Government Appeals UK First Instance Court Dismissal of 'Elliott ISDS Cancellation Lawsuit'

Elliott Side "Only Increases Public Burden Costs... Must Accept"

The Korean government has filed an appeal after a UK court dismissed its annulment lawsuit challenging the international investment dispute (ISDS) ruling with the US-based hedge fund Elliott Management.

According to the legal community on the 13th, the government submitted documents to the court the day before to appeal the decision by the UK Commercial Court, which dismissed the annulment application ordering the government to pay approximately 130 billion KRW to Elliott Management. The Ministry of Justice stated that the government conducted an in-depth review of the UK first-instance court’s dismissal ruling with relevant ministries, government law firms, and external experts (professors, domestic and international law firms, UK court advocates, etc.) and explained, “We determined that the ruling contained serious errors regarding the interpretation of the Korea-US FTA, and therefore decided to file an appeal.”

The Ministry of Justice noted that Article 11.1 of the Korea-US FTA stipulates that the provision applies to measures adopted or maintained by a party in relation to investment or investors, and said, “If we do not appeal the UK first-instance court’s dismissal ruling, which judged that Article 11.1 is not a jurisdictional or gateway clause, there is a risk of negatively affecting the interpretation and application of investment agreements with identical or similar wording in the future, as well as an increased likelihood of unjust ISDS claims. These considerations were taken into account in the decision to file the appeal.”

Here, the phrase “investment agreements with identical or similar wording” is interpreted as referring to the ISDS with the US-based hedge fund Mason Management. Mason also filed an ISDS claim, alleging that the Korean government unfairly intervened during the merger process of Samsung C&T and Cheil Industries, and the government filed an annulment lawsuit in July. The Ministry added, “We will do our utmost to correct the first-instance dismissal ruling in the upcoming appeal trial.”

Elliott urged the government to “reconsider” its decision to appeal. In a statement, Elliott emphasized, “While we did not expect the Republic of Korea to continue to challenge the arbitration award, this is a wrong course of action, especially considering that Korea has already lost the annulment lawsuit.” They also pointed out, “Korea’s actions undermine its own efforts to build a fair, transparent, and trustworthy capital market and further entrench the ‘Korea Discount.’” They warned that the continued challenges to the arbitration award would result in accumulating daily delay interest and additional litigation costs, imposing a greater burden on taxpayers, and stated, “The public should no longer be blinded or deafened to their government’s corrupt acts and mistakes.”

Previously, Elliott filed an ISDS claim in July 2018, alleging that the Blue House and the Ministry of Health and Welfare pressured the National Pension Service to vote in favor during the merger process of Samsung C&T and Cheil Industries in 2015, causing massive losses. The Permanent Court of Arbitration (PCA) tribunal ruled on June 20 last year that the Korean government must compensate $53,586,931 (approximately 69 billion KRW based on the exchange rate of 1,288 KRW at the time of the ruling), including delay interest and legal costs, totaling about 130 billion KRW. The Ministry of Justice filed an annulment lawsuit with the UK court where the arbitration took place, but the UK Commercial Court dismissed the case earlier last month after about a year.