The International Centre for Settlement of Investment Disputes on Nov. 18 overturned its 2022 ruling that ordered Korea to pay USD 216.5 million in damages to the U.S. private equity fund Lone Star. Shown is Prime Minister Kim Min-seok (center) that day speaking at a news briefing on the result of the appeal at Government Complex-Seoul in the capital's Jongno-gu District. (Yonhap News)

By Lee Dasom

The government has won its appeal of a 2022 ruling by the Washington-based International Centre for Settlement of Investment Disputes (ICSID) ordering Seoul to pay damages to the U.S. private equity fund Lone Star Funds for delaying the sale of Korea Exchange (now Hana) Bank.

The verdict negates Korea's obligation to pay USD 216.5 million (KRW 400 billion) in damages and interest 13 years after Lone Star filed the lawsuit.

Prime Minister Kim Min-seok on Nov. 18 told a news briefing at Government Complex-Seoul in Seoul's Jongno-gu District that the ICSID's annulment committee notified the government of the nullification of the awarded amount.

"The ICSID annulment committee canceled the principal amount of damages and obligatory interest of USD 216.5 million as recognized in the arbitration award dated Aug. 30, 2022," he said. "The government's compensation liability of nearly KRW 400 billion at current exchange rates per the original ruling has been completely annulled retroactively."

The prime minister added that the ICSID also ordered Lone Star to pay the government KRW 7.3 billion within 30 days for all litigation costs Seoul incurred during the annulment process.

Major violations of due process during the ICSID's arbitration process were considered a decisive factor in the successful appeal.

The prime minister said, "This victory is a major achievement that protects national finances and taxpayer funds and recognizes the Republic of Korea's sovereign authority over financial regulation."

In 2003, Lone Star bought Korea Exchange Bank for KRW 1.38 trillion and sold it back to Hana Financial Group in 2012 for nearly triple the sale price. The fund claimed that it suffered losses due to the Korean government's interference and filed for arbitration with the ICSID.

In August 2022, the ICSID ordered the government to pay damages of USD 216.5 million to Lone Star. Both the government and the fund subsequently applied to cancel this ruling, with the final verdict coming three years later.

dlektha0319@korea.kr