Japan Commercial
Arbitration Journal
VOL.1［2020］

The Japan Commercial Arbitration Association (JCAA)
President

Kazuhiko Bando
Editorial Board
Editor–in-Chief

Professor Masato Dogauchi, Chief Arbitration and Mediation Officer, JCAA

Harumichi Uchida
TMI Associates

Editorial Committee

Junya Naito
Momo-o, Matsuo & Namba

Professor Kazuhiko Yamamoto
Hitotsubashi University

Naoki Iguchi
Nagashima Ohno & Tsunematsu

Shiro Kuniya
Oh-Ebashi LPC & Partners

Professor Shusuke Kakiuchi
The University of Tokyo

Tony Andriotis
Quinn Emanuel Urquhart & Sullivan, LLP

Yoshihiro Takatori
Kasumigaseki International Law

Yoshimasa Furuta
Anderson Mori & Tomotsune

Office/International Arbitration Chambers
Yoshio Iteya
Mori Hamada & MatsumotoSupporting Law Firms
Anderson Mori & Tomotsune

Kasumigaseki International Law Office / International Arbitration Chambers
Momo-o, Matsuo & Namba
Mori Hamada & Matsumoto
Nagashima Ohno & Tsunematsu
Oh-Ebashi LPC & Partners
Orrick, Herrington & Sutcliffe LLP and Orrick Tokyo Law Offices
TMI Associates

The Japan Commercial Arbitration Association

3F, Hirose Bldg, 3-17, Kanda Nishiki-cho, Chiyoda-ku, Tokyo 101-0054, Japan
www.jcaa.or.jp

planning-consulting@jcaa.or.jp© 2020 JCAA

All rights reserved

Japan Commercial Arbitration Journal
VOL. 1 [2020]

Table of Contents
The New JCAA Arbitration Rules ―Japan’ s Attempt in Innovative Dispute Resolution
Douglas K. Freeman
New Arbitration Rules Based on the Civil Law Tradition―The 2018 DIS Arbitration Rules, the Prague Rules, and the JCAA Interactive Arbitration Rules
Aiko Hosokawa
Cooperating on Disputes―Moving towards a Stronger Cooperative Foundation for the Settlement of Disputes in Asia
Tony Andriotis, Giorgio Fabio Colombo, David MacArthur, Masako Miyatake, Michael Mroczek,
Shiori Sato, Julia Jiyeon Yu
The Act on Special Measures concerning the Handling of Legal Services
by Foreign Lawyers ―Recent Developments toward Internationalization
Junya Naito, Ryo Otobe
Four Court Decisions After an Arbitral Award
Yoichiro Hamabe
Setting Aside of Arbitral Awards under the Japan Arbitration Act―Recent Decisions by the Japanese Courts
Naoshi Takasugi

4

11

21

34
42

50

How Companies Can Prepare for Global Disputes in the Era of Japan’ s Work Style ReformYoshihiro (Yoshi) Takatori, Yumiko Ohta

59

JIMC-KYOTO ―An Attractive Option for International Mediation
Haruo Okada

67

The ADR Act ―Purpose, Actual Situation and Future
Kazuhiko Yamamoto

74

An Introduction to Japan International Dispute Resolution Center
Yoshihisa Hayakawa

79

New IP Conciliation Proceedings at Japanese Courts
Yoshiaki Shibata

83

Recognition and Enforcement of Business Dispute Resolutions in Japan in the Age of Global
Cooperation
Keisuke Takeshita

89

Interim and Provisional Measures in Japanese Courts for Disputes Involving Agreementswith Arbitration Clauses
Kazuhide Ueno, Akihiro Goda98

A Message from JCAA

106

2

Japan Commercial Arbitration Journal VOL.1［2020］

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cyakura@mofo.com© 2020 Morrison & Foerster LLPThe New JCAA Arbitration Rules―Japan’s Attempt in Innovative Dispute Resolution
Professor, Keio University Law School; Principal, Law Offices of Douglas K. Freeman

Douglas K. Freeman

Ⅰ．Introduction
As the drive to strengthen Japan’ s position in the international dispute resolution market isgathering steam, the Japan Commercial Arbitration Association―Japan’ s leading Japanesearbitral institution―recently announced significant revisions to its arbitration rules, andintroduced a new set of “Interactive Arbitration Rules,” marking a bold shift in a new direction
for Japan’ s venerable arbitral institution.

As a practicing international arbitrator in Japan and a member of the Committee for the

Amendment and Establishment of JCAA Arbitration Rules, I would like to comment on the key
features and practical implications of these rules, which took effect as of January 1, 2019.

Ⅱ．The Three Rules
With the introduction of the entirely new Interactive Arbitration Rules, the JCAA now has

three sets of arbitration rules. The default rules—which apply where no particular rules are

specified—continue to be the Commercial Arbitration Rules, which were modified substantiallyto incorporate recent developments in modern arbitration rules. I will first highlight thesechanges, most of which also apply to the new Interactive Arbitration Rules.

Next, I will introduce the innovative features of the Interactive Arbitration Rules, which were

aimed to provide speedily, cost-effective dispute resolution by mandating a “dialogue”
between the arbitrator and the parties aimed to focus on the key issues of the dispute.

Finally, I will describe the revisions to the Administrative Rules for UNCITRAL Arbitration,and explain their scope of intended use.

Ⅲ．New Features of the Revised Commercial Arbitration Rules
The key features of the revised Commercial Arbitration Rules are as follows.

4Japan Commercial Arbitration Journal VOL.1［2020］

The New JCAA Arbitration Rules―Japan's Attempt in Innovative Dispute Resolution

1. JCAA Arbitrator Candidate List

Recognizing the importance of its institutional role in providing objective information on

arbitrator candidates, under the revised Rules, the JCAA will provide upon the parties’ request

a list of arbitrator candidates tailored to the needs of the particular case or the parties’
specified criteria (Art. 9).

In generating this list, the JCAA will utilize its robust database containing approximately 100

Japanese and non-Japanese arbitrator candidates compiled from various sources. In thisregard, the JCAA has made available a list of arbitrators and mediators candidates, includingthese who have experience in JCAA cases, to be used more generally for parties contemplating
arbitration. See https://www.jcaa.or.jp/en/arbitration/candidate.html

Such information should be especially useful for parties seeking arbitrators skilled in aparticular area or practicing in certain geographical regions. The compilation anddissemination of objective, detailed data in the publicly available lists―including numbers ofcases handled in each year (with breakdowns of numbers handled as presiding arbitrator vs.

as party appointed arbitrator), birth year, nationality and language capability―is unique and awelcome sign of the JCAA’ s willingness to be more transparent and proactive as an arbitralinstitution.

2. Ongoing Investigative Duty for Arbitrater Independence/Impartiality Disclosure

Primarily in response to a 2017 ruling of the Supreme Court of Japan (Japanese Supreme

Court Dec. 12, 2017), which held that arbitrators have an on going duty to disclose potential
conflicts of interest and that such disclosures should include information the arbitrators could

have known through reasonable investigation, the revised rules now specify that an arbitrator

candidate should “conduct a reasonable investigation into any circumstances which may, inthe eyes of the parties, give rise to justifiable doubts as to his or her impartiality or

independence,” and disclose such circumstances when seeking to accept an appointment (Art.

24.2). The rules also impose an ongoing duty to conduct an investigation and disclose suchcircumstances that arise in the course of the arbitration (Art. 24.4).

While arbitrators often consult “soft law” standards such as the IBA Guidelines on Conflict ofInterest in International Arbitration (the “IBA Guidelines” ), the criteria and rigor each
arbitrator applies may differ based on their experience in a particular jurisdiction, and many

international arbitrators may be unaware of the Japanese court’ s standards. By imposing
these relatively stringent disclosure requirements, the Rules seek to minimize challenges toawards based on independence and impartiality issues. The reference to a subjective
standard “in the eyes of the parties” also brings the rules in line with the IBA Guidelines.
3. Ex Parte Communications Regarding Arbitrator Appointments

The revised Rules require explicit consent by all the parties for party-appointed arbitrators

to engage in ex parte communications with their appointing party to discuss the appointmentof the presiding arbitrator (Art. 28.5). This consent may be provided by email (Art. 2.3).

Given the disparity of ethical norms in this area, this provision helps reinforce the general

Japan Commercial Arbitration Journal VOL.1［2020］5impermissibility of ex parte communications and clarifies the scope of this narrow exception.
In practice, receiving party input regarding presiding arbitrator candidates is a useful exercise
in party autonomy, and may be easily initiated by a joint email from the party-appointed
arbitrators to the parties seeking their approval for such input.
4. Use of Tribunal Secretary

The revised Rules clarify the conditions for a sole or presiding arbitrator to engage a tribunal

secretary, by requiring the consent of both parties following disclosure by the arbitrator of the
expected tasks to be delegated and the calculation of remuneration (Art. 33.2).

These revisions remove a source of potential controversy in what has been considered agrey area in arbitration administration. Sensibly, the Rules also prohibit the delegation oftasks that substantially influence the tribunal’ s decision (Art. 33.1), and subject the secretary’ s

remuneration to the arbitrators remuneration cap (Art. 33.4), ―these elarifications make iteasier for parties to utilize such assistance, which can be very helpful in procedurally complex
cases.

5. Rights to Reject Untimely Submissions

The Rules now specify that the tribunal may reject a party’ s submission of a statement orevidence if made in an untimely manner (Art. 41). While arbitrators are generally reluctant todisallow parties’ submissions for fear of violating their right to be heard, having an express

provision empowers a tribunal to take a firmer stance in enforcing procedural impropriety
when needed in egregious cases that may significantly delay the proceedings.
6. Prohibition of Dissenting Opinions issuing

Unique among arbitration rules, the Rules now explicitly prohibit the disclosure of dissenting

opinions (Art. 63). While recognizing that this issue is controversial, the JCAA decided thatany benefits of allowing dissenting opinions are outweighed by their potential to invite
potential challenges to the resulting award.

The pros and cons of dissenting opinions is a topic of debate in academia and among

practitioners, and I personally feel that this delicate decision should be left to the arbitrator’ s
discretion as an important part of the adjudicative role. But as many arbitrators know,

tribunals are at their best when rendering awards with unanimity, and it is hoped thatoccasions are rare in which an arbitrator finds this provision to be a hindrance.
7. Amended Expedited Arbitration Procedures

The Rules have expanded the scope of mandatory application of the expedited arbitration

procedures required to be heard by a sole arbitrator which now apply to disputes under JPY

50 million, up from a previous threshold of JPY 20 million. These procedures are in principle

conducted on a documents-only basis (i.e., without a hearing) (Art. 88) and set a nonmandatory target to render an award within three months from the arbitrator’ s appointment(Art. 89).

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The New JCAA Arbitration Rules―Japan's Attempt in Innovative Dispute Resolution

While resolving a dispute within this compressed time frame is a challenge, it is a worthy

aspiration for the Rules to encourage such rapid resolution to leverage the advantage ofarbitration over litigation. It would behoove arbitrators to work to develop the skills required
to expedite the resolution of disputes while ensuring procedural soundness.
8. Amendments to Arbitrator Remuneration

The arbitrator remuneration provisions have undergone some sensible revisions. The JCAA

employs an hourly-rate system, subject to a gradual reduction in applicable rate (with amaximum reduction of 50% of the initial rate) and an overall cap to induce speedily caseresolution.

The arbitrator’ s standard hourly rate, which was previously determined on a case-by-casebasis, is now fixed at JPY 50,000 (Art. 93.2). The remuneration cap based on the value of the

dispute was slightly adjusted, and now differentiates between the presiding arbitrator (120%)and co-arbitrators (80%) for a three-member tribunal in recognition of the presiding

arbitrator’ s greater responsibilities (Art. 94.3). The threshold for starting the reduction of
the hourly rate was increased from 60 hours to a more reasonable 150 hours (providing a
10% reduction every 50 hours) in light of average case duration.

The JCAA’ s regime generally provides reasonable compensation in most cases. Althougharbitrator remuneration does not often gain too much attention in the context of arbitration
rule revisions, it is an important component of an effective arbitral institution regime, and the
JCAA would be well advised to track arbitrator satisfaction with remuneration at the conclusionof their cases to ensure the fee structure continues to attract top rate arbitrators to accept
appointments.

It should be noted that an arbitrator may agree with the parties to modify the remuneration

rules prior to appointment, but such negotiations are prohibited after appointment (Art. 98).

Parties seeking to appoint senior, renowned arbitrators may consider agreeing in advance torelax these rules (waiving the maximum fee cap in major, complicated disputes, for instance)
before conducting their arbitrator search.

Ⅳ．Interactive Arbitration Rules
1. Overview

As part of a bold experiment to contain the escalation of arbitration costs driven byprocedural inefficiencies frequently stemming from an adversarial dispute resolution culture,

the JCAA―with some “fanfare” ―has established the Interactive Arbitration Rules. The Rules’

unique features aim to promote an efficient resolution of arbitration cases by prescribing an“interactive” dialogue between the tribunal and the parties to focus the proceedings on the
key issues and by fixing arbitrator remuneration to incentivize swift case resolution. The

Interactive Arbitration Rules must be affirmatively specified by the parties, in the absence of
which the Commercial Arbitration Rules apply as the default rules. As most of the Interactive

Arbitration Rules are common to the Commercial Arbitration Rules, the features unique to theJapan Commercial Arbitration Journal VOL.1［2020］7

former rules are described below.
2. Tribunal’ s Active Identification of Issues

The first “interactive” feature is to require the tribunal as early as possible in theproceedings to summarize the party’ s claims and factual and legal issues (Art. 48.1). Thisfeature is similar to the “list of issues” in the ICC’ s terms of reference, except that the
preparation of “factual and legal grounds of the claim and defense” and the “factual and legal

issues” arising therefrom is mandatory in all cases, and such list must be presented to theparties to receive their feedback within a time limit specified by the tribunal.

Due to the inevitable gap in perspectives between the parties’ counsel and the tribunal andpressure from their principals to conduct an all-out effort to leave no stone unturned, counsels

at times devote large swaths of their pleadings on issues that bear little upon what thetribunal regards as the core, relevant issues. If administered successfully, this feature could

enable the parties to home in on the issues the tribunal considers to be relevant, leading to amore efficient proceeding.

