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Republic of Korea prevails in ISDS arbitration over expropriation claims filed under Korea-US FTA

2019. 10. 01

Yoon & Yang LLC and Herbert Smith Freehills LLP as co-counsel for the Republic of Korea (ROK) prevailed in the very first ISDS arbitration defended by the ROK under the Korea-US FTA. The case also marks ROK’s first victory among a number of ISD claims currently pending against it.

In an award issued on September 27, 2019, the tribunal unanimously dismissed claims brought by an alleged US investor following the expropriation of her real estate property in Mapo-gu district, Seoul. The property constituted part of a public redevelopment project within the district where the property was located. The tribunal granted ROK’s preliminary objections on an expedited basis, confirming it lacked jurisdiction on the grounds that the property at issue was neither an “investment” nor a “covered investment” as required under the Korea-US FTA for it to be protected.

The claimant who had originally been a Korean citizen had purchased the property in 2001 and obtained US citizenship in 2013. Subsequently, she filed the ISDS arbitration against ROK in July 2018, alleging that the expropriation of her property during the public redevelopment process (which commenced in 2008) was illegal and without just compensation. It was further alleged that the expropriation process in itself contravened the fair and equitable treatment principle.

As counsel for the ROK, Yoon & Yang and Herbert Smith Freehills swiftly filed an application for preliminary jurisdictional objections on an expedited basis by February 26, 2019, stating detailed grounds as to why the claimant’s property was not an “investment” or “covered investment” warranting protection under the Korea-US FTA. The tribunal conducted a three-day hearing from July 31 until August 2 of 2019, and ultimately upheld the ROK’s position that the property in its nature did not qualify as an “investment” under the Korea-US FTA. It was also held that the property was not a “covered investment” as the property acquired in 2001 could not be deemed to have been acquired, established or expanded after the Korea-US FTA came into force in 2003.

Yoon & Yang’s effective representation was instrumental in securing the ROK’s first ISDS defence award. Particularly, the firm presented a concise explanation to the tribunal on the public redevelopment and expropriation process in the ROK, and helped reaffirm the viability of the process in turn.

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