South Korea is set to pay compensation to Iran’s Dayyani Group over a 2015 dispute after the United States cleared the path towards the payment without violating its sanctions against Tehran, the Asian nation’s Foreign Ministry said.
Dayyani, the family behind Entekhab, an Iranian consumer electronics group, filed an investor-state dispute settlement (ISDS) complaint in 2015 against the South Korean government citing breach of a deal. It said Seoul did not return the $50 million deposit it paid for a failed bid to purchase a majority stake in bankrupt Daewoo Electronics.
In 2018 the World Bank’s International Centre for Settlement of Investment Disputes ordered Seoul to provide compensation totalling 73 billion won ($61.4 million) to the Dayyani family, but the payment has not yet been made due to U.S. sanctions against Iran.
The South Korean Foreign Ministry said on Wednesday the U.S. Treasury’s Office of Foreign Assets Control issued a “specific license” on Jan. 6 to allow the payment using the U.S. financial system.
“The license is expected to lay important groundwork for a speedy conclusion of the ISDS settlement with the Dayyani family, which has been one of the pending issues between the two countries,” the ministry said in a statement, adding it would help improve bilateral ties.
The ISDS allows a company from one country to seek arbitration against another country where it has invested.
The Dayyani case marks South Korea‘s first loss in an investment treaty dispute, and its appeal was rejected in 2019.
Washington reimposed sanctions on Iran in 2018 after then-President Donald Trump withdrew from Iran’s 2015 nuclear agreement with six major powers, under which Tehran agreed to curb its nuclear programme in exchange for U.S. sanctions relief.
Iran has repeatedly demanded the release of about $7 billion of its funds frozen in South Korea, calling it “hostage.”