March, 2024

No.44

This issue covers the following topics:
International Arbitration / International Mediation
Recent Reform of Japan’s Arbitration Act- Enforcement of the Order for Interim Measure and the Settlement Agreement
through Mediation -Kaori Sugimoto

Cyber Security
Recent Legal Developments in Japan for Fortifying Essential Infrastructure Services’
Resilience Against Cyber Threats

Yasushi Kudo

International Arbitration / International Mediation
Recent Reform of Japan’s Arbitration Act- Enforcement of the Order for Interim Measure and the Settlement Agreement through Mediation I.

Introduction

April 21, 2023 saw the enactment of three laws arbitration- and mediation-related laws: the Law Partially
Amending the Arbitration Act (Act No. 15 of 2023) (the “Amended Arbitration Act”), the Law Concerning the
Implementation of the United Nations Convention on International Settlement Agreements resulting fromMediation (Act No. 16 of 2023) (the “Act Implementing Singapore Convention”), and the Law Partially
Amending the Act on Promotion of Use of Alternative Dispute Resolution (Act No. 17 of 2023) (the “ADR Act”).
These laws were promulgated on April 28, 2023, and are scheduled to go into effect on April 1, 2024.
These three laws are aimed at integrally strengthening dispute resolution procedures administered by private
dispute resolution organizations, including international arbitration and mediation, by making the order forinterim measures issued by the arbitral tribunal and the settlement agreement through mediation
enforceable. A summary of the laws is as follows.

II.

Amendment Enabling Enforcement of an Order for Interim Measures

Japan’s current Arbitration Act (Act No. 138 of 2003) was enacted in 2003 based on the UNCITRAL Model Law(the original 1985 version) but has not reflected the latest UNCITRAL Model Law (amended in 2006). This has
been an obstacle to Japan’s being selected as a seat of arbitration. In addition, under Japan’s current
Arbitration Act, there is no means to enforce an order for interim measures issued by the tribunal until anarbitral award is issued, and there was a risk that property dispositions, etc. would be made before the arbitralaward is issued, hampering the effectiveness of the order for interim measures.
Like the latest UNCITRAL Model Law, the Amended Arbitration Act allows for enforcement of an order forcertain types of interim measures issued by the tribunal to preserve rights and evidence pending an arbitral© 2024 Nagashima Ohno & Tsunematsu

award (an “Order for Interim Measures”). While there are a variety of types of orders for interim measuresthat are issued by the tribunal, the Amended Arbitration Act specifically provides two types of Order forInterim Measures that are enforceable: (i) measures necessary to avoid significant damage or imminent
danger to the property or rights subject to dispute, or to restore the property to its original condition, and (ii)prohibition of the disposal of property, etc.1. After the Order for Interim Measures is issued, the petitioner
may request the court to issue a compulsory execution 2. The court will examine whether or not there are
grounds for refusing compulsory execution, and if there are none, the court will issue an order allowing
compulsory execution, etc. 3. If the court’s order allowing compulsory execution, etc. is issued, compulsory
execution is implemented based on the Order for Interim Measures as a title of obligation in the case of “(i)”,above, or, in the case of “(ii),” as a payment order for compensation for damages as a result of violation (whichis to be issued by the court where there is a violation or threat of violation of the Order for Interim Measures
as a title of obligation).
Order for Interim Measures by Tribunal

Court’s Order allowing Compulsory Execution. Etc.
In the case of (ii)In the case of (i)Court’s Payment Order for
Compensation for Damages

Concurrent
Issuance ispossible

Implementation of Compulsory Execution
Prepared by the author based on the website of the Ministry of Justice(https://www.moj.go.jp/content/001395270.pdf)
In addition, in connection with this amendment, the following revisions have been made:In procedures where a petitioner is seeking a compulsory execution based on the arbitral award, thecourt may, if it deems it appropriate, not require a Japanese translation of the arbitral award 4; andthe petition for a compulsory execution based on the arbitral award may also be filed at the Tokyo District
Court and the Osaka District Court as additional concurrent jurisdictions 5.

These amendments would make the Order for Interim Measures more effective and simplify the proceduresfor the enforcement of arbitral awards in Japan.

Article 24(1) of the Amended Arbitration Act
Article 47(1) of the Amended Arbitration Act
3 Article 47(7) of the Amended Arbitration Act
4 Proviso to Articles 46(2) and Proviso to Article 47(2) of the Amended Arbitration Act
5 Article 46(4) of the Amended Arbitration Act
1
2

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III.

