Yulchon Successfully Defends Woori Bank in KRW 26 Billion Lawsuit Filed by Bank Mellat
2024.08.29.
Yulchon successfully represented Woori Bank in a lawsuit filed by Bank Mellat (“plaintiff”), which sought the return of deposits and damage compensation totaling approximately KRW 26 billion. The Seoul Central District Court ruled in favor of Woori Bank, dismissing all claims.
The case stemmed from Bank Mellat’s purchase of two funds through Woori Bank in 2018, totaling approximately KRW 20 billion. The funds were set to mature in October 2018 and in November 2018, respectively, and were designated for settlement in an account held by Bank Mellat with Woori Bank. Following Bank Mellat’s designation as a Specially Designated National (SDN) under the U.S. Iranian Financial Sanctions Regulations (IFSR) in October 2018, Woori Bank froze the account, prohibiting outgoing transactions. Despite this, plaintiff requested Woori Bank to either extend the maturities of the funds or transfer the invested amounts to an account with the Bank of Korea under the plaintiff’s name, or to an account held by the Central Bank of Iran. The plaintiff claimed damages, arguing that Woori Bank’s actions constituted default, tortious conduct, and an attempt to gain unfair profits.
Yulchon successfully argued that Woori Bank’s inability to comply with the plaintiff’s requests was due to force majeure, as compliance would have exposed the bank to significant risks under U.S. sanctions, potentially jeopardizing its ability to conduct U.S. dollar transactions and foreign exchange operations. The court accepted Yulchon’s argument, ruling that the plaintiff’s demands violated principles of equity and good faith given the existential risks posed to Woori Bank by compliance.
This landmark decision provides critical legal clarity on how financial institutions should handle requests from counterparties subject to U.S. economic sanctions, particularly in cases involving claims of default or tortious conduct.
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