Korea loses Elliott arbitration again over Samsung merger

South Korea has again been ordered to compensate US hedge fund Elliott Investment Management over government intervention in the 2015 merger of two Samsung affiliates, despite securing a partial annulment of the original arbitration award earlier this year.

The Ministry of Justice said Thursday that the tribunal rehearing the case ordered the government to pay $48.49 million in damages — unchanged from the original award — plus interest and costs.

Elliott put the total award at approximately $113 million, or 153.7 billion won, including interest and legal costs. It said the total included additional costs arising from the government’s challenge to the original ruling.

The latest decision, issued Wednesday evening, is a setback for the government seven months after a UK court partially set aside the original award. The tribunal, made up of the same three arbitrators who heard the initial case, again found a causal link between government intervention in the Samsung C&T-Cheil Industries merger and Elliott’s losses.

According to Elliott, the tribunal concluded that the National Pension Service would have opposed the merger without the government’s unlawful intervention. The finding established liability regardless of whether the pension fund itself qualified as a state entity.

Elliott also argued that the government’s challenge had increased the burden on taxpayers by about $18.9 million, including the government’s own legal expenses. It urged Seoul to accept the award, saying interest would continue to accrue at more than $10,000 a day.

The dispute began in 2018, when Elliott, a Samsung C&T shareholder, brought an investor-state arbitration claim under the Korea-US Free Trade Agreement. It argued that government interference in the NPS’ merger vote had caused it financial losses.

The original tribunal held the government liable in June 2023. A month later, Seoul sought to have the award set aside in the UK, the seat of the arbitration.

In February this year, a UK court set aside the portion of the award that treated the NPS as a state entity. But it found that intervention by the presidential office and the Ministry of Health and Welfare in the pension fund’s decision-making remained subject to review under the treaty.

The court sent the case back to arbitration to determine whether those government actions caused Elliott’s losses even if the NPS was not a state entity. Neither side appealed that decision.

The Justice Ministry said it was closely reviewing the latest award with relevant ministries, government counsel and outside experts. It did not say whether it would pay the compensation or seek to have the award set aside again.