The oral hearing for the cancellation procedure of the international arbitration judgment between the Korean government and U.S. private equity fund Lone Star was confirmed to have been held at the end of January. Lone Star filed an international arbitration lawsuit through the Investor-State Dispute Settlement (ISDS) in 2012, claiming it suffered damages due to the Korean government's undue intervention in the sale of Woori Bank, demanding a total of $4.6795 billion (approximately 6.259 trillion won). The International Center for Settlement of Investment Disputes (ICSID) ruled on August 31, 2022, that the Korean government must compensate Lone Star $216.5 million (314.7 billion won), which is 4.6% of the total claim, but both the Korean government and Lone Star filed for cancellation of the ruling.
According to ICSID on the 17th, the 'Cancellation Committee,' which is a tribunal conducting the cancellation procedure, held an oral hearing for the Korean government and Lone Star in London from January 21 to 23. This oral hearing is reported to be the final argument process in the cancellation procedure. It has been 1 year and 5 months since the Cancellation Committee was formed in November 2023. If the Cancellation Committee enters the deliberation phase following this oral hearing, a conclusion may be reached within the year.
The ICSID cancellation procedure is decided by a Cancellation Committee composed of one chairperson selected by the chair of the ICSID Board (the president of the World Bank) and two commissioners. The Cancellation Committee was formed in November 2023 and held its first meeting in January of the following year. After reviewing the cancellation applications and preparation documents submitted by both sides, the committee held the oral hearing in January.
Lone Star made a profit of 4.6 trillion won when it acquired Woori Bank in 2003 and then sold it in 2007. Lone Star subsequently claimed it suffered damages due to the Korean government's intervention during the Woori Bank sale process and filed an international arbitration lawsuit demanding a total of $4.6795 billion (approximately 6.259 trillion won). ICSID ruled in August 2022 that the 'Korean government violated the investment agreement during the sale of Woori Bank shares,' ordering the government to pay Lone Star $216.5 million.
In response, Lone Star filed a cancellation request, stating that the compensation amount was insufficient. The Korean government also simultaneously applied to ICSID for the cancellation and suspension of the Lone Star ISDS ruling. The suspension request stated that 'it is unjust to execute the original ruling while both the government and Lone Star have filed for cancellation of the ruling; thus, the execution should be suspended until the cancellation procedure is concluded.' The Cancellation Committee accepted the Korean government's suspension request, halting the subsequent procedure for the $216.5 million compensation ruling. The cancellation procedure is currently ongoing.
If the government's cancellation request is granted, the obligation to pay compensation and interest ceases. However, legal experts generally agree that the likelihood of reversing the ICSID ruling in the cancellation procedure is low. The cancellation request focuses primarily on whether the ICSID ruling process was legal, making it difficult to overturn the results.
ISDS is a mechanism that allows foreign investors to seek compensation when they suffer damages due to the laws and policies of the host country. The Lone Star case was the first instance in which a foreign investor filed ISDS against the Korean government.