Government wins 160 billion won ISDS case against Elliott; key was rejecting ‘National Pension Service = government’ argument

[Financial News] The Korean government has prevailed in a lawsuit to set aside an Investor–State Dispute Settlement (ISDS) award that Elliott Management, a US hedge fund, had obtained, and has been provisionally relieved from paying about 160 billion won in damages. Elliott Management had argued that it suffered losses because of actions by the Korean government, while the government countered that the National Pension Service is not a government body. The UK court accepted the government’s position. However, if Elliott Management appeals, the ISDS process will have to start again from the beginning, and in the worst case the amount of compensation could increase.
Joara, head prosecutor and head of the International Dispute Settlement Division, said at Government Complex Gwacheon on the 24th, "We have won the lawsuit to set aside the damages award in favor of Elliott Management, which had opposed the merger between Samsung C&T Corporation and Cheil Industries," adding, "Through four attempts over three rounds of litigation, we secured a rare decision from a UK court setting aside an arbitral award, something that happens in only about 3% of cases."
The Elliott Management case dates back to 2015. That year, then-President Park Geun-hye and former Minister of Health and Welfare Moon Hyung-pyo were found to have exerted improper pressure so that the National Pension Service (NPS) would vote in favor of the merger between Samsung C&T Corporation and Cheil Industries. With the NPS’s support, the merger went through at a time when Samsung C&T Corporation’s share price was significantly undervalued and Cheil Industries’ value was overstated, causing losses to Samsung C&T Corporation shareholders. Before the merger, Lee Jae-yong held only shares in Cheil Industries, but the deal enabled him to solidify his control over the entire Samsung Group. In July last year, Lee received a final acquittal from the Supreme Court of Korea on charges related to the allegedly unfair merger.
Elliott Management, which was a shareholder of Samsung C&T Corporation, filed an Investor–State Dispute Settlement (ISDS) claim in July 2018, asserting that government intervention in the merger between Samsung C&T Corporation and Cheil Industries caused it share-price losses of 1 trillion won. Elliott Management argued that the National Pension Service, also a shareholder of Samsung C&T Corporation, should have opposed the merger in order to protect shareholder value.
In June 2023, the Korean government partially lost in the arbitration proceedings and was ordered to pay about 60 billion won in damages and roughly 100 billion won in delay interest, for a total liability of around 160 billion won. The arbitral tribunal had accepted the argument that a chain of government entities—Cheong Wa Dae (the Blue House), the Ministry of Health and Welfare, and the National Pension Service—had acted so that the NPS would vote in favor of the merger, thereby causing losses to Elliott Management as a shareholder of Samsung C&T Corporation.
A month later, the Korean government filed an action in a UK court, the seat of arbitration, to set aside the award, but the case was dismissed on procedural grounds. The court held that the claim did not fall within the scope of ISDS proceedings under Article 11.1 of the United States–Korea Free Trade Agreement (KORUS FTA). The government then appealed that dismissal, and in July 2025 the UK court overturned the earlier decision and remanded the case for a first-instance hearing on the set-aside action.
In the renewed proceedings, the Korean government advanced the argument that "the National Pension Service is not the government" with respect to the parts of the arbitral award where it had partially lost. It contended that the National Pension Service is a separate legal entity, that managing a public pension fund is not a core sovereign function, and that the NPS’s decision-making process is independent. The UK court accepted the position that the National Pension Service is not a government agency, thereby rejecting the narrative of a single chain of government bodies running from Cheong Wa Dae to the Ministry of Health and Welfare and then to the National Pension Service.
However, this victory in the set-aside action does not mean the government has won on the merits; it means the arbitral proceedings must go back to square one for a fresh determination. If Elliott Management appeals and the UK court allows the appeal, the core issues will have to be litigated again. In the merits phase, the logic of the set-aside ruling could be reversed, with a finding that the National Pension Service is in effect a government body or that the Korean government bears responsibility. In 2023 the award consisted of 60 billion won in damages and 100 billion won in delay interest; in the worst case, both the principal and interest could increase. Conversely, as in the Lone Star Funds case, the Korean government could ultimately prevail completely and see its liability reduced to zero.
Prosecutor Min Kyong Won of the Ministry of Justice noted, "The fact that those involved in the influence-peddling scandal received final guilty verdicts in domestic courts has had, and will continue to have, an adverse impact on both the earlier and any future proceedings," and added, "If an appeal is allowed and Elliott Management succeeds in proving its losses, the amount of compensation could change—in other words, it could increase."

hwlee@fnnews.com Lee Hwanju Reporter