Published by The Lawfare Institute
in Cooperation With
South Korea and Japan, two of America’s closest allies, are tumbling into a dangerous economic-diplomatic war over a South Korean Supreme Court decision that ordered Japanese corporations to compensate Korean forced-labor victims from World War II. At the heart of the dispute is a legal disagreement over a 1965 treaty that triggers centuries of bad blood and spiritual animosity between the two countries.
According to Korean estimates, during World War II Imperial Japan conscripted as many as 7.8 million Koreans into forced labor, including military service and sex slavery. The South Korean Supreme Court recently ruled that Nippon Steel and Mitsubishi Heavy Industries, two corporations that exploited Korean labor during Japan’s colonization of Korea (1910-1945), should pay reparations to their victims.
Japan contends that all claims originating from the period, including individual claims, were resolved by the 1965 Treaty on Basic Relations between Japan and the Republic of Korea. This normalization treaty established diplomatic relations between the two hostile countries in exchange for $300 million in grants and $200 million in loans from Japan to Korea. Article II stipulates that, as a result, “the problem concerning property, rights, interests ... and claims between [the Republic of Korea and Japan] and their nationals [are] settled completely and finally.”
But Seoul has a different take. In a landmark 11-2 verdict against Nippon Steel last October, the South Korean Supreme Court maintained that the 1965 treaty simply resolved state-level claims in order to achieve diplomatic relations on a nation-to-nation basis, without resolving individual claims based on emotional suffering and pain. Earlier this year, a lower South Korean court further allowed the seizure of Nippon Steel assets within Korea to compensate the four forced-labor victims involved. Mitsubishi is next in line to have its assets liquidated, and the writing is on the wall for 70 other Japanese firms currently litigating 547 similar lawsuits involving more than 1,300 plaintiffs across Korean courts.
Citing national security concerns, the Japanese government, in response, seeks to punish Seoul by passing export sanctions designed to hamstring the Korean semiconductor industry. Further escalating the dispute, Tokyo decided on Friday to demote South Korea from a “white list” of countries that receive preferential trade treatment from Japan, an explosive move that the Korean ruling party has called “an all-out declaration of economic war.” Though on paper Japan has invoked national security for its export sanctions on South Korea, there is little doubt among pundits that the sanctions amount to a direct rebuke of the Supreme Court decision.
Moreover, Japanese economic retaliation exemplifies an alarming trend of trade weaponization in international relations, in which one nation seeks to exert political influence on another nation by attacking its economy, often hitting the weakest spots. Examples abound: President Trump’s tariffs on Mexico and China over non-trade issues and China’s punitive ban on Norwegian salmon imports over Liu Xiaobo’s Nobel Prize represent just a few. By retaliating against the South Korean court decision with calculated trade sanctions in a strategically chosen industry, Japan has opened itself up to accusations of “invading” the sovereignty of another nation and its independent judiciary—accusations it must now deny by producing evidence that there were legitimate and sufficient national security reasons for undercutting a fellow U.S. ally. For this reason, the editorial board of Bloomberg last week called Japan’s sanctions “hopeless” and “foolish.”
A Legal War
Already, the Koreans are in the process of launching a legal battle against Japan on the floor of the World Trade Organization (WTO) in Geneva, while the Japanese have hinted at taking Korea to the International Court of Justice (ICJ). Victory in either arena will depend on strategically framing the dispute in a technical vocabulary of law that best corresponds to the thematic undercurrents in international law.
Since Japan insists the export sanctions have nothing to do with the Korean Supreme Court decision in the first place, the most immediate legal battle in the current dispute will occur within the strict confines of trade at the WTO. Under the Uruguay Round agreement, any WTO member state can file a complaint and call upon the General Council to appoint a dispute panel, which must then hear both sides and reach a ruling within a year. Legally, the decision of the WTO dispute panel in the current dispute will turn on a technical examination of Japan’s national security claims.
The Dispute Settlement Body of the WTO has traditionally allowed a so-called national security exception under Article XXI of the 1994 General Agreement on Tariffs and Trade (GATT), giving member states a free pass to violate WTO obligations for purposes of national security. This exception, designed to uphold the sovereignty of member states in their own security decisions, would have enabled Japan to conveniently silence a Korean challenge to its recent export restrictions. But in April, a WTO dispute panel issued a landmark ruling that narrowed the national security exception for the first time with a new standard requiring national security justifications to be “objectively” true. The General Council adopted this panel ruling on April 26. The United States, with a personal stake in upholding its steel and aluminum tariffs, has vehemently opposed the ruling.
