The issue of forced labour has long been a major source of tension between Japan and the Republic of Korea (ROK). On 30 October 2018, the ROK Supreme Court upheld the lower court verdict that “the right to compensation for forced labour is not subject to the treaty,” and that the plaintiffs hold the right to compensation. The apex court ordered Nippon Steel & Sumitomo Metal Corporation and Mitsubishi Industries - both Japanese companies - to pay compensations to the complainants. This verdict has initiated a new diplomatic spat. What elements have contributed to a further deterioration in the bilateral relationship? What is the political and economic fallout?

Legal vs. Public Reconciliation

While there exists a strong legal foundation for the resolution of historic bilateral issues, domestic audience pressures in both countries have stymied the relationship.

Japan views the ROK Supreme Court ruling as undermining the legal basis of its bilateral relationship which is bound by the San Francisco Peace Treaty. Japan has historically emphasised Article II of the 1965 treaty to argue “that every bilateral problem of the colonial past has already been settled by virtue of the treaty.” The ROK government formed an inter-agency task force on 4 December to look into the Supreme Court rulings on Japanese wartime forced labour issues. The task force, comprising of the foreign, justice and interior ministries, will examine legal issues relating to the verdict while also taking into account domestic public opinion. The setting up of the task force has also been interpreted by Japan as undermining the sanctity of the 1965 treaty.  

At the core of the treaty is the 1965 Agreement on settlement of problems concerning property and claims and economic cooperation. As per the Agreement, Japan provided the ROK government with US$ 300 million in grants, and loans of up to US$ 200 million. The ROK government was thereafter to be responsible for every individual claim from Korean nationals. For Japan, the Agreement settled the issue of claims between the two countries completely and finally.

In 2005, ROK in fact reconfirmed that the issue of claims was covered by the Agreement. Essentially, the disagreement lies in the interpretation of the formula of a “once-and-for-all” settlement, an element of the San Francisco Peace Treaty. Japan maintains that the Agreement is binding on ROK's judiciary as well. Thus for Japan, the verdict is a violation of the Agreement, which in turn is the bedrock of its relationship with ROK.  

Tokyo has suggested the possibility of raising the issue at the International Court of Justice (ICJ) in case of a diplomatic deadlock. Citing the ICJ ruling on Germany vs. Italy over state immunity as a precedent for wartime forced labour lawsuits, Japan has sought protection from being sued in the courts of other states. However, state immunity is not applicable to cases involving individuals and corporations. Since the plaintiffs in this case are Korean people and not the government, Japan may not be able to appeal to the ICJ, whose jurisdiction extends to dealing with legal disputes between states.

Following the 1965 treaty, Japan publicly apologised as another step towards reconciliation. In effect, a public reconciliation was attempted in the aftermath of the legal resolution. Japanese Prime Minister Keizo Obuchi's apology to ROK President Kim Dae-jung for Japan's occupation of Korea was seen as a major breakthrough, particularly as it was included in the 1998 Japan-ROK Joint Declaration.

Despite this development, public opinion in both countries remain contrarian. In fact, elderly victims of forced labour have pursued their own claims through the courts for years, and ROK President Moon Jae has supported their right to compensation since taking office in 2017. Public opinion has thus impacted the course of the bilateral relationship despite the existence of a solid legal foundation.

Political and Economic Setbacks

According to a report, as many as 80 Japanese companies are facing similar damage suits in South Korean courts. Japan fears that the Supreme Court ruling will adversely affect the economic future of these companies in South Korea. Japanese media coverage suggests heightened political rhetoric, with companies threatening to pull out of ROK if their business interests are jeopardised. The rising tensions have led the Japanese and ROK Chambers of Commerce to postpone their annual meeting. In fact, the Japanese decision to file a complaint against ROK in the World Trade Organisation (WTO) over the shipbuilding subsidy issue is being seen as a result of Seoul’s decision on forced labour.  The response in ROK has been equally vehement. Hong Ihk-pyo, a spokesman for the ruling Democratic Party, has called for an apology and compensation from both companies as well as the Japanese government.

The political fallout was visible at the 26th Asia Pacific Economic Cooperation (APEC) Economic Leadership Meeting, with Japanese Prime Minister Shinzo Abe and ROK President Moon Jae-in skipping bilateral talks. The leaders also did not met on the sidelines of the G20 meeting in Argentina. ROK's decision to close down the “Reconciliation and Healing Foundation” established as part of the 2015 Japan-ROK agreement to offer support to former comfort women is another diplomatic setback, and a result of the escalating tensions. Yet another recent example of the deteriorating relationship is video footage released by Japan on December 20 a South Korean warship locking its fire-control radar on a Japanese patrol plane.

This political fracture has had a debilitating impact on ROK's economy. For example, the number of newly hired workers in July 2018 was only 5,000, the lowest on record over the past eight years. Negative domestic economic indicators have certainly contributed to Moon's pursuit of better relations with Japan as a way to sustain foreign investment in the country. However, other external circumstances are also playing spoiler. Given that the Trump-Kim Summit did not result in the relaxation of sanctions that ROK was hoping for, the proposed joint economic zone between the two Koreas has come to a standstill.

Historical issues continue to be a major challenge towards meaningful rapprochement between ROK and Japan. While Japan's stand is clear, ROK perhaps faces more obstacles resulting from the economic fall-out of escalating tensions, and domestic audience pressures to extract concessions from Japanese companies. Ultimately, any new policy or attempt at reconciliation would be a direct comment on how the government approaches past issues, which puts it in an unenviable position.

Sourina Bej is a Research Associate with the International Strategic and Security Studies Programme (ISSSP), National Institute of Advanced Studies (NIAS), Bengaluru.
Dr Prakash Pannerselvam is an Assistant Professor at NIAS, Bengaluru.