POSCO E&C has won a lawsuit over the development of Songdo International Business District (IBD), filed by Gale International, a U.S. real estate development company.
POSCO E&C said on Nov. 31 the International Chamber of Commerce (ICC) rejected an arbitration against losses, submitted by Gale International in 2019.
The Korean contractor said ICC’s tribunal concluded that all taken against Gale International in the process of developing the IBD were legal.
In 2002, POSCO and Gale International established New Songdo International City Development Co. (NSIC), a joint venture in a ratio of 3:7 and implemented the Songdo IBD project.
The project involved Incheon’s plan to develop Songdo into an international city. It called for building housing, office, culture and educational facilities by investing 24 trillion won in an area covering 5.74 million sq. meters, about twice bigger than the size of Yeouido.
In 2005, POSCO E&C and Gale International once discussed ways of constructing the apartment complex “The Sharp First World,” Songdo Central Park, Songdo International School and Jack Nickclaus Golf Club.
But as POSCO E&C and Gale International were engaged in a severe dispute over the division of profit and cost, the project had drifted along since 2015. In the same year, Gale International side suspended the IBD development project, so the project failed to proceed for over two years.
An aerial view of POSCO Tower in Songdo and Songdo International Business District. (Photos: POSCO E&C)
POSCO E&C was faced with losses, caused by the suspension of the project. The contractor was owed 1.4 trillion won in contingency liabilities.
Against this background, POSCO E&D decided to break up with Gale International side. In the second half of 2017, POSCO E&C paid out borrowings owed by NSIC in a crisis of default instead of the latter, and in the process, POSCO E&C acquired a 70.1 percent stake in NSIC, offered as a collateral under an agreement of project financing.
The Korean contractor handed over the stake to other foreign companies, ACPG and TA. POSCO E&C filled out new business partners instead of Gale International.
Gale International side submitted a lawsuit to ICC against POSCO E&C’s steps in April 2019.
At that time, Gale International claimed that POSCO E&C’s disposing of NSIC’s stake violated a duty of good faith.
The legal dispute drew much attention since it involved the biggest money since 2012 when Loan Star’s international lawsuit filed against the Korean government was solved. But ICC rejected Gale International’s claim against POSCO E&C recently in three years.
POSCO E&C said ICC concluded that POSCO E&C’s disposing of the stake was a rational decision to carry out the IBD development project and the contractor tided over a crisis of compensating $2.5 billion (3.558 trillion won), including the selling of the stake, a potential risk factor.