Government to Compensate 292.5 Billion Won of Lone Star's 6 Trillion Won Claim

[Asia Economy Reporter Kim Hyung-min] Our government has been ordered to pay $216.5 million (approximately 280 billion KRW) in compensation following an Investor-State Dispute Settlement (ISDS) lawsuit with the U.S.-based private equity firm Lone Star.

The International Centre for Settlement of Investment Disputes (ICSID) arbitral tribunal handling the case ruled on the 31st, partially accepting Lone Star's claims. This amount represents about 4.6% of the $4.6795 billion (approximately 6.286 trillion KRW) Lone Star initially claimed when filing the lawsuit. Additionally, the tribunal ordered our government to pay interest calculated based on the one-month maturity U.S. Treasury bond yield from December 3, 2011, until full payment. The interest is estimated to be around 100 billion KRW.

The government plans to analyze the ruling and explain future response strategies at 1 p.m. today.

The lawsuit took 10 years to reach this outcome. Lone Star, which acquired Korea Exchange Bank in 2003, began negotiations to sell it again in 2006. In September 2007, Lone Star attempted to sell the bank to HSBC Hong Kong and Shanghai Banking Corporation, but our government did not approve the sale, judging that Lone Star's ongoing criminal trial could affect its eligibility. Eventually, Lone Star changed course and sold its 51.02% stake in Korea Exchange Bank to Hana Financial Group in 2012 for 3.9157 trillion KRW. Lone Star filed the ISDS lawsuit in November 2012, claiming that the government's actions delayed the sale process and lowered the sale price.

Since then, ICSID held four hearings. After William Ian Binny was appointed as the new presiding arbitrator, a Q&A session was conducted via video conference in October 2020. During the hearings, Lone Star argued that our government deliberately delayed the sale process of Korea Exchange Bank, exerted undue pressure, and denied tax exemption benefits guaranteed under the Korea-Belgium Double Taxation Avoidance Agreement to maximize tax collection. The government countered that all procedures were conducted lawfully. A month later, Lone Star proposed withdrawing the ISDS case if the government paid $870 million, but the government rejected the offer.

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