Posco Construction Wins International Dispute Related to 3.3 Trillion Won Songdo Development Project

Panoramic view of Songdo International Business District (Photo by POSCO Engineering & Construction)

[Asia Economy Reporter Ryu Tae-min] POSCO Engineering & Construction has won an international dispute with the U.S. real estate development company Gale International regarding the development project of Incheon Songdo International Business District (IBD).

According to POSCO Engineering & Construction on the 1st, on the 28th of last month, the International Chamber of Commerce (ICC) dismissed the arbitration request filed by Gale International, which participated in the joint development of Songdo International Business District, seeking damages amounting to $2.28 billion (approximately 3.3 trillion KRW) against POSCO Engineering & Construction.

Gale International claimed to the ICC that POSCO Engineering & Construction violated the joint venture agreement during the process of recruiting new partners after their separation in 2018 and sought damages. The ICC dismissed all of Gale's claims and ruled that POSCO Engineering & Construction did not violate the terms of the joint venture agreement. Furthermore, the ICC stated that Gale International must bear all arbitration costs payable to POSCO Engineering & Construction.

Both parties had established the joint venture company Songdo International City Development Co., Ltd. (NSIC) in 2002 to promote the IBD project. However, when Gale International faced tax issues in the U.S., disputes arose with POSCO Engineering & Construction, leading to a complete halt of the project. POSCO Engineering & Construction eventually decided to part ways with Gale and repaid NSIC’s loans, which were in default on project financing (PF) in the second half of 2017. Subsequently, POSCO Engineering & Construction, which had provided debt guarantees, secured Gale’s shares through subrogation and pledge rights and sold them to new foreign partners ACPG and TA.

Gale International argued that POSCO Engineering & Construction deliberately caused the PF default, violating the duty of good faith and cooperation under the joint venture agreement. However, the arbitration tribunal found no intentional default by POSCO Engineering & Construction and noted that the default occurred because Gale International did not proceed with the project. The tribunal also ruled that the subrogation and share sale to new partners were legitimate under the share pledge agreement and dismissed Gale’s claim that the shares were sold at a low price.

POSCO Engineering & Construction stated, “This arbitration internationally recognizes that Gale International is responsible for the delay in the Songdo project,” adding, “At the POSCO Group level, this resolves financial burdens and future management uncertainties, which will accelerate the completion of the Songdo International Business District development.”

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