Establishment of a System for Enforcement of Settlement Agreements Reached ThroughMediation(i)Compulsory Execution of Settlement Agreement Reached Through International Mediation
Under the current legal system, there was no framework to enforce the settlement agreement even
if a settlement agreement was reached in international mediation. In addition, in September 2020,
the United Nations Convention on International Settlement Agreements resulting from Mediation(the “Singapore Convention on Mediation”) came into effect, and Japan acceded it in October 2023.
In response to this trend, a system was established to allow courts to issue enforcement decisions
based on settlements reached in international mediations 6. In order for an enforcement decision to
be issued, (i) the agreement must be an international settlement agreement 7, (ii) the agreement must
be a settlement agreement pertaining to a commercial dispute (not applicable to disputes in which
individuals are parties, individual labor disputes, or disputes concerning personal status or family
matters) 8, and (iii) the parties must have agreed on enforceability of the international settlementagreement based on the Singapore Convention on Mediation or the Act Implementing Singapore
Convention (an “opt-in reservation”) 9, and (iv) there must be no grounds for refusal of execution 10.

(ii)

Compulsory Execution of Settlement Agreement Reached Through Domestic Mediation
Under the current system, even if a settlement was reached through mediation in Japan, there wasno mechanism for enforcement based on the settlement. The ADR Act establishes a new system whichallows the court to issue an enforcement decision based on settlements reached in domestic
mediations (Article 27-2 of the ADR Act). In order for an enforcement decision to be issued, (i) the
settlement must be achieved via certified (accredited) dispute resolution procedures conducted bycertified dispute resolution business operators, (ii) the settlement agreement must pertain to acommercial dispute (not applicable to contract disputes between a legal entity and a consumer,
individual labor disputes, and disputes concerning personal status or family matters) (Article 27-3 ofthe ADR Act), (iii) the parties must have agreed in the certified mediation procedures on enforceabilityof the settlement agreement through domestic mediation (Opt-in Reservation) (Article 27-3 of the
ADR Act) (Article 2, Paragraph 5 of the ADR Act) and (iv) there must be no grounds for refusal of
execution (Article 27-2, Paragraph 11 of the ADR Act).
The above amendments will also ensure the effectiveness of settlements reached through mediation,
and are expected to expand opportunities for the use of mediation in Japan as a dispute resolution
tool.

Article 5 of the Act Implementing Singapore Convention
Article 2 of the Act Implementing Singapore Convention. As used herein, “international settlement agreement” means anagreement entered into by parties (i) whose head office, or parent company’s office, is located outside Japan, (ii) whose
addresses, business offices, etc. are in different countries, or (iii) whose domicile, place of business, etc., as well as the placeof performance of obligations under the settlement agreement, are in different countries.
8 Article 4 of the Act Implementing Singapore Convention
9 Article 3 of the Act Implementing Singapore Convention
10 Article 5, Paragraph 12 of the Act Implementing Singapore Convention
6
7

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© 2024 Nagashima Ohno & Tsunematsu[Author]
Kaori Sugimoto, Partner
kaori_sugimoto@noandt.com
Kaori Sugimoto focuses on international construction & infrastructure project (including ODA
project and PPP project) and international dispute resolution including international
arbitration. She has extensive experience in negotiation or drafting of contracts forinternational construction and infrastructure projects, particularly those involving Japanesecompanies in Southeast Asia, the Middle East, and Europe. She is proficient in international
arbitration, with a focus on resolving construction-related disputes, in which she frequently
serves as legal counsel. She is currently a member of ENAA (Engineering Advancement
Association of Japan) and ECFA (Engineering and Consulting Firms Association).

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Cyber Security
Recent Legal Developments in Japan for Fortifying Essential Infrastructure Services’ Resilience
Against Cyber ThreatsI.

