Supreme Court Rules Airports Must Refund Rent to Duty-Free Operators Due to COVID-19 Closures

In a significant ruling, South Korea's Supreme Court has determined that airports must fully refund rent to duty-free operators if airport terminals are closed due to COVID-19 health measures. The Supreme Court's second division, led by Justice Oh Kyung-mi, announced on May 26 that it overturned a previous ruling in favor of Hotel Lotte and Busan Lotte Hotel, who had filed a lawsuit against Korea Airports Corporation seeking a refund of their rent payments.

Since 2016, Hotel Lotte and Busan Lotte Hotel have operated duty-free shops at Gimpo International Airport and Gimhae International Airport, respectively. However, in April 2020, the Ministry of Land, Infrastructure and Transport centralized international flights to Incheon International Airport due to the pandemic, leading to the closure of the international terminals at Gimpo and Gimhae airports and halting the operations of the two hotels' duty-free shops. The ministry had previously reduced duty-free rent by 50% from March to August 2020 and waived it entirely from September 2020 onward.

The hotels argued for a complete rent exemption for the period from March to August 2020, but their request was denied by the corporation, prompting them to take legal action. The first trial ruled that rent should be reduced by 70% from April to August 2020, while the second trial upheld a 50% reduction for March and a 70% reduction for the subsequent months.

However, the Supreme Court concluded that the airport closures due to the ministry's policy rendered it impossible to fulfill the rental contract during that period, thus ruling that no rent could be charged. The court stated, "Any rent received during the period when the obligation to provide the leased property was impossible must be returned as unjust enrichment."