President Lee publicly rebuked the company, saying the government had been 'defrauded'

The Seoul Courts Complex, which houses the Seoul Central District Court and the Seoul High Court. [Yonhap]
The Seoul Courts Complex, which houses the Seoul Central District Court and the Seoul High Court. [Yonhap]

A Seoul court has rejected train manufacturer Dawonsys's bid to suspend the cancellation of its contract with Seoul Metro, which terminated the deal after Dawonsys repeatedly failed to deliver subway cars on time.

The 50th Civil Division of the Seoul Central District Court dismissed on Tuesday a motion filed by Dawonsys in May seeking to freeze the contract cancellation. The court had held a single hearing in June before issuing the ruling.

Dawonsys signed a contract with Seoul Metro in 2021 to deliver 298 subway cars for Lines 5 and 8 by the end of June 2025. In 2023, the company signed a separate deal worth 220 billion won ($160 million) to supply 200 cars for Line 5.

The company had failed to deliver the Line 5 and 8 cars as of January, prompting Seoul Metro to notify Dawonsys of contract cancellation in April. Dawonsys then filed for the injunction, arguing that the delays were partly caused by Seoul Metro's additional instructions and slow approvals.

At the June hearing, Dawonsys said the cancellation notice did not meet the legal requirements for termination. Seoul Metro, which joined the case as an intervenor, rebuffed that claim, saying the delays were entirely Dawonsys's fault. The court reviewed both sides' written submissions and sided with Seoul Metro.

Dawonsys has faced repeated controversy over delivery delays attributed to mismanagement. President Lee Jae-myung publicly rebuked the company during a Ministry of Land, Infrastructure and Transport briefing last December, saying, "There are reports that Dawonsys accepted orders but did not manufacture the trains and was doing other things instead. It seems the government has been defrauded."

The Ministry of Land, Infrastructure and Transport subsequently announced it would refer Dawonsys to police for investigation over the delayed deliveries. Korea Railroad Corporation had signed three separate rolling stock purchase contracts with Dawonsys since 2018, all of which ran into delivery problems. Seoul Metro also filed a fraud complaint against Dawonsys in February. The Gyeonggi Southern Police Agency's anti-corruption and financial crimes unit has since taken over all complaints and accusations against Dawonsys and launched a focused investigation.

Meanwhile, the Korea Exchange's listing review committee voted to delist Dawonsys on July 27. The Korea Exchange announced on Aug. 18 that Dawonsys had submitted an appeal against the delisting decision. The exchange plans to convene a Kosdaq Market Committee by Sept. 15 to deliberate and vote on whether to proceed with the delisting.


bell@heraldcorp.com