Principal Contractor Liability in South Korea
이 글의 한국어 원문: 건설공사발주자와 도급인 구분 기준
When Is the Company That Ordered the Work Criminally Liable?
Contents
- 1. What happened in the Korea Midland Power case?
- 2. How did the three courts decide?
- 3. How does Korean law distinguish a construction client from a principal contractor?
- 4. What test did the Supreme Court of Korea set out?
- 5. Is a client that chairs progress meetings and approves safe work permits still only a client?
- 6. Does work essential to the company's business make it a principal contractor?
- 7. How did the Incheon Port Authority case differ?
- 8. What should companies commissioning construction in South Korea check?
- 9. What does this mean for foreign-invested companies in IFEZ?
- 10. Frequently asked questions
A company hires a builder to install new plant equipment or renovate its office. A worker employed by the builder dies on site. Can the company that ordered the work also be prosecuted in South Korea?
The answer turns on whether that company is a "principal contractor" (dogeubin) or a "construction client" (geonseol gongsa baljuja) under the Occupational Safety and Health Act. A principal contractor owes safety and health duties toward the workers of its subcontractors and can be punished under Article 167 if a worker dies. A construction client does not bear that criminal liability.
The line between the two is hard to read from the statute alone. In the same Korea Midland Power case, the trial court found the company to be a client, the appellate court found it to be a principal contractor, and the Supreme Court of Korea found it to be a client again. The Supreme Court set out the test in the 2024 Incheon Port Authority case and applied the same test in the 2026 Korea Midland Power case. The two decisions reach opposite results, which is why they need to be read together.
What happened in the Korea Midland Power case?
Korea Midland Power began building a coal-fired power plant in South Chungcheong Province around June 2016. On April 10, 2020, an arc flash occurred during a phase rotation test on a transformer in the electrical control building of the plant's flue gas desulfurization facility. One worker employed by the builder died and several others were injured (Supreme Court of Korea, June 25, 2026, 2024Do5902).
According to the facts found by the appellate court, the total construction cost was KRW 1.6 trillion and Korea Midland Power split the project among 27 contractors. The builder of the desulfurization facility was a large construction company ranked 23rd in South Korea's 2020 construction capability rankings, with an assessed value of KRW 1.5926 trillion (Daejeon District Court, April 4, 2024, 2022No2555; Supreme Court of Korea, June 25, 2026, 2024Do5902).
Prosecutors charged Korea Midland Power as a principal contractor that led and oversaw the construction. The company argued that it was only a construction client.
How did the three courts decide?
Three courts looked at the same facts and reversed the outcome twice. The table covers only the charges against Korea Midland Power.
| Court | Holding | Main reasons |
|---|---|---|
| Trial Daejeon District Court, Hongseong Branch, August 31, 2022, 2021GoDan249 |
Construction client, acquitted | Power plant construction is a one-time undertaking, and the company held neither the general construction license nor the specialist staff needed to build the desulfurization facility |
| Appeal Daejeon District Court, April 4, 2024, 2022No2555 |
Principal contractor, convicted (company fined KRW 50 million) | The work was indispensable to the company's core power business; the company split it among 27 contractors and oversaw it through a separate organization; it handled power reception itself and managed the related hazards |
| Supreme Court of Korea June 25, 2026, 2024Do5902 |
Construction client, reversed and remanded | Operating and building a power plant are separate businesses; the company's involvement stayed at inspection, coordination and confirmation; the equipment involved fell within the builder's area of control under the contract |
The Supreme Court of Korea reversed the parts of the appellate judgment concerning Korea Midland Power and its officers and employees and remanded them to the Daejeon District Court. It dismissed the appeals of the builder, its site manager and others (Supreme Court of Korea, June 25, 2026, 2024Do5902). The convictions on the builder's side stand, and only the client's side goes back for retrial.
How does Korean law distinguish a construction client from a principal contractor?
