Seoul’s justice ministry said Tuesday that South Korea has launched a lawsuit against an order to pay hedge fund Elliott more than $50 million in damages related to the contentious 2015 merger of two Samsung affiliates.
Elliott sued the government in 2018 after losing a proxy battle over the merger of Cheil Industries and Samsung C&T.
The US activist investor, who was C&T’s second-largest single shareholder in 2015, contended that the takeover willfully undervalued the construction firm’s share price, putting its stockholders at risk.
The purchase was approved by the state-run National Pension Service (NPS), which had a larger stake in Samsung C&T than Elliott and was considered a deciding vote.
Last month, the International Centre for Settlement of Investment Disputes ordered the South Korean government to pay $53.6 million, around 7 percent of the US activist investor’s claim.
According to Seoul, the verdict would cost the country roughly 130 billion won ($103 million) in total, including legal fees, interest, and damages.
In a statement, the country’s justice ministry said, “South Korea filed a ‘lawsuit for cancellation’ on Tuesday”.
According to the general principle of commercial law, minority shareholders do not bear any responsibility to other minority shareholders for exercising their voting rights.
“It is difficult to find an investor-state dispute settlement case in which the state is held liable for damages in cases where public institutions participated in shareholders’ meetings as minority shareholders and exercised their voting rights”, the report continued.
The merger was considered as aiding in the peaceful transition of power to Lee Jae-Yong, a scion of Samsung’s founding dynasty.
He currently serves as the executive chairman of Samsung Electronics.
Following a corruption scandal in 2016, the NPS sided with Samsung under pressure from the presidential office, led by then-president Park Geun-hye, who was ultimately impeached.
Moon Hyung-pyo, the former health minister, was eventually convicted of abuse of power for pressing the NPS to vote for the merger and sentenced to prison.
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