The ship stops, the money does not: proving loss of profit under Korean law

Where a vessel collides with another vessel or strikes a quay, the repair account is seldom the principal dispute. The argument is about the period during which the vessel, the quay or the crane stood idle — how long that period may reasonably be, what was not earned during it, and which costs went on falling due throughout. This column sets out how Korean law approaches those questions.

This blog post is an English translation of a Korean-language column the author contributed to the Korea Shipping Gazette on 3 August 2026. The translation is the author’s own; in the event of any discrepancy, the Korean original prevails.

What the law is measuring

Anyone who has been in a minor collision knows it. The number that causes the real trouble is not the repair bill but the cost of the hire car, accruing day by day from the moment the vehicle is left at the garage.

Korean law measures pecuniary loss as the difference between the financial position that would have existed had the incident not occurred and the position that in fact obtains after it. That is the settled position of the courts. On that measure the positive loss — the expenditure a party is forced to incur because of the incident — is easily established by quotations and receipts. But the negative loss, that is the loss of the profit that would have been earned had the incident not occurred, becomes capable of calculation only once “the situation that would have existed” is assumed.

The same is true where a vessel collides with another vessel or strikes a quay. The item fiercely fought over in practice is not the cost of repairs. The cost of repairs is relatively easy to settle, through the survey at which each side’s surveyors establish the extent of the damage and through the repairer’s quotation. The principal dispute concerns the repair period during which the vessel or the quay stood still: what profit was not earned, what was spent, and what expenditure was avoided. This is the territory of assumption and inference; the arithmetic shifts with the position and circumstances of each party, and it is not easy to persuade.

The reasonable repair period

The dispute begins with the period itself. The period for which the wrongdoer answers is not the time that actually elapsed but the period ordinarily and reasonably required for the repairs. If the vessel was idle for more than twenty days but the repairs required ten, the loss for the remaining ten days cannot be recovered. Conversely, a period that passed without any work being done — idle to all appearances — may still fall within a reasonable repair period, if it was spent waiting for parts to be sourced from abroad. The dispute therefore becomes an argument about why that much time was needed, and it must be proved that the period was reasonable.

Quantifying loss of profit: revenue is not the measure

What of the money not earned during that time? Where the damaged vessel can be repaired, there is no significant dispute that loss of profit over the repair period is recoverable as ordinary damages. Even where the vessel is lost altogether, by sinking or otherwise, it is the settled position of the Supreme Court that loss of profit over the period reasonably required to secure a substitute vessel is recoverable, so far as it is proved, separately from the exchange value.

The commonest misconception in quantifying loss of profit is to multiply ordinary daily revenue by the number of idle days. What is compensated is not gross revenue but the profit that would have been earned had the incident not occurred, so the variable costs saved by not operating the vessel — bunkers, port charges, stevedoring — must be deducted.

A further misconception arises here. How are the costs that fall due without fail throughout the repair period — crew wages, insurance premiums, management costs and, in some cases, hire under a time charter, that is to say the fixed costs — to be treated? Because they would have had to be incurred even had there been no incident, they are an item over which the misconception arises that they are not a loss. But fixed costs are expenditure that would have been recovered out of revenue had the business continued, and the incident, in destroying the revenue, closed off the means of recovering them; they can therefore properly be regarded as a loss. The courts have taken the same view. In a case where a business was interrupted by a wrongful act, it was held that, absent special circumstances, the scope of damages includes loss equivalent to the fixed costs that had unavoidably to be incurred irrespective of the interruption, separately from the net profit that would have been earned had the business continued. Net profit is the amount remaining once fixed costs have been deducted; compensating both net profit and fixed costs is therefore not double recovery.

Loss of profit for quays and cranes is harder to prove

Loss of profit for a quay and a crane, on the other hand, is considerably harder to prove. Unlike a ship, a terminal operating the quay rarely stops trading altogether, because it continues to operate with only some of its functions impaired. A terminal’s revenue is produced not by one quay or one crane but by the berth, the yard behind it and the labour, working together. So the contribution of the disabled quay and crane, the capacity of the remaining quays and cranes to handle the work instead, and whether the volume handled in fact fell are all in issue — as is whether the reduced volume was caused by the casualty or by the market. In practice the amount of the loss of profit for the quay and crane is often calculated on the basis of the compensation equivalent to demurrage that the terminal has to bear as other vessels’ waiting times lengthen on account of the damaged quay or crane.

Substitutes, mitigation and the limits of proof

Where a substitute has been used, care must be taken over double counting. If a replacement crane handled the scheduled volume in full, the principal loss is the hire and the additional operating cost of the substitute, and loss of profit for the same period cannot be claimed on top of it. Conversely, where a substitute was available and nothing was done, it may be contended that the duty to prevent the loss from increasing has not been discharged.

In either case, calculation becomes possible only once “the situation that would have existed” is assumed. In practice, however, not everyone agrees to that assumption. For such cases Korean law provides that, where the fact of loss is established but proof of the specific amount is by the nature of the case very difficult, the court may fix as the amount of damages the sum found reasonable, taking into account the whole tenor of the argument and all the circumstances established by the results of the examination of evidence. It is also possible, where necessary, to make use of statistics, average earnings, past performance and other reasonable and objective material.

Conclusion

In the end, the heart of a marine casualty damages claim is not the settlement of the repair account but the pleading and proof of the idle period. That is because the real loss lies in the time that runs afterwards. The ship stops; the money does not.

K. M. Choi is a partner at Law Offices Choi & Kim, qualified in the Republic of Korea, with over ten years in shipping disputes, marine insurance and major casualties in Korean waters. He can be reached at kmchoi@choikim.com or on LinkedIn.

This article describes Korean law and practice in general terms and is not advice on the law of any other jurisdiction. The law is stated as at the date of the original Korean publication and may since have changed, and nothing here creates a lawyer–client relationship.