South Korean firms challenge Kaesong closure in court

Officials of South Korean firms with plants in Kaesong hold a news conference in front of the Constitutional Court in Seoul, on May 9, 2016.
Officials of South Korean firms with plants in Kaesong hold a news conference in front of the Constitutional Court in Seoul, on May 9, 2016. PHOTO: EPA

SEOUL (AFP) - South Korean businessmen who ran factories in the now-shuttered Kaesong joint industrial zone in North Korea challenged their government's decision to pull out of the project in the constitutional court on Monday (May 9).

The group of businessmen, representing more than 100 firms, argued that Seoul's shock decision in February had violated their property rights.

The Seoul-funded Kaesong estate, located just inside the North Korean side of the border, was home to around 120 South Korean plants that hired tens of thousands of workers from the isolated state.

The South announced on Feb 10 a pullout from the estate in protest at North Korea's latest nuclear and missile tests.

The North responded by kicking out all South Korean managers a day later and seizing their assets including raw materials, finished products and production equipment.

Since then, the South Korean companies have demanded Seoul compensate them for losses which they estimate at some US$663 million (S$904 million).

Now, with their appeal to the court, they are seeking to prove that the government overreached by issuing its pullout decision.

"We once asked the North's government to run the Kaesong according to the rule of law, but it was our own government in the South that infringed upon our property rights by making the sudden decision to close it with no legal basis," the group said in a statement.

Kaesong, born out of the "sunshine" reconciliation policy of the late 1990s, had previously remained largely immune to turbulence in inter-Korea ties.

The only exception was in 2013 during heightened cross-border tensions when Pyongyang effectively closed the zone for five months by withdrawing its workers.

The estate employed more than 53,000 North Koreans, making items such as textiles and cheap electronics for the South Korean firms, which paid wages worth US$560 million over the years.