3. Tribunal Statement of Preliminary Views

The second―and potentially more controversial― “interactive” feature is the requirement

for the tribunal to provide the parties with a written summary of the factual and legal issues
the “tribunal considers important” and its “preliminary views with respect thereto,” before
making a decision on whether a hearing is necessary (Art. 56.1). As with the initial

identification of issues, the parties are allowed to comment on these views (Art. 56.2). The
stated views do not bind the tribunal in its subsequent decisions (Art. 56.5), and the parties
cannot challenge the arbitrator based on expressing these views (Art. 56.6).

Requiring disclosure of the tribunal’ s views is unique among leading arbitration rules,

although the practice of disclosing the decision maker’ s views is not uncommon in civil law
based proceedings including litigation. The new Prague Rules on Efficient Conduct ofInternational Arbitration released in 2018 also adopted a similar rule (see Art. 2.4), whichallow, but do not mandate, such disclosure, aiming to introduce a civil law based inquisitorial
approach to arbitration soft law rules. In a departure from the Prague Rules, JCAA adopted amandatory disclosure rule which has attracted much criticism.

The JCAA acknowledges that common law lawyers in particular may find such inquisitorial

proceedings offensive to their standard norms. The institution has nonetheless taken thevalorous step of adopting these Rules, which, notably, are an optional set of rules that parties
can use, aiming to devise a more efficient procedural regime.

I personally believe that disclosing a tribunal’ s views in writing in a productive and non-biased manner requires a high degree of professional finesse and may not be effective in allcases. The tribunal also risks being perceived as biased in the eyes of the parties before its
award has been issued. On this basis, I would have preferred to have the Rules encourage
rather than require such disclosure.

Nonetheless, this attempt by the JCAA to be an experimental leader, rather than a follower,

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The New JCAA Arbitration Rules―Japan's Attempt in Innovative Dispute Resolution

in seeking to rein in the spiraling arbitration costs is laudable in its aim. And if these efforts

stir debate to cause the arbitration community to reassess its excessively adversarial
practices, I belive that alone is worthy of approbation.
4. Reduced, Fixed Arbitrator Remuneration

In a departure from its traditional hourly remuneration structure, the JCAA also adopted afixed arbitrator remuneration system based on the value of the dispute, ranging from JPY 1

million for disputes worth less than JPY 50 million to JPY 5 million for disputes at or above JPY

10 million (Art. 94) for sole-arbitrator cases. Remuneration for the presiding arbitrator areslightly more, and for co-arbitrators, slightly reduced, in a three-member tribunal (Art. 95).

This fixed fee structure may not gain unanimous applause from arbitrators and could result

in remuneration that is incommensurate to the work involved in certain cases. Moreover, thefixed amounts have been criticized as being unrealistically low and failing to attract skilledarbitrators.

Still, in light of the increased focus on arbitration in Japan’ s domestic legal community—asseen in the opening of the Japan International Dispute Resolution Center in the heart of Tokyo

this spring—if the use of arbitration expands to include domestic, commercial cases, younger

practitioners and former judges may join the arbitrator pool. And experienced arbitrators may
be spurred to develop streamlined procedures that afford a fair and expeditious resolution,
which serve to compress overall arbitration costs, including counsel’ s fees and expenses.

Overall, this is a big, bold experiment, but one worthy of embracing if arbitration is tofurther evolve to establish itself as the true optimal alternative dispute resolution mechanism.
5. Administrative Rules for UNCITRAL Arbitration

In these revisions, the JCAA also clarified certain details regarding the administration of

UNCITRAL arbitration under the revised Administrative Rules for UNCITRAL Arbitration.

Most significantly, arbitrator’ s remuneration under these Rules is determined within therange of $500 to $1500 per hour (Ar t. 20.2). If agreed by the par ties, payment of
remuneration and costs may be made during the course of the proceedings rather than at its
conclusion (Art. 22.2).

This fee range is on par with, or exceeds, other arbitral institutions in the region such as

SIAC and HKIAC, and is designed to attract prominent International arbitrators in suitablecomplex cases.

Given that parties generally choose the rules of the designated arbitral institution, cases

where the JCAA is appointed to administer an arbitration under the UNCITRAL Rules are
expected to be limited. But the UNCITRAL Rules may find possible use in disputes involving
state entities having the need for an entirely “neutral” set of arbitral rules, and Japan may bewell-placed as a neutral venue for disputes under the Belt and Road Initiative, investment
state arbitration or other regional disputes involving nations.

Japan Commercial Arbitration Journal VOL.1［2020］

9

6. Summary

While a number of the JCAA’ s changes―and particularly the innovative Interactive

Arbitration Rules―may raise some controversy, it is notable that the JCAA―not known fortaking leadership in the arbitration arena―has taken a bold step forward to propose theseRules focusing on the user’ s perspective. Whether these Rules are accepted remains to beseen, but it is refreshing to see Japan seeking to take proactive role in this innovative
initiative. It is hoped that both arbitrators and counsel will respond in kind to develop newprocedural techniques to increase arbitration’ s attraction as the ideal means to resolveinternational disputes.

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New Arbitration Rules Based on the Civil Law Tradition—The 2018 DIS Arbitration Rules, the Prague Rules, and the JCAA Interactive
Arbitration Rules

Attorney-at-law (Japan), Oh-Ebashi LPC & Partners

Aiko Hosokawa

Ⅰ．Introduction
There have long been discussions on bridging the common law/civil law divide ininternational arbitration. Generally, common law jurisdictions adopt an adversarial approach todisputes while civil law jurisdictions prefer an inquisitorial one. This leads to various

differences in style of arbitral proceedings for matters such as document production, hearings,
witness examinations, and the facilitation of settlements.

As to evidence procedure, the IBA Rules on the Taking of Evidence in International

Arbitration (2010) (the “IBA Rules” ) were drafted to harmonize such differences and are now

heavily used in practice. The conventional wisdom is, however, that most historical clashes
between the civil and common law traditions in many areas of international arbitration havebeen resolved in a more or less pragmatic fashion.1）

Some practitioners have recently, contended that international arbitration practice - inclusiveof the IBA Rules - remain rooted predominantly in the common law tradition.2） They have also

put forward the criticism that the adversarial approach of the common law tradition tends tolead to lengthy and costly proceedings, involving broad document production procedures andlengthy witness hearings. In fact, in a recent survey of the worst characteristics ofinternational arbitration, the issues of “cost” and “lack of speed” of international commercial
arbitration were ranked the first and fourth, respectively.3）

Increased costs and time in international arbitration have also been partly attributed to “dueprocess paranoia,” which aptly describes the reluctance of tribunals to act decisively in certain

1）Klaus Peter Berger & J. Ole Jensen, The Arbitrator’s Mandate To Facilitate Settlement, Fordham International
Law Journal, Vol. 40 Issue 3 (2017) 887, 890, available at https://ir.lawnet.fordham.edu/cgi/viewcontent.
cgi?article=2653&context=ilj.
2）Andreas Respondek, How Civil Law Principles Could Help to Make International Arbitration Proceedings MoreTime and Cost Effective, Singapore Law Gazette February 2017 (2017) 33, 33, available at https://www.praguerules.
com/upload/iblock/af3/af3352da3709e3340951a38dfe8d7f61.pdf; Cristina Ioana Florescu, In pursuit of the cherishednotion of efficiency through the new Prague Rules, REVISTA ROMÂNĂ DE ARBITRAJ No. 2 2019 (2019) 38, 50,
available at https://www.praguerules.com/upload/iblock/2be/2be722293282aed11986600b8983c503.pdf.

Japan Commercial Arbitration Journal VOL.1［2020］11

situations for fear of the arbitral award being later challenged on the basis of a party nothaving had the chance to present its case fully.4） This has resulted, for example, in situations

where deadlines have been repeatedly extended, fresh evidence is admitted late in theprocess, or other disruptive behavior by counsel is condoned due to what was perceived to bea concern by the tribunal that the award would otherwise be vulnerable to a challenge.5） In aneffort to dispel such “due process paranoia,” many arbitral institutions have addressed it intheir rules on arbitral procedure, guidance notes, best practices and other soft law
documents.6） The need for more proactive tribunals has also been raised.7）

In response to the above criticisms, some have embraced a civil law approach in calling foran enhanced and proactive role for tribunals, more so streamlined arbitral proceedings, and apush to save both time and money for parties involved in arbitral disputes. This article willfeature three new sets of arbitral rules based on such ideas, namely, the Arbitration Rules of
the German Arbitration Institute, the Prague Rules, and the Interactive Arbitration Rules of
the Japan Commercial Arbitration Association.

It is important to note that there is a diversity of rules and thought even within the civil law

tradition. For example, though Japan is considered a civil law jurisdiction as much of its
foundational legal tradition comes from Germany and France, aspects of the American legal

tradition can also be found therein. The mixture of civil law and common law can be seen, forexample, in the development of the Japanese Code of Civil Procedure. The Japanese Code ofCivil Procedure was originally enacted based on the German Code of Civil Procedure in 1890,

but after World War II, Japan adopted an American style adversarial witness examination
system. However, Japanese judges are still active in facilitating settlements and even utilize

caucuses (i.e. ex parte meetings).8） These features differentiate Japan from the common law

legal traditions, as well as some other civil law jurisdictions. Thus, though Japanesepractitioners are familiar with a civil law type judiciary, they do not necessarily feel
uncomfortable, nor are they unfamiliar with, common law practices such as conducting
adversarial witness examinations. There is, however, a resistance to common law style fact3）Queen Mary University of London, 2018 International Arbitration Survey: The Evolution of International
Arbitration, 7-8, http://www.arbitration.qmul.ac.uk/media/arbitration/docs/2018-International-Arbitration-Survey--The-Evolution-of-International-Arbitration-(2).PDF.
4）Queen Mary University of London, 2015 Improvements and Innovations in International Arbitration, 10, http://
www.arbitration.qmul.ac.uk/media/arbitration/docs/2015_International_Arbitration_Survey.pdf.
5）Id.
6）Miroslav Dubovský & Pavlína Trchalíková, Adverse inferences drawn in international arbitration under the
Prague Rules, REVISTA ROMÂNĂ DE ARBITRAJ No.2 2019 (2019) 22, 24, available at https://www.praguerules.
com/upload/iblock/d9f/d9f25f714b17beae1540b06aad653123.pdf.
7）Queen Mary University of London, supra note 4; Klaus Peter Berger & J. Ole Jensen, Due process paranoia andthe procedural judgment rule: a safe harbour for procedural management decisions by international arbitrators,
Arbitration International, Vol. 32 No. 3 (2016) 415, 431-433, available at https://www.praguerules.com/upload/iblock/882/88256e5a0d39997b4d6ec9be17303671.pdf.
8）On the contrary, Japanese arbitrators are usually well aware of the risk of caucusing in international arbitration
giving rise to an issue of due process, so caucusing is not common in international arbitral proceedings conducted by
Japanese arbitrators.

12Japan Commercial Arbitration Journal VOL.1［2020］

New Arbitration Rules Based on the Civil Law Tradition

finding, such as American style Discovery, with its expansive document production and related
lengthy hearings. It is important to note that Japan is not alone in utilizing a hybrid system.
For example, ordinary civil proceedings before state courts in Italy are adversarial in nature.9）

In sum, it would not be appropriate to lump all civil law jurisdictions together under the

category of the “inquisitorial practice.” Rather, there is a need for a closer look at the context
of each of the following three sets of rules.

Ⅱ．Recent Arbitral Rules Based on the Civil Law Tradition
1. The New DIS Arbitration Rules (March 2018)

The recently revised rules of Germany’ s leading arbitral institution, the German Arbitration

Institute (Deutsche Institution für Schiedsgerichtsbarkeit e.V.) (“DIS”), took effect on March 1,

2018 (the “2018 DIS Rules” ).10） Though most of the changes therein were essentially in linewith recent trends in other major arbitration institutions, there were some unique German
legal tradition inspired tweaks worth noting.11）

The 2018 DIS Rules aim to help parties resolve their disputes as early as possible. For

example, Article 26 states that, “[u]nless any party objects thereto, the arbitral tribunal shall,at every stage of the arbitration, seek to encourage an amicable settlement of the dispute orof individual disputed issues.” It is an expanded version of Section 32.1 of the former DIS
Arbitration Rules (1998), which provides that, “[a]t every stage of the proceedings, thearbitral tribunal should seek to encourage an amicable settlement of the dispute or ofindividual issues in dispute.”

In addition, under the 2018 DIS Rules, at the case management conference, the arbitral

tribunal is required to discuss the applicability of the measures set forth in Annex 3 (Measuresfor Increasing Procedural Efficiency) and Annex 4 (Expedited Proceedings), and the use of

possible alternative methods of dispute resolution, such as mediation with the parties.12） Oneof the unique measures in Annex 3 is “[p]roviding the parties with a preliminary non-binding

assessment of factual or legal issues in the arbitration, provided all of the parties consent
thereto.”The above provisions of the 2018 DIS Rules are in line with the practice of German judges

and arbitrators, who actively encourage settlement during the arbitral proceedings. They are
specifically rooted in the German legal tradition, which has been further memorialized inregards to litigation under Section 278(1) of the German Code of Civil Procedure.13）

While arbitrators from common law jurisdictions tend to hesitate in suggesting settlement
9）Roberto Oliva, The Prague Rules: Minimal notes from an Italian perspective, REVISTA ROMÂNĂ DE
ARBITRAJ No. 2 2019 (2019) 64, 71, available at https://praguerules.com/upload/iblock/5a8/5a893e89210964faf24
cd23f1a8f3640.pdf.
10）The 2018 DIS Rules are available at http://www.disarb.org/en/16/rules/overview-id0.
11）For further details of the 2018 DIS Rules, see Stephan Wilske & Aiko Hosokawa, The New DIS Arbitration
Rules 2018: Germany’s Offer of an Attractive Arbitration Alternative for Asian Parties, IPBA Journal No. 91 (2018)40, available at https://ipba.org/media/normal/4245_IPBA_Sept18_final.pdf.
12）The 2018 DIS Rules, art. 27.4.

