Government: "Lone Star International Litigation in Final Stage... Preparing Follow-up Response Measures"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyung-min] The government announced on the 14th that it is preparing countermeasures for the international lawsuit with the foreign private equity fund Lone Star, which is nearing its final stage.

The Ministry of Justice held a joint briefing at the Government Complex Seoul with the Office for Government Policy Coordination, the Financial Services Commission, and the National Tax Service, stating this regarding the 'Investor-State Dispute Settlement' (ISDS) lawsuit filed by Lone Star against the government.

The Ministry of Justice said, "The Lone Star ISDS written proceedings and hearings were completed in 2016, and a considerable amount of time has passed since the new presiding arbitrator conducted a Q&A session," adding, "We believe a ruling could be issued at any time and are preparing follow-up countermeasures."

If a foreign investor suffers damages due to measures taken by the host country, they can apply for arbitration at an international arbitration institution under the ISDS system.

Lone Star attempted to sell Korea Exchange Bank to HSBC in September 2007, but the sale was canceled as the Korean government did not approve it. Subsequently, in 2012, Lone Star sold Korea Exchange Bank to Hana Financial Group. Claiming that the delay in the sale caused the price to drop, Lone Star filed an ISDS lawsuit against the Korean government the same year, seeking damages in the 5 trillion won range.

The lawsuit has been ongoing for nine years. Both the government and Lone Star submitted 1,546 pieces of evidence and 95 witness and expert statements to the International Centre for Settlement of Investment Disputes (ICSID) between 2013 and 2015, engaging in written disputes. Subsequently, four hearings were held in Washington DC, USA, and The Hague, Netherlands, until June 2016. In June last year, former Canadian Supreme Court Justice William Ian Binnie was appointed as the new presiding arbitrator. In October of the same year, a Q&A session was conducted via video conference.

Lone Star claims that the Korean government delayed the approval of the sale of Korea Exchange Bank beyond the review period stipulated in domestic laws and exerted undue pressure to lower the sale price. The Korean government countered that the review period for sale approval stipulated by law is only advisory, and considering the document supplementation period, the period was not exceeded. Furthermore, a criminal trial that could affect Lone Star's major shareholder eligibility was underway at the time, so the delay was justified.

Meanwhile, at the briefing, the government also expressed its position regarding the 800 billion won damages claim filed by the US-based private equity fund Elliott, which alleges that the Korean government unfairly intervened in the merger process of Samsung C&T Corporation and Cheil Industries.

The government argued that the arbitral tribunal lacks jurisdiction, that the National Pension Service exercised voting rights as a shareholder and cannot be seen as violating obligations to Elliott, and that Elliott did not suffer damages due to government actions. The written proceedings and document submission process for this case have been completed, and the main hearings are scheduled to take place from November 15 to 26.

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