Seoul: An international arbitration body for investor-state dispute settlement has ruled in favor of South Korea in its challenge to the award for private equity fund Lone Star over its 2012 sale of a local bank, Prime Minister Kim Min-seok said Tuesday. The International Center for Settlement of Investment Disputes (ICSID)'s annulment committee has nullified the earlier decision ordering South Korea to pay Lone Star US$216.5 million in compensation plus interest, Kim said in a briefing.
According to Yonhap News Agency, the government's compensation liability, which was roughly 400 billion won based on the current exchange rate, has been retroactively extinguished. Kim expressed his belief that this outcome signifies a positive direction for the country. Under the latest ruling, Lone Star is required to pay South Korea's legal costs incurred during the proceedings-about 7.3 billion won (US$4.98 million)-within 30 days, Kim added.
South Korea had appealed the ICSID's 2022 ruling to pay the compensation to Lone Star, after the private equity fund filed a suit in 2012 claiming that the South Korean government interfered with the sale of Korea Exchange Bank (KEB), incurring $4.67 billion in losses. The presidential office expressed satisfaction with the ruling, stating that the error has been corrected.
The spokesperson for the presidential office, Kang Yu-jung, conveyed pleasure at the positive outcome and extended gratitude to government officials and legal representatives for their dedication, as well as to the public for their trust and support. Lone Star had acquired KEB in 2003 for 1.38 trillion won and sold it to Hana Financial Group for 3.92 trillion won in 2012. They argued that government interference caused them to miss a more profitable sale opportunity.
In July 2023, Lone Star filed a suit to annul the 2022 ruling, claiming that the compensation was insufficient. Seoul also lodged a petition to cancel the award and suspend the decision in September of that year, citing the tribunal's overreach and violations of procedural rules.