James Leabeater reflects on the recent legal case – now settled – between Allianz and the Korea National Insurance Corporation.

Allianz Global Security & Specialty AG recently sought to defend a claim brought by the Korea National Insurance Corporation (KNIC)?in the London Commercial Court by trying to prove that the courts in North Korea – a country George W Bush dubbed part of the “Axis of Evil” – simply did what North Korean Leader Kim Jong-il told it to do.

Allianz’s reinsurance of KNIC had a North Korean law and jurisdiction clause. It obtained judgment against reinsurers in a North Korean court for €45m in respect of a helicopter crash. KNIC tried to enforce the judgment in London and reinsurers resisted by alleging that the Korean judgment had been obtained by fraud: there had been no crash, and the judgment was a fraud instigated by the North Korean state in order to generate profits for the country and Kim Jong-il, its “Dear Leader”. Mr Justice Field decided that he should not hear those allegations, because they were so serious and so closely connected to Kim Jong-il that they might embarrass the UK government. The Court of Appeal disagreed: the Foreign Office had not said the government would be embarrassed, and KNIC was prepared to deal with the issues at trial.

So Mr Justice Field would have had to decide the extent of criminality on the part of North Korea – had Allianz not itself decided to settle the case for €40m and retract its allegations. The lesson? If you write policies in one-party states, think carefully about your choice of law and jurisdiction clause.

James Leabeater is a barrister at 4 Pump Court Chambers.