Introduction

In light of the escalating cyber threats in Japan during the year 2023, the Japanese National Police Agency(“JNPA”) has underscored the persistent prevalence of ransomware attacks, with a noteworthy increase inincidents related to a new form of ransomware known as “No-ware ransom” 11. This variant involves the theftof data from victims’ companies without encryption of the stolen information, thereby causing substantial
harm. Additionally, the Information-Technology Promotion Agency publicly reported “10 Major Security
Threats 2024” 12 . In this article, which concerns threats to enterprises, attacks exploiting vulnerabilities
embedded in the supply chain are ranked as the second-highest threat, while damage caused by ransomware
attacks is ranked first.
Given the concerning trend in cyberattacks, the Japanese national government, together with pertinent
government agencies, has proactively established a system (the “System”) under the Economic Security
Promotion Act (“ESPA”) to ensure provision of essential infrastructure services (“EIS”) and enhance the supply
chain risk management, including ensuring cybersecurity in EIS. This System is aimed at fortifying EIS
resilience against cyber threats and ensuring a comprehensive response to emerging challenges.
The subsequent sections provide a comprehensive outline of the System, especially focusing on the supply
chain risk management implemented to safeguard EIS.

II.

Outline of the System for Ensuring Provision of Essential Infrastructure Services Under the
Economic Security Promotion Act

The System is established pursuant to the ESPA, which was enacted in 2022 in response to escalating
cybersecurity threats in Japan. Operational from May 2024, the System aims to mitigate risks such as theembedding of malware during equipment installation or software updates and the exposure of vulnerable
information by third parties outside Japan. Starting from 2023, competent authorities have created andupdated guidelines in preparation for effective implementation of the System beginning in May 2024 13.

(i)Outline of the System for Ensuring Provision of EIS
 Purpose: The primary objective of the System is to prevent critical facilities of the EIS (“CF”) frombeing exploited from outside Japan as a means of disrupting stable provision of EIS. Competentauthorities conduct a prior screening process and issue recommendations or orders concerning
the installation or entrustment of maintenance, etc. (as defined below), of the CF.
 Scope of EIS: EIS encompasses services in electricity, gas, oil, water, railways, truck transport,international maritime cargo, aviation, airports, telecommunications, broadcasting, postal
services, financial services, and credit cards. Designated as EIS are services that are either (i)crucial for national livelihoods or economic activities and the lack of which may lead towidespread or large-scale social turmoil or (ii) essential for citizen survival with limited
substitution possibilities. Competent authorities in the respective EIS fields designate the specificservices falling under this purview. Please be informed that, in response to a ransom-ware attackon the Nagoya United Terminal system operated in Nagoya port facilities in July 2023, as a resultof which certain port-facility operations were suspended for more than two days, the Japanese

https://www.npa.go.jp/publications/statistics/cybersecurity/data/R05_kami_cyber_jousei.pdf
https://www.ipa.go.jp/security/10threats/10threats2024.html
13 For example, Cabinet Office of the Japanese government publicly discloses its guideline in the following website.
https://www.cao.go.jp/keizai_anzen_hosho/doc/infra_kaisetsu.pdf
11
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government decided to amend the relevant regulations in order to add “port transport” to EIS in
January, 2024.
 Scope of the CF: Equipment or programs that may be exploited for interference with the stableprovision of EIS, such as through cyber-attacks or physical interception measures, are designatedas CF. Competent authorities in the respective EIS fields identify and designate such CF 14.
 Scope of EIS Operators: EIS operators are designated based on the unique circumstances of each
EIS, considering factors such as the scale of operation or substitutability. Competent authorities
in the respective EIS fields identify and designate EIS operators 15.
 Duty of EIS Operators: Upon the installation of CF for business use or the commencement of
entrustment of maintenance, etc., of CF to other business operators, EIS operators are generally
required to submit a notification plan in advance and undergo a screening process conducted by
the competent authorities. This measure ensures a proactive approach to cybersecurity, aligningwith the overarching goals of ESPA.
 Definition of “maintenance, etc.”: Any maintenance, management, or operation that is criticalfor maintaining functions of CF or for the stable provision of EIS concerning CF in a stable manner,and that is likely to be used as a means of sabotage.
The outlined System under ESPA establishes a comprehensive framework to fortify the cybersecurity
posture of CF, safeguarding against external threats and disruptions to EIS.

(ii)

Outline of the Prior Screening Process in the System for Ensuring Provision of Essential
Infrastructure Services Under the Economic Security Promotion Act
Please see below a brief outline of the prior screening process mentioned above: Prior Notification Plan:

Installation:- The Prior Notification Plan must include a summary of critical facilities, including content,
timing of installation, suppliers, components, etc.; and- Measures which will be implemented for managing risks related to installation.

Entrustment of Maintenance, etc.:- In addition, it must set forth a summary of critical facilities, including content, timing of
entrustment, contractors, subcontractors, etc.; and- Measures which will be implemented for managing risks related to the entrustment ofmaintenance, etc.

