Seoul: An ad hoc committee of the International Center for Settlement of Investment Disputes (ICSID) has rejected a Chinese investor's appeal to overturn a previous decision favoring the South Korean government in a high-stakes investor-state dispute. The case involved a claim of 264.1 billion won (US$196 million), as reported by the justice ministry on Sunday.
According to Yonhap News Agency, the ICSID ad hoc committee dismissed the annulment application filed by Chinese investor Fengzhen Min entirely at approximately 5:25 a.m. Saturday (Korea time). The committee also mandated that the Chinese investor pay approximately 1.51 billion won in annulment proceedings costs to the South Korean government, along with interest.
The justice ministry emphasized that the ruling reinforced the principle that investments contravening domestic law are not protected under the investor-state dispute settlement (ISDS) system. The dispute originated from loans Fengzhen Min received from a South Korean bank related to the purchase and development of an office building in Beijing.
In 2007, Min established Pi Korea in South Korea, raising 380 billion won through project financing loans arranged and guaranteed by Woori Bank. When the company defaulted on the loans, the South Korean bank sold shares it held as collateral, leading Min to file a civil lawsuit. Min ultimately lost the case at the Supreme Court in 2017.
In 2020, the Chinese investor filed an ISDS claim with the ICSID, alleging that the bank's actions, along with South Korea's civil and criminal judicial proceedings, breached the investment treaty between South Korea and China. The initial claim for damages, which was around 2 trillion won, was eventually reduced to approximately 264.1 billion won during the proceedings.
In May 2024, the arbitral tribunal concluded that Min's establishment of the company and acquisition of its shares constituted an illegal scheme to secure the loans. Consequently, it ordered the Chinese investor to pay around 4.9 billion won in legal costs to the South Korean government, plus interest.
Despite this, Min sought an annulment in September 2024, contending that the tribunal had misinterpreted the investment treaty and domestic law and had not provided him adequate opportunity to present his case.
Reflecting on the legal triumph, President Lee Jae Myung shared on his X account that the government will "respond resolutely to any unfair complaints in the future." He affirmed, "Investment made in violation of South Korean law cannot be protected just because it was made by a foreign investor," noting that the court supported this stance.