The South Korean government said it is appealing the ruling of the International Center for Settlement of Investment Disputes (ICSID) in favor of an Iranian electronics company that requires Seoul to compensate 73 billion won ($68 million) for the breakdown in the bid for Daewoo Electronics in 2010.
The Financial Service Commission (FSC) said Wednesday that it filed the counterclaim suit with the High Court of Justice in England that has jurisdiction on the case to ask for nullification of the lower arbitration court ruling.
In 2015, Dayyani, the largest shareholder of Iran’s biggest home appliance maker Entekhab Industrial Group, filed an international arbitration against the Korean government for violating the principle of fair treatment under the bilateral investment treaty in a deal where Entekhab sought a controlling stake in Daewoo Electronics in April 2010 through investment in its Singaporean subsidiary named D&A.
Entekhab in 2010 paid 57.8 billion won, 10 percent of the total deal price, to South Korea’s state-run Korea Asset Management Corp. (KAMCO), the largest shareholder of Daewoo Electronics at that time, in an upfront payment after being picked as a preferred bidder for Daewoo Electronics. But KAMCO canceled the contract in May 2011, questioning its funding capacity after the Iranian electronics group missed the deadline for full payment and asked for a discount.
Entekhab filed an investor-state dispute settlement (ISDS) with the ICSID, claiming that the Korean government violated the bilateral investment treaty. ISDS is a provision in bilateral and multilateral trade agreements designed to protect investors by giving them special rights to ask for compensation if there are any government-led discriminatory practices.
The ICSID ruled in favor of Dayyani under the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), ordering the Korean government to pay some 73 billion won in compensation.
The government will question validity in the ruling, claiming KAMCO is not a government office and therefore cannot be applied with ISD clause and that Dayyani cannot file the suit as the deal had been signed between D&A and KAMCO.
By Kim Dong-eun and Choi Mira
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