SOUTH KOREA Law and Practice Contributed by: Junu Kim, Woojae Kim, Hangil Lee and Sarthak Malhotra, Bae, Kim & Lee LLC
1.5 Major Arbitrations The most legally significant arbitrations have includ- ed both claims against Korea and claims initiated by Korean investors abroad. Claims Against Korea Lone Star v Republic of Korea (ICSID Case No ARB/12/37) • Facts: Lone Star, a US private equity fund, alleged that Korean regulators unfairly delayed approval for the sale of its controlling stake in Korea Exchange Bank and imposed excessive taxation. • Key issues: Scope of FET, definition of indirect expropriation, and valuation of damages in regu- lated financial markets. • Outcome: In 2022, the tribunal awarded USD216.5 million (well below the claimed amount). The case is under ICSID annulment review. Mohammad Reza Dayyani v Republic of Korea (PCA Case No 2015-38) • Facts: The acquisition of Daewoo Electronics by an Iranian investor was blocked by Korean authorities. • Key issues: Definition of investment, denial of justice, and Korea’s treaty obligations vis-à-vis political considerations. • Outcome: In 2018, the tribunal ruled in favour of the claimant. Payment was delayed due to sanc- tions. Follow-on arbitration is pending. Elliott Associates v Republic of Korea (PCA Case No 2018-51) • Facts: Elliott alleged that Korea pressured the National Pension Service to support a merger between Samsung affiliates, harming minority shareholders. • Key issues: Fair and equitable treatment and alleged state interference in corporate governance. • Outcome: In 2023, the tribunal ordered Korea to pay USD54 million. Korea has applied to the UK courts (the courts of the seat) to set aside the award, and the action is pending. Mason Capital v Republic of Korea (PCA Case No 2018-55) • Facts: Mason challenged the same Samsung merger, which was also challenged in Elliot Associ- ates v Korea .
a clear preference among investors for international arbitration over domestic litigation. That said, arbitration is not the exclusive route. Some of Korea’s older BITs do not contain ISDS provisions, or limit investors to state–state dispute settlement. A small number of treaties allow or require recourse to local courts for a defined period before arbitration can be commenced. In practice, domestic litigation is sometimes pursued in parallel for contractual disputes with state-owned entities, or as a strategic comple- Investor–state arbitration activity involving Korea has concentrated in a few sectors, most notably finan- cial services, banking and investment management. The highest-profile cases against Korea – Lone Star v Korea , Elliott v Korea and Mason v Korea – all arose from state measures affecting foreign shareholders in Korean banks and large corporate groups. These dis- putes reflected government regulatory intervention in sensitive areas such as bank recapitalisation, merger approvals, and corporate governance. A smaller number of cases have emerged in the ener- gy and infrastructure sector, particularly involving Korean investors abroad. For example, Korean con- struction and power companies have brought claims against states such as Oman, Libya, Saudi Arabia and Vietnam under construction or concession-related treaties. These cases highlight the global footprint of Korean contractors in large-scale projects and the political and regulatory risks they encounter overseas. The high number of disputes in the finance and infrastructure sectors can be attributed to the criti- cal importance of these industries. Financial services in Korea are subject to extensive regulation and are politically sensitive, while international infrastructure projects expose Korean investors to unpredictable political and economic conditions. These factors cre- ate an environment where disputes are likely to arise, especially due to government actions or contractual issues. ment to arbitration. 1.4 Key Industries
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