Hankyoreh | 4 July 2020
Organization in charge of Jeju Yerae Residential Resort Complex to pay over US$100 million to Malaysia’s Berjaya Group
By Huh Ho-joon, Jeju correspondent
The Jeju Free International City Development Center (JDC), an organization under the Ministry of Land, Infrastructure and Transport (MOLIT) that oversaw the development of the Jeju Yerae Residential Resort Complex, will have to pay 120 billion won (US$100.1 million) to foreign investors after the project was suspended by Supreme Court decisions invalidating its land expropriation and permits.
On July 1, the JDC announced, “With regard to the lawsuit filed by Malaysia’s Berjaya Group in 2015 with Seoul Central District Court concerning Jeju Yerae Residential Resort Complex development project investors requesting damages due to the project’s suspension, we have reached a final agreement to accept the court’s compulsory arbitration decision and end our legal battle and dispute with the Berjaya Group.”
The Berjaya Group, which established the joint corporation Berjaya Jeju Resort with the JDC at the latter’s recommendation to develop the Yerae Residential Resort Complex, filed suit in November 2015 to demand 323.8 billion won (US$270.2 million) for what it claimed were “enormous” losses after the project was suspended due to the Supreme Court ruling. According to the compulsory arbitration, the JDC is to pay the 125 billion-won (US$104.3 million) investment principal to Berjaya, which is to withdraw both its lawsuit claiming damages and the notice of intent that it submitted in July of last year to seek investor-state dispute settlement (ISDS) arbitration for a sum of 4.1 trillion won (US$3.42 billion).
For JDC, the mood in response to the decision was one of relief.
“It feels like we’ve finished a very long task,” said JDC Chairperson Moon Dae-lim. “Thanks to the Berjaya Group’s magnanimous decision and the successful negotiation outcome, the JDC and the [South Korean] government have been freed from the international litigation and the lawsuit claiming damages.”
The project was originally pursued as one of seven leading Jeju Free International City efforts. After the owners of land in the site in the Yerae neighborhood of Seogwipo refused to comply during discussions on land purchasing, the JDC requested an expropriation decision by Jeju Island’s land expropriation committee. In August 2006, the decision was made to expropriate 124,516 square meters of land. But four land owners who objected to the decision filed suit to have the expropriation decision overturned, and in March 2015 the Supreme Court ruled that land expropriation that was not of a public service nature was invalid. Construction was fully halted in July of that year at a 65% rate of completion; in February 2016, the Supreme Court also ruled to invalidate permissions for the construction project.
Then Jeju Governor Kim Tae-hwan and JDC Chairperson Kim Gyeong-taek channeled major efforts into the project, including visits to Malaysia to secure the Berjaya Group’s investment. But with the project pursued in an excessive way without the consent of landowners, the result has been a massive waste of taxpayer money. The JDC plans to take out loans or issue bonds to cover the 120 billion won to be paid to Berjaya.
With the construction halted five years in and 65% of the way through, the Yerae coastline has been blighted with unfinished buildings. Some of the landowners have filed suits against JDC to demand the return of their land; depending on the outcome, the association could end up paying additional costs to restore the site to its original state.