Korea National Insurance Corporation v Allianz Global Corporate & Specialty AG (Formerly Known as Allianz Marine & Aviation Versicherungs AG) (London Branch) (on Its Own Behalf and on Behalf of the Reinsurers Subscribing to Policy Number Ajfm157 for the 2004 Year of Account)

Field J:

1. This is the judgment of the court on a preliminary issue as to whether certain contentions pleaded by Defendants are beyond the jurisdiction of the court by reason of the doctrine of act of state or the doctrine of non-justiciability.

2. The necessary background is as follows. The Claimant (“KNIC”) sues to enforce a judgment (“the NK judgment”) in the sum of €43,454,383 given by the Court of Pyongyang (“the NK Court”) in the Democratic People's Republic of Korea (“N Korea”) on 11 December 2006. The defence to the claim is that: (i) the North Korean judgment was procured by a fraud instigated or approved by the State of N Korea and therefore implemented with the knowledge or participation of KNIC (“the fraud defence”); (ii) alternatively, the NK judgment is unenforceable on grounds of public policy in that the North Korean judiciary are part of, and not independent from, the entity (the state) which instigated or approved of the fraudulent procuration of the NK judgment (“the public policy defence”).

3. KNIC is an insurance company incorporated in N Korea. Under a contract of insurance covering the period 1 November 2004 to 31 October 2005 KNIC insured Air Koryo, an airline incorporated in N Korea, in respect of third party liability claims up to €45 million (or 7.2 billion N Korean Won) each accident, with a nil deductible. The cover for crew and non-revenue passengers for bodily injury and death was €20,000 (NKW 3.2 million) each person.

4. By a contract of reinsurance covering the same period, KNIC was reinsured by the defendant (“Allianz”) and other reinsurers represented by Allianz in this action (“the reinsurers”). Under the reinsurance, the limit of liability for third party claims for bodily injury/property damage was €45 million each accident in respect of claims involving Mi-8 helicopters, and for other aircraft €75 million. The reinsurance contract was expressed to be subject to the laws and jurisdiction of N Korea and contained a Currency Conversion Clause which provided that claims in Euros were to be paid in Euros and claims in local currency were to be paid in Euros at an exchange rate of NKW 160 to €1.00.

5. On 9 December 2005, a Relief Centre which operated a warehouse at Chonam-Ri in Pyongyang, obtained judgment against Air Koryo in the sum of KPW 7, 634,006,244 in respect of a claim for damage to the warehouse and its contents caused by a crash by an Air Koryo Mi-8 helicopter, No 313, on 9 July 2005. It was Air Koryo's case that the helicopter had been engaged on a mercy mission carrying a lady pregnant with triplets from Jamae Island to a hospital in Pyongyang (“the pregnant woman story”). KNIC invited the reinsurers to exercise their right under the reinsurance contract to take control of the claim (“the underlying claim”), but they declined to do so.

6. On 23 January 2006, Air Koryo informed KNIC that it had paid the sum due to the Relief Centre and requested reimbursement under the insurance contract in the sum of NKW 7,353,600,000 (NKW 7,200,000,000 property damage; NKW 9,600,000 deceased crew; and NKW 144,000,000 costs).

7. On or about 6 March 2006 Air Koryo commenced arbitration proceedings against KNIC under the insurance contract and obtained an award in the sum of NKW 7,301,932,137, which sum KNIC paid on or about 20 July 2006. Relying on the Currency Conversion Clause, KNIC sought reimbursement from the Reinsurers in the sum of €45,657,076, but the reinsurers refused to indemnify KNIC. KNIC accordingly brought proceedings in the Pyongyang Court against the reinsurers which resulted in the judgment sought now to be enforced in these proceedings.

8. On...