Coupang Investors Request U.S. USTR Investigation... Concerns Over Trade Dispute Escalation

Petition for Investigation Under Section 301 of the Trade Act
Claims of "Discriminatory Treatment" of Coupang by the Korean Government
Initiation of International Investor-State Dispute Settlement Arbitration Proceedings

A view of a Coupang logistics center in downtown Seoul. Photo by Yonhap News Agency

Two U.S. investment firms in Coupang have filed a petition with the United States Trade Representative (USTR), requesting an investigation on the grounds that the Korean government is treating Coupang in a discriminatory manner. They have also submitted a notice of intent to initiate international investor-state dispute settlement (ISDS) arbitration proceedings against President Lee Jaemyung.

Green Oaks and Altimeter, U.S. investment companies holding shares in Coupang, claimed on January 22 (local time) that the Korean government has treated Coupang in a discriminatory manner, violating the Korea-U.S. Free Trade Agreement (FTA) and causing them losses such as a decline in stock price. They further stated that they have sent a notice of intent to the Korean government to initiate ISDS arbitration proceedings.

The two firms also argued that Korea is attacking Coupang at a pan-governmental level using a limited-scale personal data breach as a pretext. They petitioned the USTR to investigate Korea's "unjust and discriminatory actions" under Section 301 of the Trade Act and to implement appropriate trade remedies.

All shares of Coupang's Korean subsidiary are owned by its U.S.-listed parent company, Coupang Inc. More than 70% of Coupang Inc.'s voting rights are held by Kim Bomseok, a U.S. citizen and Chairman of the Coupang Inc. Board of Directors. Neil Mehta, founder and partner of Green Oaks, is a member of the Coupang Inc. Board.

In November last year, Coupang experienced a large-scale personal data breach. The Korean government and political circles have responded strongly, judging the incident to be serious and that Coupang was not cooperating with the investigation. However, some in the U.S. IT industry and Congress, as well as Coupang itself, have criticized the Korean government for allegedly targeting Coupang and treating it unfairly. It is also known that Coupang has been actively lobbying the U.S. government and Congress regarding this issue.

Section 301 of the Trade Act, under which Coupang's investors petitioned the USTR for an investigation, grants the U.S. administration the authority to respond when a foreign government violates a trade agreement with the United States or restricts or burdens U.S. trade through unfair, unreasonable, or discriminatory acts, policies, or practices. Any stakeholder may petition for an investigation, and the USTR must decide whether to initiate an investigation within 45 days of receiving the petition.

If the USTR decides to launch an investigation, it will enter into consultations with the Korean government. Should the consultations fail to yield a satisfactory result, and the investigation finds that U.S. rights have been infringed, the USTR may retaliate with measures such as tariffs or other import restrictions.