Government to Challenge Elliott ISDS Ruling... Filing Annulment Lawsuit (Comprehensive)

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Our government is taking steps to challenge the ruling in the international investment dispute (ISDS) case, which concluded with a partial victory for Elliott.

On the 18th, the Ministry of Justice announced, "We have filed a request for interpretation and correction of the ruling with the arbitral tribunal and have initiated annulment proceedings at the UK court, the seat of arbitration." They also explained, "We confirmed that the ISDS case ruling contains clear computational errors and ambiguous findings by the arbitral tribunal."

Minister of Justice Han Dong-hoon and the Ministry pointed out that although the arbitral tribunal stated in its reasoning that the settlement amount paid by Samsung C&T to Cheil Industries after their merger should be deducted as a 'pre-tax amount' when calculating the damages Elliott suffered, the actual calculation deducted the 'post-tax amount' of the settlement. According to the Ministry of Justice, this caused the compensation amount the government must bear to increase by more than 6 billion KRW.

The Ministry of Justice also requested clarification on the part where the arbitral tribunal ordered the Korean government to pay the 'pre-award interest' on the principal damages in Korean won in the reasoning, but ruled in the order to pay the interest in US dollars.

The government also cited 'jurisdictional violation' under the Korea-US Free Trade Agreement (FTA) as a reason for contesting the ruling. They argued that the ruling was made despite the arbitral tribunal lacking jurisdiction over the 'subject matter' of the case. According to the Ministry of Justice, under the Korea-US FTA provisions, jurisdiction over ISDS cases is recognized only if the following conditions are met: ▲ the measure is adopted or maintained by the government ▲ there is a connection to the investor's investment ▲ the responsibility for the measure is attributable to the state. The arbitral tribunal found these conditions satisfied, but the Ministry of Justice claims this interpretation is incorrect.

Regarding the arbitral tribunal's view that the National Pension Service (NPS) is a 'de facto state organ' and that the responsibility for exercising voting rights lies with the government, the Ministry stated, "It is unjust to recognize state responsibility based on the concept of a 'de facto state organ,' which is not anticipated by the Korea-US FTA." They added, "The United States, the other party to the Korea-US FTA, also officially submitted a statement during the arbitration process clarifying that 'measures by non-governmental entities delegated by authorities' do not include acts beyond the scope of delegated government authority."

Since the exercise of voting rights by the NPS is not a measure adopted by the government and the responsibility does not lie with the Korean government, jurisdiction should not be recognized.

They also emphasized that domestic courts, in lawsuits filed by minority shareholders of Samsung C&T seeking to nullify the merger and claim damages, ruled that "even if there were illegal acts by former Minister of Health and Welfare Moon Hyung-pyo and others, the NPS ultimately exercised its voting rights independently." Regarding the arbitral tribunal's substantial reliance on criminal rulings related to the state corruption scandal, the Ministry argued, "Illegal acts committed during the internal decision-making process of the NPS are legally distinct from the criminal rulings against those individuals."

The Ministry of Justice also challenged the arbitral tribunal's finding that the government was 'connected' to Elliott's investment in Samsung C&T.

The Ministry stated, "The general principle under commercial law is that minority shareholders bear no responsibility to other minority shareholders for exercising their voting rights," and added, "It cannot be considered that the NPS, as one of the minority shareholders, took measures affecting Elliott's investment by exercising its voting rights."

The Ministry explained, "After discussions with government-appointed law firms and external experts, we determined that the errors made by the arbitral tribunal constitute valid grounds for annulment under UK arbitration law and have initiated the challenge process." They also noted that if the Elliott ISDS ruling is not corrected, there is concern that unjust ISDS claims may arise in the future and negatively impact ongoing ISDS cases.

Elliott, a shareholder of Samsung C&T, filed an ISDS claim worth 770 million USD (approximately 1.037 trillion KRW) against our government in July 2018, alleging that during the 2015 merger approval process between Samsung C&T and Cheil Industries, the Ministry of Health and Welfare and the National Pension Service exerted pressure to vote in favor, causing damages.

The International Centre for Settlement of Investment Disputes (ICSID) arbitral tribunal of the World Bank partially upheld Elliott's claims on the 20th of last month, ordering our government to pay Elliott 53.58 million USD (approximately 69 billion KRW) plus delayed interest as compensation. Considering the litigation costs to be borne by both parties, the actual amount the government must pay Elliott reaches about 130 billion KRW.

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