Mirae Asset's 7 Trillion Hotel Litigation Battle Likely to Focus on Title Insurance and COVID-19 Issues

Mirae Asset "Focus on Targeting Failures in Warranty Insurance Coverage"
COVID-19 'Force Majeure' Status Also a Variable

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The legal battle over the acquisition of 15 luxury hotels in the United States by Mirae Asset Financial Group, valued at approximately 7 trillion KRW, is set to intensify. Mirae Asset is expected to focus on the fact that the seller, China's Anbang Insurance, became embroiled in ownership-related lawsuits from third parties concerning the hotels, and consequently, title insurance companies in the U.S. did not guarantee the registration rights of the hotels. The first trial between Mirae Asset and Anbang Insurance is scheduled to be held over three days starting August 24.

According to the financial investment industry on the 12th, Mirae Asset is paying close attention to the fact that even U.S. title insurance companies refused to provide coverage for the hotels in question. Title insurance compensates for losses that property owners and mortgage holders may suffer due to defects in real estate ownership rights. Not only the largest U.S. title insurer, Fidelity National, but also four other insurers including First American, Old Republic, and Stewart, all refused to issue full title insurance for the 15 hotels targeted for sale.

A representative from Mirae Asset stated, "The fact that not just one, but multiple title insurance companies consecutively refused to guarantee registration rights indicates a problem with Anbang Insurance's ownership of the hotels, and it is a clear breach of contractual obligations as securing title insurance was a condition for closing the deal. Moreover, the fact that they did not inform us upfront about the ownership lawsuits involving third parties and that we discovered this ourselves is a significant issue."

During the hotel due diligence process in February, Mirae Asset discovered the ownership lawsuits and requested an explanation from Anbang Insurance. Anbang Insurance acknowledged this but claimed they did not violate any obligations under the sales contract. Instead, on the 27th of last month, they filed a lawsuit against Mirae Asset in the Delaware Court of Chancery in the U.S., demanding contract enforcement. Mirae Asset notified contract termination on the 3rd and announced plans to respond through four domestic and international law firms.

Kim Mingyu, a lawyer at EunYul, a law firm specializing in construction and real estate, predicted, "Usually, contracts include conditions allowing sales if the seller has the right to sell even without full ownership, so various issues will arise depending on the facts." There is also speculation that COVID-19 could become a point of contention, as the pandemic caused severe downturns in travel and the hotel industry, making it difficult for local financial institutions to provide secured loans. Mirae Asset planned to finance 3.6 billion USD of the total acquisition price of 5.8 billion USD (approximately 7.12 trillion KRW) through local secured loans.

Lawyer Kim explained, "Contracts typically include clauses that exempt performance in cases of natural disasters or force majeure, so the key issue is whether COVID-19 will be considered a natural disaster. South Korea has yet to recognize infectious diseases as natural disasters, but China, at the government level, issued various payment guarantees to foreign companies citing its own shutdowns, and abroad, it is regarded as a force majeure event. This could lead to intense disputes."

This content was produced with the assistance of AI translation services.