Top courts on collision course

By Na Jeong-ju

The Constitutional Court and the Supreme Court are on a head-on collision course over the former’s ruling Thursday that the latter’s 2008 verdict regarding an industrial case was unconstitutional.

The longstanding conflict between the two top courts is now entering a new phase as the Constitutional Court is seeking to become the “court of courts.”

They have often engaged in a war of nerves over their overlapping roles since the Constitutional Court was established in 1988, a year after the enactment of the current Constitution.

This time the prospect of an all-out struggle looms large. The Constitutional Court’s Chief Justice Lee Kang-kook, an expert in German law, has called for the need to strengthen the role of the court to oversee all rulings by judges like in Germany.

The court mainly rules on whether certain laws are constitutional or not. But it has increasingly raised its voice against the Supreme Court on broader cases in recent years.

Thursday’s ruling is quite embarrassing for the Supreme Court. Some judges there described it as a “rebellion” or a “coup,” suspecting that it was politically motivated under the direction of Lee.

“It’s provocative. We are very disappointed,” a Supreme Court judge said. “It’s challenging to the authority of the entire court as well as the country’s judicial system.”

At the center of the struggle are two firms — GS Caltex and AK Retail. They filed lawsuits after the government levied tens of billions of won in corporate taxes in 2004 based on a taxation clause scrapped in 1993.

According to GS Caltex, a major oil refiner, it re-evaluated its assets in 1990 under a plan to list its stocks. It received tax deductions in return.

However, the firm cancelled the plan in 2003, promoting tax authorities to impose taxes amounting to 70 billion won. The problem was that such taxing was based on the already-abolished clause.

In 2008, the Supreme Court ruled that the company must pay the tax because the clause existed when the tax deductions were given in return for asset re-evaluation. AK Retail was also ordered to pay taxes for similar reason.

The firms didn’t accept the verdict, and filed a complaint with the Constitutional Court.

“It’s against the Constitution to levy taxes based on an old law,” the court said in Thursday’s ruling. “The Constitution stipulates that taxation should be fully based on law.”

The ruling is equally embarrassing for tax authorities because they collected some 2 trillion won from many companies in line with the clause. The firms are expected to file a string of lawsuits in the coming months to get tax refunds. It is also expected to trigger debates on the roles of the two courts.

The Supreme Court once called for the need to merge with the Constitutional Court because of their overlapping roles. President Lee Myung-bak once reportedly called for clarifying their roles by amending the present Constitution.