Korea files appeal against ruling to compensate Elliott

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The Korea Times - 18 July 2023

Korea files appeal against ruling to compensate Elliott
By Jun Ji-hye

Korea has filed a suit asking a court in Britain to cancel an order by an international tribunal to pay nearly $108 million (136 billion won) to U.S.-based hedge fund Elliott Investment Management, Justice Minister Han Dong-hoon said Tuesday.

The case involves a protracted dispute caused by the controversial 2015 merger of two Samsung Group affiliates ― Samsung C&T and Cheil Industries. The merger was widely seen as aimed at solidifying Samsung Group heir Lee Jae-yong’s management grip over the family-controlled conglomerate.

The minister’s announcement came about a month after Korea was ordered by the Permanent Court of Arbitration (PCA) in the Netherlands to pay nearly $54 million plus interest in compensation to Elliott for an investor-state dispute settlement (ISDS) suit that the New York-based activist fund filed in 2018.

"The ruling goes against the FTA signed between Korea and the United States," Han said during a media conference.

The amount ordered by the PCA represents approximately 7 percent of Elliott’s demand, as the company sought $770 million in compensation from the Korean government.

The firm, which held a 7.12 percent stake in Samsung C&T at the time, claimed it suffered losses from the Samsung merger that resulted from the former Park Geun-hye administration pressuring the National Pension Service to support the deal.

At the time, the National Pension Service was the largest shareholder of Samsung C&T with an 11.21 percent stake and voted for the merger.

The PCA also ordered Korea to pay around $28.9 million to Elliott as reimbursement for its legal expenses. So the total amount the country was ordered to pay was estimated at around $108 million.

Han said his ministry did not agree with the PCA’s judgment that the National Pension Service was a de facto state institution and that the government was responsible for the service exercising its voting rights.

"The Korea-U.S. FTA does not contain a concept of a de facto state institution, so it is unfair to recognize the government’s responsibility based on that concept," Han said.

He noted that the National Pension Service’s exercise of its voting rights was not a plan initiated by the government.

The minister also cited a ruling handed down by a Korean court in a compensation suit filed by minority shareholders of Samsung C&T. At the time, the court said the National Pension Service was believed to have made a decision on its own when exercising its voting rights, despite the imprisonment of former Health Minister Moon Hyung-pyo and other high-ranking officials involving the controversial merger.

The justice ministry said if the PCA’s ruling is upheld, foreign investors will continue to file malicious ISDS suits.

"There are few cases in which an international tribunal holds a state responsible in cases where public offices exercise their voting rights as a shareholder," the ministry said in a statement.

"If the government does not correct this ruling, there is a strong possibility of other unfair ISDS suits continuing to be filed. The ruling could also adversely affect other ongoing ISDS suits involving Korea."

The ministry added that it lodged a separate request with the PCA to correct the ruling.

source: The Korea Times