South Korea’s Hyundai Heavy Industries Group has faced hurdle in its plan to complete merger of rivaling Daewoo Shipbuilding & Marine Engineering (DSME) Co. after Japan filed a petition with the World Trade Organization (WTO), accusing Seoul of providing subsidies to the domestic shipbuilding industry.

Japan called South Korea on January 31 to hold bilateral talks regarding the matter under the WTO rules, the first stage of WTO’s dispute settlement process.

It is the second time that Japan requested dispute consultations to the WTO in November 2018 when it claimed the Korean government’s financial aid to its shipbuilding industry is in violation with the WTO rule. The two sides held talks in accordance to the rules, but Japan did not ask for establishing a settlement panel.

Japan took issue with the plan that Korea’s state-led Korea Development Bank (KDB) received 9.12 million convertible shares and 6.1 million common shares from Korea Shipbuilding & Offshore Marine Engineering, formerly Hyundai Heavy Industries, in return for handing over its entire holding of 59.7 million shares in DSME. Japan also argued the stake bank’s pledge to aid additional 1 trillion won if necessary is breach of the trade rules.

Industry watchers raised concerns that the complaint could hinder HHI’s work to obtain regulatory approvals for its acquisition of DSME in six countries around the world. It received its first approval from Kazakhstan last October.

By Pulse

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