TRANSPARENCY

1. History

A. Administrative Procedure Act (APA) and Information Disclosure

Act (IDA)

From the 1970s, many scholars advocated the need for the Administrative Procedure Act (APA), and as a result, the draft APA was first introduced in 1987.

From the 1980s, many scholars and civic groups also advocated the enact­ment of the Information Disclosure Act (IDA), but it was delayed by fear of its potential adverse effects. In 1994, the Council for Information Disclosure was established within the Ministry of Government Administration, and this council proposed the draft of IDA. After public hearing, it was enacted and promulgated on 31 December 1996, and took effect from 1 January 1998 (Kim Donghee, 2006, p. 401).

Let’s examine how the administrative case decisions affected the enactment of these two statutes. First, even before APA and IDA were enacted, their spirit was included in the Korean Constitution, and the Constitutional Court actively interpreted them. The Korean Constitution was first designed in 1948, and was amended nine times, with the most recent amendment in 1987. In the consti­tution of 1987, a due process clause was included (Article 12(1), (3)) and the Constitutional Court was founded on the basis of this Constitution. The Constitutional Court clearly ruled that the due process clause applied not only to criminal procedures, but also to legislative and administrative procedures.^[469] The freedom of speech and press clause has been provided from the Constitution of 1948 (present Article 21(2)) and the Constitutional Court recognized that the claim for information disclosure can be drawn from this clause.^[470]

Secondly, prior to the enactment of these statutes, clauses related to admin­istrative procedure (hearings etc.) were provided in individual statutes, and the Supreme Court actively interpreted them.

This statute provides that hearing (cheongmun) is necessary before public agency's unilateral administrative action that closes the private company's office. The purpose of this clause is to provide private companies with the opportunity to present evidence for their part and thus enable public agencies to act more prudently. As a result, hearing is a mandatory process prior to public agency's administrative action. If a public agency acts without a hearing, that administrative action is illegal, and should be abolished.^[471]

Thirdly, prior to the enactment of APA and IDA, similar regulations existed in the form of directives (hunryeong), but the Supreme Court interpreted them passively. This attitude ironically enhanced the necessity of enactment of these legislative statutes. For example, there were the �Prime Minister Directive on Administrative Procedure for the Protection of Civil Rights and Interest'^[472] of 1989 and the �Prime Minister Directive on Management of Administrative Information Disclosure'^[473] of 1994. But the Supreme Court ruled that these directives had no legally binding force upon people, and thus it was not ille­gal to omit the procedure that was provided in these directives.^[474] These deci­sions led to a consensus among scholars and practitioners that statutes legislated in parliament are necessary.

In this context, administrative case decisions affected enactment of APA and IDA either directly or indirectly, but these enactments are closely related with the establishment of democracy in Korea.

First, the local government of Cheongju city adopted the �Municipal Ordinance on Administrative Information Disclosure'^[475] in 1991, because many civic groups demanded the mayor’s public spending be opened to public scrutiny. Cheongju’s experience spread to other local governments. As a result, enactment of statutes at national level became a very natural process.

hanryeong).

14

15

16

Secondly, Korean civic groups played an important role in the enactment of APA and IDA. The civil protest of June 1987 laid the foundation for democ­racy after years of military dictatorship. Through this civil protest, the Constitution was amended and a direct election system of president was adopted. Since then, civic groups shifted their focus from an anti-dictatorship movement to a legislative reform movement, and pressured the government to enact APA and IDA.

Comprehensively we see that administrative case decisions have been closely related with the establishment of democracy in Korea. We also find that democracy guarantees high transparency in government and the estab­lishment of the market economy. There are many debates on the relationship between democracy and the market economy. I think Korean experience after the 1980s provides one example of democracy and the market economy going hand in hand.^[476]

B. Government Procurement Act

The Government Procurement Act has a somewhat different history. It deals with the process of procuring goods, services and works for public agencies. Since controlling budgets is crucial, this area was traditionally dealt with by public finance law, with government procurement being provided for in the Public Budget and Accounting Act^[477] and Local Government Finance Act.^[478]

However, nowadays government procurement is provided for in separate statutes. The �Act on the contract in which state is party’^[479] was enacted in 1995 (Central Government Procurement Act: CGPA), and the �Act on the contract in which local government is party’^[480] (Local Government Procurement Act: LGPA) was enacted in 2005.

The influence of the WTO Government Procurement Agreement (GPA) was absolute in enacting these statutes. Korea tried to join the GPA three times during the Tokyo Round, but failed due to developed nations’ discontent with Korean government’s annexes.

