As the competition for the KDDX project nears its conclusion, a series of lawsuits have intensified the confusion surrounding the selection process. HD Hyundai Heavy Industries has filed a lawsuit claiming that the penalties for security incidents, which will apply until December of this year, are unjust. The outcome of this legal battle is expected to influence the awarding of the KDDX detailed design and lead ship construction contract.
According to legal sources on June 5, the Seoul Central District Court's Civil Division 50, led by Judge Lee Sang-hoon, held a hearing on June 1 regarding HD Hyundai Heavy Industries' request for an injunction against the application of penalties.
During the hearing, HD Hyundai Heavy Industries argued, "Even if the cases involve different sentencing dates, penalties should be applied based on the initial sentencing date for three years." In contrast, the government contended that while nine individuals were indicted together, the cases of the eight who were sentenced earlier and the one sentenced later should be treated as separate incidents. Hanwha Ocean, which participated in the lawsuit, also requested the court to dismiss HD Hyundai Heavy Industries' motion, stating, "The actions involved multiple perpetrators, with different times, locations, and objects, making them distinct crimes."
The disagreement between HD Hyundai Heavy Industries and the government, along with Hanwha Ocean, stems from the ongoing bidding for the KDDX detailed design and lead ship construction project.
In 2013, HD Hyundai Heavy Industries illegally obtained 12 classified military documents related to the KDDX concept design from Hanwha Ocean (then Daewoo Shipbuilding & Marine Engineering) and shared them through the company's internal network. On November 8, 2022, eight individuals were convicted in this case.
The illegally obtained materials included classified documents such as the KDDX concept design first review materials, the current status of the Changbogo-III concept design, a revised basic strategy for the Changbogo-III project, and the final report on performance improvement research for the Changbogo-I. As a result, security penalties are set to apply until November 2025 for defense project bids.
However, after one individual received a partial acquittal in the first trial, the prosecution appealed, leading to a guilty verdict being confirmed in the second trial on December 2023.
Consequently, the Defense Acquisition Program Administration announced that security penalties would be applied until December of this year, three years from the initial ruling.
With the competition between HD Hyundai Heavy Industries and Hanwha Ocean for the KDDX detailed design and lead ship construction project, the application of security penalties could significantly favor Hanwha Ocean, given the nature of defense contracts where even a slight score difference can determine the contractor.
In response, HD Hyundai Heavy Industries has argued that the Defense Acquisition Program Administration has unjustly extended security penalties without legal grounds, prompting the current injunction request.
The court's decision on this injunction is expected to be announced by early next week, considering the timeline for the KDDX project.
The KDDX project began with a concept design initiative in 2012. After a competitive bidding process, Hanwha Ocean secured the contract with a score difference of 21.264 points. In contrast, the basic design contract was awarded to HD Hyundai Heavy Industries, which edged out Hanwha Ocean by a mere 0.056 points before the prosecution indicted the employees involved in the leak in September 2020.
Despite receiving a guilty verdict in the technology theft case, HD Hyundai Heavy Industries retained its position and role as the contractor for the basic design.
An industry insider remarked, "The systematic illegal acquisition of military secrets and their storage and sharing on unapproved servers is a serious offense. The ruling clearly identifies which company benefited from the stolen technology."
Following these illegal activities, Hanwha Ocean argued that HD Hyundai Heavy Industries should not be awarded a sole contract for the detailed design phase. After extensive discussions, the Defense Acquisition Program Administration ultimately decided to proceed with a competitive bidding process for the detailed design and lead ship construction project.
In the context of expanding U.S.-Korea shipbuilding and defense cooperation, industry experts emphasize the need for clear government and judicial guidance regarding the KDDX military secrets theft case to avoid further confusion in the maritime defense sector.
In the U.S., the principle of not exposing military secrets during defense projects is paramount. For instance, the U.S. imposes strict penalties on companies if any misconduct involving military secrets occurs with the knowledge or approval of executives, shareholders, partners, or employees. Particularly in cases involving criminal charges, companies are often barred from entering contracts due to a lack of integrity in their business dealings.
* This article has been translated by AI.
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