 Measures for Risk Management:
The EIS operator is required to report the measures taken to prevent interference with CF in
both types of notifications.
 Specific examples of measures are outlined in the System’s guidance.
For example, the Japanese Financial Services Agency has publicly disclosed its guidance relating to the CF in the following
website.
https://www.fsa.go.jp/news/r5/economicsecurity/infra_kaisetsu_financesector.pdf
15 For example, the Japanese Financial Services Agency has publicly disclosed the designation of the EIS operators in thefinancial services in the following website.
https://www.fsa.go.jp/news/r5/economicsecurity/tokuteishakaikiban.pdf
14

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© 2024 Nagashima Ohno & Tsunematsu Examples of Detailed Measures for Risk Management:
Among other things, detailed measures for the supply chain risk management against cyber threats
include the following:

For Installation:- Implementing necessary controls to prevent unauthorized changes to the CF and theircomponents during manufacturing by suppliers. A contract should stipulate the EIS
operator’s right to verify these controls.
- Adoption of a system to identify signs of unauthorized disruption of the CF and theircomponents, as a result of which the provision of EIS can be maintained.



For Entrustment of Maintenance, etc.:- Implementation of necessary controls to prevent unauthorized changes to the CF by theentrusted party (including the re-entrusted party). A contract should allow the EIS
operator to verify such controls.
- In the case of re-entrustment, a contract should stipulate the provision of information
for cybersecurity checks and approval by the EIS operator.

 Flexibility in Implementation:
The Japanese government acknowledges that measures should be determined based on thenature and degree of risk associated with the business.
 EIS operators are not obliged to implement all listed measures; they can choose substantiallyequivalent measures and select relevant items accordingly.
 The focus is on achieving the intended cybersecurity goals, allowing flexibility inimplementation based on individual circumstances.
 Screening Period:The relevant competent authority will review the content of the prior notification.
As a general rule, the screening period is within 30 days from the receipt of the plan by thecompetent authority. This period could be extended to 4 months at most, depending on theplan-dependent degree necessary scrutiny.

 Recommendations/Orders:
Following review, the competent authority will take one of the following actions:High Risk Determination:- If the relevant authority determines that the CF poses a high risk of its being misused todisrupt the stable provision of EIS, a recommendation will be made for necessary
measures to prevent actions disruptive to the EIS operator. If the relevant authority
determines that there is not a high risk of such misuse, no recommendation will be
issued.



EIS Operator’s Response:- The EIS operator is required to respond to the relevant authority within 10 days from thereceipt of the recommendation, indicating whether or not it will accept the proposed
measures.



Orders in the Absence of Response or Rejection:- If there is no response from the EIS operator within the specified period, or if the EIS
operator explicitly notifies the relevant authority that it does not accept the- 7 -© 2024 Nagashima Ohno & Tsunematsu

recommendation (unless there are legitimate grounds for such refusal), the competentauthority may proceed to issue orders for the implementation of the recommended
measures.
This outlined process ensures that EIS operators actively engage in risk management andcybersecurity measures, fostering a collaborative effort with competent authorities to protect the CFfrom external threats.
In addition, this structured process may have an effect on the suppliers and vendors of EIS operators,
since there is a possibility that they would not be able to carry out transactions with EIS operators dueto the recommendation by the relevant authorities. Therefore, under the System, while EIS operators
are generally required to ensure to the supply chain risk management against cyber threats and makean appropriate prior notification to the competent authorities, the suppliers and vendors of the EIS
operators are effectively obligated to cooperate with EIS operators in order to timely complete thescreening process. The System therefore also has an indirect impact on both domestic and foreign EIS
operator vendors and suppliers.
[Author]Yasushi Kudo, Partner
yasushi_kudo@noandt.com
Yasushi Kudo is a partner at Nagashima Ohno & Tsunematsu. He mainly focuses on crisis
management, including dealings with domestic and international authorities, regulatorycompliance, cybersecurity/data privacy and advice on compliance systems and corporate
governance, leveraging his expertise and experience gained from his secondment to the
Financial Services Agency and the Securities and Exchange Surveillance Commission.
Recently, he has focused on legal issues raised by cybersecurity incidents such as ransomware
attack, data compromise and business e-mail compromise (BEC) and the development ofinternal control system in response to cybersecurity risks such as the supply chain risk
management.

This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s
legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view.
For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We
would be delighted to answer your questions, if any.

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