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In summary

The recent surge in the number of investor-state dispute settlement (ISDS) cases has caused Korea to review and reform its current system to respond to ISDS. With the newly introduced ISDS team under the Ministry of Justice, it is expected that Korea’s efforts for current and potential ISDS cases will be streamlined to provide for a more centralised and effective response.

Discussion points

  • The surge in the number of ISDS cases in Korea.
  • A brief explanation of recent ISDS cases against Korea.
  • An introduction to Korea’s recent efforts to respond to current and potential ISDS cases.

Surge in investment treaty cases involving Korea since 2018

Korea has been facing a surge in the number of investor-state dispute settlement (ISDS) claims since the first International Centre for Settlement of Investment Disputes (ICSID) arbitration commenced by the Lone Star Funds in 2012. To date, a total of 12 ISDS cases have been filed against Korea, among which 75 per cent were initiated only recently, since 2018 (see table below). To put things into perspective, in 2018 there were four ISDS cases against Korea; topped only by Colombia with six cases, and Spain with five cases.[1]

Pending cases

Elliott v Korea[2]

Among the pending cases, Elliott Associates LP, a US hedge fund, brought an investment treaty arbitration claim against Korea on 12 July 2018 pursuant to the Korea-US FTA and the UNCITRAL Arbitration Rules. The Permanent Court of Arbitration (PCA) acted as the administering institution.

The case relates to Elliott’s investment into Samsung C&T, a Korean company. Elliott initiated an ISDS on the grounds that Korea caused damages to its investment by inappropriately intervening in the July 2015 merger between Samsung C&T and Cheil Industries Incorporated. Both Samsung C&T and Cheil were part of the Samsung Group conglomerate (chaebol). It has been argued that the merger was conceived as a means by which Samsung Group’s controlling Lee family could transfer the control of the group from the current head of the family to his heir, which resulted in the Samsung C&T shares being undervalued to minimise the cost of the transfer of control. At the time of the merger, Korea’s National Pension Service was the largest shareholder of Samsung C&T and voted in favour of the merger. The amount claimed is reported at around US$770 million.

The case has a very high profile as it is closely connected to the political scandal, involving the previous administration under former President Geun Hye Park, in relation to widespread corruption, bribery and other criminal charges.

Mason v Korea[3]

Mason Capital LP and Mason Management LLC – both US hedge funds – initiated an investment treaty arbitration against Korea on 13 September 2018 pursuant to the same Korea-US FTA and the UNCITRAL Arbitration Rules as in the Elliott arbitration. The PCA also acted as the administering institution in this case.

As in Elliott, this arbitration concerns Mason’s investment in Samsung C&T, which is argued to have been damaged by Korea’s inappropriate interference with the Samsung C&T-Cheil merger. The amount claimed is reported to be around US$200 million.

In January 2019, Korea raised preliminary objections, claiming that Mason Management LLC was only a nominal owner of the investment, while the beneficial owner was another Cayman entity. A hearing on Korea’s preliminary objections was held in October 2019 and the relevant arbitral tribunal rendered a decision on the preliminary objections in December 2019 in favour of Mason.

Schindler v Korea[4]

As the first ISDS case against Korea under the EFTA-Korea Investment Agreement, Schindler Holding – an elevator company based in Switzerland – initiated an investment treaty arbitration against Korea on 10 October 2018 pursuant to the UNCITRAL Arbitration Rules. The PCA acted as the administering institution.

The case involves Schindler’s shareholding in Hyundai Elevator, an affiliate of the Hyundai Group. It has been argued that Schindler’s investment suffered undue dilution due to Korea’s failure to supervise, among other things, Hyundai Elevator’s wrongful capital increase between 2013 and 2015. Schindler has, in particular, found issues with the failure of Korea’s financial regulators to properly monitor and regulate Hyundai Elevator’s wrongful issuance of convertible bonds to protect management rights without performing relevant disclosure obligations and other legal requirements under Korean law. The amount claimed is reported to be around US$300 million.

Lone Star Funds v Korea[5]

The first ever ISDS case against Korea is still pending. The progress of the case is facing further disruption due to the recent tragic passing of its chair arbitrator, V V Veeder QC, in 2020.

