Kyobo Life Put Option Dispute Reignites...Appellate Court Rules "Chairman Shin Chang-jae Must Pay Indirect Compulsory Payments"

First-instance ruling invalidating indirect compulsory payments overturned

There are signs that the put option dispute between Kyobo Life Chairman Shin Chang-jae and private equity fund (PEF) managers is about to reignite. This is because, in the second-instance trial, a domestic court overturned the earlier ruling that had invalidated the International Chamber of Commerce (ICC) arbitration decision ordering Chairman Shin to pay an accumulating indirect compulsory payment of 200,000 dollars (about 288.3 million won) per day. As the strategy of "buying time" has again been put at risk by the imposition of indirect compulsory payments, Chairman Shin is expected to take the case all the way to the Supreme Court.

According to legal circles and the investment banking (IB) industry on the 25th, in the put option dispute between IMM Private Equity (PE), EQT, and Chairman Shin, the Seoul High Court the previous day further accepted the arguments put forward by the private equity funds. It overturned the first-instance ruling, which had held that the ICC lacked the authority to issue an order for indirect compulsory payments.

Earlier, in December 2024, the ICC Arbitral Tribunal ruled against Chairman Shin and ordered that, under the shareholders' agreement, if an appraiser was not appointed and an appraisal report was not submitted, he must pay IMM and EQT an indirect compulsory payment of 200,000 dollars per day, accruing until the date on which he completed performance of his obligations.

Nevertheless, Chairman Shin refused to perform his obligations, arguing that the Arbitral Tribunal did not have the authority to order indirect compulsory measures. Without indirect compulsory payments, there would be little burden in dragging out the process. In effect, IMM and EQT had hoped he would, like other financial investors (FIs) such as Affinity Equity Partners, reach a settlement and then step back. The first-instance ruling, which did not recognize the ICC’s authority to impose indirect compulsory payments, supported this strategy.

However, with the second-instance ruling reversing the decision, the situation has shifted. The appellate court also rejected the argument from Chairman Shin’s side that his obligation had expired because he had "made every effort to submit the appraisal report." The court determined that Chairman Shin faced no particular difficulty in appointing a new appraisal institution and submitting a report. In effect, the appellate court made it clear that the obligation to submit the report remains valid. As a result, Chairman Shin must now also hurry to appoint a new appraisal institution. A source in the IB industry said, "Chairman Shin’s side will take this to the Supreme Court," adding, "In the process, an interim settlement with the private equity funds could also be reached."