Notice

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Trade Minister of South Korea should not undermine the ISDS reform objectives pursued by the Prime Minister

For Immediate Release:                 Contact: Heesob Nam (hurips@gmail.com)

August 1, 2019

Trade Minister of South Korea should not undermine the ISDS reform objectives pursued by the Prime Minister

On July 12, 2019, the Korean Prime Minister officially stated at the National Assembly that he “agreed to abolish investor-state dispute settlement (ISDS)”.^[1] This remark is in line with the recommendation of UN human rights experts to UNCITRAL member states,^[2] which calls for a structural and systematic reform of ISDS. The underlying idea of both the Korean Prime Minister and the UN human rights experts is that investors should not be privileged to ignore domestic laws, institutions and culture or to undermine the ability to protect the environment, human rights and labours’ rights of the investment hosting countries. The best way to implement such ideas is to abolish ISDS.

But it is shocking to see that the Korean negotiators of RCEP, especially the Trade Minister, Ms. Yoo, Myung-hee, still maintains the position to support ISDS at  the 27th round of Regional Comprehensive Economic Partnership (RCEP) taking place in China this week. Unlike the old-fashioned perception of the Korean negotiators, ISDS is not a matter of win or lose game between Korean investors and developing countries. It’s about the regulatory space of states in the public interest versus the private interest of investors. As a civil servant, the Trade Minister should take seriously into account public interests and national obligations under international human rights instruments.

ISDS cases against South Korea also show that the Korean negotiators’ position fails to understand the nature of ISDS. The latest ISDS case against South Korea was brought by Malaysian investor, Berjaya Land Berhad.^[3] Further, the first ISDS dispute that South Korea lost was raised by a Singaporean entity, D&A, which was invested by Iranian company, Dayyani group.^[4] These cases illustrate that the nationality of the investor and degree of development of hosting countries has nothing to do with the possibility of ISDS disputes. Moreover, various investors ranging from the US-based hedge fund such as Elliott Management, Lone Star Funds and Mason Capital Management, to individual investors, Korean-American, Korean-Canadian, US real estate development company, and European manufacturers have relied upon ISDS to progressively seek profits by attacking South Korea. The amount of monetary compensation foreign investors have sought against South Korea now exceeds USD 11.7 billion in just seven years.

We call for the Korean Trade Minister to stop supporting ISDS in the RCEP negotiation. We also call for the Prime Minister to discipline the Trade Minister to be consistent with the Prime Minister’s position, and to coordinate relevant administrative branches such as the Ministry of Justice and the Ministry of Foreign Affairs to develop policy options to remove ISDS from international investment agreements involving South Korea. These options should be developed in a transparent way and with a full consultation with civil society. We also urge the RCEP negotiators to develop more fundamental solutions to solve the problems of ISDS, including removal of ISDS from RCEP.

[1] https://occupyfta.blogspot.com/2019/07/korean-prime-minister-agreed-to-abolish.html 
[2] UN Special Procedures Mandate Holders' Letter to UNCITRAL WG III on ISDS Reform, 7 March 2019, https://uncitral.un.org/sites/uncitral.un.org/files/public_-_ol_arm_07.03.19_1.2019_0.pdf, https://www.ohchr.org/Documents/Issues/Development/IEDebt/OL_ARM_07.03.19_1.2019.pdf.
[3] https://occupyfta.blogspot.com/2019/07/10th-isds-case-against-south-korea.html
[4] http://www.theinvestor.co.kr/view.php?ud=20180704000746

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• People’s Solidarity for Participatory Democracy
• MINBYUN-Lawyers for a Democratic Society, International Trade Committee
• Knowledge Commune
• Trade & Democracy Institute

10th ISDS case against South Korea

Reportedly, Berjaya Land Berhad (BLB), a subsidiary of Berjaya Group of Malaysia brought an ISDS case against South Korea, claiming damages of KRW 4.4 trillion (around 4.0 billion in USD). According to the Ministry of Justice, Berjaya's Notice of Intent under the Korea-Malaysia BIT of 1989 was submitted on 17 July, 2019.