Newly Initiated Cases

Gale v Korea[6]

Gale Investments Company LLC, a US company, filed its notice of intent in 2019 in relation to its involvement in Korea’s Songdo International Business District development project with POSCO Engineering & Construction Co Ltd. According to Gale, the Korean government allegedly coerced Gale to enter into wrongful agreements and failed to provide fair treatment to Gale, causing US$2 billion in damages.

Berjaya v Korea[7]

Berjaya Land Berhad is a Malaysian company and an ultimate holder of shares in Berjaya Jeju Resorts, a company incorporated in Korea, that was engaged in development projects on Korea’s famous resort island, Jeju. Berjaya’s claim involves allegations that its investments have been harmed by acts and omissions of the Jeju Free International City Development Centre and Korean courts.

Individuals v Korea[8]

The various investment treaty arbitrations recently initiated by individuals against Korea mainly involve claims related to expropriation of land belonging to former Korean nationals or inherited from Korean nationals. These cases have similar roots as the investment treaty arbitration initiated by a US citizen in 2018 and which was recently decided.

Concluded cases

Dayyani v Korea[9]

Claimants in Dayyani v Korea are members of Iran’s Dayyani family. They initiated an investment treaty arbitration against Korea on 10 September 2015 pursuant to the Korea-Iran BIT and the UNCITRAL Arbitration Rules. The ICSID acted as the administering institution.

The Iranian holding company Entekhab Industrial Group, owned and controlled by Dayyani, bid for the acquisition of the Korean electronics company, Daewoo Electronics, involving Korea Asset Management Company (KAMCO), a public institution that was the largest shareholder of Daewoo Electronics.

Entekhab had been chosen as the preferred bidder for acquiring Daewoo Electronics which was undergoing restructuring. Entekhab’s affiliate executed a share purchase agreement and paid approximately US$50 million as a deposit. However, issues ensued regarding Entekhab’s confirmation of financial capabilities and the share purchase agreement was unilaterally terminated in May 2011 with the deposit being forfeited.

Dayyani initiated the investment treaty arbitration on the basis that KAMCO directed and controlled the sale of Daewoo Electronics. Korea raised several jurisdictional objections including the argument that Dayyani did not have an investment for the purpose of the Korea-Iran BIT and insisted that it did not violate the BIT.

In June 2018, the arbitral tribunal did not accept Korea’s objections and found Korea to be in violation of the investment treaty. Subsequently, Korea applied to the English High Court to set aside the arbitral award on the grounds that the arbitral tribunal lacked substantive jurisdiction. However, the court dismissed Korea’s application in 2019.

The case was widely publicised not only as it was the first ISDS case decided against Korea, but also since it involved issues of negative inference drawn by the arbitral tribunal in relation to document production.

Seo v Korea[10]

Seo v Korea involves the first ISDS initiated by an individual against Korea. A US citizen initiated an investment treaty arbitration on 12 July 2018 pursuant to the Korea-US FTA and the UNCITRAL Arbitration Rules. The Hong Kong International Arbitration Centre acted as the administering institution.

The individual in this case purchased a residential property worth approximately US$300,000 in Seoul in 2001 and subsequently obtained US citizenship in May 2013. Since 2012, the area, including the individual’s property, was designated for redevelopment and the land was expropriated in exchange for compensation.

The individual alleged that the expropriation violated the Korea-US FTA because Korea failed to pay adequate compensation, the expropriation was not for a public purpose and was not conducted in a non-discriminatory manner. Korea requested the arbitral tribunal to decide on an expedited basis on preliminary objections, arguing that, among other things, the property was not an investment under the Korea-US FTA. On 24 September 2019, the arbitral tribunal accepted Korea’s preliminary objections and, consequently, dismissed the claims.

Trends of ISDS cases against Korea

The number of ISDS cases against Korea has surged since 2018 and many are still pending. This is expected to put pressure on the Korean government in terms of the necessary resources required to deal with multiple cases.

Korea has so far has adopted an approach to ISDS that generally implements jurisdictional or preliminary objections. One of the major motivations of such an approach is cost. For example, in relation to Korea’s recent victory against the abovementioned US individual, the Ministry of Justice of Korea emphasised that the case was concluded at the preliminary stage, saving time and cost.[11]

While ISDS cases against Korea are relatively steady at this early stage, as Korea gathers more cases where it successfully raises preliminary objections, it is likely that the state will gain more experience and knowledge dealing with investment disputes efficiently. Therefore, it would be prudent for investors to take note of such trends and properly review basic requirements such as investor and investment status under the relevant treaties before initiating an ISDS against Korea.