Japan Commercial Arbitration Journal VOL.1［2020］13

to the parties, parties from civil law jurisdictions tend to expect the arbitral tribunal to suggest

a reasonable settlement when the time is ripe.14） Such opposing points of view arise from theimportant role of judges in facilitating settlements between litigating parties in many civil law

jurisdictions, such as Germany, Austria, Switzerland, Belgium, France, Italy and theNetherlands.15）

Furthermore, parties from certain civil law jurisdictions expect that the arbitral tribunal will

at a certain stage express a preliminary view on the merits of the case and encourage anamicable settlement. This is often referred to as the “German approach.” 16） This approach is

not the same as mediation, and caucusing is almost never done, but this practice has been
considered to be quite successful.17） Such practice in arbitration is common not only inGermany but also in other civil law jurisdictions, such as Switzerland, Austria and China.18）

Thus, the provisions of the 2018 DIS Rules discussed above are backed by the practice ofGerman courts and arbitrators, and common in other civil law jurisdictions. Utilizing suchprovisions can lead to an efficient and early resolution of cases.
2. The Prague Rules (December 2018)

The Rules on the Efficient Conduct of Proceedings in International Arbitration, or the so-called “Prague Rules,” 19） were launched on December 14, 2018 in Prague. The rules weredrafted as a result of a project initiated by the Russian Arbitration Association (the “RAA” ),which aimed at securing more efficient arbitral proceedings from a civil law perspective.

In April 2017, the foundation of the Prague Rules was laid in Moscow during the annual

conference of the RAA, where a presentation titled, “Creeping Americanisation of international
arbitration: is it the right time to develop inquisitorial rules of evidence?” left a strong impact.

A group consisting predominantly of civil law practitioners then seized on the presentation tocreate the Working Group of the Prague Rules (the “Working Group” ). The Working Group
expressed the concern that “from a civil law perspective, the IBA Rules are still closer tocommon law traditions, as they follow a more adversarial approach regarding document
production, fact witnesses and Party-appointed experts” as described in its Note to the draftof the Prague Rules.20）

The Working Group further stated that they were concerned that common law traditions13）Berger & Jensen, supra note 1, at 910. Under Section 278(1) of the German Code of Civil Procedure, at every
stage of the proceeding, the court is to act in the interest of arriving at an amicable resolution of the legal dispute orof the individual points at issue.
14）Id. at 892, and 899-900.
15）Id. at 902.
16）Bernd Ehle, The Arbitrator as a Settlement Facilitator, in Walking A Thin Line - What an Arbitrator Can Do,
Must Do or Must Not Do (2010) 77, 80.
17）Id. at 82 and 92.
18）Id. at 81-83.
19）The Prague Rules are available at https://praguerules.com/prague_rules/.
20）Note from the Working Group on the Draft of September 1, 2018, https://praguerules.com/upload/medialibrary/b2e/b2e26123ac310b644b26d4cd11dc67d8.pdf.

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New Arbitration Rules Based on the Civil Law Tradition

increase the costs of arbitration, and that many arbitrators are reluctant to actively manage

arbitration proceedings, by, for example, making an early determination or preliminary
evaluation of the issues in a dispute, as a means of avoiding the risk of a challenge.21）

In light of the above, the initial aim of the Working Group was to develop a set of rules on

obtaining evidence in international arbitration based on an inquisitorial model of procedurerooted in the civil law tradition, which could increase efficiency, and reduce the duration andcosts of arbitrations.22）

Though the Working Group intended new rules to be an alternative to the IBA Rules,

constructive criticisms from the arbitral community on the draft of the Prague Rules shifted

their emphasis to general efficiency in arbitration as well.23） In the note to the final version,
the Working Group described their purpose more broadly by stating that “the Rules, initiallyintended to be used in disputes between companies from civil law countries, could in fact beused in any arbitration proceedings where the nature of the dispute or its amount justifies amore streamlined procedure actively driven by the tribunal, a practice which is generally
welcomed by arbitration users.”

With the intention of empowering arbitral tribunals to get more proactively involved in thearbitral proceedings, reflecting the inquisitorial approach of the civil law tradition, the Prague
Rules address various aspects of the arbitral proceedings, including the fact-finding process,documentary evidence, fact witnesses and experts, the iura novit curia principle, hearings,
and the assistance given in amicable settlements. The following are some of the key uniquefeatures of the Prague Rules relating to the civil law tradition.
A Proactive Tribunal

At the case management conference or at any later stage of the arbitration, the arbitral

tribunal may, if it deems it appropriate, indicate to the parties its preliminary views about theallocation of the burden of proof, the relief sought, the disputed issues, and the weight andrelevance of the evidence submitted. Nevertheless, expressing such preliminary views would

not by itself be considered as evidence of the arbitral tribunal’ s lack of independence or
impartiality, and cannot constitute grounds for disqualification.24）
Limited Document Production

Although the IBA Rules were drafted to prevent broad and expensive common law style

discovery, in practice, document production under the IBA Rules are still often voluminous andburdensome as parties, at times, attempt “fishing expeditions” as a means of discovering
information from the other side which may help strengthen their position. To tackle this, thePrague Rules stipulate that “[g]enerally, the arbitral tribunal and the parties are encouraged
to avoid any form of document production, including e-discovery,” and the party who wishes21）Id.
22）Id.
23）Florescu, supra note 2, at 47.
24）The Prague Rules, art. 2.4.

Japan Commercial Arbitration Journal VOL.1［2020］15

to request certain documents from the other party must first persuade the tribunal before its
document production request is allowed.25）
Fact Witnesses and Experts

Under the common law tradition, the parties can decide which witnesses to present andcross-examine,26） but under the Prague Rules, the tribunal will decide which witnesses tocall.27） Also, at the hearing, the arbitral tribunal can direct and control the examination of
witnesses, and reject questions that it considers to be irrelevant, redundant or immaterial tothe outcome of the case.28）

The IBA Rules allow the arbitral tribunal to appoint an independent expert,29） but,unfortunately, this is rarely done in practice. In this regard, the Prague Rules have made theappointment of a tribunal-appointed expert the default procedure, without, however,preventing the parties from appointing their own experts.30） This approach may save on costs
for the appointment of multiple experts.
Assistance in Amicable Settlements

Under the Prague Rules, unless one of the parties objects, the arbitral tribunal may assist

the parties in reaching an amicable settlement of the dispute at any stage of the arbitration.31）
Some critics have contended that the major feature of the Prague Rules are already possible

under most arbitration laws, institutional arbitral rules, or the IBA Rules, as they all tend tolean in the direction of party autonomy. Said critics specifically contend that an arbitral
tribunal’ s power to appoint its own expert, and their ability to limit document production, or

shortening irrelevant and repetitive witness evidence is already possible under the IBA
Rules.32）

The Prague Rules were, however never meant to present a completely new and perfect setof rules for the whole arbitration procedure.33） Rather, their aim is to provide options reflectiveof the civil law tradition to create tailor-made and efficient arbitral proceedings depending on
the needs of the parties.

3. The JCAA Interactive Arbitration Rules (January 2019)25）Id., arts. 4.2 and 4.3.
26）Ben Giaretta, Prague Rules OK?, The Resolver Spring 2019 Issue (2019) 8, 9-10, available at https://
praguerules.com/upload/iblock/8cc/8cc7a1bab295076ede8125d342580a5c.pdf.
27）The Prague Rules, arts. 5.2-5.9.
28）Id., art. 5.9.
29）The IBA Rules, art. 6.130）The Prague Rules, arts. 6.1 and 6.5.
31）Id., art. 9.1.
32）Natasha Peter, The Prague Rules as choice architecture, REVISTA ROMÂNĂ DE ARBITRAJ No.2 2019(2019) 80, 81, available at https://praguerules.com/upload/iblock/f52/f52518518a9aff503174030cf7c6830f.pdf.
33）Florescu, supra note 2, at 62.

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New Arbitration Rules Based on the Civil Law Tradition

The Japan Commercial Arbitration Association ( “JCAA” ), which is the most prominent

Japan based arbitral institution, amended their Commercial Arbitration Rules and their

Administrative Rules for UNCITRAL Arbitration, while concurrently launching a new third set ofrules called the Interactive Arbitration Rules34） (the “Interactive Arbitration Rules” ). All threesets of rules took effect on January 1, 2019. As the Interactive Arbitration Rules are novel innature and are rooted in the civil law tradition, they are of particular interest.35）

The Interactive Arbitration Rules require the arbitral tribunal to provide the parties a writtensummary of their positions on the factual and legal grounds of their claims and defenses aswell as the issues tentatively identified by the arbitral tribunal. The parties must then be given
an opportunity to comment on the summary.36）

The arbitral tribunal is then required to provide the parties a written summary of the factualand legal issues that it considers important, together with its non-binding preliminary views

thereon. After the arbitral tribunal gives the parties an opportunity to comment thereon andon whether or not a witness examination should be conducted, the arbitral tribunal will thendecide whether witness examinations are necessary.37） The parties are prohibited fromchallenging a tribunal based on the issuance of such preliminary views.38）

As already explained above, the arbitral tribunal’ s disclosure of its preliminary views is acommon practice in various civil law jurisdictions. The JCAA has indicated that the common
law adversarial type of arbitration practice has caused costly and lengthy arbitral proceedings

where parties may end up submitting evidence and arguments on matters that are notconsidered necessary or relevant by the arbitral tribunal.39） The JCAA has also indicated thatthe above interactive communications between the arbitral tribunal and the parties at
pertinent stages of the arbitral process will enhance predictability by the parties with respect

to the outcome of the proceedings while also aiding the arbitral tribunal in drafting the final
award efficiently.40）

As explained above, the 2018 DIS Rules and the Prague Rules have similar but voluntaryprovision regarding the disclosure of the arbitral tribunal’ s preliminary views, but the Prague
Rules have sometimes been criticized for going too far in that they open up the potential riskthat such actions might allow for disqualification of an award under the arbitration laws ofsome countries.41） Though this criticism could conceivably also apply to the Interactive34）The Interactive Arbitration Rules are available at https://www.jcaa.or.jp/common/pdf/arbitration/Interactive_
Arbitration_Rules2019_en.pdf.
35）For further details of the Interactive Arbitration Rules, see JCAA, Reform of the JCAA Arbitrations Rules:
Three Sets of Rules in Response to All Business Needs, January 1, 2019; Aiko Hosokawa & Miriam Rose Ivan L.
Pereira, The New Interactive Arbitration Rules of the Japan Commercial Arbitration Association, Oh-Ebashi English
Newsletter 2019 Summer Issue (2019), https://www.ohebashi.com/jp/newsletter/20190624_NL_en_2019summer.pdf.
36）The Interactive Arbitration Rules, art. 48.
37）Id., art. 56.
38）Id., art. 56.6.
39）JCAA, JCAA no chusai seido no kaikaku ni tsuite bijinesukai no arayuru nizu ni taio suru mittsu no chusai
kisoku [Reform of the JCAA Arbitrations Rules: Three Sets of Rules in Response to All Business Needs] (2019), 7(in Japanese).
40）JCAA, supra note 35, at 10.

Japan Commercial Arbitration Journal VOL.1［2020］17

Arbitration Rules and the 2018 DIS Rules, such concerns appear to be exaggerated. The
indication by the arbitral tribunal of its preliminary views to the parties will not deter

arbitrators from arriving at a different or contrary final conclusion in the award after athorough review of all the submissions and evidence.42） To be on the safe side though,arbitrators should obtain a waiver from each party on its right to challenge the impartiality of
the arbitrators due to providing such views.43） The Prague Rules and the Interactive Arbitration

Rules have both already incorporated such a waiver.44）

This new mechanism under the Interactive Arbitration Rules is expected to encourage

parties to an arbitration to focus on the issues and evidence that the arbitral tribunal considers
relevant, thereby reducing the cost and length of arbitral proceedings.

Ⅲ．The Contextual Differences of these Three Sets of Rules
The above features of the 2018 DIS Rules, the Prague Rules and the Interactive Arbitration

Rules are all rooted in the civil law tradition, but they differ to some extent depending on thenature and cultural underpinnings of each set of rules.45）

As to the nature of each of these rules, the Prague Rules mainly contain provisions for thetaking of evidence in international arbitration because, like the IBA Rules, the Prague Rules
are not intended to replace various institutional arbitration rules and were designed merely tosupplement the procedure agreed upon by the parties or otherwise applied by an arbitral
tribunal in a particular dispute.46） On the other hand, compared to the Prague Rules, the 2018

DIS Rules and the Interactive Arbitration Rules do not stipulate detailed provisions onevidence taking, as is normally the case for institutional arbitration rules.

Nevertheless, the 2018 DIS Rules include measures that aim to promote efficiency

regarding the taking of evidence, which are to be discussed in the case management
conference (Annex 3), such as limiting the length or the number of submissions, witness

statements and expert reports, conducting only one oral hearing, or limiting document
production requests. These measures are in line with German practice as German arbitrators

tend to avoid the unnecessary taking of evidence, limit the issues on which evidence is to betaken, and prefer not to hold lengthy witness hearings.47）

41）Oliva, supra note 9, at 69-70; Michael McIlwrath, The Prague Rules: The Real Cultural War Isn’t Over Civil vsCommon Law, Kluwer Arbitration Blog December 12, 2018, http://arbitrationblog.kluwerarbitration.
com/2018/12/12/the-prague-rules-the-real-cultural-war-isnt-over-civil-vs-common-law/.
42）Berger & Jensen, supra note 1, at 908-909.
43）Id.
44）The Prague Rules, art. 2.4, and the Interactive Arbitration Rules, art. 56.6.
45）For further details of the comparison of these three sets of rules, see Masato Dogauchi, Komonro gata chusai heno anchi teze toshiteno tairikuhou gata chusai [A Civil Law Model of Arbitration as an Antithesis of the DominantCommon Law Model], The Waseda law review, Vol. 95 No.3 (2020), 119 (in Japanese), and Shusuke Kakiuchi,
Tairikuhou teki chusai –JCAA intarakutivu chusai kisoku to puraha kisoku no hikaku- [Civil Law Style Arbitration: A
Comparative Study of JCAA Interactive Arbitration Rules and Prague Rules], JCA Journal Vol. 67 No. 1 (2020), 8(in Japanese).
46）Preamble to the Prague Rules.

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New Arbitration Rules Based on the Civil Law Tradition

On the contrary, the Interactive Arbitration Rules are more open regarding the style ofevidence taking. This feature suits the Japanese legal tradition, as it does not adopt a simple
and typical “inquisitorial” approach as mentioned earlier above.

As to cultural underpinnings, the implication in the very term “German approach,” German

law has a long tradition of judges and arbitrators proactively assisting parties in negotiating

and reaching a settlement during the proceedings.48） Backed by this tradition, the 2018 DIS
Rules mandate the arbitral tribunal to encourage an amicable settlement at every stage of thearbitration, while the Prague Rules merely permit the arbitral tribunal to do the same

voluntarily. As to the Interactive Arbitration Rules, while they do not expressly touch on thefacilitative role of the arbitral tribunal, the mandatory disclosure of its preliminary views may

in fact effectively promote early settlement. This approach is also in line with prevailingJapanese court practice.

