The South Korean government is exploring the possibility of exercising subrogation rights regarding the approximately 153 billion won ($153 million) compensation it is liable for following a loss in an international investment dispute with the U.S.-based hedge fund Elliott. Lee Jin-soo, the acting Minister of Justice, stated that the government will determine its response after reviewing the legal basis of the arbitration ruling and the requirements for subrogation.
During a meeting of the National Assembly's Legislative Judiciary Committee on November 4, Lee responded to a request from lawmaker Son Sol of the progressive party for a subrogation claim, saying, "We are currently closely examining the legal basis for the compensation ordered in the ISDS ruling, including the amount of 153 billion won, and will set our direction after this review."
Son emphasized, "I believe the burden of the national disgrace should not fall on the citizens," pointing out that the public should not bear the compensation costs.
In response, Lee acknowledged that while the state has incurred a responsibility to compensate, the legal requirements for exercising subrogation, such as proving intent or gross negligence, must also be considered. He indicated that these aspects would be reviewed as well.
The dispute originated from the merger between Samsung C&T and Cheil Industries in 2015. Elliott, a shareholder in Samsung C&T, claimed that the South Korean government improperly intervened in the National Pension Service's voting rights, causing financial harm. In July 2018, Elliott initiated an ISDS claim based on the Korea-U.S. Free Trade Agreement (FTA).
In June 2023, the arbitration tribunal recognized the government's liability and ordered it to pay Elliott approximately $48.49 million in principal and delayed interest. The government contested this ruling by filing a lawsuit in July 2023 to annul the decision in a British court.
The British first-instance court dismissed the government's lawsuit in August 2024, but the appeals court accepted the government's appeal in July of the previous year, sending the case back to the first instance. Subsequently, the first-instance court partially annulled the original arbitration ruling and returned the case to the arbitration tribunal for a retrial.
However, the retrial tribunal ruled on September 30 that there was a causal relationship between the government's intervention in favor of the merger and Elliott's damages. As a result, the government is now liable for approximately 153 billion won in compensation, including principal and delayed interest.
After analyzing the ruling and consulting with relevant ministries, government-appointed law firms, and external experts, the Ministry of Justice decided on October 28 not to pursue further annulment lawsuits in the British court.
With the decision not to contest the ruling further after more than eight years of dispute, the question of who will ultimately bear the compensation burden remains a significant issue.
* This article has been translated by AI.
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