This image, provided by the Justice Ministry, shows the ministry headquarters in Gwacheon, south of Seoul. (Image courtesy of Yonhap)
SEOUL, Jul. 11 (Korea Bizwire) — South Korea has filed a suit to reverse an international tribunal’s recent order to pay US$32 million in compensation to U.S. hedge fund Mason Capital over a controversial 2015 merger of two Samsung affiliates, officials said Thursday.
The suit filed by the government is in response to the Permanent Court of Arbitration’s (PCA) April ruling in an investor-state dispute settlement (ISDS) case that Mason lodged in 2018, demanding over $200 million in compensation.
Mason claimed damages due to what it alleged was the South Korean government’s unfair intervention in favor of the merger of Cheil Industries Inc. and Samsung C&T Corp., in which the fund held a 2.18 percent share.
Mason argued that the intervention resulted in the merger being conducted at undervalued prices for Samsung C&T due to the firm’s falling stock prices.
The justice ministry concluded that the PCA erroneously interpreted the conditions for jurisdiction recognition under the South Korea-U.S. free trade agreement, resulting in an unfair ruling. This constitutes reasonable grounds for canceling the ruling, a ministry official said.
“By addressing this legally flawed ruling, the government will do its best to prevent any outflow of national wealth,” the official said.
For an ISDS suit to be valid, it must simultaneously involve actions adopted or retained by a government and affect investors or investment. However, the Mason case did not meet these requirements, hence the PCA has no jurisdiction over it, the official said.
The ministry also argued that the tribunal erroneously considered unofficial misconduct by individuals, including former President Park Geun-hye, as government action.
It further contended that Mason was erroneously recognized as a legal owner of Samsung C&T shares when, in fact, it was only a general partner acting on behalf of a fund in the Cayman Islands, which is the actual owner.
The merger, seen as aimed at tightening Samsung heir Lee Jae-yong’s control over the family-controlled group, had been the center of a massive corruption scandal that led to the ousting and the conviction of former President Park, as well as the imprisonment of Lee.
Mason had accused the Park administration of exerting excessive influence in the state-run National Pension Service, a major shareholder in Samsung C&T, which was seen as a swing vote at that time, casting its vote in favor of the merger.
(Yonhap)
