Elliott files lawsuit against Korean gov’t

Elliott Associates, the activist American hedge fund, formally filed a lawsuit against the Korean government in an investor-state dispute settlement, seeking at least $770 million for the Park Geun-hye administration’s alleged intervention in a controversial merger between Samsung C&T and Cheil Industries in 2015.

The Ministry of Justice said on Friday that Elliott lodged the suit after it sent a notice of intent to the Justice Ministry in April, which gave the two parties 90 days to negotiate a settlement. The government and Elliott failed to reach any agreement.

“Elliott Associates filed a notice of arbitration in an investor-state dispute against the Korean government on July 12,” said a ministry spokesperson.

The notice of arbitration is an official announcement of an investor-state dispute that can be sent 90 days after the sending of the notice of intent.

“In the notice of arbitration, Elliott claimed at least $770 million in damages for the decline of share prices [of Samsung C&T] during the approval process of the merger between Samsung C&T and Cheil Industries,” the spokesperson said.

The amount of damages rose by $100 million from the $670 million requested in April.

The U.S. fund also suggested that the settlement take place in Britain based on the United Nations Commission on International Trade Law’s arbitration rules, according to the Justice Ministry.

A public relations representative for the fund declined to comment on Friday, saying that Elliott has yet to release any statement or comment in regard to the legal filling.

The Justice Ministry said that it will work with the related government agencies - including the Office for Government Policy Coordination under the Blue House, Ministry of Strategy and Finance, Ministry of Foreign Affairs, Ministry of Welfare and Health and the Ministry of Trade, Industry and Energy - to deal with the issue.

The fund, which once held more than a 7 percent stake in Samsung C&T, has said the merger devalued the price of its holdings and that it was a maneuver meant to strengthen the control of Samsung heir Lee Jae-yong over the entire Samsung group.

Lee was the largest shareholder of Cheil Industries and the deal allowed him to become the largest shareholder in the new combined unit. In the merger, each share of Samsung C&T was exchanged for 0.35 of a share in Cheil Industries.

In August, 2017, Lee was convicted of giving a bribe to Park so the government’s National Pension Service (NPS) would vote for the merger. The NPS owned a 11.6 percent stake in Samsung C&T. Lee is appealing the conviction. Park was also convicted of accepting a bribe from Lee, which is being appealed.

Elliott is not alone in seeking damages in relation to the merger.

Mason Capital Management, another U.S. hedge fund, also sent a notice of intent to begin an investor-state dispute earlier this month. It is claiming around $175 million in damages from the Korean government.

In a separate case, the activist fund also proposed changes to Hyundai Motor’s restructuring plan.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]