US-based private equity firm Lone Star won again in the appellate trial of the lawsuit seeking the return of unfair profits worth approximately 168 billion KRW against the Korean government and the Seoul Metropolitan Government.
The Seoul High Court Civil Division 14-1 (Presiding Judges Nam Yang-woo, Hong Sung-wook, Chae Dong-soo) on the 5th upheld the first trial ruling that partially ruled in favor of the plaintiffs by dismissing both Lone Star and the government's appeals in the appellate trial of the lawsuit filed by nine Lone Star-related entities, including Hudco Partners for Korea Limited, against the Republic of Korea and the Seoul Metropolitan Government seeking the return of unfair profits.
Lone Star purchased Korea Exchange Bank at a low price in 2003 and sold it in 2010, making a profit of 4.6 trillion KRW. Afterwards, when the National Tax Service imposed income tax and corporate tax amounting to about 800 billion KRW on Lone Star and nine top Lone Star investors, Lone Star and others filed a lawsuit claiming the taxation was unfair.
However, in 2017, the Supreme Court ruled in favor of Lone Star in the lawsuit requesting the cancellation of the corporate tax imposition of 173.3 billion KRW among the total taxes, stating that “the investment was made by the US headquarters, so it cannot be considered that there was a permanent establishment in Korea.”
Subsequently, Lone Star filed a lawsuit against the government in December 2017, claiming that it had not received 153.5 billion KRW of the corporate tax canceled by the Supreme Court decision. Additionally, in January 2018, Lone Star filed an additional lawsuit against the Seoul Metropolitan Government and others, demanding the return of local taxes that were imposed and then canceled through the same process.
The first trial court ruled in June last year that “the government and the Seoul Metropolitan Government must pay Lone Star a total of about 168.2 billion KRW,” partially ruling in favor of the plaintiffs. However, the court did not accept Lone Star’s claims for interest and claims against Gangnam-gu.
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