Jeonbuk Namwon said it unilaterally halted a theme park project in 2022, calling it a previous mayor's project, and now must pay the lenders who provided the funds roughly 40 billion won in damages, including principal and interest. Namwon's budget for this year is 1.0583 trillion won, and the payout is about 4% of its annual budget.
The Supreme Court's First Division (presiding Justice Roh Tae-ak) on the 29th upheld a lower court ruling in favor of the lenders in their damages suit against Namwon over the Namwon Chunhyang Theme Park monorail project.
With this ruling, Namwon must pay the lenders the principal of 40.8 billion won plus interest at an annual rate of 12% as damages. The total, including interest, is estimated at 49 billion won. Namwon's fiscal self-reliance last year was 8.98%.
Earlier, in 2020, Namwon signed a development agreement with the private operator "Namwon Theme Park" and pushed ahead with the theme park project. The structure allowed the operator to run the facility for 20 years in exchange for building it with 40.5 billion won and making a contributed acceptance to the city. The private operator borrowed 40.5 billion won from a lending group through project financing (PF). Namwon provided a guarantee in the process.
However, when current Namwon Mayor Choi Kyung-sik took office in Jul. 2022, the city put the brakes on the project. It did not grant the use-and-revenue permit specified in the agreement and ordered a review of the project, citing uncertain feasibility. The monorail did not even hold an opening ceremony. It began temporary operations in Aug. 2022, two months after completion, but service was suspended after a year and six months. The theme park is currently closed.
The lenders that financed the private operator filed suit against Namwon in Dec. 2023, seeking 40.8 billion won in damages, consisting of 40.5 billion won in principal and 300 million won in interest. Namwon argued that the implementation agreement signed with the private operator during former Mayor Lee Hwan-ju's term did not undergo an investment review under the Local Government Finance Act and that the city merely corrected numerous illegalities.
The first trial court accepted the lenders' claims, saying there was no reason to deem the implementation agreement invalid. The appeals court dismissed Namwon's appeal. The Supreme Court said it could accept the lower court's finding that even if an investment review under the Local Government Finance Act was not conducted, it is difficult to conclude that the very act of signing the implementation agreement was unlawful or to deny the external effect of an act approved by the local council.