The Final Conclusion around the Corner
The investor-state dispute (ISD) between the South Korean government and Lone Star Funds reached the end of the procedure on June 29 and the final conclusion is around the corner.
Lone Star took over Korea Exchange Bank (KEB) in 2003 and sold it to Hana Bank in 2012 to get 4.7 trillion won. The dispute against the South Korean government was filed in November 2012 and the final conclusion of the international arbitration is scheduled to come out within 120 days.
Lone Star has claimed that it could not sell KEB at a higher price due to a delayed approval from the financial authorities of South Korea. Lone Star signed a contract with HSBC in 2007 in order to sell KEB for 5.9 trillion won. Then, a global financial crisis broke out during the pre-approval procedure and the contract was canceled. Lone Star sold KEB to Hana Bank for 3.9157 trillion won in 2012. According to Lone Star, the South Korean government put pressure to lower the price in this process as well and its taxation related to the sale was also unfair.
If the South Korean government loses the case, it must pay Lone Star US$4.68 billion. In November 2020, Lone Star said it would drop the case in exchange for US$870 million and the government rejected the offer. Even if it wins, it cannot avoid a huge cost burden. This is because the 10-year arbitrator- and lawyer-related costs will be shared by the government and the private equity firm.