'6 Trillion Won · 10 Years' Long Battle with Lone Star... Ended with a Complete Victory for Korea

[Asia Economy Reporter Kim Hyung-min] The investor-state dispute settlement (ISDS) lawsuit between our government and the US-based private equity fund 'Lone Star' has effectively concluded with a victory for our government, and it is expected to be recorded as the longest and largest international lawsuit in history. In terms of scale and complexity of issues, it is by far the largest among the ISDS lawsuits our government has faced or is facing. This is why the ISDS case with Lone Star is called a 'comprehensive set of international lawsuits.'

The lawsuit took 10 years until the verdict was delivered. 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 it to Hongkong and Shanghai Banking Corporation (HSBC), but our government did not approve the sale. This was because Lone Star was undergoing a criminal trial, and it was judged that this could affect their eligibility.

Eventually, Lone Star changed direction and sold its 51.02% stake in Korea Exchange Bank to Hana Financial Group in 2012 for 3.9157 trillion won. Lone Star filed the ISDS lawsuit in November 2012, claiming that the government's measures delayed the sale process and lowered the price. The verdict was delivered on the 31st, about 9 years and 9 months after the lawsuit was filed. The hearing process had ended earlier on June 29, which was the 3,508th day since the lawsuit was filed.

The scale of the Lone Star-related lawsuit swelled to the 6 trillion won range ahead of the verdict. When Lone Star filed the lawsuit in November 2012, the amount was in the 5 trillion won range, but fluctuations in exchange rates and other factors increased the amount. Initially, Lone Star sued the government for compensation of $4.6795 billion, which is about 6.286 trillion won at the current exchange rate. Lone Star calculated the compensation amount by adding approximately 2 trillion won, which is the difference between the failed sale price to HSBC during initial negotiations and the amount paid to Hana Financial Group, plus taxes withheld on the sale to Hana Financial Group. Essentially, Lone Star intended to recover all costs incurred during the sale of Korea Exchange Bank through this lawsuit.

During the lawsuit, both our government and Lone Star submitted about 1,636 documents to the tribunal. The International Centre for Settlement of Investment Disputes (ICSID) held four hearings on the case between October 2013 and June 2016 in Washington DC, USA, and The Hague, Netherlands. The government and Lone Star submitted 1,546 pieces of evidence and 95 witness and expert statements. After the appointment of William Ian Binny as the new presiding arbitrator, a Q&A session was conducted via video conference in October 2020. A month later, Lone Star proposed to withdraw the ISDS case if the government paid $870 million, but the government rejected the offer.

Ultimately, the key issue in the lawsuit was whether the measures taken by our government during Lone Star's sale process of Korea Exchange Bank were lawful and whether there was intentional delay. Our government argued that the procedures were lawful, while Lone Star claimed there was unfair pressure. Although interpretations differ regarding the significance of the 300 billion won, legal circles said, "It can be seen that most of our government's claims were accepted."

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