UAE firm sues Korea over taxation
A state-run United Arab Emirates (UAE) company and its Dutch subsidiary filed a request for arbitration Thursday, seeking compensation from the Korean government over taxation worth US$170 million five years ago, a civic group said Friday, reports the Korea Times.
The Lawyers for a Democratic Society said the Abu Dhabi-based International Petroleum Investment Company (IPIC) and its Dutch affiliate Hanocal have taken the government to the International Center for Settlement of Investment Disputes (ICSID) asking for 183.8 billion won in compensation.
The National Tax Service (NTS) imposed the tax on Hanocal in 2010 for its selling of Hyundai Oilbank shares worth 1.8 trillion won to Hyundai Heavy Industries (HHI).
“IPIC, which is fully owned by the Abu Dhabi government, and its subsidiary Hanocal filed a complaint with the ICSID against Korea yesterday. They want to get back the tax, saying it should be exempted in accordance with the Korea-Netherlands tax treaty,” said the lawyers’ group at a press conference.
The civic group, however, said that IPIC’s arguments are “baseless” because the bilateral treaty does not apply to paper companies established to exploit tax benefits.
Korean district and appeals courts have handed out rulings in favor of the government in the case which is now pending at the Supreme Court.
Hyundai Heavy sold its 50 per cent stake in Hyundai Oilbank to IPIC in 1999 after being hit hard by the Asian financial crisis. In 2003, the company sold an additional 20 per cent stake to the Abu Dhabi firm. Later in August 2010, Hyundai Heavy retook the combined 70 per cent stake in the oil refiner from IPIC.
The filing came a week after the ICSID conducted a hearing on Lone Star Funds’ case against the Korean government. The Texan private equity company asked the government to pay US$4.7 billion for delaying approval for its sale of Korea Exchange Bank to HSBC in 2007.
Lone Star also argued that it was inappropriate that the NTS imposed a combined 850 billion won of corporate and income taxes on the company for selling its Star Tower in southern Seoul along with KEB to Hana Financial Group.
The company said that “based on a number of unsupported and far-fetched allegations, including that Belgium was a tax haven or that Lone Star companies were mere conduits that served no purpose other than obtaining improper tax benefits, the NTS refused to honor Korea’s binding obligations under its treaty with Belgium,” according to Lone Star’s letter to the Korean government.
IPIC was formed by the Abu Dhabi government in 1984 to invest in energy and related sectors across the globe. Today it manages a portfolio of investments in more than 18 companies across the hydrocarbon value chain, shipping and pipelines, downstream retail and marketing, petrochemicals, power and utilities as well as industrial services.
