The 70 percent stake that affiliates of Abu Dhabi’s International Petroleum Investment Company have in Hyundai Oilbank, South Korea’s fourth-largest oil refining and marketing company, is resting on shaky ground. Last month, an International Chamber of Commerce arbitration panel ruled against IPIC in a dispute with other shareholders in Hyundai Oilbank, led by Hyundai Heavy Industries. The panel ordered that IPIC sell its 70 percent stake in Hyundai Oilbank at a 25 percent or more discount to other shareholders, representing about a $750 million haircut off the market price. IPC has since protested the award, but last week, Hyundai Heavy went to South Korean court seeking an order enforcing the ruling.
The arbitration was first filed last spring. Hyundai Heavy, represented by Debevoise & Plimpton and the Korean firm Bae, Kim & Lee, complained that after IPIC increased its stake in Hyundai Oilbank from 50 percent to 70 percent between 2002 and 2003, IPIC stopped paying mandatory dividends as provided by the shareholder agreement. IPIC, represented by Shearman & Sterling and Shin & Kim, denied the allegations and made various counterclaims. But following a five-day hearing in Paris, the arbitration panel made its ruling in favor of Hyundai Heavy, finding that IPIC had made a material breach of its shareholder agreement with Hyundai Heavy.
Debevoise partners David Rivkin and Christopher Tahbaz, who tried the arbitration for Hyundai Heavy along with lawyers from Bae, Kim & Lee, told the Litigation Daily that the award may be the largest ever. But the bigger question now is how the award will be enforced. IPIC has vaguely complained about “key factual and legal conclusions of the arbitral award” and has stated that it has no legal effect unless a South Korean court enforces it.
That has baffled Rivkin and Tahbaz, who point to a passage in the shareholder agreement that explicitly states that all disputes between the parties would be settled by an arbitration panel and that its award would not be reviewable by any court. They also point to IPIC’s statements on the record throughout the arbitration process. “They never raised any objections about the fairness of the procedure during the arbitration itself,” said Tahbaz.
Nonetheless, Hyundai Heavy’s Korean counsel at Bae, Kim & Lee filed an action last Wednesday in a Korean court seeking to enforce the award. We asked Rivkin whether or not they risked losing, but he didn’t seem too worried. “We’re pretty confident … there are no grounds to challenge it,” he said.
John Savage of Shearman & Sterling, who represented IPIC at the arbitration proceeding, did not return a call seeking comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.