SEOUL, Nov. 10 (Korea Bizwire) — A mid-sized Korean construction company has raised a lawsuit against the Chinese government for violating investment contract terms. This is the first time for a Korean firm to resort to the international investment dispute settlement mechanism to try to get compensation from the Chinese government.
The Washington, D.C.-based International Center for Settlement of Investment Disputes (ICSID) said on November 4 that it has accepted a request by Korea’s Anseong Industrial to take the government of China to court. Earlier in May this year, Anseong sent a letter to the Chinese central government that it had incurred losses from an unfulfilled contract with a local government and it would be willing to raise litigation with the World Bank Group organization.
To this, the Chinese government has not responded. After waiting for the six-month cooling-off period, the company contacted ICSID which approved the case. China and Korea signed the bilateral investment treaty in 1992 to protect investment in each country. Even though the initial treaty didn’t contain an investor-state dispute settlement clause, the two parties agreed to a 2007 treaty that included the provision.
In 2006, Anseong Industrial signed an investment agreement to build a 27-hole country club in Sheyang County, Jiangsu Province. But the company wasn’t provided with all the land needed to build the facility while the local government overlooked a local company’s bid to build an unlicensed golf club in the vicinities. As a result, it withdrew from the business in 2011 by selling off the property to a Chinese buyer.
Kevin Kim, an attorney with Bae, Kim & Lee LLC who represents the case on behalf of Anseong Industrial, said, “Most Koreans believe the ICSID mechanism is detrimental to Korean business as can be seen in the experience of Lone Star Investment Advisors suing the Korean government over the handling of the Korea Exchange Bank sale. But it can also protect a small domestic company like Anseong from the abuse of power by a foreign government.”
By Sean Chung (firstname.lastname@example.org)