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The ghost of Lone Star (KOR)

Jan 06,2020
HAN AE-RAN
The author is head of the financial team of the JoongAng Ilbo.

The International Center for Settlement of Investment Disputes (Icsid) is an international arbitration body under the World Bank. Usually called the ISD, it is used to settle disputes between investors and states.

International arbitration establishments tend to get most high-profile disputes and those where the most is at stake. Judges to the panel are selectively picked. Only a few of the unquestionably reputable in the field are invited to the panel of arbitrators and conciliators. They are usually grayed — mostly in their 70s, 80s and even 90s. “One must be at least 70 to become eligible for the committees on Icsid,” one industry source said.

The number of arbitrators cannot keep up with the load of ISD cases. Ruling on the cases takes three to four years. Many complain of the lengthy process, but the aged judges cannot make haste.

A senior official at the Financial Services Commission warned about the ISD suit involving Lone Star Funds and the Korean government. The ruling on the Lone Star Funds suit filed against the Korean government, regarding allegations of intentionally delaying the sale of Korea Exchange Bank in November 2012, was scheduled for the end of 2019. The case involved a claim of $4.7 billion and took longer than other cases.

The fire sale of Korea Exchange Bank to Lone Star was portrayed in the Korean film “Black Money,” released in November last year, which told of a finance scandal in Korea during the time of 1997-1998 financial and a bailout crisis.

The progressive front, including the People’s Solidarity for Participatory Democracy, held a press conference timed with the movie release to demand a prosecutorial probe into the Lone Star case. It was designed to trigger a social uproar before the ISD ruling.

But the controversy died down after the movie was defeated by “Frozen 2” at the box office. The Lone Star ruling has spilled over into 2020, and some are raising concerns about the health of tribunal chair V. V. Veeder, who is in his 70s.

Will the Lone Star bomb explode in 2020? The government frets over the multibillion-dollar claim and renewed criticism aimed at the impotent bureaucracy if it loses the case.

Lone Star has left the country eight years after selling Korea Exchange Bank. But it still haunts the country.