(ATTN: CHANGES headline, lead; UPDATES throughout)
By Song Sang-ho
SEOUL/TOKYO, June 19 (Yonhap) -- South Korea has proposed to Japan that companies from both countries create a joint fund to compensate victims of Tokyo's wartime forced labor, the foreign ministry said Tuesday.
Seoul made the proposal as Tokyo has been ratcheting up pressure on it to accept the request for the formation of an arbitration panel to address the thorny issue stemming from Japan's 1910-45 colonization of the peninsula.
"This idea has been raised that it is desirable to enable reconciliation between the parties concerned with this issue by offering compensation to the victims, whose lawsuits have been finalized, by creating funds that companies from the two countries, including the accused Japanese firms, voluntarily offer," the ministry said in a press release.
"Should Japan accept this, (South Korea) is willing to consider accepting the consultation procedure (for diplomatic talks) that Japan has requested," it added.
The ministry was referring to the dispute settlement procedures enshrined in a bilateral 1965 accord aimed at normalizing the countries' ties.
Shortly after Seoul's announcement, Tokyo spurned the proposal, according to Japan's Kyodo News.
Japan maintains that all compensation-related issues were settled under the 1965 accord.
It has protested against South Korean Supreme Court rulings last year that ordered Japanese firms to compensate the victims.
The top court recognized victims' individual rights to claim damages, while Seoul maintains that it honors the court rulings based on the constitutional separation of the executive, judicial and legislative powers, and that it can't get involved in civil litigation.
Earlier in the day, Japan made another highly charged request to the South for the formation of an arbitration panel consisting of third-country members to discuss the forced labor issue.
The move came as Seoul did not accede to the earlier request that Tokyo made on May 20 to form a panel consisting of one member each from the two countries and the other from a third country based on the 1965 accord.
The accord stipulates that Seoul and Tokyo are to settle any dispute concerning the interpretation or the implementation of it primarily through diplomatic channels.
If they fail to settle it, the case can then be referred to a commission involving a third-country arbitrator agreed on by the two sides. Should this fail again, the two sides are to form a panel consisting of three third-country members.
Tokyo first made the call for diplomatic discussions over the thorny issue in January. It then requested the formation of a panel involving a third-country member last month.
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