North Korea Refuses To Pay $1M Embassy Refurbishment Debt

Says invoices are "false and non-payable"
January 27th, 2013
0

WARSAW – Authorities are unable to help the owner of a Polish corporation who is owed over $1m by the North Korean government after diplomats refused to pay back loans used to fund the 2005 refurbishment of their Warsaw embassy, a local newspaper reported last week.

Andrzej Kompa, owner of the Kompa Investment Company, lent over $2 million to pay for renovations for the North Korean embassy in 2005. According to his agreement with the North Korean mission, the debt was to be paid back in monthly installments from revenue generated by the North Koreans renting part of their newly refurbished offices to external clients, but payments have instead fallen well short of what had been agreed.

Unfortunately for Mr. Kompa, the embassy soon began to complain of financial problems and eventually, without reason or warning, stopped paying all together. Today, the North Korean outpost is reported to owe Kompa Investment close to 1 million dollars, not considering interest accrued.

When staff at the embassy changed in 2009 and a new team of diplomats arrived, Mr. Kompa was initially led to believe that things might pick up after receiving a request to submit new invoices for the work. But when he brought the documents to the embassy, the North Koreans were reported to have literally held them up to a lamp and then declared them to be false and non-payable.

Faced with a difficult situation, Mr. Kompa approached Poland’s Department of Foreign Affairs (MSZ) who made repeated efforts to negotiate a settlement,  but finally reported that their “interventions remained ineffective”.

When contacted by journalists on the matter, the Department of Foreign Affairs explained that in 2005 they had previously warned Mr. Kompa that there was a “a negative position concerning the commercial activities on the property at Bobrowiecka 1A, the address of the embassy of the Democratic People’s Republic of Korea.”

The Department also indicated that conducting business activities on a property with diplomatic status was an infringement of the Vienna Convention on Diplomatic Relations of 18th April 1961. Renting activities are also alleged to be a violation of the 10th May 1966 agreement between the government of the Polish People’s Republic and the Democratic People’s Republic of Korea, under which the property was transferred to the Korean embassy.

Mr. Kompa claims that other embassies rent facilities without problems in Poland and suggests that the Department of Foreign Affairs is just making an “obvious attempt to mask their incompetence”.  Angry at the Department’s warnings, Kompa complains that “they should act on behalf of the interests of Polish entrepreneurs” and accuses Polish Foreign Minister Radoslaw Sikorski of being complicit in the case.

The Department of Foreign Affairs is the part of the administrating government. I’m a Polish entrepreneur and a citizen, and any normal country in the world defends its citizens.

Taking things into his own hands, in June 2012 Kompa filed a case against the DPRK embassy in a local court. However, his claim was for only $35,000, falling well short of the million dollars he was owed. “I did not want to apply for the full amount because the costs would have been too high and I had no assurance that the claim would be accepted anyway”, Mr. Kompa explained.

Ultimately Mr. Kompa’s fears proved to be correct, with the Polish courts dismissing the lawsuit due to the embassy having no egal obligation to pay as a result of having no legal status under Polish law. Instead, the Department of Foreign Affairs explained that in these type of cases the defendant should be the foreign state rather than the offending embassy itself.

Frustrated at the outcome Mr. Kompa explained,

It appears a positive judgment before a Polish court will do nothing for me anyway, but there is no way I will go to court in Pyongyang about this. I hope that the Department of Foreign Affairs will finally treat my case seriously and will exert full pressure on the North Korean embassy. The money owed to me has instead gone to Pyongyang and who knows where they’ve invested it, perhaps in the nuclear program.

Puls Biznesu reported that they tried to contact the North Korean embassy for comment about the case, but calls were left unanswered.

North Korea expert Curtis Melvin today reacted to the news, pointing out that Mr. Kompa’s problem should serve as a warning to others,

As the victim of an inscrutable business partner, Mr. Kompa deserves some sympathy. However, he should never have agreed to such a business arrangement in the first place. Although the exact terms remain a mystery, it appears he failed to secure either adequate collateral or default insurance. In cases where the payee enjoys both diplomatic immunity and has a poor credit/transaction history, these would be minimal requirements to securing a long-term loan. Although it will come as poor consolation to Mr. Kompa, his story offers a lesson to others who seek to engage in such poorly-negotiated business deals with North Korean embassies.

North Korea’s overseas embassies have long been rumored to rely on self-generated funds to pay for their day to day administration.  As a result, stories about non-payment of debts, charges of illicit activities, and reports on criminal diplomat behavior often emerge in the international press.

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About the Author

Chad O'Carroll

Chad O'Carroll founded NK News in 2010. He is based in Washington, D.C.

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