GOV’T LOSES LAW SUIT AGAINST LONE STAR

[Anchor Lead]

The Korean government has lost the legal battle against the U.S. private equity fund Lone Star, which had lasted ten years. The International Centre for Settlement of Investment Disputes has ordered the Korean government to pay over 210 million dollars to Lone Star. The government will have to pay tens of billions of won in damages and interest using public taxes.

[Pkg]

It took ten years to receive a verdict from an international tribunal on the government's legal battle with Lone Star. The International Centre for Settlement of Investment Disputes has partially recognized the equity firm's losses and clarified the Korean government is liable for them.

[Soundbite] Han Dong-hoon(Minister of Justice) : "The verdict says S. Korea must pay USD 216.5 mn in punitive damages and interest."

Lone Star demanded a total of 4.7 billion dollars for losses incurred by the postponement of the sale of its stake in the Korea Exchange Bank, unfair taxes and compensation for winning the lawsuit. The international tribunal, however, recognized only around 220 million dollars of the 1.7 billion dollars demanded by the U.S. firm for losses caused by the delay of the business deal. What's particularly noteworthy is that Lone Star's demand that the Korean government also pay the interest has been accepted by the ICSID. According to the interest rate suggested by the tribunal, the Ministry of Justice will have to pay 18.5 billion won. The entire amount of damages would reach nearly 300 billion won. Lone Star's demands regarding taxes imposed by Korea's National Tax Service have been all turned down. The equity fund's claim that Korea and Belgium also pay 2.2 billion dollars in taxes has also been dismissed, just as experts expected.

[Soundbite] Song Ki-ho(Fmr. head of MINBYUN-Lawyers for a Democratic Society) : "I think there is no reason to consider paying even 0.01 percent in taxes if they win the lawsuit."

The arbitration fees will be shouldered by each side, as Lone Star wanted. The Korean government will never receive compensation for the 47 billion won it has paid for arbitration over ten years.

[Soundbite] Han Dong-hoon(Minister of Justice) : "Only about 4.6 percent of the USD 4.68 bn demanded by Lone Star has been acknowledged."

[Soundbite] Prof. Jun Sung-in(Hongik University (KBS 1TV)) : "The only contentious point was compensation for the delay in approval by the financial authorities until the price of the deal went down. Therefore, this compensation is only 50 percent effective."

The government will consider requesting the verdict's annulment and suspension of punitive damages after reviewing the verdict.