Government Loses Appeal Against ISDS Ruling Ordering 43.8 Billion KRW Compensation to US Private Equity Fund (Comprehensive)

Ministry of Justice Loses First Trial at Singapore International Commercial Court
Appeal Possible Within 28 Days... Ministry to Respond After Reviewing Judgment

The government filed an annulment lawsuit challenging the international investment dispute settlement (ISDS) ruling that ordered it to compensate the U.S. private equity firm Mason, which suffered losses from the merger of Samsung C&T and Cheil Industries, with $32 million (approximately 43.8 billion KRW), but lost in the first trial.

Yonhap News

On the 21st, the Ministry of Justice announced that the Singapore International Commercial Court upheld the original arbitration award in the government's annulment lawsuit.

Mason filed an ISDS claim against the Republic of Korea government in 2018. They argued that the Korean government, as a former shareholder of Samsung C&T, exerted undue pressure on the National Pension Service's voting rights to support the merger of Samsung C&T and Cheil Industries, which resulted in a decline in the stock prices of Samsung C&T and Samsung Electronics, causing approximately $200 million in damages.

At the time, our government claimed that the arbitral tribunal had unjustly recognized jurisdiction under the Korea-U.S. Free Trade Agreement (FTA). For ISDS jurisdiction under the FTA to be recognized, the measure must have been adopted or maintained by the government and must relate to the investor and the investment; the government argued that neither condition was met in this case.

It also pointed out an error in judging that illegal and unauthorized informal misconduct by individual public officials, including former President Park Geun-hye, constituted government-adopted measures. Furthermore, Mason was only a general partner (GP) and did not actually own the shares, so it lacked claimant status; however, the tribunal applied a law other than Korean law, where the assets are located, and recognized Mason as the legal owner.

However, in April last year, the arbitral tribunal partially accepted Mason's claims and ruled that the Korean government must pay $32,038,760 plus delayed interest (5% compound annually from July 17, 2015).

In response, our government filed an annulment lawsuit with the Singapore court, the seat of arbitration, in July last year.

If the government disagrees with this ruling, it can appeal by the 17th of next month. If no appeal is filed, the ruling will be finalized as is. The Ministry of Justice stated, "The government will prioritize national interests and work closely with government-appointed law firms and experts to thoroughly analyze the judgment and respond accordingly."