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IN THE MATTER OF AN ARBITRATION UNDER

THE ARBITRATION RULES OF THE UNITED NATIONS
COMMISSION OF INTERNATIONAL TRADE LAW

and

THE KOREA-UNITED STATES FREE TRADE AGREEMENT

BETWEEN:

JIN HAE SEO

(Claimant)

THE GOVERNMENT OF THE REPUBLIC OF KOREA

(Respondent)

RESPONSE TO THE NOTICE OF ARBITRATION

August 13, 2018

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1. Introduction

A. The Government of the Republic of Korea (hereinafter “Respondent”) submits this Response to the Notice of Arbitration (hereinafter the “Response") in response to the Notice of Submission to Arbitration dated July 12, 2018 (hereinafter the “Notice”) which JIN HAE SEO (hereinafter “Claimant") has served Respondent under the Korea-United States Free Trade Agreement (hereinafter the “KORUS”) and the United Nations Commission on International Trade Law Arbitration Rules as adopted in 2013 (the “UNCITRAL Arbitration Rules")¹

B. Unless expressly admitted, Respondent denies each paragraph of the Notice.

2. Respondent Information

A. Respondent

The respondent in this arbitration is the Government of the Republic of Korea, and its contact point details are as follows:

Address: Office of International Legal Affairs,
Ministry of Justice of the Republic of Korea,
Government Complex, Gwacheon,
Republic of Korea

¹ Claimant elected to arbitrate under the 2013 UNCITRAL Arbitration Rules. Respondent notes that certain provisions in Chapter 11 of the KORUS appear to contemplate the application of the 1976 version of the UNCITRAL Arbitration Rules, such as Article 11.20(6)(c) which mentions "the statement of claim referred to in Article 18 of the UNCITRAL Arbitration Rules" (the provision of the 2013 UNCITRAL Arbitration Rules that deals with the Statement of Claim is Article 20). The Respondent on this occasion does not object to the proposed application of the 2013 UNCITRAL Arbitration Rules except to the extent modified by the KORUS. However, for the avoidance of doubt, Respondent's acceptance of the application of the 2013 UNCITRAL Arbitration Rules is for the purposes of the present arbitration only, and Respondent shall not be bound by such acceptance in any other proceedings. Respondent further notes that the 2013 UNCITRAL Arbitration Rules is identical to the 2010 UNCITRAL Arbitration Rules but for the inclusion of the UNCITRAL Arbitration Rules on Transparency in Treaty-based Investor-State Arbitration, which are not applicable to the present arbitration. ↩

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B. Legal counsel

Respondent's legal counsel is Yoon & Yang LLC of the Republic of Korea, and its contact point details are as follows, to which all correspondence, notices and other documents in relation to this arbitration should be addressed:

Name: Sungbum LEE, Partner

Address: 18th Fl., ASEM Tower 517 Yeongdong-daero, Gangnam-Gu, Seoul 06164, Republic of Korea

Telephone: +82-2-6182-8527

Fax: +82-2-6003-7031

E-mail: [email protected]

3. Response regarding Procedural Matters

A. Number of arbitrators

Claimant proposes in its Notice a Hong Kong attorney Benny Lo as the sole arbitrator for this arbitration.

Respondent disagrees, and proposes that the tribunal be composed of three (3) arbitrators. Respondent wants a proper determination of this matter made by experienced practitioners with multiple investment case credentials as arbitrators. Thus, Claimant and Respondent shall each appoint one (1) arbitrator, and agree on the third who shall act as the presiding arbitrator.

B. Appointing authority

Claimant proposes Hong Kong International Arbitration Centre (the “HKIAC”) as the appointing authority.

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Respondent disagrees. Article 11.19(2) of the KORUS clearly states that the Secretary-General of the International Center for Settlement of Investment Disputes (the “ICSID") shall serve as the appointing authority for an arbitration under the KORUS Chapter 11, which shall be respected and followed in this arbitration.

C. The Administration of Arbitration

Claimant proposes HKIAC as the body for handling the administrative affairs of this arbitration.

Respondent disagrees, and proposes Permanent Court of Arbitration (the "PCA") as the body for handling the administrative affairs of this arbitration.

