A Pandora’s box in terms of diplomatic relations between Tokyo and Seoul may have just been opened with South Korea’s top court upholding a lower court ruling Tuesday that Nippon Steel & Sumitomo Metal Corp. should pay about ¥40 million in compensation to four Koreans forced to work in Japan during World War II.

The Japanese government, as would be expected, immediately reacted strongly to the ruling, with Foreign Minister Taro Kono saying “the primary legal basis of the bilateral relations between the two countries has been fundamentally undermined.”

The court ruling came despite admissions by all past South Korean administrations that the issue of labor compensation involving Japan’s colonial rule of the peninsula had been resolved by a 1965 pact between Tokyo and Seoul.

Tuesday’s ruling has “almost completely pulled out the teeth” from the key pact, said Kan Kimura, professor of Korean studies at Kobe University.

“This is destructive,” Kimura told The Japan Times after the ruling was handed down.

The South Korean top court ruled that the 1965 pact does not apply to “claims for consolation money” for “inhuman, illegal acts by a Japanese firm that was directly linked to the illegal colonial rule.”

The ruling bypasses the 1965 pact and could be applied to any individuals who suffered damages incurred due to either Japanese companies or the Japanese government, Kimura pointed out.

According to media reports, nearly 1,000 complainants have already filed a total of 14 lawsuits seeking compensation for wartime labor.

More may file similar lawsuits, and South Korean courts may find it difficult to reject their arguments, the professor said.

Japan and South Korea’s final agreement to normalize their post-colonial relationship in 1965 and conclude a basic treaty followed marathon negotiations between the two countries. The pact in question was concluded at the same time.

During those talks, Seoul had demanded compensation for damages it claimed were incurred through Japan’s colonial rule.

The two countries clinched a deal after Japan agreed to extend massive “economic cooperation” consisting of grants worth $300 million and loans of $200 million over 10 years — funds totaling 1.5 times the annual national budget of South Korea at that time.

The pact also includes a carefully worded article declaring that the two countries confirm all post-colonial compensation issues were “resolved completely and finally,” including those involving wartime South Korean laborers.

In recent years the South Korean government has start to claim that the 1965 pact does not apply to compensation claims for so-called “comfort women,” forced to provide sex for Japanese troops at military brothels before and during World War II, because the issue was not widely known when the pact was concluded.

But as far as wartime labor is concerned, all past South Korean administrations have acknowledged that the issue was resolved by the 1965 pact.

In 2005, the then South Korean government led by President Roh Moo-hyun admitted that the $300 million grant included funds for the South Korean government to compensate wartime laborers.

The Roh administration then paid about 620 billion won to about 70,000 former South Korean forced laborers based on this view, according to the online Japanese-language edition of the Chosun Ilbo, a major South Korean newspaper.

“But this Supreme Court did not give consideration to the historical and political background like this,” the newspaper pointed out in an article published Wednesday.

According to media reports, incumbent South Korean President Moon Jae-In — then a top figure in Roh’s administration — is said to have played a key role in compiling that 2005 government view.

“The Moon administration must be in trouble” since they do not want further deterioration in their ties with the Japanese government, Kimura said.

On Tuesday, Kono suggested in a statement that Tokyo may bring the case to the International Court of Justice and ask it to issue an advisory opinion on how the 1965 pact should be interpreted.

The pact meanwhile stipulates that the two countries can establish a three-member arbitration panel including a representative from a third country if they split over its interpretation. But either of those two options would require the consent of both Japanese and South Korean governments.

Hideki Okuzono, associate professor and a Korea expert at the University of Shizuoka, urged the Japanese government not to react emotionally as that could fan nationalistic sentiment in South Korea and make it politically difficult for the Moon administration to be flexible in dealing with the wartime labor issue, he said. “The Moon government is very sensitive to public opinion,” he added.

According to Kyodo News, major South Korean newspapers welcomed the Supreme Court ruling in general on Wednesday. But they also urged both Tokyo and Seoul to react calmly, expressing concern over possible effects on bilateral cooperation in economic, diplomatic and security issues.