The Japanese government called into question the legitimacy of a merger between Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering (DSME) in making an issue of the South Korean government’s shipbuilding industry restructuring plan by bringing the case to the WTO. According to the WTO’s official records released on Feb. 12, the Japanese government maintained that Korea Development Bank, the largest shareholder in DSME, sold its shares to HHI at an abnormally low price.
In filing the petition with the WTO, the Japanese government claimed that the process of the merger was in violation of WTO rules. It was the first time that the Japanese government made an issue of the merger within the WTO.
Last year, the bank decided to sell the shares to HHI in accordance with the plan. Specifically, it decided to give HHI approximately 59.7 million DSME shares and receive 9.12 million convertible and 6.1 million common stocks from Korea Shipbuilding & Offshore Engineering, which is an intermediate holding company of Hyundai Heavy Industries Group.
The Japanese government maintained that the 15.22 million shares are lower in value than the 59.7 million or so shares and the difference in value can be interpreted as subsidies for the private-sector company provided by the government-run bank. It also maintained that the lending, guarantee and insurance that Korea Development Bank, the Export-Import Bank of Korea and the Korea Trade Insurance Corp. provided for DSME in accordance with the plan also violated the WTO Agreement on Subsidies and Countervailing Measures.