South Korea’s decisive victory in its long-running arbitration battle with Lone Star Funds was not the results of a single authorized breakthrough or a late procedural shock.
It was the product of 20 years of institutional continuity, disciplined coordination throughout ministries and a authorized technique that by no means drifted, whilst governments modified and a whole lot of officers cycled by means of the case.
On Tuesday, an annulment committee on the Worldwide Centre for Settlement of Funding Disputes (ICSID) worn out a 2022 ruling that had ordered Seoul to pay greater than $230 million, together with curiosity, to the US non-public fairness agency.
The uncommon choice absolutely nullified the award, concluding one of many longest investor-state disputes in ICSID’s docket.
Out of greater than 500 awards issued since 1972, solely a handful, or 1.67%, have ever been annulled in full.
Behind that final result sits a quieter story of methodical statecraft.
A CASE THAT OUTLASTS ADMINISTRATIONS, MINISTRIES AND PERSONNEL
The underlying dispute dates again to the early 2000s, shortly after Lone Star acquired Korea Change Financial institution (KEB), now Hana Financial institution.
Home prison investigations into the US non-public fairness agency’s alleged stock-price manipulation involving a KEB bank card subsidiary ultimately produced responsible findings in Korean courts in 2011, judgments that later turned a basis of Seoul’s protection technique.
In 2012, Lone Star filed an ISDS declare, or investor-state dispute settlement, which permits a overseas investor to problem a bunch authorities in worldwide arbitration reasonably than within the nation’s personal courts.
The agency sought $4.7 billion in damages, arguing that Korean regulators had improperly delayed approval of its deliberate sale of KEB to HSBC in 2007.
In response, Korea’s Workplace for Authorities Coverage Coordination created a cross-ministerial job power, joined by the Ministry of Justice, Ministry of Technique and Finance, Ministry of Overseas Affairs, the Monetary Companies Fee, the Nationwide Tax Service and different companies to type a single unified workforce that might coordinate each authorized and coverage transfer.
Throughout 5 administrations and practically 20 shifts in personnel, the duty power by no means modified course.
For an investor-state dispute spanning greater than a decade, that degree of inside consistency is very atypical.
Korea stretched that self-discipline over 20 years.
THE SAME COUNSEL TEAM STAYS FOR 13 YEARS
The Korean authorities’s collection of authorized counsel additionally underlined the identical long-term strategy.
In 2012, the federal government appointed Bae, Kim & Lee LLC (BKL) as its lead Korean counsel and Arnold & Porter Kaye Scholer LLP for worldwide illustration – companies with deep expertise in arbitration, monetary regulation and investor-state litigation.
Throughout the Korean regulation agency, a specialised arbitration workforce dealt with the early phases of the case.
A number of years later, a few of these legal professionals left the agency to ascertain the boutique agency Peter & Kim, now one among Asia’s most outstanding arbitration practices, with Wolfgang Peter and his workforce from Peter & Companions.
Quite than restructure its authorized workforce, the federal government retained the identical people, preserving an unbroken chain of institutional reminiscence.
BKL continued to work alongside the boutique workforce, with two of its senior legal professionals overseeing the financial-regulatory points of the protection.
Their cooperation ensured continuity between the unique BKL construction and the later Peter & Kim lineup, permitting the federal government to function with a single cohesive authorized bench for greater than a decade.
That stability proved essential. Over 13 years, counsel produced 1000’s of pages of submissions, reportedly sufficient to fill a number of truckloads. Either side submitted greater than 1,500 reveals and practically 100 witness and professional statements.
Throughout 4 rounds of hearings in Washington, D.C. and The Hague, the federal government’s authorized posture remained meticulous, internally constant and strategically grounded.
THE STRATEGIC TURNING POINT AND THE PATH TO ANNULMENT
On the heart of Seoul’s authorized technique was Kim Kap-you (Kevin), founding accomplice at Peter & Kim, who represented the federal government all through the 13-year arbitration.
He stated the case in the end turned on a single evidentiary subject.
“Excluding the ICC award from proof was decisive in securing the win,” Kim stated in an interview with The Korea Financial Each day on Wednesday.
The 2019 ruling, issued in a separate industrial arbitration between Lone Star and Hana Monetary Group, contained language suggesting the Korean authorities’s actions might have influenced the KEB sale course of.
Though Korea was not a celebration to that continuing, the phrasing was favorable to Lone Star and, if admitted, might have formed the tribunal’s view of causation.
Kim known as it “just about Lone Star’s solely crucial piece of proof.”
The try to admit the ICC award turned the fulcrum of the annulment.
Korea argued that as a result of it had by no means participated in that arbitration, counting on the findings would violate primary ideas of occasion equality and due course of.
The annulment committee agreed. It held that the tribunal’s reliance on the ICC choice, created in a distinct case, amongst totally different events, below totally different procedural safeguards, constituted a “severe departure from a elementary rule of process.”
Underneath the ICSID Conference, that is likely one of the only a few grounds for setting apart an award.
The committee’s conclusion resulted within the full annulment of the 2022 choice, putting the Lone Star case among the many exceptionally small variety of ICSID awards ever absolutely voided.
A DELIBERATE DECISION: NO SETTLEMENT
Seoul’s refusal to settle was one other notable characteristic. In 2020, Lone Star proposed a settlement reportedly near $900 million.
After analyzing the evidentiary report and procedural dangers, the federal government’s job power declined.
Even after the 2022 ruling ordered Korea to pay roughly $216 million, far beneath Lone Star’s $4.7 billion demand, the federal government instantly ready for annulment.
When Lone Star filed its personal annulment request, Seoul handled it as a chance to carry procedural defects earlier than the committee.
LONE STAR SIGNALS A NEW LEGAL CHALLENGE
The annulment doesn’t completely shut the door on additional motion. Shortly after yesterday’s choice, Lone Star signaled that it might take into account new authorized steps.
At a authorities briefing on Wednesday, Chung Hong-sik, deputy minister and director normal for worldwide authorized affairs on the Ministry of Justice, stated Lone Star might try a second arbitration, since a small portion of the unique claims had not been barred by res judicata.
Jung pressured that any such effort would successfully restart the dispute.
“A very new tribunal would have to be constituted, and Lone Star must carry ahead new proof,” he stated. “The federal government will put together completely for that situation.”
Officers additionally emphasised that the annulment ruling addressed solely procedural violations, not the underlying allegation of regulatory interference within the KEB sale.
Prosecutor Yang Jun-yeol, who led the federal government’s authorized workforce through the annulment course of, defined, “Annulment procedures decide solely whether or not grounds for annulment existed. They don’t handle whether or not the Monetary Companies Fee was substantively at fault.”
