▲ Kang Jun-ha, Director General for International Legal Affairs at the Ministry of Justice, explains that the South Korean government won the investor-state dispute settlement (ISDS) case filed by a Chinese investor against the Korean government, at the Government Complex Seoul in Jongno-gu, Seoul, on the 13th.
A ruling has been finalized confirming that the South Korean government has no liability for damages in an investor-state dispute settlement (ISDS) case filed by a Chinese investor against the government.
With the application to annul the adverse ruling being completely dismissed, the government has been completely relieved of its liability for damages amounting to approximately 264.1 billion won in total claims and can also recover approximately 1.5 billion won in legal costs.
The Ministry of Justice announced that the ad hoc committee of the International Centre for Settlement of Investment Disputes (ICSID) dismissed all applications for the annulment of the arbitral award filed by the claimant, Feng Zhenming, at around 5:25 a.m. on the 12th, Korea time.
The annulment committee also ordered Feng to pay approximately 1.51283 billion won in legal costs incurred by the South Korean government in the annulment proceedings, along with interest.
This case arose in connection with loans obtained from domestic financial institutions while Feng was pursuing the acquisition and development project of the Huafu Building located in Beijing, China.
After establishing PhiKorea in South Korea in October 2007, he raised 380 billion won through project financing (PF) loans arranged and payment-guaranteed by Woori Bank.
When PhiKorea subsequently failed to repay the loans, Woori Bank, which acquired the loan claims, sold the company shares received as collateral.
Feng protested against this and filed a civil lawsuit, but lost the final appeal at the Supreme Court in July 2017.
He also underwent investigations and criminal trials for facts including promising or providing money and valuables and benefits to executives and employees of Woori Bank during the loan process, and a guilty verdict was finalized in March 2017.
Feng filed an ISDS in August 2020, claiming that the bank's sale of shares and South Korea's civil and criminal judicial procedures violated the South Korea-China bilateral investment treaty.
The claim for damages initially reached approximately 2 trillion won, but was ultimately reduced to approximately 264.1 billion won during the course of the proceedings.
In May 2024, the original arbitral tribunal ruled that Feng's establishment of the company and acquisition of shares were part of an illegal plan to raise loans through bribery of financial institution executives and employees.
Accordingly, the tribunal ruled that the claims were not protected under the investment treaty, lacked jurisdiction, dismissed all claims, and ordered Feng to pay approximately 4.9126 billion won in legal costs incurred by the South Korean government, plus interest.
In September of the same year, Feng applied for annulment, arguing that the original tribunal misinterpretation of the investment treaty and domestic law, failed to guarantee sufficient opportunities to be heard, and that there were omissions and contradictions in the reasoning of the award.
However, the annulment committee rejected the application, stating that the original tribunal's interpretation of the treaty was rational, Feng was guaranteed sufficient opportunities to be heard, and the reasoning of the award was clearly presented.
Unlike an appeal, which re-examines factual and legal judgments, the ICSID award annulment procedure permits the cancellation of an award only when limited grounds are recognized, such as the tribunal's manifest excess of powers or a serious procedural violation.
The Ministry of Justice stated, "This decision reaffirms the principle that investments illegal under domestic law are not protected under ISDS," adding, "We will do our utmost to recover the legal costs and cooperate with the claimant's side to disclose the annulment decision as much as possible."
(Photo: Yonhap News)
※
Copying, redistribution, and unauthorized use in AI training are strictly prohibited.