Yonhap | 12 April 2024

S. Korea ordered to pay Mason Capital 43.8 bln won in investor-state suit

by Park Boram

SEOUL, April 11 (Yonhap) — An international tribunal ordered South Korea on Thursday to pay 43.8 billion won (US$32 million) in compensation to U.S.-based hedge fund Mason Capital in an investor-state suit the company filed over a controversial 2015 merger of two Samsung affiliates, the justice ministry said.

The Permanent Court of Arbitration (PCA) in the Netherlands issued the decision nearly six years after the New York-based fund brought the investor-state dispute settlement process against the South Korean government, demanding $200 million in compensation.

The ordered compensation amount represents about 16 percent of what Mason demanded.

The tribunal also ordered the payout to Mason of compound interest of 5 percent per year on delayed payments, counted from July of 2015 until the date of the ruling, and a combined $10.9 million in legal and arbitration expenses.

In total, the government is estimated to owe Mason some 80 billion won.

The case dates back to the 2015 merger of two Samsung Group affiliates, Samsung C&T Corp. and Cheil Industries Inc., where a ratio of 0.35 Cheil shares was offered for every one Samsung CT&T share.

Mason, which held a 2.18 percent share in Samsung C&T at that time, objected to the merger, saying it undervalued Samsung C&T shares, and has since filed the suit in 2018, claiming the South Korean government had unfairly intervened in favor of the merger.

The merger, seen as aimed at tightening Samsung heir Lee Jae-yong’s control over the family-controlled group, had been the center of a massive corruption scandal that led to the ousting and the conviction of former President Park, as well as the imprisonment of Lee.

Mason accused the Park administration of exerting excessive influence in the state-run National Pension Service (NPS), a major shareholder in Samsung C&T, which was seen as a swing vote at that time, casting its vote in favor of the merger.

Mason also claimed the true purpose of the merger was to facilitate the succession within the owning family and solidify its control, which ultimately resulted in losses for Samsung C&T shareholders.

The government’s side countered that the bribery conviction of Park had nothing to do with the NPS’ voting decision, and that the NPS acts independently and free of any influence from the government.

The decision marks the second time that the PCA has ruled against the South Korean government in connection with the merger by the Samsung affiliates.

Last year, the tribunal ordered the government to pay around $53.59 million plus interest to another U.S. hedge fund, Elliott Investment Management, in an arbitration suit it filed, demanding the compensation of $770 million.

Including interest and reimbursement for its legal expenses, the total amount of payment was estimated to be around 130 billion won.

Elliott, which held a 7.12 percent stake in Samsung C&T at the time and objected to the merger, claimed the then Park administration pressured the NPS into throwing support behind the merger.

The South Korean government has since filed a follow-up suit to reverse the tribunal’s decision.

In a recent ruling, a South Korean court acquitted Lee of fresh charges connected to the 2015 merger, determining that his succession as the group’s chairman was not the sole purpose of the 2015 merger, nor was there any evidence showing that the merger inflicted financial losses on shareholders.

The justice ministry said it plans to announce its future action over the latest tribunal ruling later.