D. The Place of Arbitration

Despite Article 3(3)(g) of the UNCITRAL Arbitration Rules, the Claimant has not proposed the place of arbitration in the Notice.

Respondent proposes Singapore as the legal place of arbitration. Respondent reserves all rights to agree on the choice of the physical venue for this arbitral proceeding.

E. The Language of Arbitration

Pursuant to Article 11.20(3) of the KORUS, official languages of this arbitration procedure are Korean and English. Nevertheless, Claimant failed to comply with the KORUS by serving her Notice only in English and omitting to serve in Korean. Respondent reserves the rights to argue the validity of the Notice that Claimant has served in violation of her obligation under the KORUS.

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4. Facts of the Dispute

Claimant argues that Respondent has caused her damages by violating the KORUS. However, Claimant's arguments lack merits with no supporting evidences, and are based on a misunderstanding or misrepresentation of the facts. Respondent provides a brief summary of the facts and circumstances regarding this dispute.

1. (1) On April 4th of 2001, Claimant signed a contract to purchase 76.14th of 87 share of interest in the land, the size of which was 187.8 square meter, located at **-** **********, ****-**, Seoul, Republic of Korea (the "Land”). Claimant also signed a contract to purchase a three-story and a single-story residential property which existed above the Land (each residential property hereinafter referred to as the "three-story building" and "single-story building"; the Land, the three-story building and the single-story building hereinafter referred collectively as "Properties").

Subsequently, Claimant fully obtained the ownership of Properties in this case by registering with the relevant government authority on June 8th of 2001. On August 17th of 2001, Claimant purchased the remaining 10.86th of 87 share of interest in the Land and obtained its full ownership on August 23rd of 2001 through official registration. On October 23rd of 2003, Claimant granted approximately 25 percent share of the Land ownership and the title of the single-story building to her husband, ****-** Park. Consequently, Claimant and ****-** Park shared interest in the ownership of the Land, Claimant owned the three-story building, and ****-** Park owned the single-story building at the time when Properties were expropriated.

1. (2) Claimant obtained U.S. citizenship on May 23rd of 2013 and lost her Korean citizenship. ****-** Park maintained his Korean citizenship while exercising and after losing his ownership over Properties.
2. (3) Seoul Metropolitan City, the local government of the Republic of Korea, designated 2nd District of Dae-heung, where Properties were located, as a redevelopment area on December 27th of 2007. Such action taken by the Seoul Metropolitan City provides residences of the designated area the right to pursue areal redevelopment.

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1. (4) The document agreeing to establish the Residence Redevelopment Association² (the "Redevelopment Association”) and all other relevant documents were submitted under the names of Claimant and ****-** Park on February 12th of 2008. Thereafter, the Redevelopment Association was established on May 16th of 2008, the redevelopment project was authorized on January 19th of 2012, and the management and disposal plan was authorized on March 12th of 2015, respectively.³
2. (5) Upon the Redevelopment Association's notification to the stakeholders of the opportunity to review the compensation plan for their properties on March 9th of 2015, the landlords of the designated area including Claimant, Redevelopment Association, and the local government of the Seoul Metropolitan City each appointed a certified appraisal company in accordance with the law, and three appointed companies conducted appraisals on the properties subject to the redevelopment plan including Properties.
3. (6) Under the law, the average of the value determined by three appraisal companies was to be the value for each property. On the basis of the outcome of the appraisals, the Redevelopment Association offered approximately KRW 550 million to Claimant (KRW 520 million for the Land and KRW 29 million for the three-story building) and KRW 195 million to ****-** Park (KRW 175 million for the Land and KRW 20 million for the single-story building) in exchange for the title of Properties. Claimant and ****-** Park rejected this offer.
4. (7) The Redevelopment Association filed an application for adjudication on the appropriate value of Properties with the Land Expropriation Committee of the Seoul Metropolitan City on October 28th of 2015, and the Committee issued its decision on January 29th of 2016. According to this decision, the appropriate compensation amount was approximately KRW 608 million (KRW 536 million for the Land and KRW 72 million for the three-story building) for Claimant, and KRW 201 million

² An association voluntarily composed of the residents of the designated redevelopment area. A redevelopment association is neither part of government nor public entity. ↩

³ A lawsuit regarding the validity of the establishment of the Redevelopment Association was filed, and the Supreme Court affirmed its validity (Supreme Ct. Decision 2013Du21304 rendered on January 23, 2014). ↩

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(KRW 180 million for the Land and KRW 21 million for the single-story building) for ****-** Park. The Redevelopment Association offered Claimant and ****-** Park this amount, but Claimant and ****-** Park refused to accept such offer.

