Some of the "top" law firms in Korea have been notoriously conflicted - thus leading to choices made in agreements that are less than favorable to clients. This has led, in part, to South Korea being perceived as not a foreign-friendly destination for direct investment. Additionally, the courts, recently, invalidated an arbitration award against the Korean government - thus frightening more investors from the Korean shores. Hopefully, Korea has learned from these mistakes. Korea is a developed market with a vibrant local economy. Protective measures are no longer needed. Enforcement of the next arbitration award against the Korean government can be a way to enhance the international reputation of the Korean courts and, thus, increase investor confidence.
The article notes, in part, that:
"The first treaties providing for arbitration to resolve investment disputes appeared in the 1960s, as part of a broader system to encourage international investment. This system of investment protection was designed to respond to investors' strong distrust of the local courts of developing countries following the decolonization period, when former colonies nationalized and expropriated foreign investments in natural resources and land"The article goes on to note that these treaties and the "globalized world economy" has led to:
"Not surprisingly, with the massive increase of investment over the last decade in all countries and regions, a growing number of investor-state disputes have been submitted to international arbitration. The World Bank International Centre for Settlement of Investment Disputes (ICSID), the main institution supporting investor-state arbitration, has registered more than 300 investment-treaty cases in the last 15 years. More than 135 cases have been brought under the rules of UNCITRAL, the United Nations Commission on International Trade.The article notes, as what occurred with the Lone Star fiasco, " the investor walks away or becomes persona nongrata in the host country, ending the investor's hope for profit and the country's hope for sustained growth."
The Lone Star fiasco has led many investors, some that I have spoken with, as seen as a destination that is not foreign-capital friendly. Hopefully, in the future, the Korean government will look at issues that arise in a long-term perspective.
Other articles that may be of interest:
- Lone Star Loves the Constitutional Court
- Lone Star Case Analyzed: Fair & Equitable
- Korean Courts Twice Refuse to Enforce International Arbitral Award
- Protect Yourself from Bad Lawyers in Korea
Sean Hayes is co-chair of the Korea Practice Team and Entertainment, Media and New Tech Law Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He assists clients in their contentious, non-contentious and business developments needs in Korea and China.