Even after the enactment of the Government Procurement Act, however, procurement by local government was still regulated by Local Government Finance Law. But in 2005, the Local Government Procurement Act was enacted separately from the Local Government Finance Law. Since LGPA was enacted 10 years after Korea’s membership of WTO GPA, LGPA seems to have no relationship with the WTO GPA. But the opposite is true. The Local Government Procurement Act was enacted for the purpose of establishing the procurement law regime which corresponds to that of the central government. So WTO GPA indirectly influenced the enactment of the Local Government Procurement Act. The role played by administrative case decisions in the enacting of these statutes is as follows (Kim Daein, 2006, p. 86).

First, this enactment was little influenced by the Constitutional Court. This is due to the fact that the procurement law regime was traditionally considered as a part of private law (especially contract law), and many scholars thought that private law had relatively little relation to constitutional law.

Secondly, the Supreme Court has ruled that administrative litigation is permissible to debarment.^[482] This illustrates the Supreme Court’s efforts to strengthen the transparency of procurement by regulating the discretionary power of procuring agencies. Of course, this administrative case decision may not be seen as having had any direct effect upon the enactment of these statutes. But it laid a foundation for a new procurement law regime focusing on transparency.

Overall, administrative case decisions’ influence on the enactment of these statutes is very limited. On the other hand, globalization based on WTO law took a pivotal role. WTO GPA affected domestic procurement law in two different ways.

2. Current Situation

A. Administrative Procedure Act (APA) and Information Disclosure Act (IDA)

Three most widely used provisions of the Administrative Procedure Act are: (1) procedures relating to disposition (cheobun), (2) previous notice of admin­istrative legislation (haejeongsang ipbeopyeogo), and (3) previous notice of administrative plan (haejeongyeogo).

Let’s look at one example of procedure relating to administrative action. Before sanctioning drunk driving, the standard for administrative action needs to be made public so that drivers know what level of alcohol intake leads to cancellation or suspension of their driver’s license (Article 20).

Before imposing a disadvantageous disposition, the administrative author­ity should notify the title of the disposition, full name or title, and domicile of the parties concerned, and the factual ground and legal basis of the adminis­trative disposition, etc (Article 21). Before imposing disposition, an opinion hearing procedure should take place. There are three kinds of opinion hearing procedure: hearing (cheongmun), public hearing (gongcheonghoe), and notifi­cation of one’s opinion (uigyeojaechul). Of these three procedures, hearing or public hearing should take place when other individual statutes stipulate or public agency deems it necessary (Article 22).

The Supreme Court ruled that �when previous notice of administrative action or the opportunity to express one’s opinion is not guaranteed, the administrative action is illegal because of defect in the procedure.’^[483]

When enacting, amending or abrogating legislation, the administrative bureau needs to notify it in advance through official journals, internet, news­papers or broadcasting networks (Article 41, 42). The period of this notice should be at least 20 days (Article 43).

The Supreme Court ruled that if previous notice is not substantially guar­anteed, administrative action is illegal because of defect in administrative procedure.^[484] In relation to cases which are excluded from APA’s application, the Supreme Court ruled as follows:

Article 21 Paragraph (4) Item 3 of APA stipulates that formal hearing requirement may not apply �when reasonably deemed that there are grounds that hearing of opin­ions is impractical or the hearing is clearly unnecessary considering the nature of the dispositions concerned'. Whether there are these grounds must be determined by the nature of the administrative disposition concerned, and not by whether the hearing notice had been returned nor by the method of notification of the hearing. In addition, the fact that the party concerned with the administrative disposition had been absent on the date of the hearing notified as such, alone does not justify the administrative agency's infringing administrative disposition conducted without having opened the hearing required by the relevant Act or subordinate statutes. Therefore, an infringing administrative disposition without having undergone the process of a hearing on the grounds that the notice of the hearing had been returned or on the grounds that the party concerned with the administrative disposition had been absent on the day of the hearing shall be determined as unlawful.^[485]

This shows the Supreme Court's effort to minimize the scope of exception to APA's application.

IDA emphasizes the principle of �information disclosing' (Article 3), but allows exception on issues concerning national security, defense, unification, and diplomatic relations, and other private information which is evaluated to be seriously infringing upon an individual's privacy or freedom (Article 9). IDA also provides that all people have a right to apply for information disclo­sure (Article 5(1)), and urges public agencies to list and show all information they have, which should be easily accessed through the telecommunication network (Article 8(1)).

When asked to disclose a piece of information, the public organization needs to decide whether or not to disclose it within ten days from the date of the request (Article 11). National agencies operate a Committee on Information Disclosure in order to decide on which information to open or close to the public (Article 12). When it decides to disclose, it needs to notify the date and place of disclosure to the person requesting the information (Article 13).

