SEOUL, South Korea — Until recently, few had heard of PNR, a company in South Korea that turns sludge from steel mills into iron. Then a 94-year-old man named Lee Chun-shik tried to settle an old debt.

Mr. Lee grew up during the Japanese occupation of Korea, and as a teenager, he was taken to Japan and forced to work for a steel maker, essentially as slave labor. Today, that steel maker is Japan’s largest, Nippon Steel & Sumitomo Metal, with assets around the world, including $9.6 million worth of shares in PNR.

Mr. Lee asked a court in South Korea to seize some of those shares as compensation for what he endured so long ago — and the court did so last month.

The ruling is now at the center of a bitter dispute that has called into question the foundation of diplomatic ties between America’s top allies in Asia, driving them apart even as Washington is trying to build a united front against China’s rise and a nuclear-armed North Korea.

At issue is a question that has strained relations since the end of World War II: Has Japan accepted full responsibility for occupying Korea and mobilizing Koreans for its war effort?

Though the two nations have bickered for decades over their painful shared history, the current falling-out may be one of the most serious yet. And it comes as the Trump administration is seen in the region as inattentive and unwilling to act as mediator.

Mr. Lee, center, outside the Supreme Court in Seoul in October. He is the last surviving plaintiff in the drawn-out legal battle.CreditJeon Heon-Kyun/EPA, via Shutterstock

“Unless both sides pull their wisdom together to find a solution, this will get worse and could become a full-blown diplomatic war over history,” said Lee Won-deog, a scholar at Kookmin University in Seoul.

The countries have also traded heated accusations over encounters between their armed forces. In December, Japan said a South Korean warship had locked targeting radar on a Japanese military plane. Seoul denied the charge, and accused Japan of sending low-flying planes over its naval ships.

The spike in tensions has unsettled many who see cooperation between Japan and South Korea — which both host American bases — as vital to stability in the region.

In remarks before leaving his post last month, Lt. Gen. Jerry P. Martinez, the commander of American forces in Japan, urged the countries to resolve their differences. “The way you overcome history is through dialogue, and you look to the future to try to make things better,” he said.

As many as 7.8 million Koreans were conscripted as forced labor or soldiers during Japan’s imperial expansion before and during World War II, according to South Korean estimates. They toiled in mines and munitions factories across Asia and fought alongside Japanese troops. Women were sent to military-run brothels.

After the war, South Korea sought compensation on behalf of these workers. In the pact establishing diplomatic relations between the two nations in 1965, Japan provided $300 million in aid and $200 million in loans.

But most workers got nothing. Instead, the military dictatorship governing South Korea at the time used the bulk of the funds to build highways, dams and factories, jump-starting the country’s industrialization.

Park Chung-hee was president of South Korea in 1965, when it established diplomatic relations with Japan. His government used hundreds of millions of dollars in Japanese compensation for forced labor to build infrastructure.CreditKeystone, via Getty Images

It was only after South Korea’s first democratic elections in the late 1980s and early ’90s that many workers began seeking damages, first in Japanese courts and since 2000 in South Korea.

The campaign reached a climax in October, when the Supreme Court of South Korea ordered Nippon Steel to pay $89,000 each to Mr. Lee and the families of three other plaintiffs — a landmark decision clearing the way for former laborers and their descendants to claim the local assets of Japanese companies. A lower court ordered the PNR shares seized in January.

“I am happy with the ruling, but I am sad when I think of my colleagues,” Mr. Lee said, referring to the other plaintiffs, all of whom died during the long legal battle.

The Supreme Court followed up with two similar judgments in November against Mitsubishi Heavy Industries. At least a dozen cases involving 70 Japanese companies — including Toshiba, Panasonic and Nissan — are pending in lower courts, which have begun to rule in favor of the plaintiffs.

Japan has responded with outrage, pointing to wording in the 1965 treaty that describes all claims arising from the colonial era as “settled completely and finally.” Prime Minister Shinzo Abe warned South Korea not to enforce what he called “impossible” judgments, hinting at economic retaliation if it does.