1. (8) The Redevelopment Association placed the amount decided by the Land Expropriation Committee of the Seoul Metropolitan City for Claimant and ****_** Park in the court designated escrow account, and moved forward to expropriate Properties on March 18th of 2016.
2. (9) Also, the Redevelopment Association filed for an injunction against the Claimant and ****-** Park in order to prohibit the transfer of occupancy of Properties. The Seoul Western District Court awarded the injunction ordering the Claimant and ****-** Park not to transfer the occupancy of Properties on January 8th of 2016. In order to execute this order, the Enforcement Officer (Mr. **-****** Lee) and his team visited the premise of Properties on January 18th of 2016, but could not enter and thus failed to execute the injunction order. However, the Enforcement Officer was able to execute the order on January 19th of 2016 after meeting Claimant at the premise of Properties. In accordance with the law, the Enforcement Officer duly presented the copy of the order and explained its main contents to Claimant. Two (2) witnesses and representatives of the Redevelopment Association were present at the time when the injunction was duly executed.
3. (10) On May 18th of 2016, Claimant filed an appeal with the Central Land Expropriation Committee with regard to the Seoul Land Expropriation Committee's decision. On January 19th of 2017, the Central Land Expropriation Committee affirmed the legality of the Seoul Land Expropriation Committee's decision. In doing so, however, the Central Land Expropriation Committee conducted its own appraisals through two (2) certified appraisal companies, and decided to increase the compensation amount. The Central Land Expropriation Committee decided as a compensation amount approximately KRW 641 million (KRW 569 million for the Land and KRW 72 million for the three-story building) for Claimant and approximately KRW 212 million (KRW 191 million for the Land and KRW 21 million for the single-story building) for her husband ****-** Park.
4. (11) Thereafter, the Redevelopment Association filed for an eviction with the Western

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Seoul District Court against Claimant, her husband ****-** Park and others on December 9th of 2015. On January 11th of 2017, the Seoul Western District Court ruled for the Redevelopment Association, but Claimant appealed. However, on March 2nd of 2017, Claimant withdrew her appeal and the determination made by the Seoul Western District Court ordering Claimant and ****-** Park to move out from the premise of Properties and transfer its occupancy to the Redevelopment Association (Seoul Western District Court Decision 2015Gadan246301) became the final court ruling.

1. (12) As outlined above, the expropriation in this case has been conducted in accordance with the procedures established under the relevant Korean law.

5. Response to the Relief Sought

A. Respondent rejects every claim that Claimant has made in the Notice and rejects the relief sought.

B. Respondent respectfully requests the arbitral tribunal to:

1. (1) dismiss Claimant's claim on the grounds of an arbitral tribunal's lack of jurisdiction with respect to the dispute and/or Claimant's failure to state a legitimate cause of action;
2. (2) dismiss all causes of action made by the Claimant;
3. (3) order Claimant to pay Respondent any and all costs incurred in connection with this arbitration, including but not limited to, attorney fees, fees and expenses for arbitrators and for the body that has assisted administering this arbitration; and
4. (4) order any further or additional relief as the tribunal may deem appropriate.

6. Rights Reserved

Respondent expressly reserves its rights in full, including, without limitation, right to: (a) raise preliminary objections for determination on an expedited basis or otherwise; and (b) amend and supplement its arguments set out in this Response, including its request for relief, including, without limitation, with respect to matters of jurisdiction and the merits.

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Respectfully Submitted,

/s/

Signature

Sungbum LEE
Partner, Yoon & Yang LLC

Counsel to the Government of the Republic of Korea