The Seoul Metropolitan Government and the Seoul Waterworks Office decided to recycle water purification sludge (sediment generated during the production of tap water) from six water purification plants with an eco-friendly technology, rather than treating it as waste, and recruited companies to participate in the recycling project through a public offering from around 2011.

The plaintiff was selected as one of the above companies and signed a related implementation agreement with the Seoul Metropolitan Government and pursued the water purification sludge recycling project in cooperation with the Seoul Metropolitan Government for 10 years. However, in the end, it was unable to acquire the necessary technology, facilities, and related licenses, and could not execute a supply agreement regarding water purification sludge. As a result, the plaintiff filed a lawsuit for damages worth KRW 13 billion, claiming that “the Seoul Metropolitan Government is liable for damages for not supplying water purification sludge and not concluding a supply contract.” We represented the defendant, the Seoul Metropolitan Government.​

The plaintiff made a primary argument that the implementation agreement signed in 2014, which stipulates the Seoul Metropolitan Government's obligation to supply water purification sludge in connection with the water purification sludge recycling project, had the nature of a continuous contract, and that the Seoul Metropolitan Government's suspension of the water purification sludge supply constituted a default. The plaintiff also preliminarily argued that the Seoul Metropolitan Government was liable in tort for failing to conclude a final contract for the supply of water purification sludge despite collaborating with the plaintiff for a long time, which constituted “wrongful termination of contract negotiation.”

In response, we refuted the plaintiff's claim with the following main arguments.

(1) Under the Local Contract Act, contracts involving local governments must be drawn up in a certain form, and this is a mandatory regulation. There was no separate contract or extension of the contract period after the term of the implementation agreement expired as it was.

(2) Although it is true that the Seoul Metropolitan Government supported the plaintiff's recycling business for a long time after the expiration of the implementation agreement, it was only in good faith, and it is unreasonable to see it as granting trust as if a contract would be concluded.

(3) The plaintiff was not equipped with the necessary technology, facilities, and related licenses for the water sludge recycling business even after receiving the full support of the Seoul Metropolitan Government for 10 years, so the blame lies with the plaintiff.

​3. Court's judgment

The plaintiff claimed damages amounting to KRW 13 billion for the bankruptcy of its business, stating that it was unable to conclude a contract for the supply of water purification sludge despite establishing a business and investing a huge amount of money and time in the water purification sludge recycling business. However, the court of first instance rejected all of the plaintiff's claims. The court's ruling echoed our arguments. ​

The case was filed in February 2021, and the plaintiff engaged in an all-out war for more than two years, mobilizing all possible methods of attack. The eco-friendly policy project that the Seoul Metropolitan Government had been eagerly pursuing with the Seoul Waterworks Office and private companies failed, and the city was even sued for huge damages. The Seoul Metropolitan Government was worried about the outcome of the lawsuit, which made it difficult for the Seoul Metropolitan Government to develop a budget for 2024. The court ruled that “there was no breach of contract or illegal behavior by the defendant that exceeded the limits of the principle of freedom of contract,” ending the long dispute.

□ Attorneys in charge: Kang Tae-hun, Lee Kyu-won