KOR-Longstar '10-Year Dispute' Ends... Must Pay Over 300 Billion Won in Compensation and Interest from Public Funds

[Asia Economy Sejong=Reporter Son Seon-hee] The government was partially defeated on the 31st (Korean time) in a decade-long international lawsuit with the U.S.-based private equity fund Lone Star, resulting in a compensation payment and interest amounting to 300 billion KRW.

Of this, the compensation is $216.5 million, which is about 4.6% of the amount Lone Star originally claimed ($4.68 billion). The court specified that interest should be paid based on the 'one-month maturity U.S. Treasury yield' from December 3, 2011, to this day (the full payment date), which the government estimated to be about 18.5 billion KRW. Adding the compensation and interest, the total amount the Korean government must pay is approximately 310 billion KRW. Additionally, the cost spent on the international lawsuit over the past decade is known to be about 47 billion KRW. All of this money must be covered by taxpayers' money.

Although this amount is much smaller compared to the 6 trillion KRW compensation initially demanded by Lone Star, the unexpected financial expenditure in the hundreds of billions of KRW, including litigation costs incurred so far, has become inevitable.

This is an unprecedented case where the government has to pay hundreds of billions of KRW in compensation due to an investor-state dispute settlement (ISD) ruling. However, the payment timing depends on whether the Korean government takes follow-up actions. According to regulations, the government can apply for annulment within 120 days from this day, and if the government proceeds with the annulment application, it could take at least another year.

However, this can only be applied if the tribunal clearly exceeded its authority or seriously violated fundamental procedural rules, and since it is a retrial rather than an appeal, the likelihood of acceptance is known to be low. If the annulment application delays the payment timing, the interest amount to be paid will increase, potentially causing additional losses, so the government must be cautious.

The Ministry of Economy and Finance plans to finalize the budget expenditure method once the compensation payment amount and timing are decided. Depending on the scale, it may be covered by contingency funds, or if the payment timing extends beyond next year, it may be included in the main budget. A Ministry of Economy and Finance official said, "We understand that the payment timing and installment payment methods can be coordinated through bilateral consultations with the counterparty (Lone Star)," and added, "We plan to respond as soon as it is finalized."

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