South Korea wins arbitration dispute against Chinese investor
South Korea has won a case against Chinese investor Fengzhen Min at the International Centre for Settlement of Investment Disputes. The annulment committee rejected his application to set aside a previous arbitration award that dismissed the investor's claims for at least 264.1 billion won, or $197 million. The Korea Herald reports.
Committee decision
The committee's decision upheld the arbitration award issued in May 2024. At that time, the tribunal found that Min's investment was illegal and was not covered by the investment agreement between South Korea and China. The tribunal also concluded that it lacked jurisdiction to hear the dispute.
Initially, the investor sought about 2 trillion won in compensation. In his final claims, he requested the return of shares in Pi Korea or payment of at least 264.1 billion won in monetary compensation, as well as compensation for other damages.
Origin of the dispute
The dispute dates back to 2007, when Min established Pi Korea in South Korea to borrow 380 billion won to purchase the Huapu Building in Beijing. The loans were guaranteed by a Korean bank.
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After Pi Korea failed to repay the loan, the bank sought to recover the funds through the sale of the company's shares that had been pledged as collateral. Min challenged the sale in South Korean courts, but in 2017 he ultimately lost the civil case at the Supreme Court. Separately, he was convicted in a case involving promises and the provision of money and other benefits to bank employees during the loan arrangements.
Proceeding costs
In 2020, more than three years after the civil case ended, Min filed claims under the investor-state dispute settlement mechanism. He argued that the bank's enforcement of the collateral, as well as related civil and criminal proceedings in South Korea, violated the investment agreement, including guarantees against unlawful expropriation.
Min sought to annul the arbitration award, claiming that the tribunal exceeded its authority, did not give him a proper opportunity to present his case, and provided insufficient reasoning for its decision. The committee rejected his application and ordered the investor to pay the South Korean government about 1.51 billion won in legal defense costs plus interest, as well as to fully cover $426,751 in costs for the annulment proceedings.
