The federal government introduced on Nov. 18 that it received the annulment software case filed in objection to the Worldwide Funding Dispute Settlement (ISDS) arbitration ruling associated to the sale of Korea Trade Financial institution by overseas personal fairness fund Lone Star. The federal government additionally determined to recuperate the complete quantity of authorized prices it incurred in the course of the annulment course of from Lone Star. This marks the tip of the extended dispute with Lone Star that lasted over 20 years, concluding with a victory for the Republic of Korea authorities.
Prime Minister Kim Min-seok mentioned in a briefing on the Authorities Complicated Seoul, “The federal government at this time acquired a ruling in favor of the Republic of Korea from the Lone Star ISDS Annulment Committee of the Worldwide Centre for Settlement of Funding Disputes (ICSID) in Washington, D.C.”
Kim defined, “The Annulment Committee canceled all cost obligations for the principal quantity of $216.5 million in compensation to Lone Star and curiosity thereon that the federal government was required to pay beneath the arbitration ruling dated Aug. 30, 2022.” This retroactively extinguished the federal government’s compensation legal responsibility of roughly 400 billion received based mostly on present alternate charges that was acknowledged within the earlier ruling. The Korean authorities achieved the absolute best final result of zero compensation after waging an all-out battle to forestall treasury outflow.
Kim additionally conveyed, “The federal government additionally acquired a restoration determination from the Annulment Committee stating ‘Lone Star shall pay the Korean authorities roughly 7.3 billion received in whole authorized prices incurred in the course of the annulment proceedings inside 30 days.’” He added, “This can be a important achievement in defending nationwide funds and residents’ tax cash, and represents recognition of the Republic of Korea’s monetary supervisory sovereignty,” evaluating it as “the results of energetic litigation response by related authorities departments centered on the Ministry of Justice.”
Beforehand, Lone Star acquired a 51.02% stake in Korea Trade Financial institution, which was experiencing administration difficulties in the course of the 1997 overseas alternate disaster, for 1.383 trillion received in August 2003. Subsequently, controversy arose over the low-price sale of Korea Trade Financial institution, resulting in continued Board of Audit and Inspection audits and prosecution investigations, whereas Lone Star pursued the resale of Korea Trade Financial institution.
Lone Star signed a sale contract price roughly 5.9 trillion received with Hong Kong and Shanghai Banking Corp. (HSBC) in 2007, however the sale fell via when HSBC deserted the acquisition of Korea Trade Financial institution as a result of delays in approval from the Korean authorities. Lone Star proceeded with the sale of Korea Trade Financial institution once more, transferring it to Hana Monetary Group for 3.915 trillion received in 2012.
On this course of, Lone Star filed an ISDS price $4.6795 billion (6.259 trillion received based mostly on alternate charges on the time) in December 2012, claiming damages from unfair intervention by the Korean authorities. The declare was that authorities intervention brought about them to lose the chance to promote at a better value and compelled them to decrease the worth. This was the primary ISDS filed in opposition to the Korean authorities.
After extended worldwide litigation, ICSID declared the tip of arbitration proceedings in June 2022, 3,508 days after the lawsuit was filed and shortly after the inauguration of the Yoon Seok Youl authorities. Subsequently, in August of the identical 12 months, it dominated that the Korean authorities ought to pay $216.5 million (roughly 280 billion received, based mostly on an alternate price of 1,300 received), equal to 4.6% of the damages claimed by Lone Star. Later, the arbitration tribunal accepted the Korean authorities’s correction software claiming the compensation quantity was miscalculated, and the compensation was corrected to $216,018,682.
Nonetheless, Lone Star filed an annulment software in July of the next 12 months, claiming the compensation quantity was inadequate, and the Korean authorities additionally filed an annulment software together with a keep of execution software two months later, citing the tribunal’s extra of authority and critical violations of procedural guidelines.
With ICSID ruling in favor of the Korean authorities on Nov. 18 after receiving annulment purposes from each side, the worldwide litigation between Lone Star and the Korean authorities concluded after 13 years. Full annulment of ICSID rulings is extraordinarily uncommon. In response to ICSID, out of 503 whole rulings from 1972 to 2025, solely 25 circumstances had their annulment purposes accepted. Amongst these, solely 8 circumstances have been utterly annulled. The chance of victory was merely 1.6%.
Jung Hong-sik, director of the Worldwide Authorized Affairs Bureau of the Ministry of Justice, who carried out the arbitration proceedings, defined, “What was handiest (within the victory course of) was that important violations of due course of occurred in the course of the arbitration proceedings, which might be seen because the decisive issue for the Annulment Committee to simply accept the Korean authorities’s annulment software.”
Minister of Justice Jung Seong-ho mentioned, “In January, with the President and the (Ministry of Justice) minister absent, they did their greatest on their very own to go to ICSID and conduct oral arguments, and it appears these efforts mixed to provide good outcomes this time.” The federal government plans to research the choice doc as soon as acquired from ICSID and report back to the folks once more.
The Presidential Workplace expressed welcome relating to the federal government’s victory ruling. Presidential Workplace Spokesperson Kang Yu-jeong said, “The error within the earlier arbitration ruling that acknowledged the federal government’s compensation legal responsibility regardless of no unlawful acts by the federal government relating to the sale of Korea Trade Financial institution has been corrected,” including, “This implies the Republic of Korea authorities’s compensation legal responsibility to Lone Star was by no means established from the start.”