Ⅳ．Conclusion
As explained above, though the 2018 DIS Rules, the Prague Rules and the Interactive

Arbitration Rules differ in context, they all have unique features rooted in the civil law tradition

and require the arbitral tribunal to get more so involved in proceedings. All these rules serveas alternative options to the current purportedly common-law dominant arbitration world.
They allow parties to use them as tools to make the arbitral proceedings a more efficient andtailor-made process, which could then attract more users to the arbitration world, especiallythose who are dissatisfied with the current time and cost issues of arbitration proceedings.

47）Wilske & Hosokawa, supra note 11, at 42.
48）Ehle, supra note 16.

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19

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1）

Cooperating on Disputes—Moving towards a Stronger Cooperative Foundation
for the Settlement of Disputes in Asia
2）

Authors :Tony Andriotis, Giorgio Fabio Colombo, David MacArthur,
Masako Miyatake, Michael Mroczek, Shiori Sato and Julia Jiyeon Yu

With the rise of the correctly predicted “Asian Century,” we have witnessed a transition inwhich Asian economies have shifted from being the recipients of Foreign Direct Investment

1）The Authors would like to thank both the JCAA and the KCAB for their kind assistance throughout the draftingof this article. Specifically, we would like to thank Shinji Ogawa of the JCAA and Heehwan Kwon of the KCAB. We
would also like to thank Yoko Maeda, a partner at City Yuwa, for her insights and cooperation, and Sunhee Cho, anassociate at Bae, Kim & Lee LLC and Raphael Gautschi, a Summer Associate at Okuno & Partners, for theirresearch support.
2）Tony Andriotis is a Tokyo based Partner at Quinn Emanuel Urquhart & Sullivan. He is the President of the Greek
Chamber of Commerce in Japan, an Adjunct Professor at the Tokyo Campus of Temple Law School, and is a part-time
lecturer at Keio Law School and Humboldt University. He is the Professional & Institutional Affairs Officer at the
JCAA, a Board Member at the JAA, and a member of the JIDRC Advisory Board. Giorgio Fabio Colombo is Full
Professor of Law at Nagoya University Graduate School of Law, where he is in charge of International Commercial
Arbitration, and Director of the Research Unit “Decolonizing Arbitration.” He is admitted to the Bar of Milan (Italy).
David MacArthur is a partner at Bae, Kim & Lee LLC in Seoul, Korea, specializing in international arbitration. With 15
years of experience in the field, David has represented clients in dozens of arbitrations under the major global and regionalrules. He also acts as arbitrator and is a founding co-chair of KCAB Next, a professional development group composed of
the next generation of arbitrators and practitioners. Masako Miyatake is a Partner at Blakemore & Mitsuki, Tokyo as
well as a Guest Professor, Keio University Law School. She now serves as a Deputy Secretary of Japan International
Dispute Resolution Center (JIDRC) and a member of Steering Committee of Japan International Mediation Center, Kyoto(JIMC), and is a listed arbitrator at JCAA and KCAB International. She is a MCIArb and CIArb Accredited Mediator,and has earned an LL.M. at Columbia Law School (NY, U.S.) and Ph.D. in Business Law from Hitotsubashi University
Graduate School of International Corporate Strategy, (Tokyo, Japan). Michael Mroczek is a partner with the Tokyo
based Okuno & Partners where he primarily specializes in international commercial arbitration, corporate law, M&A andfinance. Michael holds two Masters of Law; one from the Basel University (Switzerland) and the other from Temple
University’s Law School (Tokyo, Japan). Prior to his election as President of the European Business Council in Japan(EBC), Michael served as President of the Swiss Chamber of Commerce and Industry in Japan. He is a lecturer at the
University of Tokyo where he teaches International Arbitration, and he also lectures at the Temple Law School (Tokyo)
and the University of St. Gallen (Switzerland). Shiori Sato is an associate at Linklaters’ Tokyo offices, and is admitted topractice law in Japan. She has an extensive background representing Hokkaido University, where she earned herundergraduate and graduate degrees in law, as both a participant and coach in the Willem C. Vis International Commercial
Arbitration Moot Competition. She began working on this article while interning at the Tokyo offices of Quinn EmanuelUrquhart & Sullivan. Julia Jiyeon Yu is a partner at Oon & Bazul in Singapore and teaching at the faculty of law of
Kyushu University in Japan. She is qualified as a lawyer in Korea and a registered foreign lawyer in Singapore.

Japan Commercial Arbitration Journal VOL.1［2020］

21

(FDI) to being primary investors. Moreover, we have seen much of that investment bothoriginate and end up in Asia. Japan, Korea, China, Singapore and Taiwan have, in particular,
acted as a major players in the growth of FDI throughout the continent, and in much of theworld.

The Asian economic boom has also led to a regional renaissance of sorts in the area ofdispute resolution. As an example, the Singapore International Arbitration Centre (SIAC)
which was founded in 1991, had 90 new cases filed in 2006, while in 2019, approximately

480 new cases were filed. This represents an over 500% increase in a little over a decade.

The Hong Kong International Arbitration Centre (HKIAC), too, with a longer history as anadministrator of ad hoc arbitrations, has seen itself reborn in the last decade-plus with theissuance of its own arbitration rules that have seen several cutting-edge revisions. With thesesuccesses, we have witnessed other regional attempts at replication. One such success story
can be found in South Korea, and the explosive growth of the arbitration caseload being
handled by the Korean Commercial Arbitration Board (KCAB).

Despite Japan’ s pivotal role as a key investor throughout Asia and the world at large,

historically speaking, Japan has not been viewed as a leader or center for arbitrationcompared to other Asian jurisdictions. This situation is often explained as being tied to a
purported anti-dispute, harmony-seeking culture and a strong confidence in domestic courts.

Also, multinational companies based in Japan historically had no significant resistance towards

arbitrating, or litigating, their disputes overseas. This historical lack of aggressive positioning
in the disputes market has, however, been reconsidered as of late, and concrete efforts havebeen made to push Japan towards the position of a leading dispute resolution jurisdiction3）.

Efforts have included the Japanese government’ s sponsorship of the recently founded Japan
International Dispute Resolution Center (JIDRC) and the recent adjustments made to theJapan Commercial Arbitration Association (JCAA) rules. Specifically, in January of 2019 the

JCAA introduced a few new amendments to their previously issued rules, along with a new setof rules. The JCAA now has three sets of rules: (1) the Administrative Rules for UNCITRAL(the United Nations Commission on International Trade Law) Arbitration, (2) the Commercial
Arbitration Rules and (3) the Interactive Arbitration Rules.

Japan’ s recent push for a piece of the “Disputes Pie” may well be aided by the success of

its neighbors in South Korea. Actions taken in Korea over the past decade are highly
instructive, and can serve as a road-map for possible future actions in Japan. Moreover, acommon legal tradition, geographic proximity, shared strong democratic institutions steepedin the concept of rule of law, and a general understanding amongst legal and businessprofessionals may act in building a strong foundation for cooperation between the two NorthEast Asian neighbors.

3）This change in attitude has been praised in Y. Furuta, T. Andriotis, Y. Sakioka, M. Mroczek, Thoughts on
Necessary Changes in Japan, in Global Arbitration Review, https://globalarbitrationreview.com/article/1169880/
thoughts-on-necessary-change-in-japan. See also e.g., J. Claxton; L. Nottage, «Japan is Back» - for International
Dispute Resolution Services, in Int. Arb. L. rev., vol. 20, 6, 2017. J. Kang, Arbitration - A Case for Tokyo, in Asian
Legal Business, 2017, https://www.legalbusinessonline.com/features/case-tokyo/75228

22Japan Commercial Arbitration Journal VOL.1［2020］

Cooperating on Disputes Moving towards a Stronger Cooperative Foundation for the Settlement of Disputes in Asia

We will below summarize recent and historical changes to the arbitration environments inboth Korea and Japan – with a particular focus on the new JCAA rule framework - while also

proposing a strategy for strengthened cooperation between the arbitration communities inthese two neighboring examples of the continued rise of the Asian Century.

The Korean Example
Founded during the post Korean War industrial economic growth era under the purview ofthe Korean Ministry of Economy Trade and Industry (K-METI) and with the support of various

trade associations, KCAB was created to facilitate resolution of disputes between Korean
manufacturers and their trade partners abroad, primarily through consent-driven mediationand other services. The missions of the KCAB has been from its very inception centeredsolely on dispute resolution.

With the explosive growth of international arbitration involving Korean parties following the

Asian Financial Crisis in the late 1990s, the KCAB found itself increasingly administeringbinding dispute resolution services and striving to meet the expectations of global users ofsuch services. It was also well understood that effective arbitration services necessitated aknowledgeable and supportive judiciary. The question was asked whether the institution did

not more suitably fit with the core mission and expertise of the Ministry of Justice (K-MOJ)
and, ultimately, in June of 2016, the competent authority of the KCAB switched from K-METI
to K-MOJ.

As the use of international arbitration in Korea accelerated in the early 2000s, authorities

and practitioners began to benchmark the leading countries in the region in an effort todevelop the industry further in Korea. One result was the proposal to establish the Seoul

International Dispute Resolution Center (SIDRC), a state-of-the-art dispute resolution center
where arbitration hearings, mediations and similar activities could be comfortably andconveniently conducted. The idea came to fruition in May of 2013 with support from K-MOJ,

the Seoul Metropolitan Government, the Korean Bar Association, and the KCAB. In addition toproviding hearing and meeting facilities, the facility houses local offices of leading international

arbitration bodies such as the International Chamber of Commerce (ICC), the London Court ofInternational Arbitration (LCIA), HKIAC, SIAC, and the International Centre for Dispute
Resolution (ICDRC) of the American Arbitration Association (AAA).

As part of continuous effort to enhance arbitration, the Korean government enacted the

Arbitration Industry Promotion Act in 2017 (the 2017 Act), which importantly included

provisions to renew a plan to stimulate the arbitration industry every five years and to expand

dispute resolution facilities while cultivating professional expertise in the area of arbitrationand supporting relevant research and developments of arbitration. Though the 2017 Act does

not specifically name the KCAB, it entrusts the execution of the above listed goals with an
institution, corporation or organization, which we know clearly to be KCAB.

Officially, SIDRC and KCAB were consolidated in April of 2018. The reality is that theoperation of SIDRC became organically integrated into KCAB International, which was also

Japan Commercial Arbitration Journal VOL.1［2020］23

established in April of 2018 as an independent division of KCAB. As a result of this integration,

the decision was taken to move the SIDRC from the financial center in the north of Seoul to

the Trade Tower in the Gangnam district of Seoul, where the KCAB is located. The new SIDRC
facilities are larger than the old ones and provide a comprehensive infrastructure for
Alternative Dispute Resolution (ADR) proceedings.

The launch of KCAB International was achieved with support of K-MOJ in cooperation with

the KCAB Board and the domestic and international arbitration community. This was done inrecognition of the distinct procedures and user expectations attendant to international
arbitration in comparison to domestic arbitrations, which in practice tend to be conducted in

Korean and to mirror the civil-law procedures used in Korean courts. Being operationallyindependent, KCAB International is able to focus on retention and training of staff with thenecessary linguistic capabilities and global focus, and to undertake international outreach andpromotion activities aimed at developing the use base and quality of service expected by theinternational business community. Having leading experts and professionals with abundant

experience and expertise in international dispute resolution, KCAB International is aiming tofurther promote Korea as a hub of international dispute resolution in North East Asia andbeyond.

The KCAB International Arbitration Rules were adopted in 2011, prior to the bifurcation of

the KCAB, and were updated in 2016. These rules apply to arbitration proceedings where atleast one of the parties to an arbitration agreement has its place of business in a jurisdiction

other than Korea, or where the seat of arbitration is in a jurisdiction other than Korea. KCAB
handled a total of 443 arbitrations in 2019, in which 373 were domestic and 70 wereinternational. It is important to note that Korea has a healthy domestic disputes market, andthat this solid foundation has been successfully seized upon by KCAB International inencouraging arbitration in regards to international disputes as well.

The Korean Arbitration Act applies to all arbitrations seated in Korea. The previous Korean

Arbitration Act, which had followed the 1985 UNCITRAL Model Law on International

Commercial Arbitration (UNCITRAL Model Law or Model Law), was amended in 2016 byincorporating the 2006 amendments to the UNCITRAL Model Law. Along with the new KCAB
International Rules, the amended Arbitration Act was designed to modernize the legal

framework for arbitration in Korea and to convey a sense of openness to the international
arbitration community.

As to issues related to the enforcement of arbitral awards, previously the Korean Arbitration

Act stated that “an application to obtain a recognition order must be filed before the relevant

competent court, accompanied by the original award or a copy thereof and, if the award ismade in a foreign language, the translation of the award in Korean.” In order to simplify theprocess of recognition or enforcement of arbitral awards, however, the law was amended in2016 so that “[t]he party requesting the recognition or enforcement of an arbitral award shallsubmit an authentic copy or a plain copy of the arbitral award: Provided, That if the arbitralaward is made in a foreign language, it shall be accompanied by a translation in Korean.”24

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Cooperating on Disputes Moving towards a Stronger Cooperative Foundation for the Settlement of Disputes in Asia

Japan in Transition
Statutory Framework in Japan

In 2003, Japan decided to update the old Arbitration Act, a residue of the 1890 Code of Civil

Procedure based on the German Zivilprozessordnung, by creating new legislation based on
the UNCITRAL Model Law, using the filters of the 1997 German Law4） and the 1999 Korean

Law5）. The Japanese Arbitration Act6） is mostly based on pre-amendment version of

UNCITRAL Model Law (1985). The Model Law stipulates, both before and af ter its

amendment in 2006, that “an arbitral award, irrespective of the country in which it was made,shall be recognized as binding and, upon application in writing to the competent court, shallbe enforced subject to [certain provisions].” Though in Japan, arbitral awards are final andbinding, much in the same way as judgements in civil litigation, the act requires an execution
order prior to the execution of an arbitral award. The Japanese Arbitration Act does notreflect the 2006 amendments to the UNCITRAL Model Law, and thus lacks specific provisions

on interim measures. Despite this, however, the pre-amended version of the Model Law,currently the foundation of Japan’ s Lex Arbitri, is considered to be more than adequate byarbitration practitioners seeking a “pro-arbitration” seat7）.
JCAA and TOMAC

The International Commercial Arbitration Committee, the predecessor institution to the

JCAA, was established in 1950 from within the Japan Chamber of Commerce and Industry
and with the support of six significant business organizations (among them: the Japan

Federation of Economic Organizations, the Japan Foreign Trade Council, the Federation of
Banking Associations of Japan) as an organization to particularly settle internationalcommercial disputes, and to promote international trade, thereby contributing to thedevelopment of the Japanese economy. In 1953, the International Commercial Arbitration

Committee was reorganized as the International Commercial Arbitration Association, an
incorporated association independent from the Japan Chamber of Commerce and Industry, asa means of expanding and streamlining its business activities.