Article 2(7) of the Occupational Safety and Health Act defines a principal contractor as an employer that contracts out the manufacture, construction or repair of goods, the provision of services or other work, and its proviso expressly excludes construction clients.
Article 2(10) defines a construction client as a person who contracts out construction work but does not lead and oversee its execution. The dividing question is therefore whether the company led and oversaw the construction.
The distinction matters because the duties differ.
- Principal contractor: When subcontractor workers work at the principal contractor's workplace, it must take safety and health measures to prevent industrial accidents (Occupational Safety and Health Act, Article 63). Where mixed work in the same place risks fire, explosion or similar hazards, it must also coordinate the timing and content of the subcontractors' work (Article 64(1)(viii)).
- Construction client: It owes accident prevention duties under Article 67 and related provisions, but the Supreme Court of Korea held that a client does not bear the criminal liability under Article 167 that applies to a principal contractor (Supreme Court of Korea, November 14, 2024, 2023Do14674).
What test did the Supreme Court of Korea set out?
The Supreme Court of Korea set out the test in the Incheon Port Authority case and cited the same rule in the Korea Midland Power case. The core is substantive control over hazards.
The Court held that whether a company is a principal contractor must be decided normatively, focusing on whether the company had substantive authority to control and manage the hazards related to preventing industrial accidents that could arise during the construction at its workplace, and considering together the degree of actual influence it exercised over the work, and its expertise and construction capability for that work (Supreme Court of Korea, November 14, 2024, 2023Do14674; Supreme Court of Korea, June 25, 2026, 2024Do5902).
- Central question: Did the company have substantive authority to control and manage the hazards of the work?
- Factor 1: How much actual influence did it exercise over the work?
- Factor 2: What expertise and construction capability did it have for that work?
- Method: Weigh these together from a normative perspective.
"Normative" means substance over form. In the Incheon Port Authority case, the Court held that a company can be a principal contractor even without a license under the Framework Act on the Construction Industry. In the Korea Midland Power case, it held that a company can remain a client despite being involved in the work in several ways.
Is a client that chairs progress meetings and approves safe work permits still only a client?
The Supreme Court of Korea said it can be. Korea Midland Power had a department managing the project, approved the builders' safe work permits (SWP), chaired weekly progress meetings and required recovery plans for delayed work. The appellate court found that the company oversaw the project through a separate organization, but the Supreme Court held that this involvement did not amount to leading the construction.
The Court first stated a general rule. Where a company lacks the licenses, specialist staff and equipment needed for the construction and has no contractual authority or duty to manage the related hazards, it must not readily be deemed a principal contractor liable under Article 167 merely because it took inspection, coordination and confirmation measures to achieve the purpose of the contract (Supreme Court of Korea, June 25, 2026, 2024Do5902).
The Court also gave its reason. If clients hesitate to get involved in construction, or give up involvement altogether, out of fear of principal contractor liability, the risk of industrial accidents rises, which runs against the purpose of the Occupational Safety and Health Act.
Applying that rule, the Court found as follows (Supreme Court of Korea, June 25, 2026, 2024Do5902).
- Much of the meeting and recovery-plan activity could be seen as part of the client's statutory accident prevention duties under Article 67 and related laws.
- The involvement did not reach the level of giving specific instructions on construction methods or work content, or anything equivalent.
- On a large site with many specialist contractors, chairing progress meetings or approving safe work permits can be seen as a client's own coordination activity to prevent conflicts in work routes and schedules.
- Requiring recovery plans for delayed work can be seen as a legitimate demand for performance by a contracting party.
The line appears to be drawn at specific instructions on how to build and how to carry out the work. Checking and coordinating progress and schedules falls on the client side; directing construction methods and work content falls on the principal contractor side.
The contract also shaped the result. Under the contract, the builder was responsible for on-site testing, inspection and trial operation of the facility, including the electrical room where the accident occurred, and the low-voltage breaker transformer had not yet been handed over by the builder. The client's power reception and commissioning guideline also listed the transformer as within the supplier's scope. On that basis the Court found the transformer to be within the area controlled by the builder (Supreme Court of Korea, June 25, 2026, 2024Do5902).
