Nippon Steel to appeal South Korea asset seizure ruling as case threatens bilateral ties

TOKYO/SEOUL (Reuters) - Nippon Steel Corp 5401.T said on Tuesday it will appeal a South Korean court ruling that allows for a seizure of its assets, as tensions between Tokyo and Seoul over the case threaten to flare up again.

FILE PHOTO: The logos of Nippon Steel Corp. are didplayed at the company headquarters in Tokyo, Japan March 18, 2019. REUTERS/Yuka Obayashi

The Asian neighbours are at loggerheads over a 2018 decision by South Korea’s Supreme Court that ordered Nippon Steel to pay compensation for forced labour during World War II. Japan argues the ruling violates international law because the issue was settled under a 1965 treaty.

A ruling by a South Korean lower court last year allowed for the seizure of Nippon Steel assets and starting midnight Tuesday, the court has gained the right to start procedures to auction off the Japanese firm's shares in a Korea-based venture with steelmaker POSCO 005490.KS.

Japan’s Deputy Prime Minister Taro Aso said on Tuesday that Tokyo would have to respond if the assets were seized but did not elaborate on what measures might be taken.

“If the assets were confiscated ... we would have no choice but to respond, so we must avoid that from happening,” he told a regular news briefing.

In a move widely seen as retaliation for the 2018 ruling, Japan last year said it would stop preferential treatment for shipments to South Korea of three key high-tech materials whose production it dominates and which are used by firms such as Samsung Electronics Co Ltd 005930.KS.

The move resulted in much anxiety at South Korean companies and Seoul has filed a complaint to the World Trade Organization.

Export curbs remain in place for two of the three materials - hydrogen fluoride which is used as an etching gas in chipmaking and fluorinated polyimides which are used in smartphone displays. Exporters now need to gain permission for each shipment, which takes around 90 days.

The WTO last month set up a panel to rule on the complaint.

Kim In-chul, a spokesman for South Korea’s foreign ministry, told reporters on Tuesday he hoped Japan would “more actively and sincerely” respond to ongoing diplomatic efforts to resolve tensions over the court ruling.

Nippon Steel was ordered to pay 100 million won ($83,800) each to four South Koreans as compensation. Its shares in the joint venture, called PNR, are worth about 400 million won at face value.

Procedurally, it could take several months before a sale is completed, a South Korean official said.

If Japan takes retaliatory steps, South Korea might respond by terminating a bilateral intelligence-sharing pact called the General Security of Military Information Agreement, Chang Ho-jin, a former South Korean presidential secretary on foreign policy, told Reuters.

South Korea had flagged it was going to end the pact last year but in November reversed that decision.

Foreign ministry spokesman Kim said the government could decide to end the pact at any time and a decision would depend on how Japan deals with the issue of the export curbs.

Reporting by Yuka Obayashi in Tokyo and Hyonhee Shin in Seoul; Additional reporting by Rocky Swift and Tetsushi Kajimoto in Tokyo; Editing by Edwina Gibbs