In 1973, the International Commercial Arbitration Association started to issue andguarantee ATA Carnets, the official forms for customs clearances under the Customs
Convention on the ATA Carnet for Temporary Importation of Goods ( “ATA Convention” ),4）K.H. Böckstiegel, An Introduction to the New German Arbitration Act Based on the UNCITRAL Model Law,
Arb. Intern., vol. 14, 1, 1998
5）The Korean Law, however, was amended to incorporate feature of the 2006 Model Law. See J. Bang; D.
MacArthur, Korean Arbitration Act Amended to Adopt Key Features of 2006 Model Law Amendments, in J. Int.
Arb., vol. 34, Special Issue, 2017.
6）See, in general M. Kondō, T. Gotō, K. Uchibori, H. Maeda and T. Kataoka, Chūsaihō konmentāru, Tōkyō, 2003
(available in English as Arbitration Law of Japan, Tokyo, 2004); T. Kojima and T. Inomata, Chūsaihō, Tōkyō, 2014;
M. Dōgauchi, S. Kakiuchi, K. Ichiba and M. Yukioka, Konmentāru shōjichūsai kisoku, Tōkyō, 2014; K. Yamamoto andA. Yamada, ADR chūsai-hō, Tōkyō, 2015.
7）As is discussed in FN9, there are some who take the position that Japan may not be an ideal seat of arbitration.

Japan Commercial Arbitration Journal VOL.1［2020］25

based on comprehensive consignment of business from the Japan Chamber of Commerce.

The ATA Carnet is an international, unified Customs document that provides for the temporary
duty free admission of three main categories of goods traded internationally:- Goods for presentation or use at trade fairs, shows, exhibitions or similar events,- Samples of value, and- Professional equipment.
Regularly goods being imported or exported to a different country need to pass throughcustoms procedures. If, however, said importer or exporter of goods are Carnet holders

handling the types of items listed above, under the ATA Convention, a waiving a customs
duties may be permitted. The Carnet aspect of the JCAA has for the most part been the
primary revenue source of the institution since 1973.

In 2003, the International Commercial Arbitration Association changed its name to theJapan Commercial Arbitration Association with the purpose of promoting the efficient
settlement of international and domestic commercial disputes through the use of ADR

vehicles, such as mediation and arbitration. Though the Head of JCAA has traditionally comefrom the ranks of the Japanese Ministry of Economy, Trade and Industry (J-METI), and JCAA
frequently exchanges information with the Japanese Ministry of Justice (J-MOJ) and J-METI,

the institution is not instructed nor supervised by them, or any other government agency or
Ministry. Despite the name change, and the recent stress on ADR at the JCAA, the primarysource of revenue for the JCAA continues to be Carnet, and it today accounts forapproximately 70% of JCAA revenue.

Though considered the primary Japan based ADR institution, JCAA is not alone in the Pacificarchipelago. The Japan Shipping Exchange, Inc. ( “JSE” ) was established in 1921 along thelines of the Baltic Mercantile and Shipping Exchange of London to provide the facilities forestablishing freight and/or charter contracts in Japan. Nevertheless, JSE does not strictly
function as a shipping exchange. JSE is a non-governmental/non-profit organization aiming

to facilitate world maritime related business transactions and assist maritime organizations
which carry out these transactions. Since its inception, JSE has been serving the shipping

industry in such ways as administrating maritime arbitration, drafting and promulgating
maritime contract forms, publishing in-depth analysis on shipping and logistics in the form ofmonthly magazine "KAIUN", and providing electronic shipping data bases. More than 370
companies and organizations join and support JSE in day-to-day activities in an effort topromote both domestic and international maritime transactions. The Tokyo Maritime
Arbitration Commission of JSE (TOMAC) is a committee within JSE that is capable ofadministering arbitrations involving shipping related disputes. Specifically, TOMAC resolves

disputes arising under bills of lading, charter parties, contracts relating to the sale andpurchase of ships, shipbuilding, ship financing, the manning of ships, and the like. TOMAC,
like the JCAA, tends to handle anywhere from 10 to 20 arbitrations a year.

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JIDRC and Government Call to Action

In June of 2017, the Basic Policy on Economic and Fiscal Management and Reform 2017(2017 Policy) was approved by the Cabinet of Japan. It aimed to “develop a foundation toactivate international arbitration” in Japan as one of the important policies of the Japanese

Government. Responding to the 2017 Policy, in September of that same year, the Liaison

Conference of Relevant Ministries and Agencies for Stimulating International Arbitration wasestablished from within the Japanese Government, with the aim of encouraging cooperation

among relevant government organizations and to consider and promote comprehensive andefficient approaches to develop the necessary foundation for the expansion of international
arbitration in Japan.

In December of 2017, the Japan International Arbitration Center Establishment Association

was founded, and was soon thereafter renamed the Japan International Dispute Resolution
Center Operating Association (the Association). With the support of the Association, JIDRC
was established in February 2018. JIDRC opened its first hearing facility in Osaka and started

operations in May of 2018 with the joint effort of both government and the private sector.
Though JIDRC - Tokyo officially opened in April of 2020, the scheduled opening ceremony andcorresponding seminars were postponed due to the COVID-19 pandemic.

Changes to JCAA Rules
The JCAA Commercial Rules

Before the rule changes of 2019, the Commercial Rules were the default rules where an

arbitration clause does not indicate a specific set of JCAA rules. This default status for theCommercial Rules continues on to the present. In 2019 JCAA implemented inventive changes

to remove inefficiencies in the previous rules, while strengthening protections against appeals

and challenges. The Commercial Rules also give clear solutions on procedural issues which
may potentially be leading to differing opinions as well as addressing issues which have notbeen addressed by the rules of peer institutions.

The first major change in the new rules were inserted to minimize challenges to JCAA

awards, and were motivated by a recent controversy related to an Osaka High Court decisionsetting aside an arbitral award due to a purpor ted conf lict by an arbitrator8）. The

implemented rules now clarify the extent of the arbitrator’ s ongoing obligation to conduct“reasonable investigations” and disclose any circumstances that may, in the eyes of theparties, give rise to “justifiable doubts” to their impartiality and independence. Additionally,
the new rules also explicitly state that a declaration must be made in advance by all8）We specifically refer to the Sanyo Electric v. Prem Warehouse LLC decision. After the Osaka High Court set
aside the arbitral award due to nondisclosure of a potential conflict of interest, the Japanese Supreme Court reversed
and remanded the decision back to the Osaka High Court holding that an abstract disclosure of potential conflictsituations is not sufficient to discharge an arbitrator’s duties under the Japan Arbitration Law. The revised
Commercial Rules now state that a general disclaimer in respect to conflicts, such as given by the arbitrator in the
Sanyo Electric v. Prem Warehouse LLC , would not be sufficient.

Japan Commercial Arbitration Journal VOL.1［2020］27

arbitrators in relation to such circumstances that may arise in the future which may be viewed
as raising a conflict. Said declaration, which is sometimes referred to as an Advance Waiver,does not discharge the arbitrators of their ongoing duty of disclosure in line with IBA
Guidelines on Conflict of Interests in International Arbitration and Japanese Court decisions,such as those tied in to the Osaka High Court decision noted above. The new rules also

disallow Arbitrators from delegating decision making to third parties, such as tribunal
secretaries. The rules clarify that the appointment of tribunal secretaries should be subject tothe consent of the parties to the action. The new rules further require the disclosure of thetribunal’ s secretary as well as the terms and conditions of appointment.

Furthermore, the rules prohibit arbitrators from disclosing their dissenting opinion “in any

manner.” This rule was inserted as a means of streamlining the arbitration process, andkeeping costs low as the drafting of dissenting opinions can be time and, and thus cost,consuming. Specifically, the drafters felt that dissenting opinions might open the door to post-

award impartiality challenges, and, that, as such, disallowing the issuance of such opinions
might serve to limit grounds to a challenge.

The rules also allow for an expansion of the types of expedited procedures that can beheard by single arbitrators. Though such proceedings were previously only available for
disputes with claims of upwards of 20 million JPY, the maximum claim amount has been

increased to 50 million JPY. Furthermore – and of particular import in the difficult times ofpandemic – said tribunals can be conducted solely on the basis of documentations. This, inturn, further speeds up the award issuance process.

Lastly, and most controversially, the new rules include a provision setting arbitrator fees to

50,000 JPY an hour, while also reducing arbitrator fees where over 150 hours are billed byany one particular arbitrator, provided that the reduction does not exceed 50 percent of theinitial hourly fee. It is important to note, however, that the previous rendition of theCommercial Rules set 60 hours as the threshold. As such, the new rules are actually more so

arbitrator friendly in this regard. Though this fixed hourly rate was included in order to give
parties to a dispute a greater sense of fee predictability, and though the rules appear to havebeen tweaked to give more leeway to arbitrators on fees, the primary criticism here rests on

the reasoning that any required lessoning of arbitrator fees will serve to discourage the mostsought after arbitrators from serving on tribunals utilizing these rules. Parties do, however,maintain the right to jointly opt out this system – in writing - prior to the constitution of thearbitral tribunal.

The JCAA Administrative Rules for UNCITRAL Arbitration

Much as predictability and consistency is a key sought after variable in internationalcommerce, consistency in rules is an important factor for many in the international arbitration
community, as consistency allows for smooth transitioning between different rules andinstitutions. It is this consistency that allows for arbitration to be truly international in nature.

Practitioners and arbitrators are free to practice throughout the world when rules areharmonized, or, at least well known and easy to conform to. In light of this, the JCAA has

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turned to a world standard issued by United Nations for said consistency; specifically the
UNCITRAL Arbitration Rules (the UNCITRAL Rules), which were drafted by UNCITRAL andlater adopted by the UN General Assembly in 1976. Though the UNCITRAL Rules areprimarily used in ad-hoc arbitration, they are well known and well understood internationally.

In order to make these UNCITRAL Rules suitable for administrating arbitration proceedings by

an institution, the JCAA has introduced the Administrative Rules. Accordingly, these
Administrative Rules are designed – as they were previously - to provide a minimal andessential framework for the UNCITRAL Arbitration Rules to be effectively overseen by an
institution.

The JCAA also altered the UNCITRAL Rules to allow for a time-charge remuneration system

in US Dollars for arbitrators, which as a default ranges between 500 and 1500 (USD) per

hour. Where there is no agreement made between the parties, the JCAA will set the rate on
the basis of factors like the reputation of the arbitrator and the complexity of the case. By

raising the hourly rates of arbitrators to a comparable level with other reputed international
arbitral institutions in the region, while also permitting the payment of arbitrator fees prior to
the termination of the arbitral proceedings, the amendments are clearly meant to attract theinterest of high profiled international arbitrators.
The JCAA Interactive Rules

Unlike the Commercial and Administrative Rules, the Interactive Rules, though based partly

on the Commercial Rules, have been created as a distinct and novel category of rules by the
JCAA, and were partly inspired by the Prague Rules on the Efficient Conduct of Proceedings inInternational Arbitration (the Prague Rules). These new rules are meant to give parties to anarbitration the option of selecting rules steeped in the Civil Law tradition while also

encouraging efficient and cost-effective procedures. As such, the Interactive Rules encouragea more so active role by the arbitral tribunal; a shift from the Common Law adversarial

system to a more so Civil Law based inquisitorial system. Additionally, in order to keep costs
low, the rules include a fixed system of remuneration for arbitrators.

The rules further impose a duty of the tribunal to communicate with the parties as a meansof improving the predictability of proceedings and to narrow issues of contention at an earlystage. The arbitral tribunal is further obliged to present its preliminary views on a case during
the proceedings. The disclosure of a preliminary, neutral and sovereign view by the tribunal

may encourage the parties to the dispute - notably a party that has been made aware thatthe tribunal may rule against them - to withdraw from the case prior to the issuance of anaward. Such announcements prior to the award might, however, seem unfamiliar to Common

Law practitioners, as issuance of such views may indicate a lack of neutrality and impartiality
by the tribunal. Critics argue that such purported lack of impartiality would act as an

infringement on their right to a fair hearing. As a result of these concerns tied in to these
criticisms, the Interactive Rules prohibit challenges to arbitrators based on their conveyance ofpreliminary views. It is thus of great import that parties electing to utilize the Interactive
Rules are well aware of this provision beforehand, or, alternatively, that they agree to wave

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this provision in writing prior to the start of the arbitration.

In regards to the fixed fees set for arbitrators, concerns have been raised that the

remuneration ceiling is lower than most well regarded arbitrators are comfortable with, and,as a result, arbitrations conducted under the Interactive Rules will very likely not be staffedwith the highest quality of international arbitrator. Though this is a valid point, the JCAA has
clarified that they intend these specific rules to appeal to Small and Medium Sized Enterprises(SMEs) that will likely be under financial restraints during dispute proceedings, and as such,they strive to create a scenario comforting such SMEs through the introduction of an easily
understood and predictable fixed fee system. Furthermore, as with the rule provisions on thegiving of preliminary views, parties to an arbitration are free to agree to disregard the fee
restraints imbedded in the rules.
JCAA Rule Overview

In recent years the willingness of Japanese companies involved in international transactions

to submit a dispute to arbitration is on the rise. Such development is supported by the

ambitious course jointly taken by the Japanese government and the JCAA. Together they
established a straightforward approach to restructure and improve the JCAA’ s reputation as a

viable and more transparent institution for international arbitration which in turn helps Japan
to become a welcoming seat for international arbitration.

The JCAA has introduced a “premium” set by adopting the UNCITRAL Arbitration Rules, a“standard” set by updating the Commercial Rules and an “interactive model” striving forreasonable costs by introducing the Interactive Rules. The recently introduced JCAA

Arbitration Rules offer a flexible choice of options to cover a wide range of business needs.
Above and beyond this, the JCAA stresses that all three sets of rules can be freely adjusted
where the parties to an arbitration agree to do so.

