The Korea Deposit Insurance Corporation lost its third trial in a liquidation case against U.S. buyout fund Lone Star, marking a shift in the court’s attitude toward the 40 billion won lawsuit.
South Korean top court said Sunday that it quashed the second appeals on the liquidation of LSF-KDIC, an investment firm jointly established by Lone Star and KDIC’s subsidiary Korea Resolution & Collection Corporation, and returned the case to the high court.
The top court ordered the KR&C to pay 39.3 billion won ($33.7 million) in U.S. dollars and $2.15 billion in Korean won for 50 percent of the liquidation expenses, arbitration costs and Lone Star’s legal service fees.
The decision by the international court should be considered a valid one, the Supreme Court said.
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| The Supreme Court of Korea (Yonhap) |
The legal fight came after LSF-KDIC tried to sell a logistics terminal located in Busan, the country’s largest port city.
Prior to the trial on Korean soil, the case was handled overseas in 2011 by the International Chamber of Commerce International Court of Arbitration, and resulted in favor of LSF-KDIC. The ICA tribunal was composed of Klaus Sachs of Germany, Neil Kaplan QC of Hong Kong and VV Veeder QC of the U.K., which ruled in favor of LSF-KDIC in 2011.
LSF-KDIC then asked the local court in Seoul to implement the ICC’s arbitration results.
However, Korea’s court rulings countered ICC’s decision on LSF-KDIC.
In August 2013, the Seoul High Court ruled in favor of the KR&C, citing that there was no recognizable “agreement” in the arbitration of KSF-KDIC and KR&C. Such ruling stood on a different ground compared to the first awards, which decided that LSF-KDIC’s claim was contrary to public policy, incompatible with the local regulations on asset-backed securitization.
In Korea, Lone Star has a public image of a vicious foreign capital, following the locally so-called “grab and run” fiasco in 2003. Lone Star bought out Korea Exchange Bank for 1.4 billion won, and claimed large dividends every year. Nine years later, it sold KEB to Hana Bank for a profit of 4.7 trillion won, and left the country.
The Financial Services Commission, the country’s highest financial decision-maker, has been trying to cut the outflow of national wealth abroad by foreign hands.
Lone Star is also known for initiating the first ever claim against the country to the International Center for Settlement of Investment Disputes in November 2012.
The ICSID was established in 1966 by the Convention on the Settlement of Investment Disputes, a multilateral treaty formulated by the Executive Directors of the World Bank, to promote international investment globally.
By Chung Joo-won (joowonc@heraldcorp.com)
