[News Terms] International Centre for Settlement of Investment Disputes Corrects Lone Star Compensation Payment

The International Centre for Settlement of Investment Disputes (ICSID) is an international organization established in 1966 to resolve investment disputes between states and nationals of other states. It is one of the five institutions belonging to the World Bank Group (WBG), alongside the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA).

ICSID was established under the ICSID Convention for the Promotion of International Investment (Convention on the Settlement of Investment Disputes between States and Nationals of Other States) in 1965. It has 158 member countries, and Korea joined in 1967. Under international trade treaties, foreign investors can request ICSID arbitration against the host country if their interests are harmed by the host country’s laws or policies, based on international law.

In front of Hana Financial Group's Seoul Myeongdong headquarters, which purchased Korea Exchange Bank from Lone Star, the cause of the dispute between the Korean government and Lone Star.
[Photo by Yonhap News]

Considering the unique nature of investment disputes, ICSID provides dispute resolution procedures such as conciliation and arbitration to appropriately balance the interests of investors and host countries. In conciliation and arbitration tribunals, each case is judged independently and neutrally based on the legal claims and evidence presented by the parties involved.

As multilateral trade agreements have increased, the number of cases referred to ICSID has also grown, enhancing ICSID’s role in international investment and economic development. As of the end of last year, 910 cases had been registered with ICSID; 64% have been concluded, while 36% remain suspended or unresolved. In the dispute between the Korean government and the U.S.-based private equity fund Lone Star, the ICSID arbitration tribunal ruled in August last year that the Korean government must pay $216.5 million (approximately 285.7 billion KRW based on an exchange rate of 1,320 KRW/USD), which is 4.6% of the damages claimed by Lone Star.

On the 9th, the Ministry of Justice announced that in October last year, the ICSID arbitration tribunal accepted a correction request submitted by the Ministry, which argued that the principal compensation and interest had been calculated redundantly and excessively, and accordingly corrected the principal compensation amount to $216,018,682. As a result, the principal compensation was reduced by $481,318 (approximately 635.34 million KRW). The Ministry of Justice plans to analyze the correction ruling and consider filing separate lawsuits to cancel the compensation order and requests for suspension of enforcement.

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