Suggested Path Forward
In recent years Japan has embraced a more forthrightly pro-arbitration stance, as bothgovernment and private sector alike have notched up their promotion of the country as a safeand reliable place of arbitration. This shift has not come easily or quickly, however, incomparison to Korea. It may be said that Japan has faced entrenched historical perceptions,
often ungrounded, as a country where a foreign party might not receive fair and unbiased
treatment9）. Those stubborn10） stereotypical misrepresentations probably made (and to some9）R. Coleman, A Preliminary Investigation of Possible Areas of Discrimination Against Foreign Litigants inJapanese Court and Arbitration Practice, in Saney and Smit (eds.) Business Transactions with China, Japan, andSouth Korea, New York, 1983; R. T. Greig, International Commercial Arbitration in Japan: A User’s Report, in J.
Int. Arb., vol. 6, 4, 1989; C. R. Ragan, Arbitration in Japan: Caveat Foreign Drafter and Other Lessons, in Arb.
Intern., vol. 7, 2, 1991; P. Godwin, Japan – eight years on and no progress, in Global Arbitration Review,https://globalarbitrationreview.com/article/1067624/japan-%E2%80%93-eight-years-on-and-no-progress.
10）Y. Hayakawa, The Distorted Image of the Japanese System of International Commercial Arbitration, in JCAA
Newsletter, vol. 5, 1999.

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extent still make) the task for Japan harder than its peninsular neighbor.

This said, however, it is undeniable that the Korean example could give some hints

applicable to the Japanese contexts. While the JCAA has historically dealt with the Carnet

system, if Japan truly intends to build a robust domestic industry as an arbitration seat orhub, it would probably require more full-time attention by the institution. In most countries,
this Carnet activity is dealt with by Chambers of Commerce, and not by arbitral institution.

Such is the case of Korea, where ATA Carnets fall under the jurisdiction of the Korea Chamberof Commerce. The JCAA should consider making ADR its exclusive focus, in line with themost competitive institutions in the world. Further to this, consideration should be made in
regard to the various roles that J-MOJ and J-METI play in regards to the expansion of Japan’ s
influence in the area of international arbitration and the government’ s positioning in regards

to institutions such as JCAA and JIDRC. The authors are not herein opining as to whether one

Ministry is better suited than the other. Japan need not emulate Korea in this regard. We are
merely contending that the government of Japan would be well served in seriously thinking
through the best means of attaining its goal in growing the use of arbitration in Japan.

Japanese authorities might also consider the possibility of combining JCAA with TOMAC. Sucha union would likely prevent the inefficient duplication of efforts, while cutting down on costs
and allow for shared efforts at market growth.

Making regional institutions like the KCAB and JCAA attractive to a global clientele will also

require continued efforts in providing a satisfactory level of service at international standards.
The KCAB has in recent years provided a remarkable example of adaptation to thisinternational environment. English remains the language of cross-border business, and the
KCAB has responded to this by creating KCAB International, an institution staffed almost
exclusively by English speakers. Moreover, KCAB International has made concrete efforts tobuild international interest in their institution by aggressively utilizing non-Korean interns andby often cooperating with sister institutions and international organizations, such as
UNCITRAL. This ability to provide high quality arbitration services in English, while alsobuilding a substantive brand that reaches outside of national borders, is of capital importancefor the success of any truly international institution. In this sense, JCAA has all the potential
to follow suit. Tokyo is an extremely cosmopolitan city, with a vast availability of professionals
with native or near-native competence in English. In addition to drawing from the local talentpool, an internship - or full time position - at the JCAA would be an attractive opportunity for

professionals coming from countries in which Japan is one of the primary investors; such as
Cambodia, Vietnam, Uzbekistan, to name a few. Here it should be pointed out, however, thatover the past year, the JCAA has made real efforts at internationalizing their staff and outlook.
As, however, the JCAA has the admirable goal of also attracting interest in domestic

arbitration, a bifurcation, such as that seen with the KCAB, may help in attracting thenecessary talent for both a domestic Japanese specialized JCAA, and an outward looking“JCAA International.”

In addition, further cooperation between Japan and Korea in the field of arbitration would

seem very appropriate as both countries share a number of common features. With someJapan Commercial Arbitration Journal VOL.1［2020］31

effort, such features could be easily turned into strategic advantages in the regional

competition for arbitration. Both countries have legal systems solidly grounded in the Civil

Law tradition, while both have also recently embraced an American style system of legal
education. Irrespective of whether or not theories on the “delocalization” of arbitration should
be deemed valid, the practice of international commercial arbitration must be able toaccommodate truly international needs. As places where the legal system is still based on

Continental Europe, but where – for example - legal education has been strongly inspired by

the United States, both Japan and Korea are able to appreciate different approaches andstrategies. In both countries there is a very active legal community of professionals who havebeen trained to understand a code-based legislation and a Civil Law grounded procedural
style, who have also often completed postgraduate education in the US or the UK; theprimary bastions of the Common Law tradition. Just a glimpse at the attorney profiles on thewebsites of the most prestigious Japanese and Korean law firms will show how this cross-cultural background is appreciated; most of the top firms in both Japan and Korea are wellstocked with attorneys with degrees from the United States and the United Kingdom.

The JCAA and KCAB will be in a prime position to encourage cooperation between theJapanese and Korean arbitration communities. This cooperation might include discussion
related to the harmonization of rules, or even efforts towards the harmonization of respective

arbitration acts. Such a harmonization of rules may further encourage the use of Japan or
Korea as a neutral seat where parties to an arbitration represent just one of the two countries.

For example, where a Japanese and an American company have a dispute, the Japaneseparty may want to consider recommending Korea as the seat of arbitration, and vice versa,
where a Korean company is involved with a dispute with a company from a third-party nation

like America, Japan might serve as a satisfactorily neutral seat. If the rules of both institutions
were harmonized, practitioners would likely feel more comfortable in moving smoothly

between the use of both institutions. Along these same lines, consideration should also bemade in regards to the encouragement of the sharing of facilities, and the issuance of MOUs
in furtherance of such cooperation by and between all relevant institutions; inclusive of JCAA,
KCAB, SIDRC and JIDRC.

Additionally, secondments or exchange programs and jointly organized events between thetwo institutions would likely assist in building a spirit of cooperation which serve as afoundation for further joint efforts. Along these lines, both KCAB and JCAA may want toconsider working cooperatively to take on a leadership role amongst other civil law

jurisdictions in Asia. In particular, institutions in jurisdictions in which both Japanese andKorean corporation are actively involved, such as those in South East Asia, should beapproached. In an arbitration world where the purported common law preferences haverecently been put in question by initiatives such as the Prague Rules, the ability to understandboth traditions and to eventually juggle with features (and sensitivities11）) of both is aninvaluable strategic asset. As demonstrated by the JCAA Interactive Rules, the legal
community in Japan is already fully aware of this issue.

This comparative law advantage has strong potential. This is particularly true as most

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emerging Asian countries are experiencing a similar pattern; legal systems based on Civil Law

tradition (sometimes in post-Soviet or post-Socialist version) and yet highly influenced byAmerican-style reforms (especially in the field of business and financial law).12） This Civil Law

expertise may also help JCAA and KCAB to create an alternative arena to the HKIAC–SIAC

duopoly, which is, to date, catering a large chunk of the English language arbitration cases
seated in East and South East Asia.

11）For example,arbitrators trained in Japanese or Korean law are likely fully aware that parties from both theCommon and Civil Law worlds may have very different reactions towards any attempt by an arbitral tribunal to settle
a dispute, outside of the scope of the issuance of an award. Indeed, the need to counter the narrative under which inJapan arbitrators would always try to make parties reach an amicable agreement (M. L. D. Hanlon, The Japan
Commercial Arbitration Association: Arbitration with the Flavor of Conciliation, in Law and Policy in International
Business, vol. 22, 3, 1991; D. A. Livdahl, Cultural and Structural Aspects of International Commercial Arbitration in
Japan, in J. Int. Arb., vol. 20, 4, 2003.) was duly taken into account when the JCAA updated their rules.
12）It is also worth mentioning that the Civil Code of Japan was used as a basis to inspire legal reforms in Cambodia
and Vietnam, which codifications incorporate several features of Japanese law. Due to similarities between theJapanese and Korean legal system, Korean lawyers will likely feel as comfortable with these new statutes as would
Japanese lawyers.

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The Act on Special Measures concerning the Handlingof Legal Services by Foreign Lawyers —Recent
Developments toward Internationalization
Momo-o, Matsuo & Namba

Momo-o, Matsuo & Namba

Attorney-at-Law, admitted in Japan and the State of New York

Attorney-at-Law, admitted in Japan

Junya Naito

Ryo Otobe

Ⅰ．Introduction
The legal services of foreign lawyers in Japan are regulated by the Act on Special Measuresconcerning the Handling of Legal Services by Foreign Lawyers (Gaikoku Bengoshi ni yoru

Hōritsu Jimu no Toriatsukai ni kansuru Tokubetsu Sochi Hō , often shortened to Gaiben Hō )(hereinafter, the “Act” ).1） The Act was enacted in May 1986 and became effective in April

1987. It allows foreign lawyers to handle legal services in Japan concerning foreign laws ifthey meet certain requirements and are registered as a Gaikoku Hō Jimu Bengoshi , orRegistered Foreign Lawyer (hereinafter referred to as “Gaiben ” ).

A bill to amend part of the Act was submitted to the 200 th Extraordinary session of the

National Diet on October 18, 2019. The bill passed the House of Representatives, but not theHouse of Councilors. In the 201st session, the bill passed and was enacted on May 22, 2020

(the amended Act is hereinafter referred to as the “2020 Amended Act” ).

The purpose of this article is to introduce the Act and its recent developments including theenactment of the 2020 Amended Act. First, we will summarize the Act and the history of its
past amendments. We will then focus on the amendments in the 2020 Amended Act and thebackground and purposes of such amendments.

Ⅱ．Historical Summary of the Act and its Amendments
Prior to the Act taking effect in 1987, basically, bengoshi , an Attorney-at-Law qualified inJapan under the Attorney Act (hereinafter, “Bengoshi ” ) exclusively handled legal services inJapan.

However, this changed when the Act allowed Gaikoku Bengoshi (lawyers admitted topractice in foreign jurisdictions and who are equivalent to Bengoshi , hereinafter referred to as“Foreign Lawyers” )2） to handle legal services in Japan if certain requirements were met1）Act No. 66 (1986).

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including, inter alia , qualification equivalent to an Attorney-at-Law in the subject attorney’ s

eligible foreign jurisdiction3）, not less than five years of experience in the provision of legal

services in the foreign jurisdiction (this type of requirement is hereinafter referred to as the“Experience Requirement” ), possessing a plan, a Japan-based residence and financial basis
to perform properly and reliably, and the ability to compensate for damages to clients in theevent of negligent or fraudulent execution of their duties. The Act further required reciprocity
between the jurisdiction of the Foreign Lawyer and Japan.

A Foreign Lawyer is eligible to handle legal services under the Act as a Gaiben only after the

Minister of Justice approves the Foreign Lawyer’ s qualifications, and the Bar Association
registers the Foreign Lawyer into the Roll of Registration as a Gaiben .
1. Experience Requirement Regarding Legal Services

The Experience Requirement under the Act has been gradually eased over the years.

Initially, two years of experience in Japan was allowed to be included as part of the five-yearexperience requirement by an amendment enforced in 1995. In a subsequent amendment in

1998, the required term of experience was shortened to three years, in which one year ofexperience in Japan can be included.4）
2. Attorney Corporation

Under the original Act, a Gaiben was prohibited from employing Bengoshi or fromestablishing a joint venture with Bengoshi . This restriction was in order to keep well-financed

Gaiben from substantially handling legal services concerning Japanese law through such
employment or from substantially controlling Bengoshi .5） By the amendment which tookeffect in 1995, a Gaiben was allowed to engage in Specified Joint Services (Tokutei Kyōdō

Jigyō ) with Bengoshi having five years or more years of experience in Japan. Thereafter, thenecessity to promote cooperation between Bengoshi and Gaiben was recognized in order to

respond to increasing demand in Japan for international legal services.6） The next amendment

effective in 2005 allowed a Gaiben to employ Bengoshi and also to establish a Foreign Law

Joint Enterprise7） (Gaikoku Hō Kyōdō Jigyō ) with Bengoshi . At the same time, to avoid theinappropriate influence of a Gaiben on legal services under Japanese law, the Act provided for2）Defined as “a person whose professional duties are to provide legal services as a practice in a foreign
jurisdiction and who is equivalent to Bengoshi ” in Article 2, item (ii) of the Act. [Note that the article
numbers of the Act cited in the footnotes hereinafter reflect the article numbers of the Act prior to the2020 amendments.]
3）In the case of federal state stipulated by Ministry of Justice Order, “Foreign Jurisdiction” means its
constituent unit such as a state, territory and others stipulated in the Order. Article 2, item (ii) of the Act,
Article 1 and Appended Table (in relation to Article 1) of Regulation for Enforcement of the Act.
4）Article 10, paragraph (1), item (i) and paragraph (2) of the Act.
5）Takanaka Masahiko, Bengoshihō Gaisetsu 5th Ed ., Sanseidō (2020) at 384.
6）Id .
7）In Article 2, item (xv) of the Act at the time, defined as “an enterprise jointly operated by a Gaiben anda Bengoshi under a partnership contract or other continuous contract for the purpose of providing legal
services” .

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several restrictions on a Gaiben who employs Bengoshi or forms a Foreign Law Joint

Enterprise with Bengoshi . Further, under the amendment of the Act, which took effect in2016, a Gaiben was allowed to establish a Registered Foreign Lawyer Corporation8） (Gaikoku

Hō Jimu Bengoshi Hōjin ).

3. Representation in International Arbitration

When the Act was originally introduced, it contained no provisions regarding representation

in international arbitration by Foreign Lawyers including Gaiben . The amendment effective in1996 defined an International Arbitration Case (Kokusai Chūsai Jiken ) as “a civil arbitrationcase which is conducted in Japan and in which all or some of the parties are persons who
have an address or a principal office or head office in a Foreign Jurisdiction.” 9） A Gaiben isallowed to represent a client in procedures for an International Arbitration Case by thisamendment.10） In addition, a Foreign Lawyer (Gaikoku Bengoshi ) who is not a Gaiben(excluding a person employed in Japan and providing services there, based on theirknowledge concerning foreign laws) is allowed to represent a client in procedures in Japan for
an International Arbitration Case which they have been requested to undertake or undertookin the foreign jurisdiction of their qualification,11） regardless of the governing law of theInternational Arbitration Case.

