Elliott served its Notice of Arbitration and Statement of Claim against
the Republic of Korea (ROK) on July 12, 2018 seeking damages arising
from the former ROK administration’s unlawful intervention in the merger
of Samsung C&T and Cheil Industries (Merger). Elliott’s loss and damage
is currently estimated at no less than approximately US $770 million.
Yesterday’s service of arbitration papers follows Elliott’s 13 April
2018 notice of intention to submit its claims to arbitration and
subsequent efforts to amicably negotiate a resolution with the ROK. To
date, the parties have not been able to resolve the dispute.
Prior to the Merger, Elliott had over many years been an investor in
Samsung C&T, recognizing the company’s undervaluation. But when Elliott
vocalized its opposition to the Merger, which was expected to cause
substantial loss to shareholders including Elliott, the former ROK
administration took action to help the Lee family’s financial interests
As detailed in the Notice of Arbitration and Statement of Claim, in
clear violation of the Korea-United States Free Trade Agreement (KORUS
FTA), the former administration of the ROK acted by improper means and
with improper motives in its intervention in the Merger. In
particular, the former administration of the ROK manipulated the vote of
a state agency, the National Pension Service (NPS), which held the
casting vote on the Merger.
Criminal prosecutions in the ROK and elsewhere have revealed that the
former administration’s support for the Lee family at the expense of
foreign investors was handsomely compensated by Samsung and JY Lee. This
scandal has led to then-President Park’s impeachment and removal, as
well as criminal trials and convictions in ROK domestic courts,
including those of senior Samsung Executives, the former Minister of
Health and Welfare, and the former Chief Investment Officer of the NPS.
Elliott was not the only victim of this manifestly unfair and
inequitable treatment. The ROK’s subversion of the NPS’ internal
processes to ensure a favorable vote for the Merger despite economic
irrationality caused the NPS to breach its public duties owed to
millions of Korean pension-holders – a fact the NPS has admitted in its
own recent internal review. Had Elliott’s meritorious criticisms of the
Merger not been overridden by vote manipulation, the Korean pensioners’
interests would also have been protected from loss instead of sacrificed
to the more powerful interests of the prior administration and the
It is regrettable that the former administration took a hostile approach
to foreign investment rather than embracing it with a view to
promoting domestic innovation and maintaining economic growth. Like all
prominent economies, Korea obviously has no interest in being viewed as
hostile to foreign investors, particularly when other economies in the
Asia-Pacific region are fast becoming potentially attractive
alternatives. But the actions of the former administration of the
ROK relating to the Merger severely damaged the country’s image
To avoid losing investor confidence, the ROK government should uphold
its investment treaty obligations towards foreign investors including by
paying damages for past breaches and working proactively to prevent
future violations and no longer shielding the ruling families of the
chaebols at the expense of investors. Maintaining credibility
internationally among investors is critical to attracting foreign
investment and propelling Korea to even greater prosperity.
Elliott still hopes to resolve this matter amicably through settlement,
but until such time as that happens will vigorously enforce its rights
on behalf of its investors.
Elliott Management Corporation manages two multi-strategy funds which
combined have approximately $35 billion of assets under management. Its
flagship fund, Elliott Associates, L.P., was founded in 1977, making it
one of the oldest funds of its kind under continuous management. The
Elliott funds’ investors include pension plans, sovereign wealth funds,
endowments, foundations, funds-of-funds, and employees of the firm.
Elliott Advisors (HK) Limited is an affiliate of Elliott Management
Corporation. With a strong understanding of the Korean market and
corporate structures, Elliott has a history of successfully enhancing
shareholder value in Korea.
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