Hanwha seeks further legal action vs HD Hyundai amid Navy project rivalry

Hanwha Ocean Co., the world’s second-largest shipbuilder, is seeking new legal action against HD Hyundai Heavy Industries Co. over the bigger rival’s leak of its military secrets as they are going all out to win new orders for South Korea’s largest-ever Navy ship project worth 7.8 trillion won ($5.8 billion).

Hanwha Ocean said on Tuesday it has filed a complaint with the National Police Agency, calling for an investigation into the allegations that some executives of HD Hyundai Heavy were involved in the technology leak, for which nine HD Hyundai Heavy employees were found guilty last year.

It is unprecedented for a South Korean shipbuilder to report a local rival to the police. The move is aimed at finding more concrete evidence on the case so that it could bring it to a criminal retrial, said Koo Seung-mo, a Hanwha in-house lawyer, in a news conference.

In November of last year, nine employees of HD Hyundai Heavy were sentenced to prison or suspended jail terms on charges of illegally acquiring the KDDX-related project details from Hanwha Ocean, then Daewoo Shipbuilding & Marine Engineering Co. (DSME), between 2012 and 2015.

They were also found to have shared the technology through HD Hyundai Heavy’s internal network.

This time, at issue is whether HD Hyundai Heavy’s executive-level officials were involved in the secret leak.

HD Hyundai Heavy Industries acknowledged the illegal actions of its employees, but maintained that there was no systematic intervention by its executives.

If the court rejects HD Hyundai Heavy's claim in a retrial, it will likely be disqualified for the remaining orders for the KDDX project, leaving Hanwha Ocean as the sole bidder.

The KDDX is South Korea’s first destroyer to be built entirely using domestic technology. Under the project, the country aims to build six units of a 6,500-ton destroyer, dubbed as a mini Aegis-class destroyer, by 2030.

In 2012, Hanwha Ocean secured the concept design contract of the KDDX. HD Hyundai Heavy won its basic design order in 2020 and completed it late last year.

After the court verdict in 2023, the Defense Acquisition Program Administration (DAPA) had considered restricting HD Hyundai Heavy’s participation in the national project. But it just issued administrative orders to HD Hyundai in that regard on Feb. 27.

Koo said that no appropriate measures have been taken against HD Hyundai Heavy’s illegal acquisition and sharing of its military secrets, which he argued were impossible without instructions from an executive level or higher.

Two more processes remain for the largest-ever Navy ship project in South Korea: detailed design and construction of its lead ship; and the construction of follow-up ships.

The two companies are desperate to win the KDDX-related orders amid dwindling backlogs of special ship orders. They see the KDDX project as a rare opportunity to strengthen their naval vessel portfolio and take an advantageous position in competition for other countries’ military vessel orders.

Hanwha Group has perfected its defense business portfolio from air to land and navy after acquiring DSME for 2 trillion won last year, after HD Hyundai failed to take over the rival shipbuilder due to the European Commission's opposition in 2022.

Write to Sang-Hoon Sung at uphoon@hankyung.com
 

Yeonhee Kim edited this article.