Republic of Korea v Elliott Associates, L.P.

Hearing dates: 12 and 13 March 2025

Further written submissions 28 March 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on Thursday 17 July 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

The issue on this appeal is whether an arbitral tribunal had substantive jurisdiction to determine whether a claim by an investor fell within the scope of the protections afforded to investors under a free trade agreement between States (including the right to bring claims by way of arbitration), or whether the jurisdiction of the tribunal is amenable to challenge under section 67 of the Arbitration Act 1996 (“the 1996 Act”) on the grounds that, contrary to the tribunal's determination, the subject matter fell outside that scope.

The essential facts

Chapter 11 of the free trade agreement between the appellant (“Korea”) and the United States of America (“the USA”) signed on 30 June 2007 (“the KORUS FTA” or “the Treaty”) provides protections for nationals of one of those States when investing in the other, the Chapter amounting in effect to a bilateral investment treaty (“BIT”). Article 11.1(1) provides that the protections, including National Treatment standards and Minimum Standards of Treatment as specified in Articles 11.3 and 11.5 respectively, relate to “measures adopted or maintained” by the State “relating to” investors of the other State or their investments (defined as “covered investments”).

Article 11.16 of the Treaty provides that an investor of one State may submit to arbitration claims that the other State has breached one of the protection obligations, by reason of which the investor has suffered damage. By Article 11.17 that other State consents to the submission of such a claim to arbitration in accordance with the Treaty.

In April 2018 the respondent (“Elliott”), a USA investment fund, purported to commence an UNCITRAL arbitration against Korea pursuant to the above provisions. The claim was, in outline, that the office of the President of Korea (referred to as “the Blue House”) and the Korean Ministry of Health and Welfare had improperly interfered, through the National Pension Service of Korea (“the NPS”), to procure a merger involving a Korean company in which Elliott had invested, Samsung C&T Corporation, contrary to Elliott's interests and wishes. Elliott alleged that Korea had thereby breached the National Treatment standards and Minimum Standards of Treatment obligations in the Treaty, causing Elliott damage.

Korea objected to the jurisdiction of the UNCITRAL tribunal (“the Tribunal”), asserting that the claim did not fall within Chapter 11, including its dispute resolution provisions, because (i) there was no relevant “measure”, (ii) there was no measure “adopted or maintained” by Korea and/or (iii) any measure did not “relate to” Elliott or its investment.

On 20 June 2023 the Tribunal issued its award (“the Award”), determining that the conduct of the Blue House and the Ministry of Health and Welfare in influencing NPS's merger vote was State conduct which fell within the term “measure” as used in the Treaty, despite being neither regulatory nor administrative action. The Tribunal further held that the measure had been adopted or maintained by Korea and related to Elliott. The Tribunal went on to find a breach of the Minimum Standard of Treatment obligation and awarded Elliott damages in the sum of US$53,586,931, subsequently corrected by the Tribunal to US$48,490,438.

On 17 July 2023 Korea issued an Arbitration claim form seeking to set aside the Award pursuant to section 67 of the 1996 Act on the grounds that the Tribunal acted outside its substantive jurisdiction, challenging each aspect of the Tribunal's decision in that regard. A contingent challenge under section 68 of the 1996 Act was resolved when the Tribunal corrected the quantum of the Award.

By his order dated 1 August 2024 Foxton J (“the Judge”) dismissed Korea's section 67 claim. In a reserved judgment of the same date the Judge held that the States' offer to investors to arbitrate in Article 11.16 of the Treaty was freestanding and not conditional on the requirements of Article 11.1(1) being met. It followed that Korea's challenges did not go to the substantive jurisdiction of the Tribunal, the Tribunal having jurisdiction to determine disputes between States and investors, including as to whether the requirements of Article 11.1(1) were satisfied. Recognising that the contrary argument had a real prospect of success, however, and also that the point was of some importance in the context of challenges to investment treaty awards, the Judge granted permission to appeal.

In the light of the Judge's decision, on 29 October 2024 the United States Department of State wrote to the Ministry of Justice in Korea enclosing a diplomatic note confirming “the United States' view that Article 11.1 of the KORUS FTA defines the scope of KORUS FTA Chapter 11 in its entirety” and that “a tribunal constituted under Chapter 11 has no jurisdiction unless Article 11.1(1)'s requirements are satisfied”. On 15 November 2024 the Ministry of Justice replied, stating that Korea “shares the [USA's] understanding set out in the Diplomatic Note and agrees with it”. Korea applies to adduce that diplomatic exchange as fresh evidence in support of its appeal, contending that it is admissible as to the proper interpretation of the Treaty which was not in existence at the time of the hearing before the Judge.

Chapter 11 of the KORUS FTA

Chapter 11 of the Treaty is headed “Investment”. It is divided into three sections. Section A is also entitled “Investment” and starts with the following provisions:

“ARTICLE 11.1: SCOPE AND COVERAGE

1. This Chapter applies to measures adopted or maintained by a Party relating to:

(a) investors of the other Party;

(b) covered investments; and

(c) with respect to Articles 11.8 and 11.10, all investments in the territory of the Party.

2. For greater certainty, this Chapter does not bind either Party in relation to any act or fact that took place or any situation that ceased to exist before the date of entry into force of this Agreement.

3. For purposes of this Chapter, measures adopted or maintained by a Party means measures adopted or maintained by:

(a) central, regional, or local governments and authorities; and

(b) non-governmental bodies in the exercise of powers delegated by central, regional, or local governments or authorities.

ARTICLE 11.2: RELATION TO OTHER CHAPTERS

1. In the event of any inconsistency between this Chapter and another Chapter, the other Chapter shall prevail to the extent of the inconsistency.

2. A requirement by a Party that a service supplier of the other Party post a bond or other form of financial security as a condition of the cross-border supply of a service does not of itself make this Chapter applicable to measures adopted or maintained by the Party relating to such cross-border supply of the service. This Chapter applies to measures adopted or maintained by the Party relating to the posted bond or financial security, to the extent that such bond or financial security is a covered investment.

3. This Chapter does not apply to measures adopted or maintained by a Party to the extent that they are covered by Chapter Thirteen (Financial Services).”

In the same section, Articles 11.3 to 11.9 set out the substantive obligations on each State in relation to the treatment of investors and covered investments of the other State. These include the National Treatment standards in Article 11.3 and the Minimum Standard of Treatment in Article 11.5 referred to above, as well as Most-Favoured Nation treatment obligation in Article 11.4, prohibition on expropriation and nationalisation in Article 11.6, requirements to permit free transfers into and out of the State's territory in Article 11.7 and prohibition on the imposition of performance requirements in Article 11.8.

Section A further provides as follows:

“ARTICLE 11.11: DENIAL OF BENEFITS

1. A Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if persons of a non-Party own or control the enterprise and the denying Party:

(a) does not maintain normal economic relations with the non-Party; or

(b) adopts or maintains measures with respect to the non-Party or a person of the non-Party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise or to its investments.

2. A Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if the enterprise has no substantial business activities in the territory of the other Party and persons of a non-Party, or of the denying Party, own or control the enterprise….

….

ARTICLE 11.14: SUBROGATION

1. If the Korea Export Insurance Corporation or the Overseas Private Investment Corporation...