Mohammad Reza Dayyani, et al. v. The Republic of Korea

Case summary

At a glance

Parties: Mohammad Reza Dayyani, Abbas Dayyani, Mohammad Hossein Dayyani, Ali Dayyani, Fetemeh Dayyani and Kosar Dayyani (Iran) v. the Republic of Korea
Case no.: PCA Case No. 2015-38; English High Court CL-2018-000454, [2019] EWHC 3580 (Comm); CL-2020-000084; Paris Court of Appeal RG n° 21/11936
Forum and rules: Ad hoc arbitration under the UNCITRAL Arbitration Rules, seated in London
Treaty: Korea–Iran BIT of 31 October 1998
Tribunal: Bernard Hanotiau (President), Philippe Pinsolle, Gavan Griffith
Court: English High Court, Commercial Court (Butcher J; Master Davison); Paris Court of Appeal, Pôle 5 – Chambre 16 (Daniel Barlow, presiding; Fabienne Schaller; Laure Aldebert)
Underlying award(s): Award of 5 June 2018 (London)
Sector: Home appliances; acquisition of a company (M&A)
Outcome: The Tribunal upheld jurisdiction and found a breach of fair and equitable treatment. The English High Court dismissed Korea's challenge to jurisdiction under s. 67. After the parties settled, the Paris Court of Appeal annulled the French exequatur order with the Dayyanis' consent.
Amount: Awarded by majority: KRW 57,777,500,000 (the Contract Deposit), with simple interest at Libor + 2% from 1 April 2011 until payment, plus costs of USD 781,870.64 and EUR 1,089,580.65. The interim charging order of 2020 records at least KRW 73,120,042,357 plus USD 781,870.64 plus EUR 1,089,580.65 owing, including interest and costs.

The dispute

The Dayyanis are Iranian nationals who own and control Entekhab Industrial Group (EIG). EIG won the tender held by Daewoo Electronics' creditor committee for the sale of the company. Because of concerns over sanctions against Iran, the Dayyanis incorporated D&A Holding Co Pte Ltd in Singapore to act as purchaser. D&A signed a Share and Claim Purchase Agreement with the creditor sellers on 7 November 2010 for KRW 577,775,000,000 and paid a Contract Deposit of KRW 57,777,500,000. The sellers terminated the agreement on 13 December 2010, saying D&A's letters of confirmation were unsatisfactory, and kept the deposit. KAMCO, Daewoo's largest shareholder, later refused to back a court mediation decision that would have returned the deposit. The Dayyanis claimed that Korea, directly and through KAMCO and the sellers, breached fair and equitable treatment (Article 4) and expropriated their investment (Article 6). Korea argued that there was no "investment" and no "investor", that the Dayyanis lacked standing as shareholders of D&A, and that the acts of KAMCO and the sellers could not be attributed to it.

Key holdings

In the Award the Tribunal unanimously upheld jurisdiction and found that Korea breached Article 4 of the BIT. By majority it ordered Korea to pay the Contract Deposit with simple interest, and the Dayyanis' costs. It dismissed all other claims. High Court judgment ¶ 19; Paris judgment ¶ 1
"Every kind of property or asset" in Article 1(1) is not limited by the listed categories. The SPA before Closing was a binding contract giving D&A vested and contingent rights under Korean law, including the Best Efforts covenant, and was property or an asset. The Contract Deposit plainly was one too. High Court judgment ¶¶ 37–55
The BIT does not require the extra characteristics of contribution, risk and duration (Romak was distinguished). In any event the SPA and the deposit had them, because they were exposed to material political risk. Both were invested in Korea's territory. High Court judgment ¶¶ 57–67
The Dayyanis were "investors" who could claim for investments held directly by D&A, the company they control. Barcelona Traction and Diallo deal with diplomatic protection and do not apply to a BIT, which is lex specialis. The court found the reasoning in Poštová Banka unpersuasive. High Court judgment ¶¶ 72–84
Whether the acts of KAMCO or the sellers can be attributed to Korea is not a question of jurisdiction under s. 67. It is a dispute between an investor and a Contracting Party, to be decided on the merits. High Court judgment ¶¶ 87–90
A majority of the Tribunal had also found Korea directly responsible for failing to compel the return of the deposit, and it had jurisdiction to do so. The operative part of the Award would have been the same on that basis alone. The s. 67 application was dismissed. High Court judgment ¶¶ 93–96
The parties had settled and the Dayyanis consented to Korea's request. The Paris Court of Appeal therefore annulled the exequatur order of 19 October 2018 and declared the proceedings extinguished. Each party bears its own costs. Paris judgment ¶¶ 10–13 and operative part

Procedural history

10 September 2015The Dayyanis commenced arbitration under Article 12 of the BIT.
May 2017Hearing on the merits.
5 June 2018Award (seat London): breach of fair and equitable treatment; the Contract Deposit, interest and costs awarded by majority.
3 July 2018Korea issued an arbitration claim form under s. 67 of the Arbitration Act 1996.
19 October 2018Exequatur order of the President of the Paris Tribunal de grande instance declared the Award enforceable in France.
20 December 2019Butcher J dismissed Korea's s. 67 challenge.
18 February 2020Commercial Court judgment in Claim No. CL-2020-000084 ordered Korea to pay money to the Dayyanis.
30 June 2020Master Davison made an interim charging order over all the issued shares in Dana Petroleum Limited. The hearing on whether to continue the charge was listed for 5 October 2020.
25 June 2021Korea appealed the exequatur order to the Paris Court of Appeal. The parties later concluded a settlement.
14 March 2023The Paris Court of Appeal recorded the Dayyanis' consent and annulled the exequatur order.

Tribunal, counsel and experts

Decided by: Bernard Hanotiau President
Philippe Pinsolle Co-arbitrator
Gavan Griffith Co-arbitrator
Daniel Barlow Judge, Paris Court of Appeal — appointed by a court (Président de chambre, presiding)
Fabienne Schaller Judge, Paris Court of Appeal — appointed by a court
Laure Aldebert Judge, Paris Court of Appeal — appointed by a court
For the claimant: Gresham Legal · Baechlin Moisan Associés
For the respondent: Freshfields Bruckhaus Deringer · SELAS Archipel