Government Wins All ISDS Cases Against Chinese Borrowers Who Lost Collateral Due to Loan Defaults

In an international investment dispute case filed by a Chinese investor who lost collateral after failing to repay a loan worth several hundred billion won in South Korea, our government won entirely.

Ministry of Justice Building.

On the 31st, the Ministry of Justice announced that it received a ruling of "complete victory for the Republic of Korea" from the arbitration tribunal in the case filed by Chinese investor Min through the Investor-State Dispute Settlement (ISDS) procedure.

The arbitration tribunal accepted the Korean government's position that Min's investment was illegal and did not qualify as an investment protected under the Korea-China Investment Agreement, dismissing all of Min's claims.

Additionally, the tribunal ordered Min to pay approximately 4.9126 billion won in legal and arbitration costs incurred by the Korean government, along with interest until payment.

It is known that Min established a corporation in South Korea in October 2007 to acquire real estate in Beijing, China, and borrowed business funds worth several hundred billion won from domestic financial institutions. Woori Bank set a lien on Min's shares when it acquired these loan claims. Although Woori Bank extended the repayment deadline six times, Min ultimately failed to repay. Woori Bank exercised its collateral rights and sold the shares to a foreign company.

Min also filed a civil lawsuit to challenge the legality of Woori Bank's exercise of collateral rights, but in July 2017, the Supreme Court confirmed a ruling against the plaintiff.

Subsequently, in July 2020, Min filed a request for arbitration with the International Centre for Settlement of Investment Disputes (ICSID), claiming that Woori Bank's exercise of collateral rights and the domestic civil and criminal trials were conducted unlawfully, violating the government's investor protection obligations. Min's initial claim amount was about 2 trillion won, and the final decided claim amount was approximately 264.1 billion won.