Foreign Minister Taro Kono summoned the top South Korean envoy in Tokyo on Friday to lodge a protest against Seoul’s rejection of a proposal to set up a joint arbitration panel to settle the issue of wartime labor, a simmering problem that is weighing heavily on bilateral ties.

In his meeting with Ambassador Nam Gwan-pyo at the Foreign Ministry, Kono said Seoul’s failure to address the issue violates international law.

The formal protest is likely to escalate the diplomatic tensions between the two countries, whose relations were already strained over new export regulations introduced by Japan on key materials that are used in chip and smartphone production.

During the meeting, Kono became angry when the top South Korean envoy mentioned Seoul’s earlier proposal to settle the compensation issue by raising funds from both Japanese and South Korean firms.

Kono interrupted Nam, saying in a loud voice, “We have already explained (to South Korea) that we cannot accept it at all because it would not correct the violations of international law. It’s extremely rude for you to propose it again as if you knew nothing about it.”

Japan has argued that an economic pact attached to the 1965 basic bilateral relationship treaty has already settled all the compensation issues and obligations over Japan’s 1910-1945 colonial rule of the Korean Peninsula.

Invoking Article 3 of the pact, Japan had requested that South Korea jointly set up an arbitration panel with it within 30 days that would include a third country, a proposal that Seoul ignored. Thursday was the deadline to agree to the arbitration process.

Article 3 explicitly obliges the two governments to agree to form an arbitration panel if the other government makes such a request.

Meanwhile, Seoul criticized the new export rules, calling them “retaliation” by Japan over the wartime labor issue. During Friday’s meeting, Nam said the export regulations are a “unilateral action by Japan,” which “has placed people and firms in both countries in a difficult situation.”

In response, Kono reiterated the wartime labor issue “is not linked” with the new export rules. However, Japanese trade officials have previously cited Seoul’s inaction over the wartime labor issue as one of the key reasons Japan has lost “trust” in the South Korean government and thereby decided to introduce the export regulations.

Under the 1965 pact, Tokyo provided a lump-sum payment to Seoul, some of which was to be used to compensate South Korean individuals seeking compensation.

However, South Korea’s Supreme Court ruled last year that Japan’s colonial rule was illegal and the 1965 pact did not deny individuals the right to seek compensation. Based on the ruling, South Korean courts, beginning last year, ordered Japanese firms, including Mitsubishi Heavy Industries Ltd. and Nippon Steel Corp., to pay damages to wartime laborers, which has led to the seizure of assets owned by the companies.

Citing the 1965 pact, Tokyo has demanded the South Korean government take measures to avoid damage being done to Japanese firms, but Seoul has not taken any action so far.

Japan is now considering bringing the case to the International Court of Justice in The Hague, but without Seoul’s consent the ICJ would not be able to adjudicate the request. A senior Japanese official said that Tokyo is likely to keep monitoring the situation for a while before deciding whether to bring the case to the ICJ.

In the meantime, the South Korean trade ministry on Friday repeated its demand to hold a meeting by next Wednesday.

When trade officials from the two countries met in Tokyo last week, Seoul urged Tokyo to agree to another meeting, according to the South Korean side. Japan, however, said it was unwilling to acquiesce to the request but remained open to answering questions via alternative methods, including email.

Jun Iwamatsu, director of the trade control policy division at the Ministry of Economy, Trade and Industry, expressed displeasure Friday evening with South Korea’s argument and rejected the possibility of organizing such a meeting.

Employing a much stronger tone than in his previous news conference, Iwamatsu said South Korea unilaterally disclosed what was discussed at the July 12 meeting on export controls, which he said involved other highly sensitive issues, such as weapons of mass destruction.

“Unless the situation improves wherein (South Korea) discloses what was discussed between the two countries without prior consent from both countries, as demonstrated by today’s South Korean remarks to the press, we believe it is difficult to convene a place for policy dialogue based on trust,” Iwamatsu said.

Staff writer Satoshi Sugiyama contributed to this report.

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