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N. Korean bank loses lawsuit for defaulting on loan in U.S. court

All Headlines 09:39 August 07, 2010

NEW YORK, Aug. 6 (Yonhap) -- A state-run North Korean bank has lost a lawsuit for not paying back a loan it borrowed from a Taiwanese bank nine years ago, the New York district court said Friday.

The District Court of New York confirmed it ordered the Foreign Trade Bank of Korea to pay compensations of just under US$6.77 million to the Mega International Commercial Bank (MICB) in a ruling made earlier in the week.

The North Korean bank is widely viewed as Pyongyang's main foreign exchange earner with branch offices in Europe, the Middle East and Hong Kong.

The ruling follows formal legal action taken by MICB on Jan. 14 after the North Korean financial institution did not pay the $5 million it borrowed in 2001 and missed its interest payments.

Under the loan agreement the North Korean bank should have returned the principle and interest by Sept. 15 2004, but only paid a total of $462,000 in backlogged interests from late 2008 through May 2009.

A source at the South Korean consulate in New York said it is very rare for a North Korea-related commercial dispute to be settled in a U.S. court.

He added that the latest ruling will probably have negative consequences on the communist country's effort to borrow money from abroad and will further hurt its credibility in the international business community.

Other legal sources said that while there is no way to tell if the trade bank will pay the compensation, MICB may try to freeze any assets held by the North Korean financial institution in the United States in an effort to recoup its loans.
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