Government: "Difficult to Accept 290 Billion Won Compensation to Lone Star... Actively Considering Cancellation Request"

[Asia Economy Reporter Heo Kyung-jun] The decade-long dispute worth 6 trillion won between our government and the US-based private equity fund Lone Star has effectively ended in a ruling victory for our side. However, the government plans to actively pursue applications for annulment and suspension of enforcement in the future.

On the 31st, the Ministry of Justice announced that the arbitration tribunal of the World Bank's International Centre for Settlement of Investment Disputes (ICSID) in the Lone Star case ruled that our government must pay Lone Star $216.5 million (approximately 292.5 billion won based on the current exchange rate of 1,350 won) which is 4.6% of the damages claimed by Lone Star.

Additionally, it was decided that interest based on the one-month maturity US Treasury bond yield from December 3, 2011, until full payment must be compensated. The interest amount is estimated to be about 100 billion won.

Lone Star filed international arbitration through the Investor-State Dispute Settlement (ISDS) system in November 2012, claiming that the Korean government unfairly intervened in the sale process of Korea Exchange Bank, causing damages of $4.6795 billion (approximately 6.3215 trillion won).

Lone Star argued, "At that time, the Financial Services Commission of the Republic of Korea unfairly delayed approval of the sale or pressured to lower the sale price, and the National Tax Service imposed taxes based on arbitrary standards." ISDS is a system through which foreign investors can receive compensation via ICSID arbitration if they suffer damages due to the laws or policies of the investment country.

The arbitration tribunal dismissed Lone Star's claims by confirming that there was no jurisdiction or violation of international law regarding the remaining financial and tax issues, in accordance with our government's arguments.

Specifically, the arbitration tribunal accepted our government's argument that it had no jurisdiction over government measures and actions taken before the enforcement of the Korea-Belgium-Luxembourg Investment Protection Agreement in 2011. Accordingly, claims related to HSBC and some tax claims were excluded from the substantive judgment.

Furthermore, the arbitration tribunal judged that the act of delaying approval until the sale price between Lone Star and Hana Bank for Korea Exchange Bank was lowered violated the fair and equitable treatment obligation under the investment protection agreement. Regarding tax claims with some jurisdiction, the Ministry of Justice explained that Lone Star's claims were not fully accepted as the government's tax measures were not arbitrary or discriminatory under the investment protection agreement.

Minister of Justice Han Dong-hoon is explaining the contents of the arbitration ruling and the Ministry of Justice's future response plan during a briefing on the Lone Star international investment dispute (ISDS) case held at the Ministry of Justice in the Government Complex Gwacheon on the afternoon of the 31st. Photo by Choi Seok-jin

On the afternoon of the same day, Minister of Justice Han Dong-hoon said at a related briefing held at the Ministry of Justice in the Government Complex Gwacheon, "The government finds it difficult to accept the arbitration tribunal's ruling. Even the dissenting opinion fully accepted our government's position, stating that the government bears no responsibility, which shows that it is worth disputing within the procedure." He added, "We will do our utmost until the end with the determination that not a single penny of the hard-earned taxes of the people of the Republic of Korea should be lost through future annulment or suspension of enforcement procedures."

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