In a major legal victory for South Korea, a 13-year investment dispute against Lone Star has finally been overturned, cancelling a preceding ruling that ordered the government to pay the U.S.-based private equity fund US$216.5 million. The case was handled under the ISDS system at the ICSID.
The most significant factor that went in Korea's favour during the annulment proceedings was its argument of the violation of due process by the earlier tribunal. The tribunal heavily relied upon the arbitration award issued in the dispute between Hana Financial Group and Lone Star by the ICC, to which the Korean government was not a party. Korea contended such use of evidence from a proceeding to which it was not a party, and where no opportunity to present its case or even cross-examine witnesses existed, was a grave procedural violation and against international law.
The annulment committee accepted Korea’s arguments and held that the earlier award had improperly found government liability without any proper evidentiary basis. Accordingly, all findings regarding illegality, causation, and damages against Korea were annulled.
This marks the first time South Korea has succeeded in an ISDS annulment, and the government will also recover part of its legal costs. However, Lone Star has indicated that it may seek further legal action.
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