Does work essential to the company's business make it a principal contractor?
Not by itself. The appellate court treated the desulfurization work as indispensable to the company's core power business and relied on that as its first reason (Daejeon District Court, April 4, 2024, 2022No2555). The Supreme Court of Korea did not accept that conclusion.
The Supreme Court relied on the following points (Supreme Court of Korea, June 25, 2026, 2024Do5902).
- Operating and building are different businesses. Korea Midland Power's main business is developing and selling electric power. The Court held that operating a power plant and building one are separate businesses.
- Construction was a one-time undertaking. For the company, building the plant was not a continuing business but a one-time project that ended when construction was completed.
- A long project is not enough. The work began around June 2016 and had run for more than three years by the time of the accident, but the Court held that a client does not become a principal contractor simply because construction takes a long time.
The Court also looked at expertise. It found it hard to say that Korea Midland Power had expertise in desulfurization facilities, while the builder was a large company with a site organization divided into administration, civil and architectural, mechanical, electrical, quality and safety functions under its site manager. The Court added that a contract entrusting construction and safety authority to such a company is hard to dismiss as mere "outsourcing of risk."
How did the Incheon Port Authority case differ?
In the Incheon Port Authority case, a subcontractor's worker fell 18 meters and died on June 3, 2020, during regular maintenance of a lock gate. The lower appellate court treated the port authority as a construction client and acquitted it, but the Supreme Court of Korea held that it was a principal contractor and reversed and remanded (Supreme Court of Korea, November 14, 2024, 2023Do14674).
The same test produced the opposite result because the facts were different.
| Factor | Incheon Port Authority (principal contractor) | Korea Midland Power (client) |
|---|---|---|
| Link to core business | Maintaining and managing the lock gate was one of its main founding purposes | Main business is power generation; building the plant was a one-time project |
| Expertise and organization | Had a dedicated lock gate team that carried out regular inspections | Hard to say it had expertise in desulfurization facilities |
| Nature of involvement | Planned the entire process from design to completion and drew up and revised the design drawings itself | Chaired progress meetings and approved safe work permits, at the level of inspection, coordination and confirmation |
| Size of contractor | Capital of KRW 1 billion, about 10 regular workers | Large builder ranked 23rd in construction capability |
In the Incheon case, the Court found that the port authority had substantive control over the hazards of the work and, as a highly expert client, exercised real influence over the contractor. It therefore held that the authority was a principal contractor regardless of whether it held a construction license under the Framework Act on the Construction Industry (Supreme Court of Korea, November 14, 2024, 2023Do14674).
Read side by side, the decisive factors appear to be whether the work belongs to the company's continuing core business and whether the company has the expertise to design and direct the work itself.
What should companies commissioning construction in South Korea check?
The following points track what the Supreme Court of Korea actually examined in the two decisions. Courts weigh the circumstances as a whole, so no single item decides the outcome.
- Check how the work relates to your core business. Is it part of a business you carry on continuously, or a one-time project that ends on completion?
- Define hazard control areas in the contract. In the Korea Midland Power case, the builder's contractual responsibility for testing and commissioning, and the fact that the equipment had not yet been handed over, supported the finding that the company was a client.
- Manage the level of your involvement. Checking progress, adjusting schedules and demanding performance were treated as client activities. Make sure you do not move into giving specific instructions on construction methods or work content.
- Check the contractor's expertise and capacity. In the Korea Midland Power case, the Court considered that the builder had ample capacity to carry out safety and health measures.
- Keep performing client duties. The Court said it is undesirable for clients to abandon involvement for fear of principal contractor liability. Accident prevention measures imposed on clients, such as under Article 67, must still be carried out.
Contract wording alone does not settle liability. The Court's test is substantive control, judged normatively. Even if the contract assigns an area to the builder, the result can differ if the company in fact directed the design and the work. This article addresses principal contractor status under the Occupational Safety and Health Act; liability under the Serious Accidents Punishment Act must be examined separately under that law's requirements.
