Full Recovery of 9.6 Billion Won Schindler ISDS Litigation Costs... Largest Amount Ever

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The Ministry of Justice announced on April 15 that the Korean government has fully recovered all litigation costs from the Swiss global elevator company Schindler. The lawsuit costs recovered, totaling approximately 9.6 billion won, represent the largest amount ever in an ISDS case involving the Korean government.

This case began in 2018 when Schindler, the second-largest shareholder of Hyundai Elevator, filed an ISDS claim against the Korean government worth about 500 billion won. Schindler argued that the paid-in capital increase and issuance of convertible bonds (CB) by Hyundai Elevator between 2013 and 2015 were carried out to strengthen the owner family's control, and that relevant authorities including the Fair Trade Commission, the Financial Supervisory Service, and the Financial Services Commission neglected to intervene, causing Schindler to suffer unfair losses. Schindler's initial ISDS claim amounted to approximately 500 billion won. However, over the course of eight years of legal proceedings, the compensation claim was reduced to around 320 billion won.

The arbitral tribunal dismissed all of Schindler's damage claims, stating that the actions of the Fair Trade Commission, the Financial Services Commission, and the Financial Supervisory Service were conducted within their lawful authority and were neither arbitrary nor discriminatory, with sufficient investigation and review carried out. The tribunal also ordered Schindler to pay the Korean government approximately 9.6 billion won in litigation costs, in accordance with the principle that the losing party is responsible for legal expenses.

In most ISDS cases, it is common for the losing investor to delay or refuse payment of litigation costs to the country, requiring the government to initiate additional enforcement proceedings in foreign courts. In this case, the Ministry of Justice sent a payment demand letter to Schindler on March 19, stating that if payment was not made by the April 12 deadline, interest would be charged from the 13th and that compulsory enforcement procedures could be initiated in case of non-payment. Schindler transferred the full litigation cost of around 9.6 billion won to the Ministry of Justice's designated account between April 10 and April 15. The amount will be returned to the national treasury.

Recently, the Korean government has been winning consecutive victories in ISDS cases. In November of last year, it prevailed in the cancellation case against the US-based private equity firm Lone Star, involving over 400 billion won, and on February 23, it also won the ISDS cancellation lawsuit against the US-based private equity firm Elliott, involving approximately 160 billion won.

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