South Korea Prevails in $566 Million Arbitration Claim by Iranian Investors

An international arbitration panel has dismissed a 770 billion won, or about $566 million, damages claim brought against South Korea by members of Iran’s Dayyani family, handing Seoul a favorable ruling in a long-running dispute linked to the attempted purchase of Daewoo Electronics.

South Korea’s Ministry of Justice said Wednesday that a panel operating under the Hague-based Permanent Court of Arbitration ruled for the Korean government. Six members of the Dayyani family filed the case in 2021, arguing that Seoul’s delayed payment of compensation awarded in an earlier arbitration caused additional losses.

The panel also ordered the claimants to pay South Korea approximately 4 billion won in legal expenses and about 800 million won in administrative fees, according to the ministry.

The dispute originated in a failed corporate acquisition. The Dayyanis were major shareholders in Iran’s Entekhab Industrial Group, which agreed to buy a major stake in Daewoo Electronics from the state-run Korea Asset Management Corp. The Korean agency canceled the sale contract in 2011.

The family initiated arbitration in 2015. A tribunal ruled in 2018 that South Korea should pay 73 billion won plus interest in compensation over the failed deal. That decision became final in December 2019, but Seoul did not make the payment until April 2022.

The Dayyanis filed the latest claim in October 2021, seeking substantially greater damages based on the delayed transfer. The Korean government maintained that it needed authorization from the US Office of Foreign Assets Control before it could send the funds because of American sanctions on Iran.

According to the Justice Ministry, the tribunal accepted that the approval requirement was justified in light of US sanctions and the broader international economic environment. It concluded that South Korea had not discriminated against the investors through the delay.

The decision removes the immediate risk of a large additional payment by Seoul while shifting part of the proceeding’s costs to the claimants. It also closes another stage of a dispute that has extended for more than a decade, moving from the canceled takeover agreement to two separate international arbitration proceedings. The outcome is significant for the government’s management of investor-state disputes involving sanctions and cross-border payment restrictions.