An international tribunal ordered South Korea on Tuesday to pay around US$53.59 million plus interest to U.S.-based hedge fund Elliott Investment Management, bringing an end to a yearslong dispute surrounding a controversial merger of two units of Samsung Group.
The Permanent Court of Arbitration (PCA) in the Netherlands delivered the verdict in the investor-state dispute settlement (ISDS) suit that the New York-based activist fund filed in 2018 demanding the compensation of $770 million from the Seoul government.
The ordered amount represents approximately 7 percent of the firm's demand, the Ministry of Justice said in a press release.
Additionally, the Seoul government was ordered to pay an annual interest rate of 5 percent compounded from July 16, 2015, to the date of the judgment, according to the ministry.
The PCA also ordered South Korea to pay around $28.9 million to Elliott as reimbursement for its legal expenses, while the hedge fund was ordered to pay $3.46 million to the Seoul government in legal costs, the ministry said.
The total amount of payment to be estimated around 130 billion won ($101 million).
The legal battle dates back to 2015, when South Korea's state pension fund, the National Pension Service (NPS), supported the merger of Samsung CTandT Corp. and Cheil Industries Inc., a move widely seen as intended to tighten Samsung heir Lee Jae-yong's control over the family-controlled group, as his father Lee Kun-hee had suffered a heart attack the previous year.
Elliott, which held a 7.12 percent stake in Samsung CandT at the time, claimed damages resulting from the former Park Geun-hye administration's intervention in the $8 billion merger deal.
Elliott led a proxy fight against the firm's merger with Cheil Industries, citing unfair terms that it said greatly undervalued the company and investors' interest. But the controversial merger went ahead, backed by the NPS, then a major stake holder in Samsung CandT, with a swing vote in Samsung's favor.
The deal later became 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, a former health minister, Moon Hyung-pyo, and the chair of the NPS.
In 2022, the Supreme Court upheld a 2 1/2-yr prison term for Moon for pressuring the NPS to endorse the deal without proper due diligence and inflicting losses for the pension.
It marks the second time for South Korea to compensate millions of dollars in the ISDS suit. Last year, the International Centre for Settlement of Investment Disputes ordered South Korea to pay the U.S. private equity firm Lone Star Funds $216.5 million plus interest over its selloff of a local bank.
The ruling could also affect five other ongoing ISDS suits involving South Korea.
Noticeably, Mason Capital Management, a U.S. hedge fund, filed an arbitration seeking $200 million in compensation from South Korea for losses incurred from the Samsung merger.
Mason, which held a 2.2 percent-stake in Samsung CandT also opposed the merger, claiming the deal undervalued the company and investors' interest.
The ministry said it plans to announce its future plans after analyzing the ruling.
Source: Yonhap News Agency