Key facts
- An ICSID ad hoc committee rejected a Chinese investor's bid to overturn an earlier award in favor of South Korea.
- The investor-state dispute was worth 264.1 billion won ($196 million).
- The committee ordered the Chinese investor to pay South Korea about 1.51 billion won in costs for the annulment proceedings.
- The decision reaffirmed that investments made in violation of domestic law are not protected under the ISDS system.
- The dispute involved loans received by the Chinese investor from Woori Bank for an office building acquisition in Beijing.
- The Chinese investor's claim was based on allegations that South Korea's judicial proceedings violated the investment treaty.
SEOUL, Sept. 13 (Yonhap) -- South Korea has won an investor-state dispute against a Chinese investor, with an ad hoc committee of the International Center for Settlement of Investment Disputes (ICSID) rejecting the investor's bid to overturn an earlier award in favor of the South Korean government. The decision, announced Sunday by the justice ministry, concerned a dispute valued at 264.1 billion won (US$196 million).
The ICSID committee dismissed Chinese investor Fengzhen Min's annulment application in its entirety around 5:25 a.m. Saturday (Korea time). The committee also ordered Min to pay the South Korean government approximately 1.51 billion won in costs for the annulment proceedings, plus interest.
The ministry stated that the decision reaffirmed the principle that investments made in violation of domestic law are not entitled to protection under the investor-state dispute settlement (ISDS) system.
The dispute originated from loans Min received from Woori Bank in connection with the acquisition and development of an office building in Beijing. Min established Pi Korea in South Korea in 2007 and raised 380 billion won through project financing loans arranged and guaranteed by Woori Bank. When Pi Korea failed to repay these loans, Woori Bank sold shares in the company that had been provided as collateral, leading Min to file a civil lawsuit, which he ultimately lost at the Supreme Court in 2017.
In 2020, Min initiated an ISDS claim with the ICSID, alleging that the bank's share sale and South Korea's judicial proceedings violated the investment treaty between South Korea and China. The damages claim, initially around 2 trillion won, was reduced to approximately 264.1 billion won during the proceedings.
In May 2024, an arbitral tribunal had previously found that Min's establishment of Pi Korea and its share acquisition constituted an illegal scheme to secure loans, ordering the investor to pay about 4.9 billion won in legal costs to the South Korean government. Min subsequently sought an annulment in September 2024, contending that the tribunal had misinterpreted the investment treaty and domestic law, and had not provided him with adequate opportunity to present his case.