addition, land and port facilities exclusively
for non-management agencies had been restricted from leasing to others but, to increase utilisation, if certain
requirements are met (ie, the original purpose of the authorisation is left unchanged) they can be leased to others.

Granting security
Can the port operator grant security over its rights under the PPP agreement to its project
financing banks? Does a port authority in your jurisdiction typically agree to enter into direct
agreements with the project financing banks and, if so, what are the key terms?
In general, investors establish a project company through investment and then raise the funds necessary for port
construction through investors’ equity capital and loans from project financing banks or issuance of corporate bonds.
Partial amounts can be financed by the government, depending on the project. After the port facility is completed, the
project company is recognised for its authority to donate ownership of the port to the government and receive as
consideration the user fees (management and operation rights) while managing and operating the port for a certain
period (ie, 30 or 50 years). In other words, the project company directly enters into a contract with the project financing
bank and, unless there are other circumstances, it is deemed that the government agrees thereto. However, in this
structure, to maintain the feasibility of the project the government sometimes provides financial support during the
construction period and guarantees a certain level of operating income for a certain period of time in preparation for
future uncertainties, such as demand risk and dispute risk from the prolongation of the project period. This can be seen
as a type of security at the time of borrowing to reduce the uncertainty of operating income considered by the project
financing bank.
Agreement variation and termination

In what circumstances may agreements to construct or operate a port facility be varied or
terminated?
If the counterparty fails to fulfil the contractual obligations after signing a port facility construction or operation
contract, the contract will be cancelled or terminated unless otherwise specified in the contract. If it is necessary to
adjust the contract amount due to price fluctuations after signing a construction or operation contract, the contract
amount can be adjusted. The contract amount can also be adjusted due to design changes. If it is necessary to adjust
the contract amount due to changes in the construction period or transport distance, etc, the contract can be amended
(eg, by adjusting the contract amount).
Contractual breach
What remedies are available to a government or port authority for contractual breach by a port
operator?
The government or port authority may cancel or terminate the contract if there is any violation, such as a counterparty’s
failure to fulfil contractual obligations. If it is recognised that the counterparty has committed improper, manipulative or
unjust acts when fulfilling a contract, the government or port authority may take measures to restrict the counterparty’s
eligibility to participate in the bidding for between one month and two years. In addition, if it is deemed that the
contractor can maintain the contract and the contract needs to be maintained, the contract can be maintained by
making the counterparty pay an additional contract deposit corresponding to the portion of the unfulfilled contract,
which is limited to the original contract deposit plus the maximum amount of compensation for the delay.

Governing law
Must all port PPP agreements be governed by the laws of your jurisdiction?
In Korea, the principle of private autonomy, which allows legal relations under private law to be freely carried out at an
individual’s will, is used and freedom of contract is the most common aspect. Therefore, the formation of legal
relations by port public–private partnership agreements is left to the freedom of each individual. However, Korea is a
civil law system country and, thus, freedom of contract is allowed to the extent that it complies with related laws such
as the Harbour Act, the Port Authority Act and the Act on Public–Private Partnerships in Infrastructure.
Disputes
How are disputes between the government or port authority and the port operator customarily
settled?
It is common for port operators to file administrative lawsuits against the government in the Korean administrative
court, and to bring civil lawsuits to general courts against port authorities and other agencies. In general, it takes a
considerable amount of time for a judgment to be made through trial so, in some cases, disputes are resolved by
arbitration at arbitration agencies, such as the Korean Commercial Arbitration Board.
UPDATE AND TRENDS

Key developments of the past year
Are there any other current developments or emerging trends that should be noted?
The Korean government plans to build a second, 21-berth port alongside the Port of Busan and foster the two ports as
a mega-port for 25,000 20ft equivalent unit-class supersize ships. The government also plans to build a smart
automation port, a liquefied natural gas bunkering terminal and repair shipbuilding complex to make the new mega-port
the world’s third-largest port by 2040 in terms of freight volume. Furthermore, there are active plans to build eco-
friendly ports, such as the introduction of smart ports that combine information and communication technologies –
such as the Internet of Things, artificial intelligence and 5G – with the cargo handling process in existing ports in Korea.
As part of the eco-friendly port construction plan, the Special Act on the Improvement of Air Quality in Port Areas
entered into force in January 2020 that designates major ports with severe air pollution as ‘port air quality management
zones’, regulating the emission of sulphur oxides (0.1 per cent applied) in sea areas subject to management.

Jurisdictions
Brazil Kincaid | Mendes Vianna Advogados
China HFW
Costa Rica Nassar Abogados Costa Rica
Denmark Gorrissen Federspiel
India Phoenix Legal
Italy Legal 4Transport
Japan TMI Associates
Mozambique VdA
Netherlands Van Steenderen MainportLawyers
Nigeria Foundation Chambers
Paraguay Palacios Prono and Talavera Abogados
Portugal SRS Advogados
Russia Jurinflot International Law Office
South Korea DR & AJU LLC
Turkey Turunç
United Arab Emirates HFW
United Kingdom HFW
Venezuela Sabatino Pizzolante Maritime & Commercial Attorneys

Lexology - GTDT - Ports and Terminals in South Korea

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Lexology - GTDT - Ports and Terminals in South Korea

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PORTS &

Ports & Terminals

Generated 25 January 2022

© Copyright 2006 - 2021 Law Business Research www.lexology.com/gtdt 1/19

LEGISLATIVE FRAMEWORK AND REGULATION

PUBLIC PROCUREMENT AND PPP

PORT DEVELOPMENT AND CONSTRUCTION

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UPDATE AND TRENDS

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Kyu Min Hwang

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Law stated - 01 October 2021

Reform and port models

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State development policy

state-of-the-art, eco-friendly and high value-added digital ports;

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LEGISLATIVE FRAMEWORK AND REGULATION

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the establishment and change of the port master plan;

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the establishment and operation of port facility technology standards.

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Public service obligations

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PUBLIC PROCUREMENT AND PPP

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Joint venture and concession criteria

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the designation of a target project;

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the execution of an implementation agreement;

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On what basis can the term be extended?

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PORT DEVELOPMENT AND CONSTRUCTION

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