Fengzhen Min v. Republic of Korea

At a glance

Parties

Fengzhen Min (China) v. Republic of Korea

Case no.

ICSID Case No. ARB/20/26

Forum and rules

ICSID Convention; ICSID Arbitration Rules 2006 (Rule 41(5) preliminary objection)

Treaty

China–Korea BIT (in force 1 December 2007)

Tribunal

Ian Glick QC (President), Stephen L. Drymer, Donald M. McRae

Sector

Real estate; shareholding in a Korean holding company

Outcome

Rule 41(5) objection upheld only for the stand-alone expropriation claim based on the Woori Bank enforcement (Claim D). It was rejected for the criminal-proceedings claim and the two composite claims. Costs reserved (18 June 2021).

Amount

Damages claimed for loss of the Pi Korea shareholding, plus moral damages, both to be quantified later. No amount stated.

The dispute

Mr. Min is a Chinese national. In 2007 he set up Pi Investment Co. Ltd (Pi Korea), which in 2008 became the ultimate owner of a building in central Beijing. The purchase was financed by loans of KRW 380 billion, which were later assigned to the state-owned Woori Bank. Woori Bank enforced its security over the Pi Korea shares and sold them to Manner International Trading Ltd; the shares were transferred in March 2014 and January 2015. The Korean courts rejected Mr. Min's challenge to the sale, with a final Supreme Court ruling on 18 July 2017. In parallel, Mr. Min was convicted of embezzlement and other offences and sentenced to six years in prison; the Supreme Court confirmed the conviction on 22 March 2017. He claims breach of fair and equitable treatment (Article 2(2)), denial of justice and expropriation (Article 4(1)), each based on the acts separately and taken together as a composite act. Korea objected under ICSID Rule 41(5) that the claims based on the Woori Bank enforcement and the criminal proceedings were time-barred under the three-year limit in Article 9(7).

Key holdings

1. Article 9(7) goes to jurisdiction: Korea has not agreed to answer claims brought more than three years after the investor first knew, or should have known, of loss or damage. Conduct before that date may still be relevant to liability and damages. The parties agreed that the cut-off date is 16 July 2017. ¶¶ 71, 81
2. Efficiency is a purpose of Rule 41(5). A claim that is manifestly without legal merit should not go forward merely because it shares facts with other, more meritorious claims. ¶ 73
3. The Request, fairly read, contains a stand-alone expropriation claim based on the Woori Bank enforcement (Claim D), although the claimant disclaimed it. That claim is manifestly without legal merit and time-barred: the enforcement ended in January 2015, and Mr. Min knew of the loss of his shares no later than March 2015. The Tribunal compared it to the claim based exclusively on the FDA Decision in Apotex. ¶¶ 83–85
4. Claim B (FET and denial of justice through the criminal proceedings) is not, as a whole, manifestly without legal merit. Whether the conduct is a continuing breach is a question for the merits. It is arguable that loss incurred after the cut-off date flows from fresh breaches and is not time-barred. ¶¶ 86–90
5. The composite claims C and F are not manifestly without legal merit. Korea accepted, for this objection only, that the acts were interconnected. As pleaded, each composite act was complete only with the Supreme Court decision of 18 July 2017, two days after the cut-off date. Which parts of the loss are recoverable is left to the merits. ¶¶ 91–96
6. The costs of the Rule 41(5) objection are reserved. ¶¶ 97–98

Procedural history

1. 16 July 2020Request for Arbitration filed. ICSID registered it on 3 August 2020.
2. 1 February 2021Tribunal constituted.
3. 5 February 2021Korea filed its preliminary objection under Rule 41(5).
4. 26 May 2021First session and hearing on the Rule 41(5) objection, held by videoconference.
5. 1 June 2021Procedural Order No. 1 issued.
6. 18 June 2021Decision on the Rule 41(5) objection: Claim D dismissed; Claims B, C and F proceed; costs reserved.

Tribunal, counsel and experts

Decided by

• Ian Glick President — appointed by the parties jointly
• Stephen L. Drymer Co-arbitrator — appointed by the claimant
• Donald M. McRae Co-arbitrator — appointed by the respondent

For the claimant

King & Spalding LLP · Hui Zhong Law Firm

For the respondent

Allen & Overy LLP · Yulchon LLC · Ministry of Justice, International Dispute Settlement Division

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Keywords

• Rule 41(5)
• manifestly without legal merit
• time bar
• limitation period
• China–Korea BIT
• Article 9(7)
• composite act
• continuing breach
• fair and equitable treatment
• denial of justice
• indirect expropriation
• Woori Bank
• Pi Korea
• Manner Transfer
• criminal proceedings
• Apotex
• Ansung
• real estate

Summary generated with AI from the published documents — refer to the award for the authoritative text.