As a result, the Korea-Japan dispute sits atop larger legal undercurrents that will pose a litmus test for the WTO’s new precedent, with unexpected repercussions for the Trump administration if the objective standard is enforced. A Korean victory at the WTO depends on forcing Japan to produce “clear evidence,” per the new objective standard, to substantiate the national security allegation that Seoul had allowed technology imports from Japan to flow illegally into North Korea. Meanwhile, a Japanese victory will depend on fighting for an interpretation of the “objective” standard that is favorable to Japan’s national security argument or altogether undermining the authority of the WTO to encroach on national security decisions. In a strategic struggle for institutional legitimacy, the WTO risks becoming toothless if it alienates important members like the United States and Japan; but by the same token, adjudicators will feel pressured to enforce the new legal standard created in April. The result of this battle in Geneva not only will determine the technical legitimacy of Japan’s sanctions but also may serve as a barometer for the future legitimacy of the WTO itself.
A battle at the WTO, however, will only scratch the surface of a bigger legal question at the heart of the current dispute regarding the 1965 normalization treaty. Despite Japanese insistence to the contrary, the more substantive battle is one that has little to do with national security and everything to do with national grievances. Article III of the 1965 normalization treaty calls for an “arbitration board composed of three arbitrators” to settle the dispute if diplomacy fails. Seoul recently rejected Japan’s arbitration proposal, triggering speculation that Japan will try to take the dispute to the ICJ. Under Article 36 of the ICJ Statute, the ICJ can preside over international legal disputes only if both parties accept its jurisdiction. That said, Japan has contended previously that it may raise the issue with the ICJ unilaterally and pressure Seoul to defend its decision before the international tribunal.
South Korea, a military dictatorship at the time of the 1965 treaty, established diplomatic relations with its former colonizer in exchange for financial aid that went toward its economic development but not toward compensating individuals. In 1964, a popular uprising known as the June 3rd Resistance Movement challenged the dictatorship’s rapprochement attempts with Japan, and dictator Park Chung-hee had to declare martial law and arrest thousands of protesters to get the highly unpopular 1965 treaty passed.
Ultimately, the legal questions that rise from this dispute question the adequacy of this treaty in reducing the suffering and grievances of a wounded nation. The majority opinion of the South Korean Supreme Court emphasizes that Japan had never agreed with Korea on the “illegality of the colonial era,” a prerequisite for assuming legal accountability to its victims. Without this consensus, the court argues, Japan could not possibly have intended to compensate the forced-labor victims through the 1965 treaty. The opinion also highlights that the 1965 treaty was intended not to settle individual grievances but to resolve property and debt claims in accordance with Article 4 of the Treaty of San Francisco, which Japan signed with the Allied Powers in 1951. A further complication is the 2015 agreement between the two countries on the so-called comfort women—since then abrogated by current Korean President Moon Jae-in—whereby Japan agreed to pay $8.3 million to the surviving sex-slave victims. Japan insists that the 2015 agreement was “moral” not legal and, therefore, not a concession on its legal position regarding the finality of the 1965 treaty. Regardless, the concurring opinion adds that even though, under international law, nations can enter into treaties that extinguish the claims of their own citizens, courts should apply higher scrutiny when those rights concern the gross violation of human rights including emotional suffering and pain.
For Japan, by contrast, victory will depend on maintaining that the four corners of the contract must still be respected, regardless of the context. The Japanese Ministry of Foreign Affairs has already released statements in five different languages calling the South Korean ruling a “breach of international law.” South Korea, perhaps sensing Japanese confidence, has not consented to an ICJ duel. After all, the simpler, more straightforward legal argument belongs to Japan.
Both Japan and Korea, in the end, are waging a much deeper spiritual battle behind the façade of a legal dispute. Japan’s existential search for a clear postwar national identity is predicated on becoming a “normal nation” and exorcising the phantom of World War II from its future. This yearning for a “Normal Japan” is ultimately at the heart of Tokyo’s anger with the South Korean court decision, which threatens to excavate the World War II skeletons in Japan’s closet.
