Samsung Group Investor Moves to Confirm Arbitration Award Against Korea

Mason Capital L.P. and Mason Management LLC filed a petition to confirm a $30 million arbitration award against the Republic of Korea before the U.S. District Court for the District of Columbia on Friday, May 24, 2024. Petitioners also seek to confirm an award of more than $10 million in costs and fees related to the arbitration.

The arbitration arose out of Petitioners investments subject to the Free Trade Agreement between Korea and the United States (the "FTA"). Specifically, Petitioners acquired publicly traded shares in Samsung Electronics, Inc. and Samsung C&T. Petitioners allege that they acquired shares in SEC and SC&T, believing that incoming reform to Samsung’s corporate governance would unlock value for all Samsung shareholders, including Mason itself. However, in 2014, Samsung began to change its governance structure and the market speculated that it would transition to a holding company structure. This happened in May 2015, when Samsung announced that Cheil Industries Incorporated will merge with Samsung C&T. At the time, financial experts advised Samsung C&T stockholders to vote against the merger as it grossly undervalued the company and was solely aimed to allow Samsung Electronics, Inc.'s Vice Chairman to strengthen his control over Samsung under his family's succession plan while avoiding tax liabilities, the petition alleges. The merger was approved because Korea's National Pension Service, Samsung C&T's largest individual stockholder, voted in favor of the transaction despite the analysts' warnings. According to the petition, it was subsequently revealed during criminal proceedings in Korean courts that the President of Korea, Park Geun-hye, had financial interests in approving the merger and used his political influence to push for a vote in favor of the merger.

Petitioners initiated arbitration under the FTA, which concluded in their favor. The tribunal held that Korea breached the FTA in connection with the investments by Mason in Samsung and imposed on Korea obligations to pay Mason over $30 million in damages for losses, with interest, €630,000.00 in arbitration costs, with interest; and over $10 million in legal fees and expenses.

The case is Mason Capital L.P. et al. v. Republic of Korea, No. 24-cv-1551. Petitioners are represented by Abid R. Qureshi and Joseph V. Langkilde from Latham & Watkins LLP.

The petition can be downloaded below.

D.D.C. 24-cv-01551 dckt 000001_000 filed 2024-05-24.pdf

Download PDF • 232KB

D.C. Circuit Affirms Denial of Romania Attempt to Avoid Arbitral Award by Micula Brothers

Yet another appeal in the Micula v. Romania saga was rejected by the D.C. Court earlier today. After the confirmation of the arbitration award in 2019, Romania appealed the District Court for the District of Columbia's decision, arguing that the Court did not have subject matter jurisdiction over the matter, arguing that the arbitration provision in the Sweden-Romania BIT was void as of Romania’s 2007 accession because EU law prohibits intra-EU agreements to arbitrate EU law disputes between a member state and the citizens of another member state. The D.C. Circuit affirmed the confirmation of the award in 2020, agreeing with the lower court's ruling thatEU law was inapplicable because the parties’ dispute predated Romania’s EU membership and the award did not “relate to the interpretation or application of EU law." The parties found themselves before the D.C. Circuit court twice more in relation to discovery sanctions and accrued sanctions. The D.C. Circuit ruled in favor of the Micula brothers both times.

In 2022, Romania filed a motion under Rule 60(b) seeking relief from the 2019 confirmation of the award and the ensuing sanctions,  arguing that two decisions of the EU’s highest court in 2022 held, “[i]n unequivocal terms,” that “the agreement to arbitrate in the [Sweden-Romania] BIT was void the moment that Romania entered the EU.” The district court denied the Rule 60(b) motion, concluding that the CJEU Decisions did not hold Romania’s accession retroactively voided its pre-EU consent to arbitrate and “the jurisdictional fact . . . that there was a valid agreement to arbitrate before Romania acceded to the EU — remains undisturbed.” This appeal ensued.

The D.C. Circuit denied Romania's fourth appeal. As to Romania's arguments under Rule 60(b)(4)--requiring relief when the judgment is void--the Court found that Romania did not make a showing, as required, that the district court lacked even an arguable basis for jurisdiction in confirming the award. Romania maintained that even so there is no arguable basis for jurisdiction because the “sole basis” for the district court’s determination that jurisdiction existed under the FSIA was an erroneous “interpretation and application of EU law." The appellate court rejected that, explaining that the district court’s jurisdictional analysis in 2019 was not premised on the “interpretation and application of EU law,” but that the district court independently found the requisite “jurisdictional fact[]” under the arbitration exception of an agreement to arbitrate with the Miculas, through the 2002 Sweden- Romania BIT and the Miculas’ 2005 request for arbitration. Further, the Court explained that the 2022 CJEU decisions on which Romania relies do not support the interpretation that its 2007 accession to the EU retroactively rendered the preexisting agreement to arbitrate with Swedish investors “void ab initio.”

