South Korea

South Korea moves to freeze assets of Japanese company over wartime forced labour dispute

  • Japan quickly called the asset seizure ‘extremely regrettable’ and said Tokyo will push for talks with Seoul on the issue
PUBLISHED : Wednesday, 09 January, 2019, 7:22pm
UPDATED : Wednesday, 09 January, 2019, 10:47pm

A South Korean court said on Wednesday that it has decided to freeze the local assets of a Japanese company involved in disputes over compensation for wartime Korean labourers, in an escalation of a diplomatic brawl between the East Asian neighbours.

Japan quickly called the asset seizure “extremely regrettable” and said Tokyo will push for talks with Seoul on the issue.

In a landmark ruling in October, South Korea’s top court ordered Nippon Steel & Sumitomo Metal Corp to pay four plaintiffs, who were forced to work for the company when Japan colonised the Korean peninsula from 1910-45, 100 million won (US$89,000) each.

But the company had refused to follow that ruling, siding with Japan’s long-held position that all colonial-era compensation issues were settled by a 1965 treaty that restored diplomatic relations between the two governments. Japanese officials said they could take the issue to the International Court of Justice.

On Wednesday, the Daegu District Court’s branch office in the southeastern city of Pohang said it had approved a request by lawyers for the plaintiffs to seize Korean assets held by the Japanese company as it was refusing to compensate the former labourers.

The Japanese company holds 2.34 million shares, or around US$9.7 million, in its joint venture in Pohang with South Korean steelmaker Posco.

In Tokyo, Chief Cabinet Secretary Yoshihide Suga said that Japan has “grave concern over the development”. Suga was expected to hold a meeting of top officials later on Wednesday to discuss how to respond.

South Korea’s Yonhap news agency, citing an unidentified official at the district court office in Pohang, reported that only 81,075 of the Japanese company’s 2.34 million shares had been frozen. Yonhap said the freeze will only become effective after a related court document is delivered to the joint venture.

The asset freeze could further chill diplomatic ties between South Korea and Japan, which are both key US allies in the region. The ruling in October was the first of its kind, and in November South Korea’s Supreme Court ordered a second Japanese company, Mitsubishi Heavy Industries, to compensate 10 former Korean workers, drawing strong criticism from Japan.

Mitsubishi Heavy ordered to compensate victims of wartime forced labour

When South Korea and Japan signed the 1965 treaty, South Korea received more than US$800 million in economic aid and loans from Japan and used the money to rebuild its infrastructure and economy devastated by the 1950-53 Korean war. In its October and November verdicts, the South Korean Supreme Court said the 1965 treaty cannot prevent individuals from seeking compensation for forced labour because Japanese companies’ use of such labourers were illegal acts against humanity that were linked to Tokyo’s colonial rule and its war of aggression.