SK ecoplant is preparing to sue the South Korean government for approximately 500 billion won ($375 million) in additional investment costs, in what would be the largest-ever lawsuit by a construction firm against the state, sources said.
The company plans to file the suit against the Ministry of Land, Infrastructure and Transport within the month, with the claim to be initiated by Smart-Rail, the project operator it established for the construction, according to sources familiar with the matter. The lawsuit amount may be increased later, they added.
The dispute stems from cost overruns tied to delays in the Busan-Masan double-track railway project, a 32.7-kilometer line designed to connect Busan’s Bujeon Station with Gimhae’s Sinwol Station. The SK ecoplant consortium won the contract for the project, which was originally set for completion in June 2020.
However, in March 2020, with 97% of construction finished, a tunnel collapse in the Nakdong River-Sasang Station section halted progress. The collapse affected a 400-meter stretch of tunnel and triggered a 20-meter-deep sinkhole, prompting extensive restoration work and design modifications that have indefinitely delayed the project.
SK ecoplant claims it has spent around 900 billion won on restoration and five years of accrued interest. The company is moving ahead with the lawsuit as the statute of limitations on construction cost claims expires this month, sources said.
The firm argues that the collapse resulted from ground subsidence, an unforeseeable event that qualifies as force majeure, making the government liable for cost compensation. Under the contract between the two sides, the government is required to reimburse the project operator for 80% of costs in cases of “non-political force majeure due to disasters.”
The government, however, disputes this, maintaining that the accident was not force majeure and that SK ecoplant is responsible. It argues that the collapse was preventable. “We have legal grounds to counter the company’s claims,” a ministry official said.
The legal battle is expected to hinge on whether the tunnel collapse qualifies as force majeure. Two investigative reports, commissioned by Smart-Rail in consultation with the ministry, were conducted by the Korean Geotechnical Society and the Korean Society of Civil Engineers. While the findings have not been made public due to ongoing litigation, SK ecoplant reportedly interprets them as supporting its argument.
A construction industry official noted that the government’s decision not to form an official accident investigation committee at the time, despite the scale of the incident, could weaken its defense. “Cost disputes and liability issues were foreseeable after the 2020 collapse, and the government’s failure to launch an investigation committee could become a key issue in the lawsuit,” the official said.
