The Korean government won 100% in an investor-state dispute settlement (ISDS) brought by Schindler Holding AG (hereafter Schindler), a Swiss global elevator company, over Hyundai Elevator's rights issue.
Minister Jung Sung-ho of the Ministry of Justice said at a briefing at Government Complex Seoul on the afternoon of the 14th that "at about 2:03 a.m. today, the arbitral tribunal of the Permanent Court of Arbitration (PCA) dismissed all of Schindler's claims."
The Minister said, "The claim for damages of about 320 billion won that Schindler asserted during the arbitration was all dismissed," adding, "our government will also be able to recover about 9.6 billion won in litigation costs from Schindler."
Hyundai Elevator, an affiliate of Hyundai Group, carried out rights issues from 2013 to 2015. Schindler was the second-largest shareholder of Hyundai Elevator at the time and engaged in a management control dispute with Chair Hyun Jung-eun of Hyundai Group over the rights issues.
Schindler argued that Korean government agencies, including the Korea Fair Trade Commission, the Financial Services Commission, and the Financial Supervisory Service, did not faithfully exercise their regulatory and investigative authority regarding Hyundai Elevator's rights issues and the transfer of call options. Because of this, Schindler said it suffered losses of about 500 billion won, including a decline in the price of Hyundai Elevator shares, and filed an ISDS against the Korean government.
When Schindler first filed the ISDS, the damages claim was about 500 billion won, but after eight years of back-and-forth, the final claim was reduced to 320 billion won.
On this case, the arbitral tribunal found that the actions of the Korea Fair Trade Commission (FTC), the Financial Services Commission (FSC), and the Financial Supervisory Service (FSS) could be recognized as having conducted sufficient investigations and reviews within the scope of lawful authority that was neither arbitrary nor discriminatory. Therefore, it did not recognize any breach of the investment treaty by our government, meaning no state responsibility could arise under international law, and dismissed all of Schindler's claims for compensation.
The Minister said, "Through this decision, we clearly confirmed the principle of respecting a state's regulatory power—that the exercise of regulatory authority reasonably carried out for legitimate public purposes must be respected under international law," adding, "it is meaningful that we clearly separated a private dispute among shareholders from an investor-state dispute and safeguarded the national treasury."
He continued, "Following the Lone Star and Elliott cases, this victory is imprinting the Korean government's strong ISDS response capabilities on the international community," adding, "going forward, our government will devote every effort to respond to investor-state disputes, prevent the outflow of national wealth, and protect the national interest."
At the start of the briefing, the Minister said, "Politics are a bit unsettled and people are very worried because of the Iran war, but I am very pleased to deliver good news." Seong-min Seo, head of the Legal Affairs Office at the Ministry of Justice, Jo Ara, director of the International Investor-State Dispute Division, and prosecutor Yang Jun-yeol from the same division attended the briefing.