Korea Times | 24 June 2020
Is Korea caught in Lone Star’s trap?
By Park Jae-hyuk
The government is apparently baffled by Lone Star Fund’s attempts to use Korean news outlets as a means of putting itself in a dominant position in its $4.68 billion legal battle against Seoul.
After the U.S. private equity firm (PEF) spoke out on its stance amid the ongoing litigation ― in contrast with the administration that has stayed mum about the case ― the government has become worried about the possible influence on the eight-year-long litigation that has recently entered a new phase with the appointment of a new arbitrator.
In 2012, the Texas-based fund filed a request with the International Center for Settlement of Investment Disputes (ICSID), claiming the government should compensate it for the "belated" approval of the sale of its KEB stake to Hana Financial Group and return the taxes it paid during the delay.
According to KBS and the Maeil Business Newspaper, Wednesday, Lone Star general counsel Michael Thomson recently told them that his company had sought a settlement with the government that would keep the dispute out of the ICSID.
He also reportedly said his company has continued to propose the out-of-court settlement over the past eight years since the beginning of the ICSID claim.
His remarks came just a few days before the appointment of the new ICSID arbitrator.
The Ministry of Justice announced Tuesday that William Ian Corneil Binnie from Canada had been appointed to replace the recently deceased V. V. Veeder, so this would allow the arbitration procedure that has been halted since March to be resumed.
At the same time, the ministry expressed its displeasure with Lone Star’s interviews with local media, denying the PEF’s claim that it had asked to negotiate with the government.
"Recently, a Lone Star official unilaterally disclosed his stance through the media, but at this moment, as the arbitration procedure has resumed with the appointment of the new chairman, such behavior could affect the result of the case, so we are seriously concerned about it," a justice ministry official said.
Some observers attributed Lone Star’s recent attempts to its concerns about losing the case, but those familiar with the company disagreed.
"Lone Star has always preferred a compromise to a litigation that takes time and results in winners and losers," said AMCHAM Korea Board Chairman Jeffrey Jones, who was among the group of attorneys for Lone Star that Kim & Chang organized when the PEF was doing business here. "It seems that the company wants to end the dispute as soon as possible."
Lone Star also told KBS it wants to end the dispute quickly, as its investors want a prompt settlement.
Industry insiders said Lone Star has been more likely to defeat the government in the ICSID claim, because it lost to Hana Financial Group in separate litigation it filed alleging the Korean firm had deceived it to purchase the KEB shares for a lower price.
"The ruling in the Hana Financial case indicates the government is considered to blame for the price cut and delayed approval," a lawyer-turned-local PEF executive said on condition of anonymity.
Song Ki-ho, the former chairman of the International Trade Committee at the Lawyers for a Democratic Society, advised the government to transparently disclose information about the Lone Star case, if it wants a better solution.
"Because the litigation has been delayed, Korea may have to pay an excessive amount of interest, even if the ICSID only partially accepts Lone Star’s request," the lawyer said. "For the public to agree with the government’s decision if it compromises with Lone Star, it should preemptively allow the public to review Lone Star’s request and the government’s countermeasures."