South Korea must indemnify 73.0 billion won ($62.9 million) to Iran’s Dayyani for the breakdown of an acquisition deal over Daewoo Electronics in 2010 after the government was defeated in the international appeals court in investor-state suit.

According to Korea’s Financial Services Commission on Sunday, the High Court of Justice in England denied the Korean government’s appeal against the International Center for Settlement of Investment Disputes (ICSID)’s ruling over a lawsuit with Dayyani, the largest shareholder of Iranian electronics maker Entekhab Industrial Group that sought to take over Daewoo Electronics in 2010 but failed to complete the deal.

Last year, the Korean government filed a counterclaim suit with the High Court of Justice in England versus the ICSID ruling in favor of Dayyani, ordering the Korean government to pay 73.0 billion won out of 93.5 billion won claimed by the Iranian company. The High Court of Justice in England has jurisdiction on the case.

In 2010, Korea’s state-run Korea Asset Management Corp. (KAMCO), creditor of Daewoo Electronics, picked Entekhab as a preferred bidder for the Korean home appliance maker. Entekhab paid 10 percent of the total deal value or 57.8 billion won as an upfront fee after signing a contract. But KAMCO canceled the contract in December 2011, arguing that the Iranian company missed the full payment deadline and asked for a discount. Dayyani in 2015 filed an international arbitration suit against the Korean government, accusing Seoul of having violated a fair treatment principle under the bilateral investment treaty. It demanded Seoul to pay 93.5 billion won including interests.

The Korean government has argued that the legal dispute was between Dayyani and Daewoo Electronics’ creditors, not the government. But the final appeals court interpreted the concept of investment and investor “in a very broad manner,” seeing “Dayyani as an investor that invested in South Korea,” said Financial Services Commission.

The Korean government is planning to arrange Daewoo Electronics’ creditors to pay the damages to Dayyani, given that the case originated from the deal between the two.

It is the first time for the Korean government to lose in an ISD suit. It has some 10 ISD suits waiting for a verdict, including a case raised by U.S. private equity fund Lone Star with a claim for 5 trillion won.

By Kim Gang-rae and Cho Jeehyun

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