After a British court battle that dragged on for nearly two years, a group of international insurance firms have abandoned their accusations of reinsurance fraud against a firm owned by the regime of North Korean dictator Kim Jong Il, and agreed to pay out more than $52 million in contested claims for a 2005 helicopter accident in Pyongyang.
The settlement between the insurers, led by a subsidiary of giant Allianz Group and the state-owned monopoly Korean National Insurance Corporation (KNIC), was announced in London on December 10. It amounted to a clear victory for the North Korean firm, which had argued long and strenuously that the damage claim was a legitimate commercial debt, and the fraud accusations were no more than a smokescreen to avoid payment.
In a press release, Tim Brentnall, KNIC's lead lawyer on the case, declared the result a "total vindication" and declared that "we and KNIC are delighted by this settlement."
Click here to read the settlement document.
Attorneys for the insurers declined to comment.
Click here to read the insurers' agreement to the deal.
At the center of the dispute was a North Korean helicopter crash on July 9, 2005, that destroyed a Pyongyang warehouse containing emergency relief goods for the much abused North Korean population, which has suffered from famine, flood and destitution under the Kim regime.
The goods were insured by KNIC, which in turn had signed hard currency contracts in euros with the reinsurers — hard currency that was in short supply partly as a result of U.S.- and U.N.-led financial sanctions against the Kim Jong Il regime for its nuclear weapons program.
But then the reinsurers balked at paying, claiming that the property damage was overstated, that the paperwork provided by the North Koreans on the exact extent of the damage was supplied in a suspiciously short time, and photos of the damage did not support the extent of the claims.
An over-valued, government-dictated exchange rate between North Korea's won and the euro further overstated the value of the claim, the insurers argued.
The helicopter crash was also considered important by reinsurers as the first of a possible series of North Korean reinsurance claims involving other accidents that a lawyer for several of the insurance firms told FOX News could reach more than $150 million.
The dispute arose at a particularly sensitive time for relations between North Korea and the West, as the Bush Administration was pushing hard for tighter U.N. sanctions enforcement against the Kim regime on the nuclear arms front, and as charges circulated around the world that the Kim regime was involved in illicit weapons sales, drug dealing and the counterfeiting of U.S. currency. (Only last month, U.S. officials announced that they had successfully thwarted North Korea's secret air shipment to Iran in August of technology that could be used in weapons of mass destruction.)
Despite all the pressure, the Kim regime announced in October 2006 that it had successfully conducted a nuclear explosion.(And last October 11, the U.S. removed North Korea from its list of state sponsors of terrorism, in an apparent bid to coax North Korea into abandoning its nuclear proliferation efforts.)
For their part, lawyers representing the North Koreans argued that the insurance claim was a legitimate commercial debt owed to KNIC by reinsurers who were fully aware of the nature of the contract when they signed it, and had even agreed to let a North Korean tribunal adjudicate the claim.
English judges evidently agreed. The reinsurer's position was first rejected in England's High Court of Justice in August, 2007, and again on appeal two months later. Another trial began on November 12, 2008 before the Commercial Court in London before the two sides came to their agreement.
The settlement amounts to roughly 95 percent of what KNIC had originally demanded. It includes a specific confirmation that the reinsurers "have retracted and withdrawn all allegations of fraud and impropriety against KNIC."
George Russell is executive editor of FOX News.