The Korea Times | 4 September 2022
Korea on alert over 6 more investor-state suits following Lone Star ruling
By Anna J. Park
While government’s high-profile battle with Lone Star Funds has finally reached an outcome after 10 years, Wednesday, six more similar investor-state dispute settlement (ISDS) cases filed against the government are still pending at the international arbitration tribunal. The total amount of claims asked by claimants against the Korean government exceeds 1.6 trillion won ($1.2 billion).
According to ISDS Navigator operated by the United Nations Conference on Trade and Development (UNCTAD), there are a total of 10 ISDS cases filed against the Korean government, four of which have been concluded or discontinued, and the remaining six are ongoing.
The case with the largest amount of claim is the one filed by U.S. activist fund Elliott Management against Korea in 2018, on the grounds that the Korean government allegedly interfered in the merger process of Samsung C&T and Cheil Industries.
Elliott, a 7.12 percent stake holder in Samsung C&T at the time, demands $770 million in compensation from the Korean government, arguing that the government inflicted substantial losses on Elliott by aiding the merger to favor Samsung heir Lee Jae-yong, by undervaluing Samsung C&T shares unfairly and deliberately. The case is currently pending at the Permanent Court of Arbitration (PCA).
On similar grounds, U.S.-based hedge funds Mason Capital and Mason Management, which were minority shareholders of Samsung C&T and Samsung Electronics at the time of the merger with Cheil Industries, also filed against the Korean government, claiming damages of $200 million. The case has also been pending at the PCA since 2018.
Iran’s Dayyani family filed against Korea twice, one of which was concluded in favor of the Dayyani family. The PCA ordered the Korean government in 2018 to pay $53.2 million to the Iranian family as an award. The Dayyani family claimed that the Korean government violated bilateral investment agreements between Korea and Iran, when Daewoo Electronics was acquired in 2011 by Entekhab ― in which the Iranian family was the largest shareholder.
However, the Korean government failed to give the award due to global sanctions on Iran, and the Iranian family filed another arbitration case in 2021 against Korea, asking it to pay the award.
Another case pending at the PCA is a battle between Switzerland-based Schindler Holding and the Korean government. The Swiss elevator company was the second-largest shareholder of Hyundai Elevator. It alleged that the Korean government caused significant impairments to Hyundai Elevator by failing to exercise financial oversight related to share capital increases and the use of the corporate funds.