[Law Firm Now] Bae, Kim & Lee Leads Government to Complete Victory in Lone Star ISDS Annulment Proceedings

"The Fruit of Over a Decade of Major International Arbitration Efforts"
Comprehensive Expertise in Arbitration, Finance, Tax, and International Trade Mobilized
Result of Extensive Data Analysis and Close Collaboration with the Government

Bae, Kim & Lee Law Offices (Managing Partner Lee Junki) announced on the 19th that it had achieved a complete victory in the case where the Korean government filed for annulment of the arbitral award at the International Centre for Settlement of Investment Disputes (ICSID) regarding the international investment dispute (ISDS) with the foreign private equity fund Lone Star over the sale of Korea Exchange Bank. The firm stated, "This is a remarkable achievement in completely defending against a national loss, as a result of 13 years of dedicated representation as the government's legal advisory team."

Headquarters building of Bae, Kim & Lee Law Offices in Jongno-gu, Seoul. Bae, Kim & Lee Law Offices

International Arbitration Experts Including Kim Junwoo Mobilized... 13 Years of One-Team Collaboration with Government Ministries

Since November 2012, when Lone Star filed for arbitration at ICSID, Bae, Kim & Lee, together with the U.S. law firm Arnold & Porter, has led the government’s response throughout the entire arbitration process.

Bae, Kim & Lee stated, "This annulment decision reaffirms the lack of legal and factual grounds for Lone Star’s claims and the original award," adding, "Our firm supported the government’s response with a 'one-team' strategy, mobilizing expertise not only in international arbitration but also in finance, tax, and international trade." The firm continued, "In large-scale international arbitration cases like the Lone Star dispute, it is crucial to comprehensively assess areas such as domestic law, international law, international finance, and trade to develop a response strategy. We concentrated the expertise of our professionals to establish an effective collaboration system."

In this dispute, Bae, Kim & Lee’s response was led by attorneys with extensive practical experience and know-how in international arbitration, including Kim Junwoo and Kim Woojae; financial experts such as attorneys Seo Dongwoo, Yang Sikyoung, Lee Jaein, and foreign attorney Kim Youngmo; tax expert attorney Yoo Cheolhyeong and tax accountant Kim Hyukjoo; and international trade specialists attorney Kwon Sodam and foreign attorney Jeong Kyusang.

Kim Junwoo, who led the arbitration, commented, "Over the past 13 years, government ministries, the Ministry of Justice, and both domestic and international counsel worked together as a perfect one-team throughout the arbitration process. Even as government personnel changed due to the prolonged nature of the dispute, the consistent sharing of information and materials and maintaining a coherent dispute strategy proved to be key factors in our success."

Kim also shared, "Even in cases that may seem daunting from the outside, this experience reaffirmed my belief that a meticulous and unwavering approach can yield positive results. Above all, it is a great honor to have contributed to protecting the nation's vital interests."

Lee Junki, Managing Partner of Bae, Kim & Lee, stated, "This decision has reaffirmed the comprehensive capabilities of Bae, Kim & Lee, including in international arbitration. On behalf of the firm, I express my gratitude. As the Lone Star dispute underscored the importance of international arbitration, we will further strengthen our professionals’ expertise and focus on building trust that even the most challenging and complex matters can be resolved by entrusting them to Bae, Kim & Lee."

4 Billion Won Compensation Liability Extinguished... 7.3 Billion Won in Litigation Costs to Be Reimbursed

This case began when, after acquiring Korea Exchange Bank for approximately 1.3 trillion won in 2003, U.S. private equity fund Lone Star sold it to Hana Financial Group in 2012 for nearly three times the purchase price. Lone Star then claimed that the Korean government had caused it to miss the opportunity to sell at a higher price and demanded damages.

In November 2012, Lone Star filed for international investment dispute arbitration at ICSID, seeking approximately $4.68 billion (about 6.9 trillion won) in compensation from the Korean government.

The original arbitral tribunal, in August 2022, partially accepted Lone Star’s claims regarding financial issues and ordered the Korean government to pay $216.5 million plus interest.

In response, in July 2023, Lone Star applied for partial annulment of the award concerning its loss (about 95.4%), and the government also applied for partial annulment in September 2023 regarding its own loss (about 4.6%).

After intense arguments during the annulment proceedings, the ICSID annulment committee, on the previous day, rendered a decision to annul the Lone Star ISDS arbitral award, fully rejecting Lone Star’s annulment application and upholding the government’s application.

The annulment committee explained, "The original arbitral award seriously violated the fundamental international legal principle of due process by relying heavily on the ICC commercial arbitration award between Hana Financial Group and Lone Star-which Korea was not a party to-as key evidence, and hastily recognizing the Financial Services Commission’s illegality and state liability."

As a result, the government’s compensation liability of approximately 400 billion won (based on current exchange rates, including interest) recognized in the original award has been retroactively extinguished. The government will also be able to recover approximately 7.3 billion won in litigation costs incurred during the annulment proceedings from Lone Star.

Prime Minister Kim Minseok is making an announcement at an emergency briefing related to the 'Lone Star International Investment Dispute Settlement (ISDS) Cancellation Application' held at the Government Seoul Office Building on the 18th. Photo by Yonhap News

The government announced the previous day, "By centering the International Investment Dispute Response Team, composed of relevant ministries, and working closely with domestic and international government counsel (Bae, Kim & Lee, Peter & Kim, Arnold & Porter), as well as external experts from academia, we thoroughly analyzed tens of thousands of pages of records and evidence. As a result of our best efforts in carrying out the annulment proceedings, we have prevented the outflow of national wealth worth several hundred billion won."

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