(C) Nikkei Asia

SEOUL – The South Korean government has successfully overturned an international arbitration award that ordered it to pay approximately 160 billion won ($116 million) to the U.S.-based hedge fund Elliott Management. The ruling, delivered by a British court, marks a definitive win for the Ministry of Justice in its long-standing legal battle against the activist investor.

On the 23rd, the Ministry of Justice announced that it had prevailed in its set-aside action filed in the English High Court. The lawsuit sought to nullify a previous Investor-State Dispute Settlement (ISDS) ruling that held the South Korean government liable for damages related to the 2015 merger of Samsung affiliates.

The Core of the Dispute: A Controversial Merger
The legal saga dates back nearly a decade to the 2015 merger between Samsung C&T and Cheil Industries. At the time, Elliott Management—then a major shareholder in Samsung C&T—strongly opposed the deal, arguing that the merger ratio unfairly undervalued Samsung C&T to benefit the family of Samsung Electronics Chairman Lee Jae-yong.

The controversy intensified when it was revealed that the National Pension Service (NPS), a state-run entity and key shareholder in Samsung C&T, voted in favor of the merger despite internal concerns about the valuation. Elliott subsequently launched an ISDS claim, alleging that the South Korean government’s improper intervention in the NPS vote constituted a violation of the "Fair and Equitable Treatment" standard under the Korea-U.S. Free Trade Agreement (KORUS FTA).

The Reversal of Fortune
In 2023, the Permanent Court of Arbitration (PCA) initially sided with Elliott, ordering Seoul to pay roughly $107.8 million plus interest and legal fees. The South Korean government immediately challenged this, filing a cancellation suit in London (the designated seat of arbitration).

The government’s primary argument was one of jurisdiction: it contended that the PCA lacked the authority to rule on the matter because the actions of the NPS—acting as a commercial shareholder—did not constitute "measures" taken by the state under the specific definitions of the KORUS FTA.

The road to victory was not linear:

August 2024: A lower British court initially dismissed the government’s suit, citing lack of jurisdiction.
July 2025: The UK Court of Appeal overturned that dismissal and remanded the case for a full review.
February 2026: The High Court finally ruled in favor of South Korea, determining that there were valid grounds to set aside the original PCA award.

Implications for the Future
With this ruling, the original compensation order is no longer enforceable. The case has been remanded to the arbitration tribunal, effectively resetting the process in South Korea's favor. Legal experts suggest this verdict sets a crucial precedent regarding how state-run pension funds are viewed in international trade law and provides a blueprint for the government to defend against similar claims in the future.

"This decision protects our national treasury from a significant outflow and reaffirms our position that the government acted within the bounds of international law," a Ministry of Justice official stated.

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