Lone Star Disputes ISDS Arbitration Ruling Over 280 Billion KRW Compensation

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US-based private equity firm Lone Star has appealed the international investment dispute (ISDS) arbitration ruling that recognized the South Korean government's liability for compensation of approximately 280 billion won. The arbitration tribunal decided in August last year that the Korean government must pay Lone Star $216.5 million.

The Ministry of Justice announced on the 31st, "On the 29th, we received notification from the International Centre for Settlement of Investment Disputes (ICSID) Secretariat that Lone Star has filed a request to annul the original arbitration award."

On August 31 last year, ICSID ruled that the Korean government must pay Lone Star $216.5 million (approximately 280 billion won, based on an exchange rate of 1,300 won per dollar), which corresponds to 4.6% of the damages claimed by Lone Star.

In response, Lone Star stated that "the compensation is insufficient for the risks borne when rescuing Korea Exchange Bank in 2003, as well as for the added value contributed to all shareholders of Korea Exchange Bank and the Korean banking system."

The Ministry of Justice plans to thoroughly review the contents of Lone Star’s annulment request together with the government’s legal representatives and law firms, fully reflecting the analysis of Lone Star’s annulment petition, and will file the annulment request within the deadline. The deadline for the annulment request is September 5, Eastern Time (US).

The Ministry of Justice said, "We will faithfully engage in the subsequent procedures to ensure that not a single penny of the public’s hard-earned tax money is wasted," and added, "We will promptly inform the public about any future developments."

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 alleged, "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 criteria."

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