The South Korean government has again lost an investor-state dispute settlement (ISDS) case brought by U.S. hedge fund Elliott, reversing an outcome that a British court had set aside earlier this year. A remand arbitration tribunal found a causal link between the government's intervention in the 2015 merger of Samsung C&T and Cheil Industries and the losses Elliott incurred, leaving Seoul liable for damages seven months after the earlier award was annulled.
The Ministry of Justice said on the 1st that the remand tribunal handling the ISDS case Elliott filed in June 2018 issued a ruling against the South Korean government on the 30th of last month.
The tribunal found a causal link between the government's intervention to push for approval of the merger between Samsung C&T and Cheil Industries in 2015 and the losses suffered by Elliott. It ordered the government to pay Elliott $48.49 million, or about 67.9 billion won, in damages plus delayed interest. Elliott says the total payment, including accrued interest and legal costs on top of the principal award, amounts to $113 million.
Elliott, a shareholder in Samsung C&T at the time, filed the ISDS claim against the South Korean government in 2018, arguing that the government had improperly intervened in the National Pension Service's exercise of voting rights during the 2015 merger of Samsung C&T and Cheil Industries, causing it losses. In 2023, an arbitration tribunal partially accepted Elliott's arguments and found the government liable for damages. The government challenged that award in a British court, the seat of the arbitration, and in February this year the court sided with the government and annulled the award, sending the case back to arbitration.
In the annulment proceedings, the government prevailed with the argument that the National Pension Service is not a state body whose actions trigger state liability. The remand tribunal, however, concluded that a causal chain ran from the government to the National Pension Service and on to Elliott even without treating the pension fund as a state body. The British court ruling also held that intervention by the presidential office and the Ministry of Health and Welfare in the National Pension Service's decision-making during the merger of Samsung C&T and Cheil Industries constituted "relevant measures."
Whether the government can again challenge the remand award in a British court will depend on the specific reasoning and issues set out in the ruling. Kim Se-jin, head of the Trade and Industrial Policy Center at Shin & Kim and a senior foreign attorney, said that raising the same issues already litigated in the earlier annulment proceedings between the same parties in the same case could prove difficult because of res judicata and related obstacles. He added that if the reasoning or grounds in this award differ from those at issue in the earlier annulment case, there may be room to mount a fresh challenge on different grounds.