Korea’s attention and allocation of resources to ISDS cases is also expected to increase with the rise in cases. This is partially because the recent surge in the number of cases has garnered the attention of certain media that continue to take a critical view against arbitration clauses in treaties to which Korea is a party.[12] There have even been arguments that arbitration should be removed as a dispute resolution mechanism from investment treaties.[13]

Although public sentiment alone is unlikely to lead to radical change in the manner that dispute resolution mechanisms and arbitration are reflected in treaties to which Korea is a party, it is expected that Korea’s response system towards ISDS claims will continue to be enhanced and optimised to reduce the cost to taxpayers in order to, among other things, assuage any negative press.

Recent measures by Korea – presidential directive and the ISDS team

As part of Korea’s response to negative press regarding the surge in recent ISDS cases, on 5 April 2019, Korea announced the immediate introduction of a presidential directive titled ‘Regulation on International Investment Dispute Prevention and Response’.[14] The Regulation stipulates necessary provisions for creating an effective prevention and response system and a channel of cooperation among relevant government departments. Although the Regulation is an internal regulation for administrative agencies, it encapsulates Korea’s need and intent for a better coordinated ISDS prevention and response system.

Specifically, pursuant to the Regulation, a permanent response team (ie, the ISDS team) was introduced as part of the Ministry of Justice to effectively prevent and respond to international investment disputes.[15] This feature is noteworthy, since to date Korea has adopted an ad hoc approach in responding to ISDS cases. Instead of a permanent team of experts that other jurisdictions have adopted (eg, the United States), the Ministry of Justice has been allocating resources on a case-by-case basis. This is expected to change with the introduction of the Regulation and the ISDS team.

The ISDS team’s main tasks include a variety of subjects:

  • review of the possibility of a new ISDS;
  • formulation of ISDS response strategies;
  • selection, direction and monitoring of external counsel responsible for each dispute resolution process on behalf of Korea’s administrative agencies;
  • review of the adequacy of the cost of responding to ISDS cases;
  • investigation and review of information related to foreign investments in Korea, including policy, trend and administrative measures regarding foreign investment; and
  • education on the topic of preventing ISDS.[16]

The team is composed of standing and non-standing members, with the standing members being selected from among high-ranking officials of the Office for Government Policy Coordination, the Ministry of Economy and Finance, the Ministry of Foreign Affairs and the Ministry of Trade, Industry and Energy.[17] The non-standing members are composed of high-ranking officials or other personnel from agencies and institutions that are directly involved in the ISDS.[18]

Under the Regulation, administrative agencies and relevant institutions are further required to mutually cooperate in a facilitative manner in collecting necessary material and sharing information necessary for ISDS prevention and response. The ISDS team may request relevant agencies and institutions to submit materials. The team also has the authority to request interviews of officers and employees of relevant agencies and institutions.[19]

The Regulation obliges the heads of administrative institutions or relevant agencies to immediately report to the ISDS team on events that have the potential of leading to an ISDS.[20] For instance, the head of an administrative institution is required to report to the ISDS team when the institution enters into a contract with a foreign investor from a country that has an investment treaty with Korea or when a regulation, administrative measure or policy to be enacted or already in effect has the potential of infringing a foreign investor’s right to property.[21]

Therefore, as the title and content of the directive demonstrates, the purpose of this new legislation is not only to deal with ISDS cases once they are initiated but also to operate in a pre-emptive manner. To do so, it is expected that Korea will increase its resources to monitor any changes in regulations and public policies that have the potential of negatively influencing foreign investors’ property rights. While this may make it more difficult to succeed in ISDS cases against Korea, ultimately it is expected to be helpful for enhancing foreign investors’ rights in Korea and preventing unnecessary disputes.


While Korea is still relatively fresh to the ISDS arena, it has been facing increasing challenges in recent years, some of which have been successful while others have failed. This has prompted Korea to revisit its relevant policies and strategies that are expected to provide a better organised and consistent approach regarding claims by investors. In the long run, however, these changes are likely not only to benefit Korea, but ultimately also foreign investments into Korea.

