Court approves seizure of Nippon Steel shares

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Court approves seizure of Nippon Steel shares

A local court approved the seizure of assets of a Japanese steelmaker by Korean plaintiffs forced to work for the company during Japan’s colonial rule, a court spokesman revealed Tuesday.

The Pohang branch of the Daegu District Court ruled Jan. 3 to approve the seizure of 81,075 shares owned by Nippon Steel & Sumitomo Metal in a joint venture with Korea’s largest steelmaker, Posco. The shares are worth around 380 million won (around $340,000).

The plaintiffs’ lawyer said this seizure would only compensate two of the four plaintiffs in the case. They will be taken from around 2.34 million shares owned by Nippon Steel in PNR, a rotary heat furnace technology joint venture with Posco, valued at around 11 billion won.

A court spokesman made the announcement Tuesday, five days after the ruling was made, as the relevant documents were sent to PNR. When the documents are received, Nippon Steel will lose any rights to sell or transfer its shares in the company.

The decision follows recent landmark rulings by the Korean Supreme Court, ordering Nippon Steel and Mitsubishi Heavy Industries to compensate Korean victims of forced labor during World War II.

In October, Nippon Steel was ordered to pay 100 million won to each of four Korean plaintiffs who sued them, and a month later Mitsubishi was ordered to pay 100 to 150 million each to five women and 80 million won each to six victims who worked at its plants and shipyards in Hiroshima.

Both companies have refused to comply with the Korean rulings, and the plaintiffs appealed to local courts for seizures of the Japanese companies’ assets in Korea.

In Japan, the rulings elicited a backlash both from the public and government, with Prime Minister Shinzo Abe publicly denouncing the Supreme Court verdicts as “extremely regrettable” and reportedly vowing to take steps towards contesting them in an international court.

But the asset seizure ruling is not expected to have an immediate impact on PNR since the plaintiffs have not yet requested the seized assets be monetized.

“We have so far not filed for a court order forcing a sale of the shares in the interest of seeking a general reconciliation,” said one of the plaintiffs’ lawyers on Wednesday. “But if [Nippon Steel] refuses to begin negotiations on a settlement by March 1, we will have no choice but to take the final step.”

Lawyers representing the victims in the Mitsubishi case have set a similar ultimatum for March 1, on which Korea will commemorate the centennial anniversary of massive public resistance against Japanese rule that took place on that day in 1919.

According to Japanese broadcaster NHK, representatives of Nippon Steel said they have not yet received an asset forfeiture notice from a Korean court but will “deal will the matter appropriately in consultation with the Japanese government.”

In response to the asset forfeiture order, Japan’s government on Wednesday issued a formal request to Seoul to launch a bilateral commission to arbitrate the issue as per a dispute resolution mechanism contained in the 1965 treaty that normalized relations between the two countries.

Seoul’s Foreign Ministry confirmed it received the request Wednesday afternoon, but said it would respond “after considering all underlying factors.”

Foreign Minister Taro Kono on Monday said that any disadvantages brought upon Japanese companies in Korea would be met with “immediate action.”

The Japanese Foreign Ministry summoned Korean Ambassador Lee Su-hoon Wednesday to protest the court’s decision to seize assets.

Japan insists that its compensation of $800 million in loans and grants to the South Korean government in the 1965 agreement settled all property and claim disputes between the two parties, and rejects these latest forced labor suits by Korean victims.

That 1965 agreement also includes an article that any future claim disputes between the two countries would be submitted to a specially designated commission consisting of representatives from each country, but a source in the Korean government recently said that Seoul had long abandoned the idea of taking the case to such an organ due to the implications it would have about the legitimacy of its judiciary’s discretionary powers.

If any form of bilateral arbitration is declined by Seoul, Tokyo could ultimately take the issue to the International Court of Justice in The Hague, but Korea’s consent would be necessary for a case to go forward. Some Japanese media outlets speculate that Abe’s cabinet is mulling retaliatory measures such as trade barriers against South Korea.

Japan’s exceptional sensitivity to these forced labor ruling may be owed in part to concerns that it may shatter the post-war status quo over responsibility for its past actions and liability for damages.

Encouraged by the Nippon Steel case, a torrent of lawsuits are now proceeding in Korea against around 70 Japanese companies. If the asset forfeiture succeeds, many more are expected in Korea, as well as in many other countries victimized during the war.

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