Invest1 publisher3 min readPublished
Failed annulment bid leaves a Chinese investor owing just under 7 billion won in costs
An ICSID committee rejected every ground the investor raised against the 2024 award that dismissed his 264.1 billion won claim on South Korea. The three cost orders against him now total 6.9956 billion won plus interest.
The Investor · Invest desk
What happened
- An ICSID annulment committee rejected in full the Chinese investor Min's application to annul the arbitral award, the Ministry of Justice said on Sept. 14, citing a decision issued the previous day.
- Min set up Pi Korea in 2007 to acquire the Huafu Building in Beijing and raised 380 billion won through a project financing loan that a domestic bank arranged and guaranteed.
- The tribunal found the establishment of Pi Korea and the share acquisition were part of an unlawful scheme to obtain the loan, so the investment fell outside the Korea-China treaty's protection.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- cost Losing on the merits and then on annulment costs this claimant about 2.6% of what he claimed, so the fee award works poorly as a filter on the next comparable filing.
- precedent A treaty claim aimed at Korean court proceedings themselves has now failed at ICSID, and the government has an upheld award to cite the next time a claimant attacks a domestic judgment.
- constraint Deals financed through local workarounds lose the ISDS backstop once a host-state court has found the underlying conduct unlawful, because the treaty defence rides on the domestic record.
- contradiction The two accounts put the final claim 18 billion won and $12 million apart, and the smaller figure raises the cost-to-claim ratio the deterrence argument depends on.
Min's cost bill has three parts. The award ordered 4.9126 billion won of the government's legal costs, plus interest [6]. Then 1.51 billion won for the annulment stage, plus interest [4], and about 573 million won in arbitration costs [5]. That is 6.9956 billion won [1] against a final claim of 264.1 billion won [3], so the losing claimant pays about 2.6% of what he asked for [2]. Collection is a separate matter, since the bank had already enforced its security interest and sold his Pi Korea shares [8].
Min filed in 2020 [10], the award came in May 2024 [2], and he applied to annul it that September [13]. The committee decided this September, six years after the filing [4]. The Ministry of Justice said it worked the annulment for more than two years. It used an inter-agency international investment dispute response team, outside counsel including the law firm Yulchon, and academic experts [14].
Kang Joon-ha directs the ministry's international legal affairs bureau. He said this was "the first case in which a foreign investor directly argued that South Korea's judicial proceedings and their outcome, as applied to that investor, amounted to a violation of an investment treaty" [17]. The committee found the tribunal's treaty interpretation reasonable, found that Min had a sufficient opportunity to present his case, and found no omissions or contradictions in the reasons. On that basis it rejected every ground he had raised [15]. That account comes from the ministry, which announced the outcome citing a decision issued the previous day [1].
Kang also said the ministry "upheld the original award and safeguarded some 2 trillion won in precious taxpayer money" [18]. Two trillion won is what Min asked for when he started; the claim he ended with was 264.1 billion won, about 13% of it [11][3].
The illegality holding rests on facts a Korean court had already found. The tribunal held that setting up Pi Korea and acquiring its shares formed part of an unlawful scheme to obtain the project financing loan through the provision of money and benefits [12]. Min had been convicted in a criminal trial over payments to bank executives and employees, after the Supreme Court rejected his civil challenge in 2017 [9]. President Lee Jae-myung wrote on X that "Being a foreign investor does not mean that an investment made in violation of South Korean law can be protected". He called it "a principle confirmed in international arbitration proceedings through this victory in the ISDS annulment process" [21]. This decision leaves open whether a tribunal reaches the same finding without a domestic conviction in the file.
The second reading is that respondent states will plead illegality earlier and more often. Pleading it is cheap next to defending a treaty claim on the merits, and this committee did not disturb a tribunal that accepted it [15]. Both readings depend on deterrence. If the deterrent is real, the next claimant with a criminal conviction behind him does not file at all; at about 2.6% of the claim in fee risk [2], I would not count on it.
What to watch
- Min has 45 days to apply for correction or supplementation of the decision; the ministry calls that unlikely because the procedure covers matters such as clerical errors.
- Whether the government actually collects the 1.51 billion won and about 573 million won ordered, from a claimant whose pledged Pi Korea shares were already sold.
- Whether the ministry publishes the committee's decision text rather than describing its findings.