SEOUL, Jul. 13 (Korea Bizwire) — U.S. activist fund Elliott Associates has filed an investor-state dispute (ISD) suit against the South Korean government seeking compensation for its losses from a 2015 merger of two Samsung units, Seoul’s justice ministry said Friday.
The notice of arbitration lodged by the American firm comes three months after Elliot asked Seoul if it was willing to settle the matter. Under the ISD procedure, if the matter is not resolved through settlement in 90 days, the investor can bring the claim directly to the international tribunal.
The Ministry of Justice said it held talks with Elliott over the matter but failed to come to a settlement.
Elliott’s damages claim has increased by $100 million from the amount it claimed in April when it sent to South Korea the notice of intent proposing a settlement.
Elliott, with a 7 percent stake in Samsung C&T, led a proxy fight against the firm’s merger with Cheil Industries Inc., citing unfair terms that it said greatly undervalued the company and investors’ interest. The controversial merger went ahead, backed by the state-run National Pension Service’s swing vote in Samsung’s favor.
The merger deal was widely seen as a step to facilitate the leadership succession at the family-run business empire from ailing patriarch Lee Kun-hee to his son, Samsung Electronics Vice Chairman Lee Jae-yong, after the elder Lee fell into a coma in 2014.
The deal became the center of a massive corruption scandal that led to the ousting of former President Park Geun-hye and arrest of the younger Lee, who was released after winning an appeal.
Early this month, U.S.-based Mason Capital Management notified South Korea of its intent to seek $175 million payout for its losses from the Samsung merger.
In a statement issued later in the day, Elliott called on the South Korean government “to uphold its investment treaty obligations towards foreign investors including by paying damages for past breaches and working proactively to prevent future violations.”
Claiming that the former administration led by ousted leader Park Geun-hye “took action to help the Lee family’s financial interests in Samsung,” the fund also urged South Korea to stop “shielding the ruling families of the chaebol at the expense of investors.”
Elliott said it still “hopes to resolve this matter amicably through settlement, but until such time as that happens will vigorously enforce its rights on behalf of its investors.”