It was an honor to represent the Korean government over the past 13 years and help lead the dispute with Lone Star to victory.
Behind the Korean government's final victory on the 18th of last month (local time) in its international dispute with private equity firm Lone Star were steady legal battles by domestic and international law firms representing the government, alongside the government working-level team's response. Not only domestic firms like Taepyungyang, but also U.S. Big Law firm Arnold & Porter played a key role.
Anton A. Ware, an Arnold & Porter attorney, said in a June 26 interview with ChosunBiz, "The joy and relief I felt when I heard the final decision are beyond words," adding, "I felt grateful that justice was served." A Veteran in international arbitration, he has represented the Korean government and been involved in every stage of this case since 2012.
◇ the case of "Korea Exchange Bank Credit Services stock manipulation" investigated by Han Dong-hoon was the key
Ware said his prior experience handling cases entangled with Lone Star laid important groundwork for this win. In 2008, he represented Olympus Capital, the second-largest shareholder of KEB Credit Services, in an International Chamber of Commerce (ICC) arbitration against Lone Star and Korea Exchange Bank, leading to a victory in 2011.
At the time, Olympus Capital demanded damages, saying Lone Star deceived shareholders through "stock manipulation" of KEB Credit Services and caused massive losses in the process. The ICC tribunal sided with Olympus, and Lone Star and Korea Exchange Bank had to pay more than 70 billion won in damages.
Ware said, "Lone Star used its control over the Korea Exchange Bank board to pressure that it would drive KEB Credit Services into default risk and forced Olympus Capital to hand over its equity at a bargain price," adding, "After that, KEB directors appointed by Lone Star issued a false announcement that they would push a capital reduction, sending the stock price plunging."
In fact, on Nov. 20, 2003, when Lone Star announced it would acquire all of the equity in KEB Credit Services held by Olympus Capital, the company's share price soared to 5,400 won. But after the capital reduction push was released, the stock price plunged day after day. On Nov. 26, it was cut in half to 2,550 won.
However, when the stock rebounded the next day (Nov. 27), Lone Star abruptly declared the following day that it would "merge without a capital reduction," and pushed for the merger based on the previous day's closing price of 2,930 won. Ware explained, "This was the backdrop that allowed Lone Star to acquire KEB Credit Services cheaply without injecting additional funds."
The case was also personally investigated by former People Power Party leader Han Dong-hoon when he was a prosecutor, resulting in a final guilty verdict at the Supreme Court. Ware said, "In the International Centre for Settlement of Investment Disputes (ICSID) arbitration, the core issue was Lone Star's criminal conduct and the resulting indictments and convictions in Korea," adding, "Because we had deeply grasped the facts in the earlier case, we were able to explain them to the ICSID tribunal more clearly and persuasively."
◇ "We were confident of Korea's victory early this year... the 'procedural defect' was revealed"
But the international dispute with Lone Star was a tough fight. Lone Star's damages claim reached $4.6 billion (about 6.7661 trillion won), and even Big Law firm Baker McKenzie joined, complicating the legal battle.
In Aug. 2022, the ICSID tribunal, equivalent to a court of first instance, ordered the Korean government to pay $216.5 million (about 317.1 billion won) to Lone Star. That meant only 4.6% of the amount Lone Star claimed was recognized as liable for compensation.
Ware said, "The decision at the time was very disappointing," adding, "There was a serious procedural defect because it relied on evidence from a separate proceeding in which Korea did not participate, and yet did not give Korea sufficient opportunities to rebut and cross-examine."
Ware zeroed in on the procedural defect as a key issue. He said he saw the prospect of victory at the oral hearing held in London in January this year. "Over three days of hearings, it became clear that a majority of the tribunal violated procedural principles," he said. "From then on, I was confident we would win."
In the end, on the 18th of last month, the ICSID annulment committee found that due process and the right of defense required in international arbitration were seriously violated. As a result, the Aug. 2022 award was annulled in its entirety, and the damages the Korean government had to pay Lone Star disappeared. This was the best outcome the government could hope for.
Ware emphasized, "This annulment decision goes beyond simply lifting the burden of damages," adding, "It officially confirmed that Korea did not commit internationally unlawful acts."
◇ "An important precedent in the history of international arbitration... motivated by the dedication of Korean public officials"
Ware said this annulment decision will remain an important precedent in the history of international arbitration. "In international arbitration, parties often try to submit materials from separate proceedings in which the other side did not participate," he said. "This annulment committee decision made clear that to use such materials against the other party, the principles of due process must be satisfied."
He went on, "In particular, it pointed out that if such materials are submitted belatedly after the close of evidence, the procedural risk is very high," adding, "Going forward, tribunals will more strictly manage proceedings so that each party can fully contest and rebut the evidence presented."
He said working with the Korean government over the past 13 years, the dedication of Korean public officials was a great motivation. He added that he was "honored" to have helped contribute to a just result for the Korean government.