The headquarters of Samsung Group in southern Seoul. (Yonhap)
SEOUL, July 18 (Korea Bizwire) — The government has filed a suit to reverse an international tribunal’s order to pay nearly US$100 million in damages to hedge fund Elliott Investment Management in a dispute stemming from the controversial 2015 merger of two Samsung Group affiliates, officials said Tuesday.
Last month, the Permanent Court of Arbitration (PCA) in the Netherlands delivered the verdict in the investor-state dispute settlement (ISDS) suit that the New York-based activist fund filed in 2018, demanding compensation of $770 million from the South Korean government.
Including delayed interest and legal fees, Seoul was ordered to pay US$107.8 million to Elliott.
The legal battle dates back to 2015, when the state-run National Pension Service (NPS) approved the merger of Samsung C&T Corp. and Cheil Industries Inc., a move widely seen as intended to tighten Samsung heir Lee Jae-yong’s control over the family-controlled group, as his father Lee Kun-hee had suffered a heart attack the previous year.
Elliott, which held a 7.12 percent stake in Samsung C&T at the time and objected to the merger, has since filed the ISDS case, claiming the then Park Geun-hye administration pressured the NPS into throwing support behind the merger.
The NPS was seen as a swing vote at that time.
The Ministry of Justice said Tuesday the government has filed a suit with a court in Britain, the location of the arbitration, to cancel the PCA verdict and has lodged a separate request with the PCA to correct “errors” in the calculation of the damages.
The ministry claimed the tribunal does not have jurisdiction to deal with the case because the NPS is not a government organization.
The ministry said disputes attributable to measures taken or retained by the government should only be within the ISDS jurisdiction under the free trade agreement (FTA) between South Korea and the United States.
Justice Minister Han Dong-hoon briefs the media at the government complex in Seoul on July 18, 2023. (Yonhap)
“It’s unfair that (the PCA) recognized the state liability on the basis of the concept of a ‘de facto state organization,’ which is not defined in the Korea-U.S. FTA,” Justice Minister Han Dong-hoon said in a media briefing.
The ministry also referred to a previous court finding, in an unsuccessful case filed by minority shareholders of Samsung C&T to nullify the merger, in which, “The NPS appeared to have exercised its voting rights independently despite former Health Minister Moon Hyung-pyo’s illegal acts.”
The merger deal was part of a massive corruption scandal that led to the ousting and the conviction of former President Park and the imprisonment of Samsung heir Lee and Moon Hyung-pyo, who was then chairing the NPS’ fund management committee.
In 2022, the Supreme Court upheld a 2 1/2-year prison term for Moon for pressuring the NPS to endorse the deal without proper due diligence and inflicting losses on the pension.
The correction request with the PCA, meanwhile, calls for a recalculation as it claims the damages ordered by the court were miscalculated by 6 billion won (US$4.7 million) more than the actual amount due to tax matters.
“If the government does not put things right (in cases like this), more unfair ISDS cases could likely be raised against the voting rights of our government organizations or public funds,” the minister said.
“I will do my utmost to the end so as not to have the precious taxpayers’ money go to waste.”
(Yonhap)
