South Korea said on Tuesday it had blocked a North Korean bid for the right to detain South Korean businessmen working in the Kaesong joint industrial zone in the event of a dispute.
The Kaesong complex, which lies about 10 kilometres (six miles) inside North Korea, hosts some 100 Seoul-owned factories where 53,000 North Korean workers produce goods from clothes to watches.
Hundreds of South Korean managers also work in the complex, established in 2004 as a symbol of inter-Korea cooperation.
Last September, Pyongyang drafted a new operational regulation that would allow the North to detain South Korean businessmen when there is an unresolved business dispute.
"They sent us the request to change some rules on the Kaesong complex, including making it possible to detain our entrepreneurs," an official from Seoul's Unification Ministry told AFP.
"We rejected the request ... and there has been no word from the North on that since then," said the official, who spoke on condition of anonymity.
A precious source of hard currency for the impoverished North, Kaesong had until recently remained largely immune to the volatile swings in inter-Korean ties.
But in April 2013, the North effectively shut down the complex by withdrawing its workforce during a spike in military tensions that followed the North's third nuclear test.
Kaesong reopened five months later, but the shutdown raised concerns over the safety of South Koreans working there.
In an effort to prevent any future closures, the North and South created a joint committee to oversee Kaesong and deal with any problems related to its operations.