South Korea’s lower court on Friday ordered the Korean government and Seoul City to repay US private equity firm Lone Star Funds 168.2 billion won ($127.6 million), which the firm had paid as corporate tax levied on the sale of its now-defunct Korea Exchange Bank stake.

The Seoul Central District Court said the central government should pay 153 billion won and Seoul city government 15.2 billion won, respectively. The ruling applied an annual interest rate of 5 percent for delayed damages, the court added.

Lone Star Funds, which acquired the now-defunct Korea Exchange Bank stake for 1.38 trillion won in 2003, had initially planned to sell off its entire stake to HSBC for about 5.94 trillion won. However, after a delay it ended up selling it to Seoul-based Hana Financial Group for some 3.9 trillion won in 2012.

The National Tax Service then charged around 850 billion won in income and corporate tax, which Lone Star Funds contested through a lawsuit. In 2017, the Supreme Court of Korea ruled that since Lone Star Funds is a foreign firm that does not have operate a fixed establishment in the country, it is unjust to impose corporate taxes worth 173.3 billion won.

In 2017 and 2018, Lone Star Fund sued the government and Seoul City, respectively, in a civil court, claiming that the firm did not receive the taxes worth 150 billion won back from the governments. The US company claimed that the governments should pay some 300 billion won including interest from 2012 when the corporate tax was imposed.

In August last year, the International Center for Settlement of Investment Disputes ordered South Korea to cough up $216.5 million to Lone Star Funds.

In the investor-state dispute settlement suit filed by Lone Star against the country in 2012, the US company claimed that the nation's financial regulator deliberately delayed approval of the initial plan to sell its controlling stake in KEB.