What if the Lone Star case happened today?

When those who obstructed the process try to claim credit, and those who bore risk go unrecognized, who will take responsibility for the public good in the future?

Chin Jung-kwon

The author is a professor at Kwangwoon University.

The government and ruling party have credited the victory in the Lone Star arbitration to President Lee Jae Myung’s administration. Lawmakers offered competing praise: “a feat of the new government” (Kim Min-seok), “a diplomatic achievement of President Lee” (Jung Chung-rae), “another accomplishment of the new administration” (Park Ji-won), and “clear proof of the Lee administration’s competence” (Kang Deuk-gu).

Han Dong-hoon, then justice minister, briefs reporters at the Ministry of Justice in the government complex in Gwacheon on Aug. 31, 2022, on the arbitral ruling in Korea’s investor–state dispute with Lone Star. Despite opposition from the Democratic Party, which was the main opposition party at the time, Han said the government would continue pursuing the case. [JOINT PRESS CORPS]

But supporters of the Democratic Party were taken aback. Many had expected defeat and were preparing to accuse Han Dong-hoon of wasting legal fees if Korea lost the case. The party had strongly opposed Han’s request to withdraw and refile pleadings, insisting Korea had “zero chance of winning,” would owe “interest on top of legal costs,” and was “only enriching certain law firms.” Had the government followed that advice, Korea would have lost billions of won in taxpayer money.

In reality, the administration played almost no role in the outcome. Final arguments in the case were completed in January this year, five months before the Lee administration took office. The Ministry of Justice’s international litigation office, which handled the case, was also created while Han Dong-hoon was justice minister.

Prime Minister Kim Min-seok gives an emergency briefing at the government complex in Seoul on Nov. 18 regarding Korea’s request to annul the Lone Star investor–state dispute settlement ruling. The government said that day it had been notified by the International Centre for Settlement of Investment Disputes’ annulment committee that Korea had won the case. [YONHAP]

The opposition People Power Party has also struggled to handle the victory. Some members later praised Han, while others downplayed his contribution. One party official, Kim Min-su, dismissed the attention, saying some were trying to “turn the Lone Star affair into a heroic narrative.”

Lessons matter more than credit. One question deserves attention: If the Lone Star dispute were to happen today, what would the result be?

Over 13 years of litigation, Lone Star’s damage claim dropped from 6 trillion won to 280 billion won, and now to zero. A key factor was the conviction obtained in the criminal trial over stock price manipulation involving Lone Star. Investigating international private equity funds requires expertise in financial law. Today, prosecutors have lost much of their investigative authority and soon may lose supplementary investigative powers as well. Where would a case like Lone Star be handled now?

The financial crimes joint investigation unit, revived under the previous administration, is set to be moved to a new investigative agency. Prosecutors, reluctant to serve as investigators under a new status, are expected to leave during the transition. The conviction in the stock manipulation trial was possible because the lead prosecutor, who understood the entire case, actively participated, questioning Lone Star officials and securing admissions. Under the separation of investigation and indictment, such participation is no longer allowed.

What about the bureaucracy? During the earlier stages of the Lone Star litigation, the Democratic Party insisted Korea had “zero chance of winning,” while the justice minister believed Korea had a real chance. Civil servants then still had professional judgment. Today, the official who declared that Korea could not win holds a senior post as presidential secretary for national security, without apology or resignation. If the case happened now, the government would likely forgo appeal and end up paying 400 billion won, including interest and legal costs.

Public ethics also matter. The Democratic Party put enormous pressure on the justice minister who chose to appeal. Even the Yoon administration at the time was wary because a ruling could come down during its term. An official who pushed ahead with the appeal despite political risk faced severe backlash. Yet at least one civil servant then was willing to assume that responsibility. Would that happen today?

If the Lone Star case happened now, the investigation would be weak, the indictment uncertain and the conviction unlikely. Without proving stock manipulation, Korea would also lose in arbitration. The central question in the ISDS case was who was responsible for the delays in the bank sale. Without evidence, Korea could be found to have discriminated against foreign capital, leaving the government responsible for the entire claim. Those who believed Korea had “zero chance” of winning would never authorize an appeal. Korea could end up paying the full 6 trillion won demanded by Lone Star.

The National Assembly votes on a government reorganization bill during a plenary session on Sept. 26, which includes abolishing the Prosecutors’ Office and creating a Major Crimes Investigation Agency and a Public Prosecution Agency. Shown is the Supreme Prosecutors’ Office in Seocho District, Seoul, on the same day. [YONHAP]

The recent decision to drop appeals in the Daejang-dong case shows the contrast. Some defend the treasury by pursuing appeals despite political risk; others protect fraudsters by abandoning appeals that should proceed.

The old system protected public funds. The current one no longer can. That is the true face of the “reforms” the Democratic Party has championed. When those who obstructed the process try to claim credit while those who bore the risk go unrecognized, who will take responsibility for the public good in the future?

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.