International court orders South Korea to pay $216.5 million to US fund

An international court has ordered South Korea to pay $216.5 million to US investment firm Lone Star, ending a 10-year legal battle, officials said Wednesday.

The corporation reported that it suffered huge losses due to Seoul’s delay in agreeing to a lucrative deal.

The Washington International Dispute Resolution Center ruled on an investor-state dispute settlement lawsuit filed by Lone Star in 2012 to seek $4.68 billion in compensation from the South Korean government, and the amount requested is 4.6% of the request lone. Star”.

The Texas-based institution said its 2007 plan to sell a majority stake in Korea Exchange Bank (KEB) to global banking giant HSBC fell through as financial regulators in Seoul delayed approval of the deal.

Lone Star, which acquired a stake in the Bank of Korea Exchange for 1.38 trillion won ($1.02 billion) in 2003, planned to sell that stake to HSBC for 5.94 trillion won, but the plan ended up being sold to Hana Financial. group. Seoul for 3.9 trillion won in 2012.

Lone Star argued that South Korea deliberately blocked approval of the deal and deprived it of fair and equitable treatment and other guarantees guaranteed by the investment treaty.

South Korea denied Lone Star’s allegations, saying it treats them equally and fairly as it does with local organizations in accordance with international laws and local regulations.

The South Korean government said there were legitimate reasons for the suspension of the HSBC deal, citing legal issues related to the institution that were ongoing at the time, including allegations of stock manipulation in the context of Lone Star’s acquisition of HSBC’s credit card division. Korean exchange.

In another case, Lone Star alleged that local tax authorities applied inconsistent standards in an attempt to offset the taxes they paid on the proceeds of the sale of its assets, because the subsidiaries that did the transactions were technically located in Belgium or Luxembourg.

The corporation claims it should be exempt from taxes under South Korea’s investment treaties with European countries, but South Korea says its subsidiaries are paper companies and should not be protected by investment treaties.

It is unlikely that an ICSID decision will be overturned, although according to legal experts, there is a procedure for requesting an overturn.

The latest ruling is expected to deal a blow to South Korea, which is currently involved in 5 other investor-state arbitration disputes.

The court’s decision was closely watched in South Korea, not only because of the amount of money, but also because of the alleged involvement of several current high-ranking officials in the case.

Earlier this year, it was claimed that Prime Minister Han Deok-soo earned a total of 150 million won between November 2002 and July 2023 for his work as an adviser to the law firm Kim & Chang, which at the time represented an American firm.

Lone Star’s entry and exit from South Korea has been the target of criticism in South Korea amid widespread public opinion that the corporation made huge profits by taking advantage of the country’s economic difficulties following the Asian financial crisis in the late 1990s.

Source: Yonhap

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