The Japanese cargo ship Baosteel Emotion has been seized by China over a pre-war debt, following an order by the Shanghai Maritime Court.

The event is likely to have an adverse affect on the business ties between the countries, which are already strained due to territorial disputes over an island chain in the East China sea.

Japan chief cabinet secretary Yoshihide Suga was quoted by BBC News as saying: “The Japanese Government considers the sudden seizure of this company’s ship extremely regrettable.”

“This is likely to have, in general, a detrimental effect on Japanese businesses working in China.”

Baosteel Emotion is owned by Mitsui OSK Lines (MOL) and was seized on 19 April.

The ship has been taken into custody over issues relating to unpaid compensation for two Chinese ships, Shun Foong and Hsintaiping, that were leased in 1936 and then sank or were lost at sea by the Japanese army.

The two vessels were chartered from Chinese shipowner Chung Wei Steamship Co., by Daido Kaiun, the predecessor of Navix Line, which merged with MOL in 1999.

MOL was instructed by the Shanghai Maritime Court to pay Chung Wei Steamship around JPY2.92bn ($28.46m) on 7 December 2007.

The company disagreed with the ruling and appealed to the Shanghai Municipal Higher People’s Court, which upheld the initial judgment on 6 August 2010.

On 17 January 2011, MOL’s motion for a new trial to the Supreme Court of the People’s Republic of China was also refused.

The the 320m long Baosteel Emotion ore carrier was built in 2011 and is currently docked at Majishan, according to data compiled by Bloomberg.