Korea National Insurance Company v Allianz Global Corporate & Specialty AG

The doctrines of act of state and non-justiciability may prevent an English court from investigating foreign sovereign conduct, even where the parties wish the issue to be tried. Non-justiciability is particularly engaged where determining allegations concerning foreign state criminality would create an obvious risk of embarrassment to the United Kingdom’s foreign relations. The court must decide that issue before hearing evidence on the allegations, and may raise it of its own motion. The modern English doctrine of act of state is narrower than its broad historical formulation; however, it was unnecessary to determine its precise scope where the allegations were independently non-justiciable.

Korea National Insurance Company sought to enforce a judgment of the Pyongyang Court against Allianz Global Corporate & Specialty AG and subscribing reinsurers. The defences alleged that the North Korean judgment and the underlying insurance claim had been procured by fraud instigated or approved by the North Korean state, and that the North Korean judiciary lacked independence. The court directed that the issue of non-justiciability be determined as a preliminary issue before evidence was heard. The central question was whether investigating alleged North Korean state criminality and its supposed involvement in procuring the judgment would be contrary to the doctrines of act of state or non-justiciability.

1. Preliminary issue. The court was required to decide non-justiciability before hearing evidence on the pleaded allegations. Otherwise it would conduct the very inquiry which the doctrine might prohibit.
2. The broad historical formulation of act of state, stated in Oetjen v Central Leather Co 268 US 297, had been narrowed in English law after Buttes Gas & Oil Co v Hammer [1982] AC 888. It was plainly arguable that governmental acts such as the seizure considered in Princess Paley Olga v Wiesz [1929] 1 KB 718 remained within act of state, but the court found it unnecessary to resolve that question.
3. Non-justiciability involves judicial restraint where a dispute concerns sovereign authority that cannot properly be resolved by judicial means. Relevant considerations include the absence of judicial or manageable standards and the potential embarrassment to foreign relations. The guidance in Kuwait Airways Corporation v Iraqi Airways Company [2001] 3 WLR 1117 was applied.
4. The pleaded allegations that the North Korean state, acting through its guiding minds, procured the North Korean judgment by fraud, that KNIC knew of the fraud because it was part of the state, and that the fraud could be inferred from other North Korean state criminality, had an obvious potential to embarrass relations between the United Kingdom and North Korea. The allegations were therefore non-justiciable and were struck out.
5. The equivalent part of the public policy defence, alleging that the underlying claim resulted from a state-instigated or state-approved conspiracy to defraud, was also non-justiciable and struck out. The doctrines were not subject to agreement by the parties and could be raised by the court of its own motion.