Korean gov't files appeal against Elliott damage claim

The Korean government on Tuesday filed an appeal against a ruling made by an international tribunal that ordered the government to pay up to $108.5 million to U.S. hedge fund Elliott for a controversial merger of two Samsung units.

Justice Minister Han Dong-hoon announces the government's decision to submit an appeal in the Elliott case that required it to pay up to $108.5 million. [NEWS1]

The Korean government on Tuesday filed an appeal against a ruling made by an international tribunal that ordered the government to pay up to $108.5 million to U.S. hedge fund Elliott for a controversial merger of two Samsung units.

Last month, the Permanent Court of Arbitration (PCA) partially accepted Elliott’s $770 million damage claim against the Korean government for substantial losses incurred during the 2015 merger between Samsung C&T and Cheil Industries.

The Korean government was ordered to pay $53 million to Elliott in damages, as well as interest and legal fees, bringing the total to $108.5 million.

"The Korean government concluded that the international tribunal misinterpreted the requirements for an Investor-State Dispute [ISDS] case [stated] on the Korea-U.S. FTA," the Justice Ministry said in a release Tuesday.

The Ministry said the PCA held the Korean government liable for a deal decision that was supported by the National Pension Service (NPS), categorizing the organization as a "de facto state agency,"

“It is unfair for the government to be held responsible when the Korea-U.S. FTA does not include such a concept as ‘de facto state agency’,” the ministry added.

The dispute centers around the merger between Samsung C&T and Cheil Industries, which Elliott opposed by claiming the deal greatly undervalues Samsung C&T shareholders’ interest.

Elliott at the time held a minority share of 7.1 percent in Samsung C&T while the National Pension Service had an 11.2 percent stake.

Despite Elliott’s objection, the deal went through with NPS lending its support as a swing voter.

The hedge fund accused the former Park Geun-hye administration of pressuring the NPS to approve the deal. It also claimed the merger would tighten then-Samsung heir Lee Jae-yong’s influence over the affiliates.

The deal later became the center of a major corruption case involving Park and the heads of major conglomerates in Korea.

At the time, former health minister Moon Hyung-pyo was jailed for pressuring the NPS to approve the Samsung units' merger.

Elliott used the ruling to support its damage claim with the international tribunal.

"Although Moon exercised illegal practices, the Korean court determined that the NPS ultimately made an independent decision of its own," the release said.

The Ministry of Justice also said the PCA's ruling goes against commercial law.

"It is globally accepted commercial law that a minor shareholder's exercise of a voting right cannot be a reason for it to be responsible for other shareholders," Justice Minister Han Dong-hoon said in a briefing Tuesday.

"The NPS, which was a minor shareholder, should not bear the burden of Elliott's damages just because it exercised its commercial voting right."

The Korean Justice Ministry also filed a separate cancellation suit of the PCA’s ruling with a court in Britain.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]