South Korea suffered a major setback on Thursday when its appeal against a ruling mandating the payment of over $100 million in compensation to U.S. hedge fund Elliott Management was rejected. The legal dispute arises from the controversial 2015 merger between two Samsung affiliates.
The ruling confirmed that South Korea must compensate Elliott Management for the controversy-sparked merger of Samsung C&T and Cheil Industries. Despite the appeal, the decision stands, marking a costly defeat for the South Korean government.
Last year, the Permanent Court of Arbitration (PCA) in the Netherlands ordered the South Korean government to pay approximately $108.5 million to Elliott Management, covering damages, interest, and legal fees. This ruling was linked to the contentious 2015 merger between Samsung C&T and Cheil Industries.
South Korea challenged the PCA’s ruling by taking the case to London’s High Court, asserting that the PCA did not have the authority under the free trade agreement between South Korea and the United States. However, on Thursday, the High Court dismissed this challenge, affirming the initial decision.
Following the decision, Elliott Management expressed satisfaction, stating that the ruling was “the proper outcome based on well-established principles of English law.” The hedge fund welcomed the resolution of the dispute, which had implications for international arbitration and investment agreements.
Elliott Management initiated the lawsuit due to the role of South Korea’s National Pension Service in endorsing an $8 billion merger between Samsung C&T and Cheil Industries, where Elliott held a minority stake. The hedge fund contended that the merger undervalued its shares in Samsung C&T, resulting in financial losses.
The 2015 merger has also prompted legal action from another U.S.-based hedge fund, Mason Capital Management, which was awarded approximately $32 million plus interest in a separate ruling this past April. These cases highlight the ongoing international legal challenges faced by South Korea regarding its corporate governance and regulatory environment.
Additionally, the merger has led to criminal proceedings in South Korea. In February, a Seoul court acquitted Samsung Electronics Chairman Jay Y. Lee of charges related to accounting fraud and stock manipulation. However, prosecutors have appealed the verdict, seeking to reassess the charges against Lee.
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