Ⅲ．The 2020 Amended Act
1. Background of the New Bill

Even after several amendments to the Act, there remained a need to respond to increasing

demand for international legal services due to the internationalization and specialization of legal
services in Japan. The Cabinet’ s “Implementation Plan for Regulatory Reforms” (Kisei Kaikaku

Jisshi Keikaku ) and the ensuing report entitled the “Review Committee for the Registered
Foreign Lawyer System Report” (Gaikokuhō Jimu Bengoshi Seido ni Kakaru Kentōkai Hōkokusho )in July 201612） suggested (a) introduction of a corporation for providing legal services underJapanese and foreign laws, established by Bengoshi and Gaiben 13）; and (b) easing of the termof the Experience Requirement as follows: either (i) two years of experience in Japan can be

included in the three-year requirement, or (ii) the term of Experience Requirement is shortened
to two years, during which one year of experience in Japan is deemed sufficient.14）8）In Article 2, item (iii)-2 of the Act, defined as “a corporation established by a Gaiben for the purpose ofhandling legal services concerning foreign laws (meaning legal services regarding a legal case, all or amajor part of which the laws that are or were in effect in a foreign jurisdiction apply or should apply[. . .]) pursuant to the provisions of this Act” .
9）Article 2, item (xi) of the Act.
10）Article 5-3 of the Act.
11）Article 58-2 of the Act.
12）For the English version, see http://www.moj.go.jp/content/001207135.pdf13）Id . from pages 4 to 7.
14）Id . from pages 1 to 4.

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Concurrently, a sense of urgency among the Japanese Government and legal practitioners

emerged regarding the lack of popularity of Japan as a seat of international arbitration whencompared to foreign jurisdictions, particularly to Asian jurisdictions such as Singapore, Hong

Kong and South Korea. The Liaison Meeting among Relevant Ministries toward Revitalizationof International Arbitration (Kokusai Chūsai no Kasseika ni Muketa Kankeifushō Renraku Kaigi ),which was held from September 2017, issued a report in April of 2018 titled “Possible
Measures Towards Revitalization of International Arbitration” (Kokusai Chūsai no Kasseika ni

Mukete Kangaerareru Sesaku ).15）

It pointed out that clarification on the scope of representation by Gaiben and Foreign

Lawyers should be examined.16） The newly formed Review Committee for Representation inInternational Arbitration, etc. by Gaiben or Foreign Lawyers (Gaikoku Hō Jimu Bengoshi ni

yoru Kokusai Chūsai Dairitō ni kansuru Kentōkai ) further studied this issue and produced its

September 25, 2018 report17） which included suggestions regarding the expansion of thescope of representation of International Arbitration Cases by Gaiben and Foreign Lawyers.18）

Following the two reports, the Ministry of Justice proceeded with codifying the amended bill

and the Cabinet submitted the bill to the Diet on October 18, 2019.
2. Amendments in the 2020 Amended Act(a) Expansion of the Scope of Representation in International Arbitration

Under the Act prior to the 2020 amendments, as mentioned above in II.3., Gaiben andForeign Lawyers were allowed to provide representation in International Arbitration Cases.19）

To qualify as an “International Arbitration Case” , (i) the case is required to have its seat ofarbitration in Japan and (ii) all or some of the parties to the case are persons who have anaddress or a principal office or head office in a Foreign Jurisdiction.20）

Prior to the 2020 amendments, Gaiben and Foreign Lawyers were not able to representclients in arbitration cases under which the seat of arbitration is outside Japan. However,even if the seat of arbitration is outside Japan, in practice, certain arbitration procedures suchas hearings including witness testimony can and in fact do occur in Japan, because thelocation of arbitration procedures and the seat of arbitration have no direct relationship. In
order to allow Gaiben and Foreign Lawyers to provide representation in cases where

proceedings occur in Japan, the Japan-seat requirement was abolished in the 2020 Amended

Act, and thus, an arbitration case whose seat of arbitration is in a foreign jurisdiction
categorically falls within an “International Arbitration Case” .21） It should be noted, however,15）https://www.cas.go.jp/jp/seisaku/kokusai_chusai/pdf/honbun.pdf16）Id . at page 4.
17）For the English version, see http://www.moj.go.jp/content/001308967.pdf18）Id . from pages 2 to 7.
19）Article 5-3 and Article 58-2 of the Act.
20）Article 2, item (xi) of the Act.
21）Article 2, item (xiv)-(c) of the 2020 Amended Act. [Note that the article numbers of the 2020
Amended Act cited in the footnotes hereinafter reflect the article numbers after all of the amendments
take effect under Article 1 of the Supplementary Provisions of the 2020 Amended Act.]

Japan Commercial Arbitration Journal VOL.1［2020］37

that, as a matter of course, the Attorney Act and the Act regulate legal services in Japan, andtherefore, this amendment is only relevant when some of the arbitration procedures—whose
seat of arbitration is outside Japan—occur in Japan.

Furthermore, prior to the 2020 amendments, to qualify as an International Arbitration Case,at least one party to an arbitration case was required to be a person whose address or
principal office or head office is outside Japan. However, even if all the parties are located inJapan, if the parent company of one or both parties is located outside Japan, the parent
company may control the party and thus the case itself. Under the 2020 Amended Act, thescope of an “International Arbitration Case” is broadened by expanding the definition of aparty to the International Arbitration Case to the following: a party in the definition will

include a person of which more than fifty percent (50%) of the voting shares (or equivalent)

are owned by a person whose address or principal office or head office is outside Japan.22） By

the amendment, if the parent company of a party to the case has an address or a principal

office or head office outside Japan, Gaiben and Foreign Lawyers can represent such client in
the International Arbitration Case.

Another expansion of “International Arbitration Case” is that a case under which thegoverning law agreed upon by the parties to the case is added to “International Arbitration
Case.” 23） By this amendment, if the governing law is a foreign law, Gaiben and Foreign

Lawyers can categorically represent clients.

The Act prior to the 2020 amendments allowed Gaiben and Foreign Lawyers to representclients on the procedures for mediation (settlement) resulting from an International

Arbitration Case.24） It was argued and accepted under the Act that such procedures should

include mediation (settlement) proceedings carried out during the arbitration case (so called“Arb-Med” ). However, the Act prior to the 2020 amendments was silent on other mediation
proceedings including mediation proceedings conducted before the commencement of anarbitration case (so-called “Med-Arb” ) and mediation proceedings when there is noarbitration agreement.

There is an international trend to utilize mediation proceedings for the resolution ofinternational disputes,25） and to expand representation by Gaiben and Foreign Lawyers, the2020 Amended Act allows Gaiben and Foreign Lawyers to represent clients in mediation
proceedings concerning disputes that meet the requirements of an International Arbitration

Case and have an agreement to arbitrate, which occur both before and af ter thecommencement of the arbitration.26） By this amendment, in addition to Arb-Med, most of22）Article 2, item (xiv)-(a) of the 2020 Amended Act.
23）Article 2, item (xiv)-(b) of the 2020 Amended Act.
24）The parenthetical phrase of Article 5-3 of the Act prior to the 2020 amendments.
25）The establishment and opening of the Japan International Mediation Center in Kyoto (JIMC-Kyoto) in
November 2018 reflect such trend in Japan. Globally, the Singapore Mediation Convention was made in
2019, and numerous jurisdictions have been signatories to the Convention. This Convention grants aparty to mediation (settlement) the ability to enforce it in the signatory jurisdiction. Although as of now
Japan is not a signatory, this Convention could still have an impact on mediation (settlement) occurring inJapan in that a deed of settlement can probably be enforced in the signatory jurisdiction.

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The Act on Special Measures concerning the Handling of Legal Services by Foreign Lawyers (Gaiben Hō): Recent Developments of Gaiben Hō toward Internationalization

Med-Arbs will be able to receive representation by Gaiben and Foreign Lawyers. As long as

the above requirements are met, the scope and the type of the mediation proceedings that

Gaiben and Foreign Lawyers may represent is not limited.

Moreover, the 2020 Amended Act newly establishes the category of “International Mediation

Case” , which is defined as a civil mediation case regarding a dispute (limited to civil disputes
over a commercial contract or transaction between business operators), where (i) one orsome of the parties is a person of which more than fifty percent (50%) or more of the voting
shares (or equivalent) are owned by a person whose address or principal office or head office

is outside Japan or (ii) Japanese law is not applicable to the formation and effect of the claim

arising out of the contract or transaction (only when the applicable law has been agreed uponby the parties).27） By these amendments, Gaiben and Foreign Lawyers are permitted torepresent clients in International Mediation Cases that are independent from an International

Arbitration Case, or a Med-Arb (even without an agreement to arbitrate). It should be notedthat International Mediation Cases conducted by the Japanese courts or administrative bodiesof the Japanese government or municipalities cannot be represented by Gaiben or Foreign
Lawyers.28）(b) Easing of the Experience Requirement

Prior to the 2020 amendments, the Experience Requirement for Gaiben was at least two

years of experience outside Japan, in addition to one year of experience in Japan. While somehave argued that the two years of experience outside Japan should be shortened to facilitate

the ability of Foreign Lawyers to work in Japan, others have stressed that a certain period ofwork experience needs to be maintained to secure the ability and integrity of Foreign Lawyers
who are to become Gaiben . Under the 2020 Amended Act, the requirement of three years ofexperience in total remains, but two years of experience in Japan can be included within thethree years of experience.29） In other words, the requirement for experience outside Japan
has been shortened to one year, thus reducing burden for Gaiben applicants who settled inJapan soon after becoming lawyers in their local jurisdictions.

(c) Introduction of a Joint Corporation by Bengoshi and Gaiben

Though Gaiben have been allowed to incorporate a Registered Foreign Lawyer Corporation(Gaikokuhō Jimu Bengoshi Hōjin ) which can provide legal services to the extent that Gaiben

are allowed, the 2020 Amended Act allows for the establishment of Attorney-at-Law/
Registered Foreign Lawyer Joint Corporation30） (Bengoshi-Gaikokuhō Jimu Bengoshi Kyōdō

Hōjin , or Bengoshi-Gaiben Joint Corporation), a corporation which consists of Bengoshi and
Gaiben as its members.31） Bengoshi-Gaiben Joint Corporations are expected to provide fulllegal services as a corporation. In addition, Bengoshi-Gaiben Joint Corporations can establish26）Article 7, item (i) of the 2020 Amended Act.
27）Article 2, item (xv) of the 2020 Amended Act.
28）Article 7, items (ii) of the 2020 Amended Act.
29）Article 12, paragraph (2) of the 2020 Amended Act.
30）Article 68 of the 2020 Amended Act.
31）Article 2, item (vi) of the 2020 Amended Act.

Japan Commercial Arbitration Journal VOL.1［2020］39

branches (secondary offices) in Japan. It is therefore expected that “one-stop” legal services
can be provided by Bengoshi-Gaiben Joint Corporations.

Ⅳ．Effective Dates of the Amendments
The amendments regarding (a) expansion of representation by Gaiben and Foreign Lawyersand (b) easing of the Experience Requirement will take effect on August 29, 2020.32）

The amendments regarding (c) establishment of Bengoshi-Gaiben Joint Corporations willtake effect within two years and six months from the date of the promulgation of the 2020
Amended Act.33）

Ⅴ．Conclusion
In this article, we have reviewed the Act and its amendment history and the amendmentsin the 2020 Amended Act. Although the world is currently facing the COVID-19 crisis andinternational travel and mobility have been greatly reduced as a result, the overall trend ofinternationalization and specialization of legal markets and services will only grow in the
future. The 2020 Amended Act is a testament to how Japan is responding to the calls forfurther internationalization and openness of its legal market.

32）Article 1 of the Supplementary Provisions of the 2020 Amended Act.
33）Id .

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Four Court Decisions After an Arbitral Award

Professor, Aoyama Gakuin University and Attorney, Waseda University Legal Clinic L.P.C.

Yoichiro Hamabe

Introduction
International commercial arbitration, a means of dispute resolution, is generally deemed to

be faster, more reliable and cost effective than litigation as it is decided by arbitrators who are

impartial third parties. However, a losing party may file a petition with the court to set aside

an arbitral award, if there are any reasonable grounds to doubt the impartiality or
independence of the arbitrator(s).

Article 18(4) of the Japan Arbitration Act ( “JAA” )1） provides, “During the course of thearbitration procedure, an arbitrator shall, without delay, disclose to the parties all the facts
that are likely to give rise to doubts as to his/her impartiality or independence (excluding

those which have already been disclosed).” If it is found that reasonable grounds to doubt theimpartiality or independence of the arbitrator were not disclosed in accordance with Article
18-(4) of the JAA, the parties may challenge such arbitrator under Article 18(1) of the JAA. If
the breach of duty of disclosure by an arbitrator is deemed to be a material procedural defect,

the arbitral award may be set aside. Any dispute over setting aside of an arbitral award is
subject to the court intervention at three instances with remitted trial.

This article discusses a case in Japan where a losing party challenged an arbitral award on

the basis of arbitrator's breach of duty to disclose a concrete relationship under some unclear

circumstances that was likely to give rise to doubts as to his/her impartiality or independence.
Part I of this article provides the background and related facts in this case. Part II provides

the summaries of the court decisions in this dispute. Part III focuses the contents of thedecision of the Supreme Court (3rd Petty Bench) on December 12, 2017, which overturned

the Osaka High Court's decision to set aside the arbitral award and remanded the case to theHigh Court for further consideration2）. Part IV provides some comments on the court
decisions with some lessons in conclusion.

1）English translation of the Arbitration Act of Japan is located at the Japanese Law Translation Database System.

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Four Court Decisions After an Arbitral Award

I．Case Summary
There was an arbitration agreement in an international contract for the sale and purchase of

air conditioning equipment, concluded around October 2002. Based on the arbitrationagreement, Sanyo Electric Co. Ltd and Sanyo Asia Pte Ltd. (the “Claimants” )3） commenced

the arbitration procedure against Prem Warehouse LLC, and Prem Sales LLC (the“Respondents” ) under the rules of the Japan Commercial Arbitration Association ( “JCAA” )in Osaka, Japan, in June 2011. In accordance with the arbitration agreement, a total of threearbitrators were appointed; each party appointed one arbitrator and the two party-appointed

arbitrators appointed the presiding arbitrator “for for this case (Arbitration Case No. Osaka
11-02 of JCAA)” After approximately three years of arbitration proceedings, an arbitral award
was rendered in favor of the Claimants by the arbitral tribunal on August 11, 2014.

