South Korea Wins Second ISDS Case Against Iran’s Dayani Family, Blocking 770 Billion-Won Outflow

The South Korean government has won its second Investor-State Dispute Settlement (ISDS) case brought by Iran's Dayani family, who had sought hundreds of billions of won in compensation.

During a briefing held at the Government Complex Gwacheon this morning (September 30), the Ministry of Justice announced, "In the second ISDS case filed against the government by six members of the Iranian Dayani family in October 2021, the ISDS tribunal unanimously ruled entirely in our favor on September 28 (Korean time)."

The Ministry explained, "The tribunal also ordered the Dayani family to pay the South Korean government approximately 4 billion won, which accounts for 75 percent of the legal costs incurred, as well as about 800 million won in arbitration administration costs."

The Dayani family had argued that the South Korean government discriminated against investors based on nationality by delaying the payment of compensation under the pretext of approval from the Office of Foreign Assets Control (OFAC). However, the ISDS tribunal judged that the South Korean government's decision was justified in light of U.S. economic sanctions against Iran and the international economic order.

In November 2010, the Dayani family paid a contract deposit of approximately 57.8 billion won to creditors through Entekhab, an Iranian company, in order to acquire Daewoo Electronics, which was undergoing a workout process.

Daewoo Electronics' creditor group initially selected Entekhab as the preferred bidder, but canceled the sales contract and confiscated the entire deposit in 2011 on the grounds that Entekhab failed to submit a letter of investment commitment.

The Dayani family filed a first ISDS against the South Korean government, and in June 2018, a ruling was issued ordering South Korea to pay approximately 73 billion won plus interest. Although the government filed a lawsuit to annul the decision, it was dismissed, finalizing the defeat.

Subsequently, in April 2022, the government paid 62.2 billion won out of the total 85.8 billion won in compensation and interest to the Dayani family, while depositing the remaining 23.6 billion won with the court pursuant to a seizure and collection order.

In October 2021, before receiving the government's compensation, the Dayani family filed a second ISDS, claiming that "the South Korean government violated investment agreements by failing to pay compensation."

In the second ISDS, the Dayani side initially claimed approximately 1.26 trillion won—arguing this was the profit they could have earned if they had received the compensation immediately and invested it elsewhere—before later reducing the claimed amount to around 770 billion won.

The government emphasized, "Through this victory, we have blocked the outflow of approximately 770 billion won in state funds claimed by the claimant and safeguarded the national budget."

It added, "We successfully defended against the claimant's attempt to collect compensation from the first ISDS by filing a separate ISDS rather than through the courts of the enforcing state, thereby blocking the abuse of 'endless' ISDS filings."

(Photo: Provided by the Ministry of Justice, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.