Korea files for cancellation of int'l tribunal's compensation order in Lone Star case

The Korea Times

The Korea Times

National

Thu, November 30, 2023 | 23:21

Law & Crime

Korea files for cancellation of int'l tribunal's compensation order in Lone Star case

Posted : 2023-09-01 13:57

Updated : 2023-09-02 15:09

This Aug. 31, 2022 file photo shows Justice Minister Han Dong-hoon speaking during a briefing on the Washington-based International Centre for Settlement of Investment Disputes' (ICSID) verdict at the justice ministry in Gwacheon, Gyeonggi Province. Korea Times file

The Korean government on Friday filed an appeal seeking to cancel an international tribunal's order to pay compensation to American private equity firm Lone Star Funds in connection with the firm's sell-off of the now-defunct Korea Exchange Bank (KEB).

In August last year, the World Bank's International Centre for Settlement of Investment Disputes (ICSID) in Washington ordered Korea to pay $216.5 million plus interest to Lone Star, ending a decadelong legal battle over the U.S. fund's sell-off of KEB to Hana Financial Group in 2012.

The same year, the private equity fund brought a claim against Korea under the investor-state dispute settlement mechanism, insisting its 2007 plan to sell a controlling stake in KEB fell through because Seoul's financial authorities delayed approving the deal. Lone Star claimed it had been inflicted with a loss of $4.68 billion.

Lone Star eventually sold KEB to Hana in 2012 for 3.91 trillion won ($2.96 billion), which it bought in 2003 for 1.38 trillion won.

The Justice Ministry said Friday its appeal to cancel the ICSID decision was filed on grounds that the ruling constitutes a clear overstepping of the tribunal's authority, related procedures were seriously violated and the reasons behind the ruling were not written down.

The ministry argued that the ruling was made without specifying details of the Korean financial authorities' "illegal acts," as demanded by international law when acknowledging state responsibility.

The government had also been stripped of the right of audience and the right to cross-question witnesses during the process to adopt evidence while the ruling did not lay down the reasons backing the tribunal's conclusion that Lone Star had reasonable profit expectations of its investment in KEB, the justice ministry noted.

Lone Star also filed an application to cancel the ICSID decision in late July, claiming the ordered compensation is not enough. (Yonhap)