Government Achieves 100% Victory in ISDS Against Schindler, Relieved of 320 Billion Won Compensation Liability

The Korean government has achieved a final victory in the international investment dispute (ISDS) with the Swiss elevator company Schindler Holding AG. As a result, the government is no longer liable for the massive compensation claim that amounted to about 320 billion won.

Yonhap News Agency

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On the 14th, the Ministry of Justice officially announced, "At around 2:03 a.m. (Korean time), the arbitral tribunal of the Permanent Court of Arbitration (PCA) dismissed all claims brought by Schindler." With this ruling, the approximately 320 billion won in damages demanded by Schindler during the arbitration process has been entirely invalidated. In addition, the government will be able to recover in full the approximately 9.6 billion won in expenses incurred during the litigation from Schindler. A Ministry of Justice official emphasized, "This decision represents a 100% victory for the Korean government."

The root of this dispute dates back to a paid-in capital increase by Hyundai Elevator between 2013 and 2015. At the time, Schindler, which was the second-largest shareholder of Hyundai Elevator, has argued that the capital increase was not for business necessity, but rather a means to secure funds to maintain control over affiliates such as Hyundai Merchant Marine.

Schindler claimed that the Korean government and financial authorities failed to properly investigate or regulate this unjust capital increase, resulting in significant losses as a shareholder, and filed an ISDS against the Korean government in 2018. The initial amount of damages claimed by Schindler was approximately 500 billion won (259 million Swiss francs), but during the course of the litigation, the final claim was adjusted to around 320 billion won.

However, the arbitral tribunal did not accept Schindler's arguments. The tribunal determined that the actions taken by the Korean government at the time were within the scope of its legitimate authority and that adequate investigation and review procedures were conducted.

Accordingly, it was concluded that there was no violation of the investment agreement by the Korean government and that there was no basis for state responsibility under international law. After eight years of protracted legal proceedings since the filing of the case, the dispute has been definitively resolved in the government's favor.

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