Korean government criticized for lack of transparency on ISDS suit
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Federation of Korean Trade Unions members protest at the National Assembly in Seoul, accusing the government of approving Lone Star Funds’ sale of Korea Exchange Bank to Hana Financial Group, in this Jan. 30, 2012 file photo (Korea Times).

Korea Herald 2015-05-25

Government criticized for lack of transparency on ISDS suit

While the South Korean government is facing its second international arbitration under the investor-state dispute settlement system, civic groups are demanding that the details should be made public as they could cost several billion dollars of taxpayers’ money.

The groups claimed that the government not only kept the first Lone Star arbitration process under wraps, but also hid from the public a lawsuit filed by an Abu Dhabi state-owned company. The claimed amounts for both cases are $5 trillion won ($4.55 billion) and 183.8 billion won respectively.

Lawyers for a Democratic Society, a leading association of progressive lawyers, held a press conference last week and urged the government to reveal the arbitration notice it received late last year from the Dutch subsidiaries of the International Petroleum Investment Company.

The companies, owned by Sheikh Mansour bin Zayed Al Nahyan of Abu Dhabi, filed an investor-state dispute settlement lawsuit against the Korean government, asking for a refund of the taxes which it had paid in 2010 when selling off its stake in Hyundai Oilbank to Hyundai Heavy Industries.

The arbitration was initiated last November, when the IPIC affiliates sent out the notice, and was made public in February this year after the details were published in the Global Arbitration Review journal. But the Korean government did not comment on the issue until recently.

The IPIC arbitration, which is the second ISDS lawsuit filed by foreign investors, came up even as the International Center for Settlement of Investment Disputes held its first hearing on the Lone Star case.

The ISDS mechanism grants foreign investors access to third-party arbitration tribunals for actions by relevant governments that go against agreements made in FTAs or investment treaties.

The U.S private equity fund filed an ISDS suit in 2012, arguing that the Korean government had caused financial damage by delaying the approval for its sale of Korea Exchange Bank.

But all throughout last week, while the hearings were in progress, the government task force led by the Ministry of Justice revealed little on the case, citing confidentiality.

“People, whose tax may be spent to cover the multitrillion compensation, have the right to know what is going on,” said Rep. Kim Gi-juhn of the main opposition New Politics Alliance for Democracy.

He also pointed out that the United States and Canada, when facing an international lawsuit, let the people know right away and reveal the full text of their defense statements on the Internet.

“The Korean government is stretching the meaning of the arbitration court’s confidential order,” the NDS said, supporting the lawmaker’s claim.

“It should reveal the content of the lawsuit in order to prevent unnecessary doubts.”

By Bae Hyun-jung (tellme@heraldcorp.com)

source: Korea Herald