Back in 2008, BLB began to invest a resort-style residential and commercial complex (called "Yerae Resort-type Residential Complex") in Jeju Special Self-Governing Province. For this purpose, Berjaya signed, on 29 April 2008, a joint venture agreement with Jeju Free International City Development Center (JDC), and established Berjaya Jeju Resort (BJR). In 2009, BJR was designated as the developer of the Yerae project in place of JDC.

The Yerae complex is a huge project, aiming at building, on an area over 744,205 square meters (183.7 acres), casino hotel, spa resort, landmark tower, medical center, spa auditorium, condominium, 5 star hotel, shopping center, and a museum [1]. Its estimated gross development value (GDV) was USD 3.1 billion, but the project, the first sod was cut in 2013, was stalled in July 2015 due to the Supreme Court ruling in March 2015. 

The Supreme Court held that the expropriation of land in the area of Yerae, owned by several hundreds individuals is invalid (2011Do3746, March 20, 2015). According to the Court, the expropriation of land by JDC is allowable when the land is utilized for building facilities for entertainment and recreation mainly to contribute to the welfare improvement of residents. However, the Yerae Resort-type Resident Complex planned by JDC and approved by Seogwipo city of the Jeju Province is, according to the Court, to build facilities aimed at attracting domestic and foreign tourists, especially high-income elderly people, to stay in the mid- to long-term, thereby generating tourism revenue. Further, the Supreme Court found that the illegality of the measures of the Seogwipo city is so serious and thus illegal per se, resulting in null and void of the subsequent measures for the expropriation.

Berjaya argued, in the Notice of Intent, that the acts and measures of JDC and the Korean courts violates the obligations of: fair and equitable treatment; protection of investment against expropriation, and MFN. Also BLB sought compensation of actual damages, KRW 302.8 billion and lost profit, KRW 4.1 trillion.

The first ISDS dispute against South Korea was raised by the US private equity fund Lone Star at the end of 2012 and South Korea has been involved in 10 cases so far. Including the claim of Berjaya, the cumulative amount of compensation claimed by investors is more than 13 trillion won. 

[1] According to Berjaya Group's annual report of 2009, Berjaya planned to buidl "mid-rise condominiums, a 150-bed medical centre facility, a 500-room casino hotel, a full-fledged casino, world-class entertainment facilities, a 4-storey integrated shopping mall and indoor arena with seating capacity for 6,000 people, a 300-room 5-star resort hotel including 128 units of hotel suites, and exquisite Ocean Villas Resort with a resort-style club house".

* A scanned copy of the Notice of Intent is here and downloadable from the website of the Ministry of Justice.

Korean Prime Minister agreed to abolish ISDS

On 12 July 2019, the Prime Minister of South Korea, Mr. Lee Nak-Yon, attended the National Assembly and said that he agreed to abolish ISDS. (Media coverage: Yonhap, Hani, Khan) This remark came out while his responding to a lawmaker, Mr. Song, at the plenary session of the Budget and Accounting Committee.

The Prime Minister gave reasons for his consent: an excessively high cost; a poor predictability of outcome; and the problem of tyranny of a strong man. He added that the government, especially the Ministry of Justice, the Ministry of Industry, Trade and Energy, and the Ministry of Foreign Affairs were discussing how to reform ISDS, and would consult with the National Assembly when a government plan was developed.

As for the UNCITRAL working group, he said that the Korean government's solution would be prepared in consideration of the national interest and submitted in due time. Interestingly, both the Prime Minister and Mr. Song said the due date is the end of July, not July 15th (This is because the Korean government was granted from the UNCITRAL an extension on the July 15 deadline).

It is the first time that the senior government official officially mentions the repeal of ISDS. Back in 2012, Mr. Lee signed a letter of Korean politicians to the U.S. political leaders (including the President Obama), but at that time he belonged to the opposition party. 

