The first case in which a private railway operator sued the government for damages resulting from the Free Ride Policy for the Elderly

Lee & Ko represented Shinbundang Railroad Co., Ltd.(“SR”) in a USD 30 million lawsuit against the Korean government and won in its entirety in December 2023.

In 2011, SR constructed Sinbundang Line using the BTO (Build-Transfer-Operate) method, and the Korean government granted SR the rights to freely use and manage the subway line from 2011 to 2041. In accordance with the Free Ride Policy for the Elderly (“the Policy”), the Korean government and SR agreed that SR would not charge any fees for the elderly for the first five years. The Korean government also agreed that SR could transit to a paid system for the elderly after the first five years following negotiations. However, due to concerns about the social impact of transitioning to a paid system, the Korean government refused to accept SR’s request for a transition. As a result, SR incurred losses amounting to approximately USD 30 million by 2021, and filed a lawsuit against the Korean government seeking compensation for damages.

While acknowledging the necessity of the Policy, Lee & Ko argued that it was unfair to unilaterally impose the costs on the operators, and that the government should compensate SR for the losses incurred due to the refusal to negotiate the transition to a paid system. The court found that the government failed to negotiate without justifiable reasons, and in December 2023 awarded full damages claimed by SR.

This is the first case in which a private railway operator sued the government for damages resulting from the Policy. With SR’s victory, the outcome of the case is expected to have a significant impact on other private railway operators in Korea. Furthermore, it is anticipated that there will be significant changes in the government’s operation of the free-ride policy.