Protesters clashing with police officers in Seoul during a 1965 rally against the normalization of South Korea-Japan relations.CreditThe Asahi Shimbun, via Getty Images

South Korea’s president, Moon Jae-in, replied that Japan’s leaders were escalating tensions for political reasons. “The Japanese government needs to become more humble on this issue,” he said.

The stakes are high. A South Korean commission in the 2000s confirmed the identities of 149,000 living and deceased victims of forced labor, and scholars say some 300 Japanese companies in operation can be traced to those that exploited such workers.

Most do not have major holdings in South Korea, but there is a risk Tokyo will respond with sanctions if any assets are redistributed, disrupting a trade relationship worth more than $82 billion in 2017.

In private, Japanese officials have argued the rulings cast doubt on South Korea’s trustworthiness. For many Japanese, they represent the latest attempt to punish their nation for actions for which it has already apologized and, in this case, paid reparations.

But for many South Koreans, the rulings represent vindication after a prolonged struggle against powerful forces, including their own government.

Despite the help of Japanese activists, the workers lost their lawsuits in Japan, where the courts ruled their claims were settled by the 1965 treaty. The courts in South Korea initially echoed that position.

“The governments got what they wanted. The victims were victimized again,” said Lee Hee-ja, 75, a South Korean activist whose father died while forced to work for the Japanese military.

Lee Hee-ja, 75, a South Korean activist whose father died while forced to work for the Japanese military, at the Museum of Japanese Colonial History in Seoul. “The governments got what they wanted. The victims were victimized again,” she said.CreditJean Chung for The New York Times

But in 2004, the workers got a break — a court ordered the South Korean Foreign Ministry to release documents related to the talks behind the 1965 treaty. That led to the creation of a national commission, which concluded the treaty did not cover “illegal acts against humanity.”

The commission acknowledged that much of the $300 million paid by Japan should have gone to the laborers, and the South Korean government later distributed $547 million to 72,600 people.

Still, many received nothing. “Our lives were crushed, but no one cared about us,” said Yi Won-soo, 87, who was forced to work at a Mitsubishi factory at 14.

In 2012, the Supreme Court ruled the workers had the right to sue Japanese companies despite the 1965 treaty, and ordered lower courts to reconsider earlier verdicts. But the workers continued to face obstacles.

The Foreign Ministry submitted an opinion to the Supreme Court warning of “irreversible catastrophe” if Japanese assets were seized, citing concerns that South Korea would be branded a nation that flouts international law and breaks promises.

It took so long for the Supreme Court to rule again that some accused the former president, Park Geun-hye, of conspiring with the court to delay a ruling or find a way to overturn the 2012 decision.

Prosecutors investigating that allegation indicted the former chief justice, Yang Sung-tae, on Monday.

Yi Won-soo, 87, was forced to work at a Mitsubishi factory at age 14. “Our lives were crushed, but no one cared about us,” he said.CreditJean Chung for The New York Times

When the court finally ruled for the workers in October, eight of the 14 sitting justices were newcomers appointed by Mr. Moon, who succeeded Ms. Park after her impeachment and removal on corruption charges in 2017.

Mr. Moon has long supported the workers’ right to seek compensation from Japanese companies; nearly two decades ago, as a lawyer, he had represented one of the first workers’ groups to file suit.

As president, he has urged a diplomatic settlement.

Some have proposed that the two governments establish a fund for victims, with contributions from Japanese companies as well as South Korean businesses that benefited from the aid provided by Japan in 1965.

Mr. Abe’s government, however, has said Japan does not want to set up a fund or pay any more. Last month, a spokesman for Mr. Moon said a fund would be “unreasonable,” adding that the high court’s ruling should be respected.

For now, that means the next move may be with the court in the South Korean port city of Pohang that seized the shares in PNR on Jan. 9. The court is expected to sell them to pay the $89,000 awarded to Mr. Lee, but his lawyers have not yet asked it to take that final step.

Ms. Lee with photos of other victims of forced labor who joined lawsuits at her urging and have since died.CreditJean Chung for The New York Times

Orignially published in NYT.

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