The inquiry of the lawmaker Mr. Song and the response of the Prime Minister stems from the campaign of Korean civil society groups, especially the press conference of June 26th  at the National Assembly, and subsequent media coverage (here, here, here and here). When Mr. Song asked the Prime Minister about ISDS, he reiterated what the civil society groups explained at the press conference and subsequent op-ed. 

Mr. Song demanded, exactly as the CSOs did, the Korean government to present solutions which went beyond the US did in the re-negotiation of NAFTA and the new model BIT of the Netherlands. NAFTA 2.0, or USMCA, eliminates ISDS between the US and Canada and limits the application of ISDS between the US and Mexico. The Dutch new model BIT imposes an obligation upon foreign investor to comply with domestic laws and regulations of the host state, including laws and regulations on human rights, environmental protection and labor laws.

Letter between USG and SKG on confidentiality of KORUS renegotiation documents

January 5, 2018

Michael Beeman

Assistant United States Trade Representative

Office of the United States Trade Representative

Washington, D.C.

Dear Mr. Beeman:

This letter is to acknowledge receipt of your letter of this date, which reads as follows:

“In preparation for initiating negotiations on amendments and modifications to the United States-Korea Free Trade Agreement (KORUS), I would like to outline the following important points about the handling of documents in the context of the negotiations, and confirm that you agree with this approach: 

Letter b/w EC and SKG on confidentiality of negotiation documents of EU-Korea FTA

Facts and Figures of TRIPS-Plus: Experiences of South Korea

Joint Sign-on Letter of CSOs to Trade Ministers of RCEP Negotiating Countries

- Updated version with further signatories from 29 Sep. letter-

 6 October 2017

Dear Ministers of Trade & Negotiators from RCEP Negotiating Countries,

The 20th round of the Regional Comprehensive Economic Partnership (RCEP) negotiations is taking place from 17-28 October 2017 in Songdo, Korea. [1] RCEP negotiations include chapters on goods, services, investment, intellectual property etc and the proposed provisions in these chapters affect the daily lives of the peoples of all sixteen countries [2] involved in these negotiations including their access to knowledge and affordable life-saving medicines, farmers’ livelihoods, privacy, environmental protection and many other needed regulations.

KORUS Negotiation Documents (Preamble for Investors): Disclosed by the Supreme Court Order

Now we got a piece of negotiation documents of KORUS FTA. They reveal the US unilateralism, which will be pursued more strongly by the Trump Administration. Efforts of Korean negotiators to insert "Korea" into the KORUS Preamble were all failed. Compare the final text and failed proposals of South Korean Government (SKG).

Korean Supreme Court Opposing ISDS in KorUS FTA

When the KorUS FTA was negotiated from 2006, the Korean Supreme Court delivered its opinion against ISDS to the Korean government twice in 2006 and 2007. Ridiculously, the opinion of 2006 was disappeared for unknown reason. Here is the opinion of 2007. English translation was made by the Korea National Assembly in May 2012 upon request of the lawmaker Joosun Park (currently the Deputy-Speaker). Original Korean text is found here, and PDF file of the official English translation is here.

Written Opinion on RCEP to South Korean Government and Request for a Face-to-Face Meeting and Public Hearings

Written Opinion on RCEP to South Korean Government and Request for a Face-to-Face Meeting and Public Hearings

·              

This is English translation of the written opinion (Korean) submitted to the Korean Ministry of Trade on July 25, 2016. For PDF file, click here (Korean text, English text).

Pursuant to Article 8 of the Act on the Procedures for Concluding Commercial Treaties and the Implementation Thereof, we, the undersigned organizations and individuals, submit a written opinion on RCEP negotiation. We also call for a face-to-face meeting with the Korean negotiators and public hearings on RCEP.

