A South Korean court on Wednesday ordered a Japanese steel giant to pay compensation over forced wartime labour in what was described as the first ruling of its kind, a report said.

The decision marked the latest chapter in a 16-year legal battle launched by four South Koreans, now aged in their eighties and nineties, who were drafted to work for the predecessor of Nippon Steel before World War II.

The forced labour issue and wartime sexual slavery remain key points of contention between Seoul and Tokyo after Japan's brutal colonisation of the Korean peninsula from 1910 to 1945.

In its ruling, the Seoul High Court ordered Nippon Steel -- which is now the world's second-biggest producer after merging with Sumitomo Metal last year -- to pay 100 million won ($88,000) to each victim as compensation for unpaid salaries and mental suffering, Yonhap news agency said.

The labour amounted to "crimes against humanity", Judge Yoon Seong-Keun said in his ruling, according to Yonhap.

"(This) not only goes against the international order and the South Korean constitution but also the Japanese constitution," Yoon added.

Nippon Steel vowed to appeal the ruling to South Korea's top court, saying it was "surely regrettable that this unjust ruling was given".

The company said the decision ignores a 1965 treaty which saw Seoul and Tokyo restore diplomatic relations. It included a reparations package of about $800 million in grants and cheap loans.

The treaty was "an official bilateral agreement which addressed the issue of conscripted employees completely and conclusively", Nippon Steel said in a statement.

In 1997, Yeon Un-Taek, now 90, and three other forced labourers filed a compensation suit in Japan, but it was dismissed by the country's top court.

They launched a separate action in South Korea in 2005.

Koreans conscripted by Japan into forced labour during the 35-year occupation numbered around 780,000, excluding women who were forced to work in wartime brothels, according to official data.