CONTENTS
- 1. International Litigation | The International Litigation Arising from the Merger of Samsung C&T and Cheil Industries
- - An Order Directing the Korean Government to Pay Approximately KRW 160 Billion in Damages
- - Filing of an Action to Set Aside the Award in a UK Court
- 2. International Litigation | The Central Issue: Was the National Pension Service Truly a State Organ?
- - The UK Court's Determination: Denial of State Organ Status
- 3. International Litigation | A Reaffirmation of the Standards for State Responsibility in International Litigation
- - Daeryun Law Firm LLP's Assistance
1. International Litigation | The International Litigation Arising from the Merger of Samsung C&T and Cheil Industries
This case, which concerns international litigation, began with the 2015 merger of Samsung C&T and Cheil Industries.
Elliott, a U.S. private equity fund that was then a shareholder of Samsung C&T, claimed that the Korean government had exerted improper pressure on the National Pension Service to bring about the merger, and that as a result, the value of the shares it held declined, causing it substantial losses.
On that basis, Elliott initiated an international investment dispute (ISDS) in 2018, and this dispute expanded into questions of whether the State had intervened and of State responsibility under the international agreement.
An Order Directing the Korean Government to Pay Approximately KRW 160 Billion in Damages
The Permanent Court of Arbitration (PCA), which heard the case, partially accepted Elliott's claims.
The arbitral tribunal found that the government had influenced the National Pension Service's exercise of its voting rights, and that this had thereby breached the obligation to protect investors. It rendered an award holding that the Korean government had to pay approximately KRW 160 billion (including principal and interest).
Accordingly, the Korean government came to bear liability for a substantial sum in damages.
Filing of an Action to Set Aside the Award in a UK Court
The Korean government contested the arbitral award and filed an action to set it aside in the UK courts, the seat of arbitration (in July 2023).
At first instance, the action was initially dismissed, but on appeal the case was remanded, and the UK court subsequently ruled in favor of the Korean government.
As a result, the award of approximately KRW 160 billion in damages was set aside, and the case was to be reheard.
2. International Litigation | The Central Issue: Was the National Pension Service Truly a State Organ?
The crux of this international litigation was a single question.
Could the National Pension Service's exercise of its voting rights be regarded as an act of the Government of the Republic of Korea?
For State responsibility to be established in an international investment dispute, the conduct at issue must be a measure of the State.
In other words, it must be proven that the entity in question was a state organ or was under the control of the State.
Elliott claimed that the National Pension Service was in effect under the government's influence, and that the decision to approve the merger was the result of State intervention.
The Korean government, by contrast, countered that the National Pension Service is a legally independent and autonomous fund-management entity, and that it cannot be regarded as a state organ on that basis alone.
The UK Court's Determination: Denial of State Organ Status
The UK court accepted the Korean government's argument.
The court found that, after a comprehensive review of the legal structure and operating arrangements of the National Pension Service, among other factors, it could not be equated with the Government of the Republic of Korea or regarded as a state organ on that basis alone.
The court therefore held that it was legally problematic for the Permanent Court of Arbitration to have treated the National Pension Service's exercise of its voting rights as a measure of the State and to have recognized liability for damages.
As a result, the arbitral award was set aside and the obligation to pay approximately KRW 160 billion in damages was provisionally resolved, and it is likely that the case will be remanded to the arbitral proceedings or that the appellate proceedings will resume through the filing of an appeal by Elliott.
3. International Litigation | A Reaffirmation of the Standards for State Responsibility in International Litigation
This judgment is an important determination regarding the extent to which State responsibility may be recognized in international litigation.
It is significant in the following respects.
✔Even an arbitral award may be set aside by the courts at the seat of arbitration
✔An international investment dispute may remain subject to judicial review even after arbitration
✔The legal distinction between the State and public institutions may determine the scale of financial liability
Because the possibility of a further appeal by Elliott remains in this case, the dispute has not been entirely concluded.
That said, with this judgment the Korean government's obligation to pay approximately KRW 160 billion in damages has, for the time being, been resolved, and the course of the international litigation has, to a considerable extent, shifted in the Korean government's favor.
Daeryun Law Firm LLP's Assistance
In an international investment dispute, highly advanced issues of international law and procedure are interwoven, including the attribution of State responsibility, the legal status of public institutions, the interpretation of investment treaties, and the possibility of setting aside an arbitral award.
Accordingly, a financial burden on the scale of hundreds of billions of won may turn on the early response strategy.
Daeryun Law Firm LLP provides the following integrated response in international litigation and international arbitration matters.
✔Analysis of the legal status of public institutions and public enterprises and response on the question of state organ status
✔Development of a response strategy for international arbitration and management of the proceedings as a whole
✔Response in actions to set aside an arbitral award (before the courts at the seat of arbitration)
✔Preventive advisory work on large-scale damages risk
✔Management of multinational litigation through collaboration with overseas law firms
In particular, in international disputes involving public entities such as public institutions, pension funds, and local governments, a structural analysis of whether the conduct is attributable to the State is central.
Daeryun includes a number of foreign attorneys qualified as foreign legal consultants in U.S. law who have experience in ISDS, international arbitration, and international litigation matters, and through collaboration with law firms in various countries, it reviews administrative and international law together to design defensive arguments aimed at resolving the dispute.
Daeryun can provide systematic assistance throughout the entire course of an international dispute, drawing on its experience. If you have any related inquiries, you are welcome to request a consultation.