ISDS cases involving Korea’s investment treaties[22]

 Year of initiationClaimantOutcome of proceedings (year)International investment agreementArbitral rules
12012LSF-KEB Holdings SCA and others (Lone Star Funds)PendingBLEU (Belgium-Luxembourg Economic Union) - Korea bilateral investment treaty (BIT)ICSID
22015Hanocal Holding BV and IPIC International BVDiscontinuedKorea-Netherlands BITICSID
32015Mohammad Reza Dayyani and othersDecided in favour of investorIran, Islamic and Korea BITUnited Nations Commission on International Trade Law (UNCITRAL)
42018US citizenDecided in favour of stateKorea-US free trade agreement (FTA)UNCITRAL
52018Elliott Associates LPPendingKorea-US FTAUNCITRAL
62018Mason Capital LP and Mason Management LLCPendingKorea-US FTAUNCITRAL
72018Schindler Holding AGPendingEuropean Free Trade Association (EFTA)- Korea Investment AgreementUNCITRAL
82019Canadian citizensNotice of intent, 23 May 2019Korea-Canada FTAN/A
92019Gale Investments Company LLCNotice of intent, 20 June 2019Korea-US FTAN/A
102019Berjaya Land BerhadNotice of intent, 17 July 2019Korea-Malaysia BITN/A
112020US citizenNotice of intent, 2 January 2020Korea-US FTAN/A
122020US citizenNotice of intent, 7 February 2020Korea-US FTAN/A


[1] UNCTAD World Investment Report 2019, Chapter III Recent Policy Development and Key Issues, p. 103.

[2] Elliott Associates LP (United States) v Republic of Korea (PCA Case 2018-51).

[3] Mason Capital LP (United States) and Mason Management LLC (United States) v Republic of Korea (PCA No 2018-55).

[4] Schindler Holding AG v Republic of Korea (PCA Case 2019-44).

[5] LSF-KEB Holdings SCA v Republic of Korea (ICSID Case ARB/12/37).

[6] Gale Investments Company v Republic of Korea, notice of intent
available at www.moj.go.kr/moj/221/subview.do?enc=Zm5jdDF8Q

[7] Berjaya Land Berhad v Republic of Korea, notice of intent available
at www.moj.go.kr/moj/221/subview.do?enc=Zm5jdDF8QEB8JTJGYmJ

[8] Relevant notices of intent available at www.moj.go.kr/moj/220/subview.do?enc=Zm5jdDF8QEB8JTJGYmJzJTJGbW9qJTJGNDM5JTJGYXJ0Y2xMaXN0LmRvJTNGcmdzQmduZGVTdHIlM0QlMjZiYnNDbFNlcSUzRCUyNnJnc0VuZGRlU3RyJTNEJTI2aXNWaWV3TWluZSUzRGZhbHNlJTI2cGFnZSUzRDElMjZiYnNPcGVuV3JkU2VxJTNEJTI2c3JjaENvbHVtbiUzRCUyNnNyY2hXcmQlM0QlMjY%3D.

[9] Mohammad Reza Dayyani v Republic of Korea (PCA Case 2015-38).

[10] Jin Hae Seo v Republic of Korea (HKIAC Case 18117).

[11] See, for example, Yonhap News article, 30 September 2019.
Available at www.yna.co.kr/view/AKR20190930166700004.

[12] Kim, ‘S. Korean investment agreements allow paper companies to
request international arbitration’, Hankyoreh, 14 January 2020.
Available at http://english.hani.co.kr/arti/english_edition/e_international/924401.html.

[13] PSDS, ‘Trade Minister of Republic of Korea should not undermine the ISDS reform objectives pursued by the Prime Minister’. Available at www.peoplepower21.org/English/1647088.

[14] Regulation available at http://law.go.kr/LSW/main.html.

[15] Regulation, Article 3.

[16] Regulation, Article 3.

[17] Regulation, Article 4.

[18] Id.

[19] Regulation, Article 6.

[20] Regulation, Article 7.

[21] Id.

[22] UNCTAD’s Investment Policy Hub; Information on the website of Korea’s Ministry of Justice.

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