The top South Korean representative of French defence company Thales has been arrested on spying charges.
Thales' electronics systems are used on land, on sea and in the air
Accused of stealing classified South Korean defence files, the unnamed Frenchman has been placed in custody.
Thales, Europe's biggest supplier of electronic defence systems, insisted it had followed South Korean law and was co-operating with the investigation.
The firm has operated in Korea for 30 years and is currently tendering to supply radars for new navy frigates.
"Thales would like to state that it has always maintained the very best of relations with its Korean military customers over the past 30 years, and that it pursues a proactive policy of technology transfers to the benefit of Korea," the firm said in a statement.
Thales recently announced acquisition plans
"Thales believes that a positive outcome to this incident will be reached and that its good faith will be recognised in this case.
"The group will continue to fully cooperate as the investigation moves forward."
Earlier this month, Thales reported a 3% rise in annual profits and said it was planning to make acquisitions after successfully halving its debts.