Government gives up challenge to Elliott ISDS ruling ... 153 billion won payout all but finalized

[Financial News] The government has decided not to challenge the remand arbitration ruling in the international investment dispute (ISDS) it brought against U.S. private equity firm Elliott Investment Management. In other words, it has lost. It will therefore be liable for the approximately 153 billion won in compensation ordered by the tribunal on the 30th of last month.
The Ministry of Justice said on the 28th that the government had decided not to file a set-aside action or other challenge to the remand arbitration ruling in a UK court. The decision followed a comprehensive review of opinions from relevant ministries, the law firm representing the government and outside experts, as well as an analysis of the ruling and the additional costs that would be incurred. Immediately after the ruling, the ministry said avenues for challenging it remained, including a set-aside action, and that it would consider follow-up measures such as seeking interpretation and correction of the ruling and requesting an additional award. But after nearly a month of review, it decided not to contest the ruling.
The case stemmed from the 2015 merger of Samsung C&T Corporation and Cheil Industries. Elliott, then a shareholder in the former Samsung C&T, opposed the merger. But after it went through in July that year, Elliott took issue with the National Pension Service’s (NPS) vote in favor of the merger, among other things, and in July 2018 filed an ISDS claim under the United States–Korea Free Trade Agreement (KORUS FTA) seeking about 1 trillion won. In June 2023, the original arbitration tribunal ordered the government to pay $48.49 million—about 65.8 billion won, or roughly 7% of the claim—plus interest for delay and other costs.
The government won once in a UK court. The court accepted the argument that the NPS’s exercise of its voting rights could not be considered an act of the state, and partially set aside the original ruling in February. However, it found that the interventions by the Blue House and the Ministry of Health and Welfare themselves constituted measures under the treaty, and sent the question of causation between those interventions and the losses back to the original arbitration tribunal.
The tribunal found causation in the remand arbitration. The same three arbitrators who heard the original case handled the remand and concluded that if the merger would have passed even without government intervention, there would have been no reason for a senior official to intervene at the risk of criminal liability. The government argued that lawsuits seeking damages brought by shareholders who opposed the merger had ultimately been dismissed and that Samsung Electronics Co., Ltd. Chairman Lee Jae-yong had been acquitted in his criminal trial, but its arguments were rejected. The government’s argument that damages should be recalculated to reduce the payout was rejected as outside the scope of the remand proceedings. Elliott’s argument that the payout should be increased was also dismissed.
The government will therefore have to pay $113 million, consisting of the $48.49 million in principal plus interest for delay and legal costs, or about 153 billion won. Six government agencies were involved in the decision, including the Office for Government Policy Coordination, the Ministry of Economy and Finance, the Ministry of Foreign Affairs, the Ministry of Justice, the Ministry of Trade and Industry, and the Ministry of Health and Welfare. The government said it would continue to respond thoroughly, prioritizing the national interest. 

[email protected] Kim Dong-kyu Reporter