What does this mean for foreign-invested companies in IFEZ?
Foreign-invested manufacturers, logistics operators and research centers in the Incheon Free Economic Zone (IFEZ), including Songdo International Business District, Cheongna International City and Yeongjong International City, regularly commission plant expansions, equipment installation and facility upgrades from Korean builders.
For these companies, the practical question is how far headquarters engineers or local facility teams should direct the builder. Working with local counsel at the contract stage to allocate hazard control areas, and training on-site staff on the difference between coordinating progress and instructing construction methods, reduces the room for dispute if an accident occurs. Atlas Legal, based in Songdo, advises companies on construction contracts and represents them in industrial accident criminal cases.
Frequently asked questions
Q. How do Korean courts decide whether a company that commissioned construction is a client or a principal contractor?
A. The central question is whether the company had substantive authority to control and manage the hazards of the work. Courts also weigh the actual influence it exercised over the work and its expertise and construction capability, and decide from a normative perspective (Supreme Court of Korea, November 14, 2024, 2023Do14674; Supreme Court of Korea, June 25, 2026, 2024Do5902).
Q. If a company is found to be a construction client, does it face no criminal liability for an industrial accident in South Korea?
A. It does not bear the principal contractor’s criminal liability under Article 167 of the Occupational Safety and Health Act. The Supreme Court of Korea held that a person who does not lead and oversee the construction is a construction client and does not bear that liability (Supreme Court of Korea, November 14, 2024, 2023Do14674). A client still owes separate accident prevention duties under Article 67 and related provisions, and liability under other laws must be examined separately.
Q. Does chairing progress meetings and approving safe work permits make a client a principal contractor?
A. Not by itself. The Supreme Court of Korea held that on a large site with many specialist contractors, chairing progress meetings or approving safe work permits can be seen as a client’s own coordination activity to prevent conflicts in work routes and schedules. The question is whether the involvement reached specific instructions on construction methods or work content (Supreme Court of Korea, June 25, 2026, 2024Do5902).
Q. Can a company without a construction license still be a principal contractor?
A. Yes. In the Incheon Port Authority case, the Supreme Court of Korea found that the authority, whose main purposes included maintaining the lock gate and which had a dedicated team and high expertise, planned the whole process and revised the design drawings itself. It held the authority to be a principal contractor regardless of whether it held a construction license under the Framework Act on the Construction Industry (Supreme Court of Korea, November 14, 2024, 2023Do14674).
Q. Is work essential to the business, or a long construction period, enough to make a company a principal contractor?
A. No. The Supreme Court of Korea held that operating a power plant and building one are separate businesses, and that building the plant was a one-time project ending on completion. Although the work had run for more than three years, the Court held that a long construction period alone does not turn a client into a principal contractor (Supreme Court of Korea, June 25, 2026, 2024Do5902).
Q. Is it enough to state in the contract that the builder is responsible for safety?
A. The contract is important evidence but does not decide the outcome by itself. In the Korea Midland Power case, the builder’s contractual responsibility for on-site testing and commissioning, and the fact that the equipment had not yet been handed over, supported the finding that the company was a client. Because the test is substantive control, a company that in fact directed the design and the work may be treated differently from what the contract says.
Q. Does this decision also decide liability under the Serious Accidents Punishment Act?
A. No. The decisions discussed here concern principal contractor status under the Occupational Safety and Health Act. Liability under the Serious Accidents Punishment Act depends on that law’s own requirements and must be examined separately.
This article summarizes the test for distinguishing a construction client from a principal contractor under the Occupational Safety and Health Act of South Korea, based on published court decisions. It is not legal advice on any particular matter. The Korea Midland Power case was remanded by the Supreme Court of Korea and proceedings may continue, and principal contractor status depends on the nature of the work, the contract terms and how the company was actually involved, so specific situations require separate review.