As to Romania's arguments under Rule 60(b)(5)--which provides relief from certain judgments, including a judgment “based on an earlier judgment that has been reversed or vacated” or where “applying it prospectively is no longer equitable"--the Court rejected the notion that the district court judgments are based on a judgment of the General Court that the CJEU reversed or vacated. The Court explained that the district court’s subject matter jurisdiction, contrary to Romania’s view, did not “depend” on the 2019 General Court decision, but simply on the fact that the dispute pre-dated Romania's ascension to the EU. In fact, the district court's decision to confirm the award never even referred to the 2019 General Court decision.

Lastly, as to Romania's arguments under Rule 60(b)(6)--which provides relief from a judgment for “any other reason that justifies relief"--the D.C. Circuit found it to be barred because it simply repackaged the same arguments under Rules 60(b)(4) and (5).

The appeal is captioned Micula et al. v. Gov't of Romania, No. 23-7008.

Construction Co. Opposes Guatemala's Motion to Dismiss

On May 10, Sigma Constructores, S.A. ("Sigma"), a well-established construction and engineering company incorporated in Guatemala, opposed Guatemala's motion to dismiss its petition to confirm three awards totaling over $32 million. Sigma addressed six different arguments--or categories of arguments--advanced by the sovereign in its attempt to dismiss the petition to confirm the awards.

First, Sigma argued that the sovereign's arguments such as "(i) that Sigma’s claims in the Arbitrations were time-barred; (ii) that Guatemalan law prevents Respondent from paying the amounts due in U.S. dollars, or (iii) that payment of the Awards would otherwise violate Guatemalan law" are impermissible attempts by Guatemala for a second bite at the apple, as they have been considered--and rejected--by the competent arbitral tribunals, as well as Guatemalan courts, that confirmed the three awards. Petitioner explained that these arguments are not jurisdictional and thus improperly raised in a Rule 12(b)(6) motion. Petitioner further argued that these arguments should be precluded under a long line of precedent that bars award debtors from re-litigating substantive issues during a confirmation proceeding.

Second, Sigma used Guatemala's counsel own words during a status conference to reject an argument that the awards were made against Guatemalan Ministry of Communications, and not the state itself. Petitioner not only pointed out that the Ministry was not a party to the contracts underlying the arbitrations, nor to the arbitration itself, but also quoted Guatemala's counsel who conceded during a status conference that the Ministry "does not have a separate legal personality" under Guatemalan law.

Third, Sigma rebuffed Guatemala's attempt to apply the Panama Convention instead of the New York Convention to its request to confirm the awards because the awards are purely domestic. Nevertheless, the petitioner pointed out that it has satisfied the pleading requirements for recognition under the Panama Convention as well.

Fourth, Sigma asked the Court to reject the "comity" arguments set forth by the sovereign as premature and factual.

Fifth, petitioner explained that Guatemala's forum non conveniens arguments should be rejected because the D.C. Circuit held that the doctrine is inapplicable in arbitration award confirmation proceedings.

Lastly, petitioner asked the Court to deny the sovereign's request for a stay of the confirmation proceedings, as all the ancillary litigation launched by Respondent to collaterally attack the judgments confirming two of the awards have been finally decided in Sigma’s favor. Moreover, the remaining award has been confirmed and Respondent’s efforts to stay its enforcement have been consistently rejected by Guatemalan courts.

The case is Sigma Constructores, S.A. v. Republic of Guatemala, C.A. No. 1:22-cv-01674-TSC (D.D.C.). Jonathan Cross and Daniela Paez of Herbert Smith Freehills N.Y. LLP represent petitioner. Guatemala was represented by Greenberg Traurig in moving to dismiss, but the firm withdrew its appearance earlier this month after presidential elections in Guatemala resulted in a change of regime and, as Greenberg Traurig explained, "effectively, a new client." According to the motion to withdraw, Guatemala is actively looking for a new firm to take Greenberg Traurig's place. Guatemala's reply is due on May 30, 2024.