The government has been ordered by the court to compensate Gyeonggi Railroad Co., the private operator of the Shinbundang Line extension, for losses incurred from the operation of free rides for seniors and people with disabilities. The Seoul Administrative Court’s 11th Administrative Division recently ruled partially in favor of Gyeonggi Railroad in its lawsuit seeking compensation, ordering the government to pay approximately 8.99 billion won.
In December 2009, Gyeonggi Railroad signed an agreement with the Ministry of Land, Infrastructure, and Transport regarding the design and construction of the Shinbundang Line extension from Jeongja Station to Gwanggyo Station. Upon the opening of the extended line in January 2016, both parties agreed to compensate for losses arising from a free transportation policy for an initial five-year period up to a limit of 5.5% of total usage demand, and to decide on the operation plan for free rides from the sixth year, January 2021, through consultation.
Gyeonggi Railroad requested consultations starting in April 2020 to decide on free-riding policies post the initial five years, but the Ministry did not respond, citing the need for public discussions and research on calculation methods for free transportation. As negotiations were delayed, Gyeonggi Railroad filed a fare change, applying regular fares to free-riding eligible groups (seniors over 65, people with disabilities, and meritorious persons) from May 2022, which the Ministry refused to process.
Subsequently, Gyeonggi Railroad sought arbitration from the Korean Commercial Arbitration Board, and after refusal, filed a lawsuit in November of the same year. They demanded compensation of over 35.7 billion won, accounting for potential revenue from formerly free passengers and failure to achieve the stipulated 4.7% business profit rate outlined in the concession agreement.
The court ruled that the Ministry violated the agreement by not engaging substantively in consultations on free-riding policies and sided with Gyeonggi Railroad. However, it rejected the claim that the government should further compensate for the difference between appropriate fares to achieve profit rates and the actual collected fares, as it seemed to imply the government should bear all risks.