Lone Star Funds has filed investor-state dispute arbitration claims against the Korean government for delaying the sale of the U.S.-based private equity firm’s controlling stake in Korea Exchange Bank, officials in Seoul said on Thursday.

The equity firm brought the Korean government to the Washington-based International Center for Settlement of Investment Disputes, accusing it of violating a bilateral investment treaty between Korea and Belgium.

This marked the first time that the Korean government has been involved in an ISD case.

The equity fund has argued that it suffered losses totaling some 1 trillion won ($940 million) as Korea’s financial authorities unreasonably intervened in the sale process.

Lone Star, which bought a 64.6 percent stake in Korea Exchange Bank in 2003 for $1.2 billion, was given the green light early this year to sell a 51.02 percent stake to Hana Financial Group for $3.45 billion.

Its attempts to sell the controlling stake to Kookmin Bank and HSBC fell through in 2006 and 2008, respectively.

In response, the Korean government briefly commented on its stance to actively defend itself, saying that “Lone Star’s claim is irrational.”

Last year, Lone Star was convicted by Korea’s top court of manipulating stocks of KEB.

(kys@heraldcorp.com)