Business Korea | 21 February 2019
South Korean Government’s assets about to be seized
By Jung Suk-yee
Iran’s Dayyani group started a procedure to seize the South Korean government’s assets in the Netherlands after winning its investor-state dispute (ISD) against it. This is the first time that such a procedure has been initiated against the South Korean government.
The Financial Services Commission (FSC) of South Korea announced on Feb. 19 that the District Court in Rotterdam recently accepted the group’s application for provisional attachment of assets. The group won the case in June 2018 and the Korean government was told to pay a compensation of 73 billion won. However, the government did not pay the compensation and filed a lawsuit with the High Court of Justice in England to nullify the verdict.
The Dutch court is said to have sent a provisional attachment notice to Samsung, LG, KEB Hana Bank, Woori Bank and Busan Port Authority, which are South Korean enterprises doing business in the Netherlands. The notice is to tell them not to repay their debts to the South Korean government if they owe the government. It is also said that the distraint has not been realized yet because the companies currently owe nothing to the government. The FSC is going to focus on the nullification suit for the time being.
The conflict between the Iranian group and the government dates back to 2010. At that time, the government selected the group’s consumer electronics company Entekhab as the preferred bidder for the sale of Daewoo Electronics, which was under the control of creditors such as Korea Asset Management Corp. (KAMCO) and Woori Bank. Dayyani paid the creditors 57.8 billion won in down payment. However, Korea Development Bank, which arranged the acquisition financing, called Entekhab’s financing plan into question and broke the contract and KAMCO confiscated the total down payment.
Dayyani filed the ISD with the U.N. Commission on International Trade Law (UNCITRAL) in 2015, claiming that the creditors include KAMCO as a public agency. The ISD continued for three years and the South Korean government was told in June 2018 to pay 73 billion won, which includes the interest on the down payment.
The South Korean government filed the lawsuit for nullification in July 2018, claiming the commission of the United Nations is entitled to no arbitration according to England’s Arbitration Act 1996 and KAMCO cannot be an ISD target because it is not a state agency.
Some point out that the group will start the same procedure in multiple countries worldwide based on the Rotterdam District Court ruling. The others say that the court is relatively favorable for enterprises and provisional attachment will be possible in few other countries.