In relation to information subject to non-disclosure, the Supreme Court ruled that the �public agency's ordinance based on the statute' does not mean all ordinances based on delegation of statute. It only means specific ordinance which is concretely delegated from the statute. Thus the Supreme Court mini­mized the sphere of information subject to non-disclosure.^[486] This approach was adopted in the revised 2004 IDA.^[487]

In another related case, the Supreme Court tried to also restrict the scope of non-disclosure as follows.

Article 1, 3 and 6 of the Act prescribes that public institutions in principle shall disclose informations in their possession and management to the people in order to ensure people's rights to know and secure people's participation in state affairs and the transparency of the operation of state affairs. Thus, public institutions receiving people's request of disclosure must disclose informations unless non-disclosure grounds provided under each item of Article 7(1) of the Act are applicable. And in the case of non-disclosure, public institutions must plead and prove the reason why certain items of Article 7(1) of the Act apply to specific parts of information. After examining the information requested to be disclosed, public institutions should indi­cate that information disclosure in this case infringes on legal interests or basic rights of individuals. And thus we can say that rejection of such requests cannot be justified upon comprehensive grounds.^[488]

In this way, the Supreme Court restrained the scope of non-disclosure.

In the 1996 IDA, �people who had statutory interest' could protest, appeal, or file a lawsuit. However the Supreme Court ruled that �anyone who is denied disclosure has statutory interest'^[489] and this decision affected an amendment of this clause. In the present Act, if application for disclosure is denied, �anyone who does not accept this decision' can protest to the administrative authority concerned (Article 18), or appeal to upper administrative authority (Article 19), or file a litigation in court (Article 20).

Overall, we see that administrative decisions heavily influenced the revi­sion of the Information Disclosure Act. Many decisions were adopted by Legislature (Kyoung, 2004, p. 11). This shows one example of legal activism in Korea.^[490]

B. Government Procurement Act

The Central Government Procurement Act (CGPA) provides for two cases: procurement from national contractors and procurement through international tender (competition). A Presidential Decree (Decree) and Ministerial Ordinance (Ordinance) were enacted by delegation of CGPA. And especially for international tender situations, the International Contract Dispute Resolution Council was established (CGPA Article 29). The international tendering process is further regulated by delegation of this statute by the Presidential Decree on Government Procurement through International Tender (Special Decree)^[491] or Ministerial Ordinance on Government Procurement through International Tender (Special Ordinance).^[492] Special Decree provides non-discrimination as a principle of international tender, and bans the discrim­inatory distribution of information (Article 4).

A typical example of transparency is the information disclosure clause. In international tendering, procuring agencies should comply with requests from bidders for information disclosure, and information concerning procurement practice or procedure should be included in the list of disclosure (Special Decree Article 17(2); Special Ordinance Article 4(1)). If this disclosure brings about the discouragement of legal execution or infringement of public interest, information disclosure can be denied (Special Ordinance Article 4(3)).

In domestic tendering, procuring agencies or the contracting officer should disclose the following information via a �designated information processing tool’ (online): purpose of contract, bidding time, calculated or anticipated price, method of contract, name of contractor, size of contract, overall price of contract, etc (Decree Article 92-2, Ordinance Article 4(3)). Nevertheless, in local government procurement, information related to contracting is not included in the list of disclosure (LGPAArticle 84).

With regard to the method of contracting through international tendering, there are three types: open competition, selective competition, and single­source contract (Special Decree Article 7). This was stipulated according to the WTO GPA. For domestic tendering, there are four types: open competi­tion, limited competition, selective competition, and single-source contract (CGPA Article 7, LGPA Article 9). Open competition is the principal method. It is a similar enactment to that of the UNCITRAL Model Law on Government Procurement. It can be evaluated positively because there is a high chance that it will strengthen transparency in Korea (Kim Dae-In, 2006, pp. 137-8).

Disputes regarding government procurement are dealt with by the judiciary, and the Supreme Court rules apply civil procedure to the disputes. This is because the Supreme Court deems government procurement contracts as private contracts. One reason for this is because the Government Procurement Act provides â€?[government procurement] contract should be concluded by consent of coordinate parties, each party should fulfill this contract in good faith’ (CGPA Article 5).³4 â€?Lawsuit for confirmation of awarding contractor’ is the most frequently used remedy in civil procedure. There are some govern­ment procurement disputes which are dealt with in administrative lawsuits. A conspicuous example of this is a dispute regarding debarment. The Supreme Court deems debarment as an administrative disposition, and permits quash­ing litigation (chuisososong).

