Government Wins 260 Billion Won ISDS Lawsuit Against Chinese Investor... Zero Compensation Liability

Full Recovery of Litigation Costs and Interest by the National Treasury
"Investments Illegal Under Domestic Law Are Not Protected"

The Korean government has ultimately prevailed in the international investment dispute (ISDS) case worth approximately 260 billion won, which was filed by a Chinese investor against the Korean government.

Kang Junho, Director of the International Legal Affairs Bureau at the Ministry of Justice, explained on the 13th at the Government Complex Seoul in Jongno-gu, Seoul, that the Korean government won the international investment dispute (ISDS) lawsuit filed by a Chinese investor against the Korean government. Photo by Yonhap News Agency

On September 13, the Ministry of Justice announced that the annulment committee of the International Centre for Settlement of Investment Disputes (ICSID) had dismissed in full the annulment request regarding the arbitral award filed by Chinese investor Min Pengzhen. The annulment committee further ordered Min to pay the Korean government approximately 1.5 billion won in litigation costs incurred throughout the annulment process, along with interest.

Previously, in October 2007, Min had established Pai Korea domestically in order to purchase a building in Beijing, China, and borrowed 380 billion won from domestic financial institutions. When Min failed to repay the loan, the financial institutions sold company shares that had been provided as collateral. In response, Min filed a civil suit but ultimately lost in July 2017 when the Supreme Court rendered its final verdict. Furthermore, Min was indicted on charges of providing money and valuables to employees of the financial institutions during the loan process and was convicted the same year.

Min then filed an ISDS claim in August 2020, arguing that the sale of the company shares by the financial institutions and the Korean judicial procedures violated the Korea-China investment agreement. The initial compensation claim was approximately 2 trillion won, but through the course of the proceedings, the final claim amount decreased to about 264.1 billion won.

However, in May 2024, the arbitral tribunal dismissed all of Min's claims, determining that the company's establishment and share acquisition were part of an illegal scheme to secure loans by providing money to financial institution employees. Subsequently, Min filed for annulment in September of the same year, arguing the tribunal had misinterpreted the investment agreement and domestic law and had failed to protect his procedural rights. However, his arguments were not accepted.

The Ministry of Justice stated, "This decision reaffirms the principle that investments illegal under domestic law are not protected under ISDS," and added, "We will do our utmost to recover litigation costs and, in consultation with the claimant, will release the annulment decision and related documents as fully as possible."

This content was produced with the assistance of AI translation services.