Overseas Construction

Overseas construction means construction works, engineering activities, and urban development projects carried out outside the country.

It includes not only civil engineering, building, industrial equipment, electrical, and information and communications works but also indirect services such as design, supervision, feasibility studies, and consulting, and these are collectively referred to as "overseas works" or "overseas construction works."

To carry out overseas construction activities, a report on the overseas construction business must be filed under the "Overseas Construction Promotion Act," and the status at each stage of the works must be notified to the Ministry of Land, Infrastructure and Transport.

If the report or notification required by the law is not fulfilled, an administrative fine, as well as restrictions on the recognition of performance, may arise.

• Submission of the Report Form: Submitted online through the Overseas Construction e-Information System (yes.icak.or.kr)
• Required Documents: Overseas construction business report form (where Korean and English are written together, the trade name, representative, and location must all be stated in English), a copy of the business registration certificate, a copy of the relevant license, and the receipt for payment of the registration license tax (paid individually by business type through Wetax)
• Receipt and Processing: Report to the Overseas Construction Association (issued online within 3 days)

If the trade name, representative, or business location changes after the report, a change report must be filed within 30 days from the date of the change, and failure to do so will result in an administrative fine of up to 3 million won.

Previously, a change of officers was also subject to reporting, but currently only changes to the trade name, representative, and business location need to be reported.

For a change report as well, the change report form is submitted through the e-Information System, and a copy of the business registration certificate and a copy of the license reflecting the changes are required.

Where a local corporation is established or acquired in order to undertake overseas construction work, that fact must be reported within 60 days from the date of establishment or acquisition to the Minister of Land, Infrastructure and Transport or the head of the diplomatic mission abroad.

The report is also submitted through the e-information system, and related documents such as the local business registration certificate, investment permit, proof of capital remittance, and articles of incorporation must be submitted together.

If a report is not filed or a false report is filed, an administrative fine of not more than 3 million won is imposed.

Even when the local corporation's business is terminated, the reason and the date of termination must be specified and reported to the association, and failure to do so may result in an administrative fine of not more than 1 million won.

The Minister of Land, Infrastructure and Transport designates excellent overseas construction operators.

When designated as an excellent overseas construction operator, there are various advantages, such as the designation being valid for 3 years and preferential treatment in support for market development projects.

• The overseas construction operator's overseas construction contract performance over the last 3 years
• Soundness of financial condition
• Performance in developing new markets
• Foreign currency earning ratio of overseas construction
• Performance in the use of technology development expenses
• Performance in the use of domestic equipment and materials and domestic personnel
• Excellence in construction performance, such as shortening of the overseas construction period

Overseas construction projects require large-scale capital over a long period, so having a stable financing structure in place is crucial.

Accordingly, various forms of investment vehicles, such as overseas construction investment companies, investment trusts, and private equity collective investment schemes, are available.

A collective investment scheme must invest 50% or more of its total funds in overseas construction projects (acquisition of shares, equity interests, or bonds of a construction business corporation, or the lending of money for the purpose of carrying out a construction business, and the like).

Borrowing of funds is also possible within a limit of 30% of the capital or the total amount of beneficiary certificates.

For crisis situations that may arise at overseas construction sites, such as terrorism, disasters, and epidemics, the initial response manual must be thoroughly understood, and the following step-by-step measures are required.

In particular, depending on the situation, cooperation with the Ministry of Foreign Affairs, the Korea Disease Control and Prevention Agency, the National Intelligence Service, and the like may be necessary, and where a Level 3 travel alert (advisory to evacuate) or higher applies, immediate evacuation is required.

[Common steps]

• Step 1 (within 30 minutes): Emergency measures and prompt dissemination
• Step 2 (within 1 hour): Protection of remaining workers and evacuation of the site
• Step 3 (within 3 hours): Reconfirmation of the situation
• Step 4 (within 6 hours): Determination of whether to evacuate

In the case of an epidemic

• Isolation and examination of infected persons
• Reporting of the epidemic outbreak and cooperation with relevant agencies required

Where there is a concern that external public credibility may decline due to defective construction by an overseas construction operator, the overseas construction operator may be entrusted with carrying out the construction by proxy.

Where proxy construction is decided after hearing the opinions of the overseas construction operator who is to carry out the proxy construction, the head of the diplomatic mission abroad with jurisdiction over the relevant area, the head of the bank designated by the existing contractor, the head of the Overseas Construction Association, and others, the existing contractor must hand over the rights and obligations concerning the construction work to the proxy contractor in the form of a subcontract or a substitute contract.

• Qualification requirements Confirmation of whether a domestic license is held
• Initial report Access to the e-information system
• When a change occurs Report of the change within 30 days
• Establishment of a local corporation Mandatory status report within 60 days
• Planned order-winning activity Mandatory notification before bidding or implementation
• After completion Result notification and performance reporting carried out without omission

Overseas construction projects may give rise to claims even after an order has been won.

These arise from contract interpretation, extension of the construction period, claims for additional costs, force majeure assertions, and similar matters, and they originate from differences in the positions of the ordering party, the contractor, and subcontractors, as well as conflicts between local systems and practices.

Because overseas construction involves differing legal systems and intertwined factors such as the labor environment and procurement issues, it is advisable to obtain advice from attorneys experienced in international disputes and construction before and throughout the process.

From removing poison-pill clauses at the contract drafting stage, reviewing the legal validity of contract terms, collecting and organizing the grounds for claims, and calculating losses, to negotiating with the ordering party and conducting international arbitration, we can strategically protect the company's position throughout the entire process.

If you need legal consultation at every stage, from reporting the overseas construction business to resolving construction claims, please refer to the link below.

To enhance convenience for corporate clients, a video consultation system has been made available, so please feel free to leave an inquiry.