Korea braces for possibility of losing Lone Star case - The Korea Times
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Korea braces for possibility of losing Lone Star case

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Ministry of Justice's legal affairs bureau chief Lee Sang-gab, fourth from left, speaks during a press conference on the progress of investor-state dispute settlements at the Government Complex Seoul, Tuesday. Yonhap
Ministry of Justice's legal affairs bureau chief Lee Sang-gab, fourth from left, speaks during a press conference on the progress of investor-state dispute settlements at the Government Complex Seoul, Tuesday. Yonhap

US firm ceases attempts to compromise with gov't

By Park Jae-hyuk

The Korean government is not ruling out the possibility of losing a nine-year-long legal tussle with Lone Star Funds, which could lead to a massive outflow of over $4.6 billion in taxpayers' money to the U.S. private equity firm (PEF) in the worst-case scenario.

"It is not easy for us to be 100-percent sure about winning the Lone Star case," the Ministry of Justice's international dispute settlement division director Han Chang-wan said in a press conference, Tuesday. "In particular, issues regarding the Lone Star case are complex and a great volume of documents and evidence were submitted to the tribunal, so it is difficult to predict the result."

The government was also unclear about when the arbitration decision will be reached, although the final question-and-answer sessions with arbitrators ended in October last year. The uncertainty is mainly attributed to the absence of a declaration on the termination of proceedings.

According to the International Center for Settlement of Investment Disputes, the final ruling should be made within 120 days ― or at least 180 days in extenuating circumstances ― after the declaration, so there still exists a possibility that the long-pending dispute may not be settled this year.

"The government is expecting the final decision to be made any time now, so we have held meetings regularly to draw up follow-up measures," said Lee Sang-gab, chief of the justice ministry's legal affairs bureau.

Han mentioned an application for annulment as one of methods to protest an unfavorable ruling. In that case, a three-member ad hoc committee will be organized to review an annulment for at least a year.

However, the arbitration decision cannot be nullified, unless the underlying arbitral tribunal was improperly constituted; the tribunal manifestly exceeded its powers; there was corruption on the part of a member of the tribunal; there was a serious departure from a fundamental rule of procedure; or the decision has failed to state the reasons on which it is based.

The government's remarks can be seen as proof of its skepticism about winning the legal battle which revolves mainly around the Financial Services Commission's delayed approval of the Texas-based PEF's sale of its stake in Korea Exchange Bank to Hana Financial Group in 2011.

The Office for Government Policy Coordination's financial policy division director Kwon Min-young also confirmed that Lone Star has not made any additional offers, since the government rejected the company's proposal made last November to end the dispute if the government pays $870 million.

Lone Star spokeswoman Christina Pretto told The Korea Times last December that it was a sincere proposal to resolve the long-running conflict, but she has declined to comment on the matter since January.

The muted stance may indicate that the U.S. firm decided to try to win the case through arbitration proceedings.

In addition to Lone Star, the government has clashed with Elliott Management and Mason, which have demanded compensations of $770 million and $200 million, respectively, for the government's intervention in the merger of Samsung C&T and Cheil Industries.

Schindler Elevator has also sought to receive $190 million from the government, arguing that financial authorities caused damage to the company by allowing Hyundai Elevator to issue new stocks and convertible bonds.


Park Jae-hyuk pjh@koreatimes.co.kr


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