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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] SEOUL, June 1, 2026 — A South Korean court has ordered the Bank of Korea to compensate Bank Mellat for interest losses stemming from the suspension of deposit transactions, marking a significant ruling on contractual obligations involving sanctioned entities.
The Seoul Central District Court ruled in favor of Bank Mellat’s Seoul branch, ordering the central bank to pay KRW 10 billion ($7.3 million) in damages, along with delay interest.
The dispute arose after Bank Mellat had deposited funds with the Bank of Korea under a liquidity adjustment deposit agreement—a mechanism that allows financial institutions to temporarily place surplus funds with the central bank for liquidity management purposes.
However, on June 12, 2019, the Bank of Korea suspended the transaction, citing the bank’s lack of trading activity with other financial institutions.
Bank Mellat filed a lawsuit in December 2024, claiming total interest losses of approximately KRW 100 billion, and arguing that the suspension constituted a breach of contractual obligations. The bank asserted that it should be compensated for the interest it would have earned had the deposits remained active.
The Bank of Korea countered that the suspension was permissible under internal regulations and contractual provisions. It also argued that continuing transactions with Bank Mellat—designated as a Specially Designated National (SDN)—could expose it to secondary sanctions from the United States, justifying refusal to perform under the principle of good faith.
The court rejected these arguments, stating that the cited regulations and contractual provisions did not provide sufficient legal grounds for the suspension. It ruled that the central bank’s action constituted a failure to fulfill its contractual obligations.
The court further determined that the Bank of Korea is liable for the interest income that Bank Mellat would have earned from June 13, 2019 onward. While the plaintiff sought partial compensation, the court recognized KRW 10 billion in damages and applicable delay interest.
It also dismissed the argument that the SDN designation constituted a significant change in circumstances, and found that Bank Mellat’s request for continued transactions did not violate the principle of good faith.
In a disclosure, Bank Mellat stated that it had sought partial damages from a total claimed loss of KRW 151.4 billion, adding that a full favorable ruling could result in gains exceeding KRW 110 billion.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
