Korea appeals $32 million fine for 2015 Samsung merger dispute

Industry

Published: 11 Jul. 2024, 12:24 Updated: 11 Jul. 2024, 18:47

Korea appeals $32 million fine for 2015 Samsung merger dispute

The Ministry of Justice building in Gwacheon, Gyeonggi [YONHAP]

Korea on Thursday filed an appeal against a tribunal ruling that ordered it to pay $32 million to the New York-based hedge fund Mason Capital Management for intervening in a 2015 merger of two Samsung affiliates.

The appeal to the ruling made by the Permanent Court of Arbitration (PCA) was filed to the Singaporean International Arbitration Centre.

"The Korean government concluded that the international tribunal misinterpreted the requirements for an Investor-State Dispute [ISDS] case as [stated] in the Korea-U.S. FTA," the Ministry of Justice said in a release Thursday, three months after the PCA ruling in April.

The ministry claimed that the Korean government should not be held liable for "unlawful and unofficial actions done" by the "former president or the former Minister of Health and Welfare."

It also claimed that the PCA had only based its decisions on the "wrongful factual information" submitted by Mason Capital Management.

"According to the FTA, actions done by the government should 'have meaningful relation lawfully,' thus the indirect and accidental impact should not be considered," the Justice Ministry said.

The dispute concerns a 2015 merger deal between two Samsung affiliates, Samsung C&T and Cheil Industries.

Mason Capital and another U.S. hedge fund, Elliott Investment Management, opposed the deal as minority stakeholders, claiming the deal greatly undervalued Samsung C&T shareholders’ interests. Despite the objection, the merger went through with the National Pension Service (NPS) lending its support as a swing voter.

Mason Capital held a minority share of 2.18 percent in Samsung C&T at the time, while Elliott had 7.1 percent, compared to the 11.2 percent stake owned by the NPS.

The PCA ruled last April that the Korean government should pay $32.03 million to Mason Capital in damages, 7 percent of the investment firm's initial claim. It also required the government to reimburse the U.S. company for $10.32 million in legal fees and cover arbitration expenses of 630,000 euros ($675,000).

The ministry also filed an appeal against a ruling in favor of Elliott concerning the same case last July. The decision held the Korean government liable for the merger due to the support of the NPS, categorizing the organization as a "de facto state agency," to which the ministry rebutted with the assertion that "the Korea-U.S. FTA does not include such a concept as 'de facto state agency'."

Elliott accused the former Park Geun-hye administration of pressuring the NPS to approve the deal. It also claimed the merger would tighten then-Samsung heir Lee Jae-yong’s influence over affiliates.

Update, July 11: Added background details about the ruling in the cases brought by Mason Capital Management and Elliott Investment Management.

BY CHO YONG-JUN [cho.yongjun1@joongang.co.kr]