The enforcement of the International Centre for Settlement of Investment Disputes (ICSID) ruling that ordered the Korean government to pay approximately 280 billion KRW in compensation to the foreign private equity fund Lone Star for the sale of Korea Exchange Bank has been indefinitely suspended.
According to the Ministry of Justice, on the 16th, the ICSID annulment committee issued a decision to "unconditionally extend the suspension of enforcement of the Lone Star international investment dispute (ISDS) ruling." Previously, ICSID had issued a provisional suspension of enforcement on September 12 following annulment requests from both Lone Star and the government, and now plans to maintain this suspension indefinitely until a final conclusion on the annulment requests is reached.
The Ministry of Justice explained, "With the unconditional extension of the suspension of enforcement requested by the government, Lone Star cannot seek enforcement of the ruling until the annulment procedure is concluded. Going forward, both the government and Lone Star will engage in written arguments and oral hearings during the annulment process."
Han Dong-hoon, Minister of Justice, stated, "This is an issue that the Republic of Korea government has fought over for more than ten years through multiple administrations," adding, "The government will do its utmost until the end to ensure that the hard-earned taxes of the Korean people are not wasted."
Lone Star purchased Korea Exchange Bank in 2003 for 1.3834 trillion KRW and, after negotiations with several companies, sold it to Hana Financial Group in 2012 for 3.9157 trillion KRW. During the sale process, Lone Star claimed that due to unfair intervention by the Korean government, it lost the opportunity to sell at a higher price and had to lower the price. In November 2012, Lone Star filed an ISDS claim with ICSID demanding damages of 4.6795 billion USD (approximately 6.1 trillion KRW).
On August 31 of last year, ICSID ruled that the government must pay Lone Star 216.5 million USD, which corresponds to 4.6% of the damages claimed. Subsequently, the arbitral tribunal accepted the government's correction request that the compensation was miscalculated, adjusting the amount to 216.01 million USD.
Lone Star filed an annulment request in July, arguing that the compensation amount was insufficient. The government also requested annulment and suspension of enforcement in September, citing the tribunal's ultra vires actions and serious violations of procedural rules.
In November, ICSID formed a separate annulment committee composed of three arbitrators and held oral hearings to hear both parties' opinions.
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