hankyoreh

Samsung C&T’s offices in Seoul’s Seocho District

The US hedge fund Elliott Management has been confirmed to be pursuing an investor-state dispute settlement (ISDS) according to the South Korea-US Free Trade Agreement (KORUS FTA), claiming that the South Korean government exercised improper pressure in a merger between Samsung C&T and Cheil Industries.

According to accounts on May 1 from officials in related government ministries, Elliott submitted a notice of intent for arbitration to Justice Ministry on Apr. 13 based on the ISDS provisions in the KORUS FTA’s investment chapter (Chapter 11).

A senior official confirmed, “It is correct that Elliott submitted a notice of intent to the Justice Ministry based on the KORUS FTA provision in question.”

“My understanding is that the content of the notice of intent for arbitration will be made public shortly on government agency websites following in an internal review by related ministries, in accordance with the KORUS FTA’s principles of transparent disclosure of arbitration and complaints,” the official added.

A notice of intent for arbitration is part of a procedure to establish an investor’s intent for arbitration prior to submitting an official complaint against a government to the World Bank-affiliated International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C.

Under the ISDS system, overseas companies and investors can pursue international arbitration against and demand direct damages from the government of a state receiving investment when they suffer damages due to policies or institutions in that state that are in violation of obligations according to a trade agreement.

The notice of intent reportedly claims that Elliott Management, which opposed the 2015 Samsung C&T/Cheil Industries merger as a Samsung C&T shareholder, suffered damages due to the South Korean government’s improper intervention in the merger through the National Pension. In 2015, Elliott Management attempted to block the merger decision by requesting a South Korean court injunction to bar a Samsung C&T general shareholders’ meeting vote, but its case was dismissed.

On the question of whether the notice specified “improper intervention” by the South Korean government, a senior government official explained, “Notices of intent for arbitration are typically very brief, about one to two pages.”

“My understanding that Elliott deliberately avoided stating the specific nature of its claim in the notice, recognizing the likelihood of bilateral arbitration talks in the future with the party against which the complaint was made [the South Korean government,” the official added.

“It is very likely that it only included content concerning violations of provisions in the corresponding chapter of the KORUS FTA, namely those involving national treatment (Article 11.3) and minimum standard of treatment (fair and equitable treatment, Article 11.5).”

According to the KORUS FTA, the two parties have a period of at least 90 days for discussions from the notice’s submission date before an official arbitration suit. With 90 days as a minimum, discussions between Elliott and the South Korean government could continue for over three months. In the case of a KORUS FTA-based notice of intent for arbitration submitted by a US citizen in Oct. 2017 claiming that their home had been improperly appropriated through the city of Seoul’s urban redevelopment project system, the situation has yet to progress to the level of an official ICSID suit, and talks between the individual and city are reportedly still under way.

By Cho Kye-wan, staff reporter

Please direct comments or questions to [english@hani.co.kr]