Korean government files an appeal against the PCA ruling

The South Korean government has taken legal action to challenge the investor-state dispute settlement (ISDS) ruling that ordered the Korean government to pay 140 billion won to the U.S.-based hedge fund Elliott Investment Management. The government argues that the National Pension Service (NPS) exercising its voting rights is not related to Elliott’s investment or “governmental” action.

During a briefing at the Seoul Government Complex, Justice Minister Han Dong-hoon announced that Seoul applied the interpretation and application of the Permanent Court of Arbitration (PCA) verdict. The government has also filed an appeal at the U.K. court, the Seat of Arbitration, 28 days after the issuance of the verdict. Today was the deadline for filing the lawsuit to appeal the PCA verdict.

Minister Han emphasized that under commercial law and universally recognized common sense, minority shareholders cannot be held responsible for the actions of other minority shareholders on account of the exercise of their voting rights. He stated that the NPS is just one of the shareholders of Samsung C&T and that compensating Elliott, another shareholder, for the exercise of its commercial voting right contradicts this fundamental principle. Minister Han clarified that the NPS only exercised its voting right without exceeding its authority or pressuring anyone, highlighting that the PCA’s ruling favoring Elliott’s argument regarding the causal relationship between the NPS’s voting right and the shareholders’ loss goes against commercial law principles.

Regarding the PCA’s reference to the conviction of former health minister Moon Hyung-pyo for unfairly intervening in the merger, Minister Han emphasized that the criminal decision against former minister Moon is entirely separate from the PCA verdict. As someone who invested the case in the Special Prosecution team, Minister Han claimed to have a comprehensive understanding of the matter and stated that the South Korean government has no obligation to compensate Elliott simply because there was a minor illegality in steering the direction of the exercise of voting rights.

The South Korean justice ministry also criticized the PCA’s unfair characterization of the NPS as a “de facto State institution.” The ministry argued that the PCA arbitrarily introduced a concept not defined by the KORUS FTA and contended that the NPS did not persuade or reconcile with other shareholders, making it incorrect to classify the NPS’s exercise of voting rights as a “measure” by the State. It highlighted that the United States, where Elliott is located, also submitted a non-disputing party submission that aligns with the South Korean government’s stance.


Dong-Jun Heo hungry@donga.com