By Peter Rutherford

SEOUL (Reuters) - As the rest of the world's top women golfers were playing for millions of dollars in prize money at the U.S. Open last week, South Korea's Ko Jin-young was half a world away dreaming of what might have been.

One of the brightest young talents in women's golf, Ko made her mark on the world stage by finishing second at last year's British Open and has risen to 33rd in the world despite playing outside the U.S. circuit, where events offer far more money and world ranking points than the domestic Korean Tour.

While Ko received an invitation to the U.S. Open, the most prestigious tournament in women's golf, and one she dearly wanted to play, there was one thing holding her back - the threat of a $100,000 fine from the KLPGA.

The 21-year-old, who won the 2015 Chojung Sparkling-Yongpyong Resort Open with SBS, was a victim of the KLPGA's "Defending Champion" rule, which demands golfers repay all the prize money from a tournament they win if they do not come back the following year.

Aimed at discouraging players from taking up invitations to foreign tournaments when the dates clash with Korean events, the KLPGA told Reuters 'Regulation 14:2' helped the Tour flourish by giving sponsors value for money and bringing in more fans.

"It is a player's duty to defend their title," the KLPGA told Reuters by telephone. "The regulation is a promise to fans that the champion will be back next year. It also makes sponsors happy to have the champion come back.

"Appearing in a tournament as a defending champion is an honor for a player."

That honor can sometimes become a burden, however.

Players have had to turn down invites to high-profile foreign tournaments including the U.S. Open where this year's champion Brittany Lang pocketed $810,000 from the $4.5 million prize pot.

The KLPGA said that, to date, it had never had cause to impose the fine, suggesting Korean players take their defending champion duties very seriously.

That or they are unwilling to repay the prize money.

With domestic tours around the world losing many of their top players to the lucrative U.S. and European circuits, the KLPGA is not alone in threatening financial sanctions on those who do not defend their titles.

"The Japanese LPGA has a similar rule," the KLPGA said.

A spokesman for the Ladies Professional Golfers' Association of Japan told Reuters they did have a similar rule, though players face a fine of only 1 million yen ($9,739) if they do not defend their titles.

If the tournament clashes with one of the five global majors then the fine is not levied.

'RIDICULOUS' RULE

Caddie Dean Herden, who carries the bag for Ko, told Reuters it was "absolutely ridiculous" the Korean Tour does not make an exception for players given invitations to majors.

"Am I hearing this right?" asked Herden, who has caddied on men's and women's tours around the world for the last 23 years.

"A rule that forces a player to return all her prize money if she does not defend her title from the year before ... because the KLPGA put the tournament on the same week as a major? This is ridiculous." 

Herden's bio reads like a "Who's Who" of Korean golfing greats. He guided Chun In-gee (2015) and Ryu So-yeon (2011) to U.S. Open wins, and racked up 24 tournament victories worldwide with former world number one Shin Ji-yai.

The Korean Tour's structure made it a terrific incubator for producing top-class players who can thrive on any circuit around the world, said Herden.

"But what the KLPGA has to understand is that the only reason the Tour is where it is now is because of Korean major winners," he added.

"After In-gee won the U.S. Open last year she became twice as popular and crowds were huge here in Korea in the second half of the year."

Herden sympathized with the KLPGA in some respects, in that it had a duty to protect the Tour and that the increasing popularity of Korean players had brought opportunities in Japan, Europe and the United States.

But global major championships were scheduled at least two years in advance, while the KLPGA calendar is typically released in February for the year ahead, he said, therefore there was no reason for the local Tour to schedule events that will clash.

"When you think about it, it's actually the KLPGA who should pay a fine for scheduling an event during the week of a world major such as the U.S. Open in the first place," he added.

"The KLPGA needs to wake up and change this rule to give players the freedom to be able to compete in majors."

GOLF AND THE LAW

If the KLPGA failed to "wake up", the issue could be decided through the courts if a player decided to go down that route, said Kim Sung-youl, a managing partner at Korean law firm Kim, Chang & Lee.

"The regulation as it stands is unfair to players to the point of being brutal," Kim, who has also written a book titled 'Golf and the Law', told Reuters.

"If a player went to court over it, whether in South Korea or in an international arbitration court, it would not hold up.

"If a player refused to pay back the prize money and the KLPGA filed a lawsuit, the court would rule against it because the KLPGA is abusing its power," he added.

Shin Jihye, a partner at law firm Shin & Kim who has handled sports cases in Korea, said that from a legal perspective the regulation was "problematic".

"It's questionable whether they can actually levy a fine through this regulation as it's the sponsors who provide the prize money, not the KLPGA," Shin told Reuters.

Caddie Herden said that Ko had taken the whole thing in her stride, determined to try her best in her title defense last weekend.

Clearly, however, her heart was not in it.

She missed the cut for the first time this season.

($1 = 102.6700 yen)

(Additional reporting by Jee Heun Kahng and Elaine Lies in Tokyo; Editing by Greg Stutchbury)