SEOUL -- As South Korea prepares to meet with Japan and the U.S. at the upcoming Group of Seven summit, a court here on Monday dismissed a wartime compensation suit against Japanese companies in a potential step toward thawing ties with Tokyo.

The Seoul Central District Court on Monday dismissed a lawsuit by those who claim that they were forced to work for Japanese companies during World War II and their families. Eighty-five former laborers and family members initially filed the case in May 2015, each seeking roughly 100 million won ($90,000) from a total of 16 Japanese companies, including Nippon Steel, Eneos and Nishimatsu Construction.

But South Korean citizens cannot exercise their individual rights through lawsuits against Japan or Japanese people, the court said Monday. It cited an agreement from 1965, the year that the countries normalized their relations.

This is the first South Korean ruling to dismiss wartime compensation claims over the 1965 accord since 2018, when the Supreme Court ordered Nippon Steel to compensate wartime laborers.

The district court warned that a ruling in favor of compensation could violate international law and that any court-ordered confiscation of the defendants' property could undermine public order and qualify as an abuse of power. It also rejected the Supreme Court's stance that Japan's colonial rule over Korea was illegal, arguing that this understanding had not been established under international law.

The decision comes as South Korea, Japan and the U.S. prepare for a potential three-way gathering on the sidelines of the Group of Seven summit in the U.K. starting Friday.

U.S. President Joe Biden is eager for a thaw between the two American allies in East Asia, especially amid the growing rivalry between Washington and Beijing. But ties between Japan and South Korea had deteriorated over the last few years in response to a court rulings in favor of Japanese compensation to wartime laborers and former "comfort women."

The administration of South Korean President Moon Jae-in so far has not put forth a solution the Japanese side finds acceptable, and a new ruling ordering companies to compensate wartime laborers would likely have exacerbated tensions with Tokyo ahead of the G-7.

South Korea is open to discussing reasonable solutions that are acceptable to all parties, its Foreign Ministry said shortly after Monday's decision was announced.

The Japanese government has long held that the issue of wartime labor, including any individual rights to compensation, was settled as part of the 1965 agreement.

But South Korea's Supreme Court in 2018 ordered Nippon Steel to compensate former wartime laborers, arguing that the 1965 accord does not apply to illegal activities by Japanese companies under illegal Japanese rule. The Seoul Central District Court in January also ordered the Japanese government to compensate former "comfort women."

Moon initially argued he had no choice but to respect the courts' decision on these wartime issues. But he shifted his tone in January, telling reporters that forcibly liquidating Japanese corporate assets to pay victims was "not desirable" for bilateral relations. He also expressed hope of reaching a diplomatic solution with Japan, partly in response to Biden's push for improved ties between the U.S. allies.

In South Korea's hyperpartisan political environment, courts tend to be influenced both by the political tides and by the personal views of each judge. The same Seoul court that ruled in favor of comfort women in January dismissed on April 21 a similar case brought by a separate group of plaintiffs.

Still, war-related lawsuits hang heavy over South Korea's ties with Japan. The plaintiffs' counsel in Monday's case told reporters afterward that the decision was "unjust" and "contradicts previous rulings," and plans to appeal the decision.

The Daegu District Court has also finished appraising stock in a joint venture with Nippon Steel and South Korea's Posco, which was seized under a past ruling ordering Nippon Steel to compensate wartime laborers. The court could potentially liquidate the asset at any time.