South Korea prevails in ISDS case against Schindler

South Korea’s Justice Ministry said Friday that the government has won an international investment dispute worth about 320 billion won filed by Swiss elevator manufacturer Schindler. The ruling follows recent victories in similar investor-state dispute settlement cases involving Lone Star and Elliott.

Justice Minister Jung Sung-ho said at a briefing that an arbitral tribunal at the Permanent Court of Arbitration dismissed all claims brought by Schindler. “This amounts to a 100 percent victory for the South Korean government,” he said.

The ministry said the decision means the government will not have to pay the 320 billion won sought by Schindler and will also recover about 9.6 billion won in legal costs from the company.

Schindler, the second-largest shareholder of Hyundai Elevator, filed the ISDS claim against the South Korean government in October 2018, seeking roughly 500 billion won in damages.

The Swiss company argued that a rights offering and the issuance of convertible bonds by Hyundai Elevator between 2013 and 2015, along with the transfer of call options in 2016, were not carried out for legitimate management purposes but to strengthen the controlling stake of the family of Chairwoman Hyun Jeong-eun. Schindler claimed that regulators including the Fair Trade Commission, the Financial Supervisory Service and the Financial Services Commission failed to intervene, causing the company unfair losses.

However, the Justice Ministry said the tribunal concluded that the actions taken by the Fair Trade Commission, the Financial Services Commission and the Financial Supervisory Service fell within their lawful authority and followed adequate investigation and review.

The South Korean government has recently secured a string of victories in ISDS cases. In February, it won a lawsuit seeking to annul a ruling that had ordered it to pay about 160 billion won to U.S. hedge fund Elliott Management.

In November last year, the government also prevailed in a case seeking to overturn an ISDS arbitration ruling tied to the sale of Korea Exchange Bank to private equity firm Lone Star, allowing Seoul to avoid compensation liability of about 400 billion won.


송유근 기자 big@donga.com