U.S.-based hedge fund Elliott Management did not appeal after the Korean government won a lawsuit to set aside an investor-state dispute settlement (ISDS) arbitral award. The case has returned to square one, and the government and Elliott are expected to wage a legal battle over whether there is liability for damages related to the Samsung C&T–Cheil Industries merger.
The Ministry of Justice said on the 25th that neither the government nor Elliott filed an appeal in the U.K. court lawsuit to set aside the Elliott ISDS arbitral award, in which Korea won last month. As a result, the outcome of the set-aside suit has been finalized.
The case was remanded to arbitration. The Ministry of Justice said it will draw on its accumulated response experience and know-how to ensure a systematic and professional response led by the International Investment Dispute Response Team in the remanded arbitration proceedings.
Earlier, Elliott filed an ISDS claim in 2015 based on the Korea-U.S. Free Trade Agreement (FTA) in connection with the Samsung C&T–Cheil Industries merger. Elliott argued that, in the process of Samsung Electronics Chairman Lee Jae-yong's succession of management control, the merger ratio was calculated to be disadvantageous to Samsung C&T, and that the National Pension Service, a major shareholder, voted in favor of the merger, causing losses to Samsung C&T shareholders. Elliott had opposed the merger.
Elliott sought 1 trillion won in damages, but the Permanent Court of Arbitration (PCA) in 2023 ordered the Korean government to pay Elliott about 160 billion won. The Korean government filed a set-aside suit in a U.K. court, the seat of arbitration, arguing that the PCA ruled on a case over which it lacked jurisdiction under the Korea-U.S. FTA.
The U.K. court accepted the Korean government's argument and annulled part of the arbitral award. It recognized that the National Pension Service has a legal personality separate from the government and that the fund's routine decision-making is not completely subordinate to the government. It therefore set aside the portion of the original award that was predicated on the fund being a state organ.
The Korean government also did not appeal this ruling. The Ministry of Justice said it decided not to appeal after comprehensively considering the U.K. court's clear decision that the National Pension Service does not constitute a state organ and the additional legal expenses that would be incurred.