3. Prospects

A. Administrative Procedure Act (APA) and Information Disclosure Act (IDA)

Despite their short history, the APA and IDA have greatly strengthened trans­parency in the government. While many analyses concerning possible causes of Asia’s financial crisis in 1997 abound, many agree that the financial super­visory system’s malfunctioning fuelled the crisis. Conversely, enhanced trans­parency in government with the adoption and implementation of APA and IDA is expected to contribute to overcoming weaknesses in the Korean economic regulation system.

Nevertheless, there are shortcomings in these statutes. In the case of the APA, hearing (cheongmun), which is a core element, is undertaken passively and only when another statute calls for it or when administrative authority deems it necessary is it taken into effect (Hong, 2007, p. 482). Public hearings (gongcheonghoe) on controversial issues are often disrupted by opposing groups.^{[493] [494]}

As for the Information Disclosure Act, a large amount of information is still closed to the public, infringing on the people’s right to know. Moreover, many critics say that Information Disclosure is often misused for private interest, thus weakening the statute’s real function of monitoring administrative agen­cies (Kyoung, 2004, p. 3).

Policies and institutions need to improve in order to overcome these weak­nesses, yet more importantly, people’s understanding of the rule of law also needs to be upgraded to ensure the success of these statutes. In most countries, people’s awareness of the rule of law can be described as progressing through three �stages’. In the first stage, the sense of responsibility (imposed by government) only is emphasized. In the second stage, the rights of the people are emphasized in contrast with the first stage. In the third stage, people’s rights and voluntary sense of responsibility are balanced. Misuse or abuse of two Acts in Korea shows that the country is still in the �second stage’.^[495]

However, many indicators point to the expectation that understanding of the rule of law will develop from the second to the third stage. Many impor­tant decisions are pouring out from the Constitutional Court and Supreme Court, and these decisions are widely discussed among non-legal profession­als.^[496] Also, the rapid development of the Internet facilitates access to legal resources. These phenomena are expected to balance the sense of responsibil­ity and the sense of right in Korea.

B. Government Procurement Act

With respect to the Government Procurement Act, e-procurement is estab­lished successfully, enhancing transparency in government tremendously.^[497] But the single-source contract (suuigyeyak) is often indicated as a main source of corruption (Jeong, 2006, pp. 107-46). Many efforts have been made to fight against corruption in the single-source contract scheme, but this problem is as yet unsolved.

The reason for corruption surrounding the single-source contract lies in a limited scope of trust. Francis Fukuyama asserts that �trust’ as a social capi­tal is indispensable in the development of capitalism. The enlargement of �level of trust’ in one society minimizes the transaction cost, and it can be an engine for developing capitalism. He points out that Korea has limited scope of trust (limited to blood relationship, school tie, etc.) (Fukuyama, 1996, pp. 178-200).

In a case of a procuring agency evaluating qualification for contract in breaching the standard stipulated in Presidential Decree on Government Procurement Law, the Supreme Court ruled that:

breaching the standard stipulated in Presidential Decree on Government Procurement Law does not automatically lead to nullification of the contract. The breach should have such gravity as enormously infringing the fairness of the tender­ing process, and the other party knew or could have known this situation, or it should be evident that this awarding or conclusion of contract was initiated by infringing the good custom or other established social order. Only under this special circumstance, government procurement contract is rendered void.^[498]

The above decision is based on two theories. One is a view that government procurement contracts are private law contracts. The other is that public finance law has no legally binding effect on people. But these theories should be criticized for two reasons.

First, it does not reflect the legal nature of the Government Procurement Act. As separated from Public Finance and Accounting Law, the newly enacted Government Procurement Act adopted many clauses concerning transparency. It increased public law elements in the Government Procurement Act. The Supreme Court should have paid more attention to the legal nature of the Government Procurement Act (Kim Dae-In, 2006, p. 110).

Secondly, it does not correctly reflect the enactment history of the Government Procurement Act. Under WTO GPA’s influence, the Government Procurement Act strengthened the protection of unsuccessful bidders. On that perspective, denying the legally binding effect towards people is not persua­sive (Kim Dae-In, 2006, pp. 110-11).

In considering the public law element of this contract, major transparency related clauses should be deemed mandatory, so that violation of the clauses leads to nullification of contract. For example a �tendering nullification clause’ or �method of contract clause’ should be interpreted to be mandatory.

More fundamentally, we should raise the following issues: �Is it right to deal with government procurement disputes principally by civil procedure?’ If we consider government procurement as a public contract, disputes arising therefrom should be handled by the administrative procedure (Kim Dae-In, 2006, pp. 148-60).

39

IV.