Last month, Mohammed Diyani, the owner of Entekhab, an Iranian home electronics company, filed an ISD lawsuit against the Korean government. So now, the Korean government is involved in a total of three IDS lawsuits.
Of late, a rumor is going around that U.S.-based private equity fund Elliott Management will sue the National Pension Corp. for an ISD case, since the latter spoke out for a proposal as an institutional investor during the merger between Samsung C&T and Cheil Industries.
An ISD case is an international lawsuit between an investor and a nation. Losing the lawsuit necessitates spending taxpayer money. Some people are insisting that Korea needs to nurture international legal specialists with the increase in international lawsuits thanks to new FTA deals.
According to the legal service industry and financial industry, Korea has signed international investment guarantee agreements since the 1960s. Last year, Lone Star filed an ISD lawsuit for the first time in Korea based on this fact. General opinions among specialists are that active international exchanges inevitably entail international disputes and lawsuits.
But an ISD lawsuit against the Korean government causes the Korean government to cope with the lawsuit with Korean taxpayer money. Furthermore, if Lone Star wins, the victory may make the Korean government an easy target of international lawsuits.
The three current IDS cases facing the Korean government are all different. So it is quite a big challenge to predict who will file what kind of lawsuit in the future. Lone Star is a U.S.-based private equity fund, but filed the lawsuit based on the Korea-Belgium Investment Agreement by using its paper company based in Belgium. The agreement document is missing the clause that a paper company shall be excluded from a list of entities for investment protection.
Hanocal, a U.A.E. oil company, lost cases in Korean courts twice, and appealed the case to the Supreme Court of Korea. At the end of April, they filed a ISD lawsuit on the case. The ISD lawsuit was filed by Entekhab last month, even after the case was closed in the Korean court.
Recent ISD lawsuits against Korea not only involve damages from changes in laws and systems, but have strong elements of civil cases. Hundreds of millions of U.S. dollars for international lawsuits are a big headache. Another vexing fact is that Korea suffers from a severe shortage of international lawsuit specialists. Up to now, tackling the lawsuit by Lone Star has cost the Korean government about 35 billion won (US$31 million). A budget of 3.8 billion won (US$3.4 million) was apportioned to the Hanocal case.
“At the moment, foreign law firms are nearly monopolizing the international lawsuit market in Korea,” said a law school professor in Seoul. “This situation calls for nurturing international lawsuit specialists who can cover international and domestic laws and trade and investment laws.”