Court ordered Disclosure of the Negotiating Documents of KorUS FTA

This is a rare victory. The court has long been reluctant to raise hands of individuals having rights to know, especially when it comes to trade agreements. Back in 2007 when the KorUS FTA talk was close to a conclusion, the court decided in favor of the Korean government to keep confidential draft texts of the FTA. We have two additional court decisions rejecting the request for information disclosure of negotiating documents of KorUS FTA in 2008 and in 2009.

TPP International Symposium and Strategy Forum

1. Goals

• Where TPP negotiation is in now
• What is its impact on domestic industries and strategy of the damaged people to come up with TPP
• International solidarity against TPP
• Mobilizing pubic disapproval against TPP

FTA letter to Obama from Korean law makers

PDF version is here.

THE NATIONAL ASSEMBLY OF THE REPUBLIC OF KOREA
1 Uisadang-daero, Yeongdeungpo-gu
Seoul 150-701, Korea

February 8, 2012
 
His Excellency Mr. Barack Obama
President of the United States
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
U.S.A.
 
Dear Mr. President,
 
We are writing to express our deep concern about the Korea-U.S. Free Trade Agreement (“KorUS FTA”) and our belief that the agreement needs a significant revision prior to further advancements of its implementation process.
 

Resolution of the National Assembly to Urge Renegotiation of the Korea - US Free Trade Agreement

Resolution of the National Assembly to Urge Renegotiation of the Korea - US Free Trade Agreement

Introduced: December 23, 2011
Amended: December 27, 2011
Passed: December 30, 2011

DEMAND

The National Assembly of the Republic of Korea is acutely aware of the fact that concerns have been raised about potential damage to the balance of interests between Korea and the US regarding the investor-state dispute (hereinafter the "ISD") specified under Part 2 of Chapter 11 of the Korea-US FTA during the review of the "ratification agenda in the exchange of letters concerning the free  trade agreement between Korea and the US (hereinafter the "Korea-US FTA")";

Candlelight Vigil on 19th November

Today, over 2,500 people came to the City Hall Square in Seoul and cried out against the Korea-US FTA. Here are some pictures.

Water Cannon Crackdown on Anti-Korea-US FTA Protesters

During a peaceful march near the National Assembly building on 10th November 2011, the police force aimed directly at the protesters and shoot out a powerful stream of water. Watch how strong it was. This caused one's eardrum ruptured and severals fallen down to the street.

For more detailed story, click here and Hani News.

Water Cannon Shooting Protesters

Police aimed water cannons directly at citizens during a peaceful protest against the Korea-US FTA.

Officials from National People’s Movement and Human Rights Joint Meetings claimed one participant in the protest was hit with the water cannon by the police and passed out with her eardrum ruptured. They urged the police authorities to find and punish those responsible and immediately apologize for its excessive use of force.

Stand in Solidarity with the 99% in Korea

Stand in Solidarity with the 99% in Korea

What: An international day of solidarity with the 99% in Korea against the US-Korea trade deal, the biggest job-killing agreement of its kind since NAFTA.

When: Tuesday, November 22, 2011. Day or Night.

How: Gather fellow fair trade activists. March, hold up signs, pass out flyers, and/or stand united with our Korean friends in a candle-light vigil.

Where: In front of the Korean Consulates in Boston, Chicago, Honolulu, Houston, Los Angeles, New York City, San Francisco, Seattle, and Washington, DC—or any place where you can gather all your fellow fair trade activists and raise your voices against the Korea trade deal.

Tell us your plans so we can promote your action.

Call for Solidarity and Action

Call for Solidarity and Action - The Korea-US FTA is not for the 99%

November 16, 2011

Free Trade Agreements have a long history of mass protests. The Korea-US FTA is no different. Its official negotiation was kicked off in 2006 and signed five years ago in June 2007. From the outset of the negotiations, thousands of people in both countries have opposed the deal. One Korean labor union member took his own life in protest against the negotiations, and several hundreds of activists have been arrested during peaceful and legitimate demonstrations. They know that the deal only benefits big corporations, not the people. Nonetheless, the U.S. Congress approved the deal last month. Now the ball is in the court of the Korean National Assembly.