(Yonhap)

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The South Korean government has scored a rare complete victory in its 13-year legal battle against U.S. private equity firm Lone Star, with an international tribunal annulling the entire damages award that had been ordered against Seoul. The decision — almost unprecedented in global arbitration — came after the country successfully argued that the original ruling contained serious procedural violations.

“The annulment committee recognized that major due process violations occurred during the arbitration proceedings, which was the decisive factor in accepting Korea’s request,” said Chung Hong-sik, director-general of the Ministry of Justice International Legal Affairs Bureau during a government briefing Tuesday.

The annulment committee under the International Centre for Settlement of Investment Disputes (ICSID) is composed of three arbitrators appointed directly by ICSID to ensure impartiality. Korea filed for annulment in 2023, followed by written submissions and a three-day oral hearing in London this January. “During the hearings, the committee raised numerous questions about procedural breaches,” Chung said, noting that the government had sensed a positive outcome.

Legal experts described the result as extraordinary: of the 133 annulment requests submitted to ICSID between its founding in 1966 and 2021, only 20 cases, or 15 percent, were even partially successful. A legal official said, “It’s extremely rare for any government to achieve a full annulment.”

The presidential office welcomed the outcome, with presidential spokesperson Kang Yu-jung saying, “We thank all government officials, legal teams, and citizens who believed in and supported us.”

Lone Star filed the investor-state dispute settlement (ISDS) case in 2012, claiming it had suffered $4.68 billion (6.85 trillion won) in damages because the Korean government had unfairly delayed approval for the sale of Korea Exchange Bank (KEB). Lone Star had purchased a 51 percent stake in KEB for 1.38 trillion won in 2003 and sold it to Hana Financial Group in 2012 for 3.92 trillion won, triggering public controversy over a “fire sale” to a foreign fund.

In 2022, an ICSID tribunal ruled partially in Lone Star’s favor, ordering Korea to pay $216.5 million — just 4.6 percent of the claimed amount. The award was later revised slightly to $216 million after Korea pointed out calculation errors in principal and interest.

Lone Star sought annulment in July 2023, arguing that the damages were insufficient. Korea countered two months later, filing for annulment on grounds of “manifest excess of powers and procedural irregularities.”

Former Justice Minister Han Dong-hoon, who oversaw the filing, insisted at the time that Korea should “fight to the end” despite skepticism among some lawmakers and lawyers. After the annulment was confirmed, Han posted on Facebook: “Lone Star lawsuit — Korea wins!”