Hyundai Heavy Wins $750M, Right To Buy IPIC Stake

By Hilary Russ

Law360, New York (November 17, 2009) -- Hyundai Heavy Industries Co. Ltd. has won at least $750 million in an arbitration award against the International Petroleum Investment Corp., an oil investment fund of Abu Dhabi's government that allegedly breached a shareholder agreement with HHI.

An arbitration tribunal, acting under the rules of the International Chamber of Commerce's International Court of Arbitration, issued the award, according to Debevoise & Plimpton LLP, co-counsel for HHI.

HHI had accused IPIC affiliates of breaching a shareholder agreement over IPIC’s stake in Hyundai Oilbank Corp., Korea's fourth-biggest oil refining company, Debevoise said.

The tribunal — the Singapore International Arbitration Center — also ordered IPIC to sell its 70 percent stake, or 171 million shares, in Hyundai Oilbank to HHI for about $13 a share, according to a report in the Korea Times.

IPIC was ordered to sell the 70 percent stake to HHI for $2.25 billion — about a $750 million discount from its market value, according to the law firm.

The dispute began around late 2007, when HHI claimed IPIC wanted to sell its stake in Hyundai Oilbank. That move allegedly violated a 2003 bilateral agreement, the Times reported.

IPIC had been pushing since earlier that year to sell the stake to South Korean conglomerates like GS Group and Lotte Group, the Times said.

In 1999, IPIC took over 50 percent of Hyundai Oilbank from HHI for 613 billion won. It has since raised its interest to 70 percent, the Times reported.

HHI had said an agreement with IPIC gave it a preemptive right to buy the 70 percent stake controlled by the United Arab Emirates oil fund. In 2008, IPIC denied the breach of agreement allegations, according to the Times.

Thursday's arbitration decision makes it easier for HHI to buy back the stake in Hyundai Oilbank, according to the Times.

“It remains to be seen which (Hyundai) companies will buy those shares and how the deal will be funded,” an HHI spokesman told Reuters, adding that no timetable had been set for the Oilbank stake purchase.

HHI won all the relief it sought in a case in which both sides raised claims against the other, Debevoise said.

The tribunal found that IPIC had breached the shareholders' agreement when it told them to sell their shares in Hyundai Oilbank to HHI at 25 percent less than the market value, according to the law firm.

Attempts to reach Hyundai and IPIC for immediate comment were unsuccessful.

HHI was represented by Debevoise & Plimpton LLP and Bae Kim & Lee LLC. Working on the case for Debevoise were partners David W. Rivkin and Christopher K. Tahbaz. Associates Caroline H. Moustakis, Corey S. Whiting and Ina Popova were also on the team.

Bae Kim partners included Kevin Kim, John P. Bang and Minwoon Yang, and the team included associates Matthew J. Christensen and Seung Woo (Sean) Cho.

Counsel information for IPIC could not be immediately confirmed.