A story of unjustly treated South Korean compressor maker

지윤석 기자l승인2020.04.23l수정2020.04.24 09:47






  • ARRA: American Recovery & Reinvestment Act of 2009

This $787 billion stimulus package makes use of US steels and industrial products in public works mandatory. The act has been softened on value of parts as long as the industrial products are made in the US.


  • ISDS: Investor State Dispute Settlement

It is a system through which investors can sue countries for discriminatory practices. In 2015, a promising South Korean company in the US was accused of a crime. Late last year, CEO Lee Hun-suk of KTurbo wrote in his letter of intent for arbitration that the US government should pay $10 million for the illegal expropriaton of the company property without any legal proceedings. However, the claim is only warmin-up of the main claim regarding the criminal prosecution of CEO of KTurbo with frivolous indictment which does not invoke jurisdiction of the court.

KTurbo is famous for making high performing air blowers and compressors and the company won a presidential prize at the Korea Technology Awards. It was 10 years ago that the company opened a subsidiary in the US in an effort to expand the market. The company attracted attention with a possible technology transfer contract with German Aerzener, a global compressor company.

But a staff of KTurbo USA gave a statement to the United States Environmental Protection Agency that the company was violating ARRA and the company was listed in EPLS as a result. A company official then refuted “EPLS bans contracts with the Federal Government of the US but we have no occasion to sign a contract with it and local governments also.”

In 2011, KTurbo signed a technology transfer contract worth 65 billion won ($52 million) but knowing that KTurbo was on the EPLS list, Aerzener stopped ordering to avoid violating ARRA, insisting Aerzener should take over the asset of KTurbo for direct production. A KTurbo official refuted “No manufacturers are subject to ARRA because it is about subsidy of the Federal Government so Aerzerner’s claim is wrong.” But the result was in favor of Aerzerner and KTurbo had to hand over its staff, special equipment and factory meaning the company lost its 3 year exclusive production right. Back in Korea last year, CEO Lee is still in battle with Aerzerner over the issue. 

Lee says “Suing for fulfillment of the contract can only be made by Aerzener proving it first. But the court is trying to making a ruling without this proof. In other words, the court has no jurisdiction in the case. I’m continuing this legal battle so that no South Korean companies should be treated unfairly like us again.”

지윤석 기자  jsong_ps13@naver.com
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