Yet Koreans contend that Tokyo’s alleged postwar pacifism was never extended to its Asian neighbors. It was pacifism under the heel of the American boot, based on a victim mentality earned from the only nuclear attacks in human history. From Seoul’s perspective, Japan’s indignation and legalistic approach in the current dispute exemplify its lack of true “repentance” over World War II atrocities. True repentance, meanwhile, is a spiritual act; earlier this year, the speaker of the South Korean National Assembly called upon Japanese Emperor Akihito himself to personally apologize to the Korean victims, contending that if the emperor “holds the hands of the elderly [victims] and says he’s really sorry, then that one word will resolve matters once and for all.”
But the era of Japanese colonization (1910-1945) is itself only the most recent in a series of hostilities that date back several centuries. In the Japanese imagination, the Korean Peninsula has long been described as the “dagger pointed at the heart of Japan.” Meanwhile, engraved in the Korean psyche are the Japanese invasion of 1592, when the country’s royal palace was torched, and the murder of a Korean queen inside that same palace by Japanese assassins in 1895. It is no strange coincidence that Gwanghwamun Square, the largest public square in Seoul, where thousands of Koreans descended last weekend to protest Japan, prominently features a statue of Admiral Yi Sun-sin, the celebrated Korean general who thwarted Japan’s invasion in 1592.
Nor does it help that both countries are currently led by nationalist leaders with little interest in pulling the emergency brake. Japanese Prime Minister Shinzo Abe, widely considered a right-wing nationalist, has publicly sought to remilitarize Japan by revising the country’s pacifist postwar constitution. Meanwhile, in Korea, where the political left champions an unbridled ethnic nationalism built on unity with the North and hatred of Japan, the liberal President Moon Jae-in has repeatedly and openly emphasized that Japan is America’s ally, not his. On Aug. 5, he issued an urgent nationalistic call for economic collaboration with North Korea to destroy Japan’s economic superiority in “one burst.” Moon has publicly vowed “not to be defeated again” in an economic war against Japan and threatened to pull out of a military intelligence-sharing pact with Tokyo that is crucial to the U.S. alliance architecture in Asia. With China’s rise, along with the threat of missiles from Pyongyang and Russian-Chinese incursions into Korean airspace, the infighting between South Korea and Japan significantly compromises the cohesion of the Seoul-Tokyo-Washington triangle and is also a testament to the declining leadership of the U.S. in Asia under Trump.
Public opinion reflects this deepening rift: 71 percent of Japanese are currently in favor of Abe’s export restrictions on Korea, a record 74 percent feel “distrustful” of Koreans and 80 percent think their country has already apologized enough for the past. Reciprocally, a record 77 percent of South Koreans feel “unfriendly” toward Japan—the highest since polling began in 1991—and 87 percent believe Japan still needs to apologize for its colonial-era atrocities. A #BoycottJapan movement is in full swing both on social media and offline, with banners around Seoul calling people “traitors” for traveling to Japan and gas stations refusing to refuel Japanese cars. More than six in 10 South Koreans are reportedly participating in this boycott. Two South Korean men set themselves on fire in front of the Japanese embassy in Seoul last week in apparent protest, and Japan has issued a travel advisory for Korea. With nationalists at the helm in both countries and Korean Liberation Day (V.J. Day) just around the corner, the two U.S. allies are speeding ahead at full steam in a dangerous game of chicken, with national dignity and the U.S. trilateral alliance at stake.
The Clock Is Running Down
Ultimately, there is no language available to the WTO or ICJ that could possibly capture the pain and spiritual stakes at the heart of this dispute. A supranational arbiter could render a ruling with legal finality, but it may still fail to offer permanent closure. Lost in the technical battles over law are the human grievances of hundreds of thousands of victims, most of them now in their 90s, who are quickly fading from the public consciousness as a political resolution has eluded the two countries for decades. Of the four South Korean victims who brought the case against Nippon Steel back in 2012, only one of them, the 94-year-old Lee Chun-sik, lived to hear the verdict last October. Lee Young-sook, another victim who filed a damage suit against Mitsubishi, died of old age shortly after filing her suit. For others like them, this battle for closure isn’t just spiritual. It is against the clock.