ISDS final ruling on Korea-Lone Star dispute due on Aug. 31

[Photo by MK DB]

A final and legally binding rule by an international arbitrator over a decade-long legal dispute between South Korea and Lone Star Funds will be made on Aug. 31, the Ministry of Justice said on Wednesday.

The Texas-based private equity fund started the arbitration in Nov. 2012, filing with the World Bank¡¯s investor-state dispute settlement (ISDS) body to demand the South Korean government pay almost $4.7 billion for its estimated losses from delayed sale of a stake in Korea Exchange Bank (KEB).

ISDS is a system that allows overseas private investors to sue a host state when they suffer damage due to the host country¡¯s regulations or policies.

Lone Star bought a 51 percent stake in KEB for about 1.4 trillion won ($1.04 billion) in 2003 and signed a deal to sell it to HSBC for $6.2 billion in 2017. But the deal with HSBC collapsed, and Lone Star eventually sold the stake to South Korea¡¯s Hana Financial Group for 3.92 trillion won in 2012.

Despite making huge profits, Lone Star sought compensation against the Korean government, arguing that the government delayed approval and pressured to lower the price while tax authorities imposed unfair taxes when it sold the stake to Hana.

The government has responded by forming a task force on the dispute since 2012. If the government loses the case, it will be a significant hit to the budget and have an impact on other ISDS pending cases against the Seoul government.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]