However, on November 13, 2014, the Respondents filed a petition at the Osaka District

Court to set aside the arbitral award, arguing that the presiding arbitrator had failed todisclose a conflict of interest.

The presiding arbitrator was a member of the Singapore office of a U.S.-based famousinternational law firm, King and Spalding ( “K&S” ), with approximately 1,100 lawyers and 20

offices worldwide, including 10 offices in the United States. About one and a half years after

the arbitration commenced, a new lawyer joined the San Francisco office of K&S in February

2013. Before his move to K&S, he acted as a counsel for Panasonic Corporation of North
America ( “Panasonic North America” ) in an unrelated class action against Panasonic North
America pending in the United States District Court for the Northern District of California. Both

Panasonic North America and Sanyo Electric Co. Ltd are subsidiaries wholly-owned by

Panasonic. (the “Fact” ). The presiding arbitrator did not disclose that a lawyer from adifferent office of K&S had acted for a sister company of one of the Claimants and the arbitralaward was made in favor of the Claimants.

Such a relationship between the two lawyers was later found, and the Respondents(Petitioners) argued that the failure to disclose violated Article 18 (4) of the JAA. The
Respondents requested the arbitral award be rescinded, arguing that there were grounds forsetting aside under Article 44 (1), items (iv) (vi) and (viii) of JAA.4）

Ⅱ．Court Decisions
The Osaka District Court rejected the petition, but the Osaka High Court, the appeal court,

set aside the arbitral award. However, on further appeal, the Supreme Court of Japan2）Minshu Vol. 71, No. 10. English translation of this decision is posted in the Japanese Yearbook of InternationalLaw, Vol 61, at 395 (2018).
Also, see https://www.courts.go.jp/app/hanrei_en/detail?id=1558 (https://www.courts.go.jp/saikosai/index.html）
3）In April 2004, Sanyo Electric Co., Ltd. succeeded to the rights and obligations of Sanyo Electric Air Conditioning
under the original sales contract, and in April 2011, Sanyo Electric Co., Ltd. became a wholly-owned subsidiary ofPanasonic Corporation. Also, in January 2009, Sanyo Asia Pte Ltd, a Singaporean corporation, succeeded to therights and obligations of Sanyo Airconditioners Manufacturing Singapore Pte Ltd, under the original sales contract.

Japan Commercial Arbitration Journal VOL.1［2020］43

overturned the Osaka High Court's decision and remanded the petition to the high court for
further consideration.

1. Osaka District Court

The Osaka District Court rejected the petition for setting aside of arbitral award on March

17, 2015.5） The District Court found that the arbitrator’ s failure to disclose his colleague’ sconnection to the Claimant's sister company Panasonic North America should be a sistercompany, not a subsidiary, of Sanyo Electric Co. Ltd. did not create doubts to his impartiality
or independence. It cannot be deemed that the existence of this fact has affected theconclusion of the arbitral award. Even if the presiding arbitrator's breach of the above
obligation of disclosure falls under Article 44 (1) (vi) of the JAA, such defect was minor, and it

was not reasonable to set aside the decision. (full stop) Accordingly, the petition was
dismissed.

2. Osaka High Court

However, the Osaka High Court, the appeal court, set aside the arbitral award on June 28,

2016.6） The court reversed the decision of the district court by ruling that the arbitrator could

have investigated the existence of conflicts of interest through a conflicts check without any
particular difficulty, the conflict was "likely to give rise to doubts as to the arbitrator's

impartiality or independence," and the arbitrator breached the obligation to disclose under the
JAA. Also, the court pointed out that the statement of an abstract and potential conflict ofinterest that may arise in the future does not constitute a proper disclosure of an actual eventof conflict. Accordingly, the arbitrator had breached the obligation to disclose the conflict ofinterest. Non-disclosure of the conflict constitutes a breach of the disclosure obligations under

Article 18 (4) of the JAA and is a serious procedural defect. Even if a breach of the obligation

to disclose a conflict of interest does not directly affect the conclusion of the arbitral award, it
falls under the grounds for setting aside arbitral awards under Article 44 (1), item (vi) of the
JAA.

The district court and the high court seem to have made very different evaluations on

similar assumptions.

3. The Supreme Court and the Aftermath

Nevertheless, on December 12, 2017, the Third Petty Bench of the Supreme Court

overturned the Osaka High Court's decision and remanded to the Osaka High Court to have it
further and fully heard.

After this decision, the Osaka High Court rejected the petition for setting aside of the arbitral4）Article 44 (1) of JAA provides, if any of the following grounds exist, the parties may file a petition with the court
to set aside the Arbitral Award:(iv) the petitioner was unable to put up a defense in the arbitration procedure;(vi) the composition of the Arbitral Tribunal or the arbitration procedure is in violation of Japanese laws andregulations (if the parties have reached an agreement on the matters concerning the provisions unrelated to publicorder in such laws and regulations, said agreement);(viii) the content of the Arbitral Award is contrary to public policy in Japan.
5）Osaka District Court, March17, 2015, 2014 (arb) No. 3, 2270 Hanrei Jiho 74.
6）Osaka High Court, June 28, 2016, 1431 Hanrei Times 108.

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Four Court Decisions After an Arbitral Award

award on March 11, 20197） by finding that before the arbitral award was made, the presiding

arbitrator had not been aware of the Fact and the Fact could not normally be found by thepresiding arbitrator’ s reasonable investigation.

Ⅲ．Supreme Court Decision
The Supreme Court appears to have concluded that both the district court and the highcourt were wrong and that the case should be reconsidered.
1. Two Issues

This Supreme Court decision took issue with the following two points as stated in the highcourt decision.

The first point is that the statement of an abstract and potential conflict of interest that may

arise in the future does not constitute a proper disclosure of an actual event of conflict.

The second point is that the conflict was a fact "likely to give rise to doubts as to thearbitrator's impartiality or independence," and the arbitrator breached the obligation todisclose under Article 18 (4) of the JAA.

The Supreme Court approved the first point, but denied the second. In other words, theSupreme Court affirmed the judgment that the statement of an abstract and potential conflictof interest that may arise in the future does not constitute a proper disclosure of an actual

event of conflict. However, the Supreme Court could not reach the conclusion that thearbitrator breached the obligation to disclose under Article 18 (4) of the JAA for setting asideof the arbitral award.
2. Reasoning

The Supreme Court appears to have made an opposing judgment from the original highcourt decision. The Supreme Court overturned the high court decision to set aside the arbitralaward for the following reasoning:(a) The arbitrator is obliged to disclose all the facts of Article 18 (4) of JAA to the parties, if
the arbitrator is aware of the facts with respect to Article 18 (4) of JAA.

(b) In light of the fact that the same paragraph does not limit the facts to be disclosed tothose recognized by the arbitrator, the arbitrator is obliged to disclose what can usually befound by a reasonable range of investigations regarding the existence of facts with respect to
Article 18 (4) of JAA.

(c) In addition, the arbitrator shall find out any facts relevant for purposes of Article 18 (4) of

the JAA. The obligation to disclose is simply “in the course of the arbitration proceedings,” ,with the only exception of "already disclosed" facts. For example, the arbitrator may berequested information from the parties until the arbitration procedure is completed.
Regardless of the presence or absence of such request, the arbitrators bear the sameobligation.

(d) Therefore, if the arbitrator did not disclose the facts set forth in Article 18 (4) of the JAA
to the parties, he would have violated the disclosure obligation in the same paragraph. In7）Osaka High Court, March 11, 2019, 1468 Hanrei Times 65.

Japan Commercial Arbitration Journal VOL.1［2020］45

addition, it is a reasonable interpretation that it is necessary for the arbitrator to be aware offacts that the arbitrator could usually find out by conducting a reasonable range ofinvestigations.

(e) However, even in light of the documents submitted to the court, it is not clear whether thepresiding arbitrator was aware of the facts before the arbitration decision was made.

(f) Also, it is not clear whether K&S was aware of this fact, or what sort of conflict checksystem was provided in K&S, to which the presiding arbitrator belonged.

(g) Therefore, it is not clear whether the fact could normally be found by the presiding
arbitrator through a reasonable investigation before the arbitral award was made.

(h) Without confirming each of the above points, the judgment that the presiding arbitrator
had breached disclosure obligations was clearly a violation of laws and regulations.

As the high court ruling on the second issue was made without confirming the points listed

above, the ruling contains illegality that obviously affects its judgment. Therefore, the highcourt decision should inevitably be quashed without considering the rest of the reasons forappeal.

Ⅳ．Some Comments
1. Four Decisions

Since the seat of arbitration of this case was Japan, the JAA governs the arbitration

procedure and the procedures of the court related to the arbitration proceedings, inaccordance with Article 1 of the JAA. Article 4 of the JAA provides that with respect to anarbitration proceeding, the court may exercise its authority only in cases expressly provided
for in the JAA.

Eventually, the parties of this case received the court decisions at least four times throughsubstantial hearings. While arbitration proceedings could be conducted in English between
Singaporean or Japanese corporations and US companies in this dispute, the court
proceedings could only be conducted in Japanese. Therefore, all the evidence had to betranslated to Japanese, which could be exceptionally expensive and extremely burdensome tothe parties up to the conclusion of this dispute.
2. Conflict of Interest

There were many commentaries against the setting aside of the arbitration rendered by the

Osaka High Court, because many specialists believed/ were of the view that the arbitrator's
disclosure duty was not violated. If an arbitral award could be set aside easily, an unfavorable
judgment could be reversed by discovering a far-fetched relationship later. And this would beagainst justice. They argued that this kind of dispute could be viewed as the action of making
a final decision at a later time in a tossup.

However, in order to show justice, arbitrators should maintain their fairness or independence,

which is the key of arbitration. That is why an arbitrator should disclose any facts that would
raise doubts of impartiality or independence during the course of an arbitration.

Recently, awareness of conflicts of interest has rapidly changed in various areas in Japan.

For example, conflict of interest in parent-subsidiary transactions and MBO (Management

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Four Court Decisions After an Arbitral Award

Buyout) have been seriously scrutinized in business law areas, and business society is
becoming more sensitive to conflicts of interest and is gradually adopting stricter thinking.

The high court decision may be a reflection of such a recent trend over conflict of interest inJapan.

If undisclosed fact indicates that the arbitrator departed from ethics, it would be difficult toquell a suspicion that the related party may have obtained an advantageous arbitral award incollusion with the arbitrator through its firm in an unfair manner. If this is the case, such
arbitration should never be allowed, and the arbitral award should be set aside.
3. Conflict Check System in International Law Offices

The Supreme Court did not quash the decision of the High Court and decide the conclusion

by itself, but remitted the case to the High Court to reconsider several factual issues becausesome important facts were not clear on the basis of the court records of the proceedings at
the three instances over three years. One of the reasons would be the difficulty for the courts
to ascertain the actual practices of conflict check system in international law offices.

In general, it may be difficult to assert and prove the internal circumstances of a global law

firm. The problem is the extreme difficulty to understand from the outside what sort of conflict

check system is provided in a firm such as K&S’ , which has many offices around the world.
And it is extremely difficult for both parties to prove whether such a system is fully andproperly functional or not.

However, such a big firm is expected to fully maintain a conflict check system. After theSupreme Court decision, the remitted high court scrutinized the details of how the conflict
check system worked in this case. In conclusion, it was recognized that there had been no

reason to believe that the presiding arbitrator could normally find out the Fact by conducting areasonable scope of investigation.
4. Duty of Investigation

An arbitral award should be set aside if the arbitrator knew the related client and was taking

measures to render an award advantageous to them. On the other hand, the arbitration

should not be set aside if the arbitrator could not have known anything at all through areasonable investigation as long as a reliable conflict check system is properly provided. In
particular, if the Singapore office and the San Francisco office were economically linked toeach other or had some influence on each other, the conflict check system should have been
designed to cover all overseas offices.

In order to fulfill the obligation to disclose, arbitrators are obliged to investigate within areasonable range as to whether doubtful circumstances exist. However, if a questionable
relationship is found later, it may then be questioned whether the disclosure obligation has
been fulfilled.

5. Risky Appointment

The underlying facts in this case are probably quite usual because arbitrators are sometimes

appointed from major law firms. Movement of lawyers between firms is very common, and it
would create a delicate conflict of interest issue.

Although the seat of arbitration was Japan, the presiding arbitrator for this case selected

Japan Commercial Arbitration Journal VOL.1［2020］47

and appointed by lawyers belonged to the Singapore office of an international law firm, eventhough many independent lawyers actually separate from big firms in order to be an arbitrator
in Singapore.

From the point of view of the client, the risk of court interventions should be avoided asmuch as possible. Considering the economic burden of the dispute resolution, arbitrators
should be selected from among the lawyers who would not pose conflict issues. It isnecessary to recognize the existence of ethical problems and the risks that this case has
shown.

In this case, the presiding arbitrator submitted a statement, writing “Attorneys at K&S may

in the future give advice to, or represent, clients in cases which are not related to the

Arbitration Case but in which the clients’ interests conflict with those of any of the parties to
the Arbitration Case and/or any of its/their affiliated companies. Attorneys at K&S may also in
the future give advice to, or represent, any of the parties to the Arbitration Case and/or anyof its/their affiliated companies in cases not related to the Arbitration Case.” 8）

However, the Supreme Court affirmed the high court decision that an arbitrator’ s abstractstatement to the parties that there is a possibility of occurrence of events that “would likely togive rise to doubts as to his/her impartiality or independence” under Article 18 (4) of the JAA
is not enough for such events to be considered as facts “which have already been disclosed”
as referred to in the same paragraph.

While a world-wide office network of an international firm can provide advantageous

services to clients, it could also bring some burdensome risk of conflict. Although the arbitralaward was finally upheld, the wasted costs were not recoverable.

8）https://www.courts.go.jp/app/hanrei_en/detail?id=1558（https://www.courts.go.jp/saikosai/index.html）

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ヽ

ANDERSONMORI &TOMOTSUNE

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Otemachi Park Building, 1-1-1 Otemachi, Chiyoda-ku, Tokyo 100-8136, Japan
Tel: 81-3-6775-1000 URL: www.amt-law.com
Tokyo•Osaka•Nagoya•Beijing• Shanghai•Hong Kong• Singapo『e•Ho Chi Minh City•Bangkok•Jakarta

Setting Aside of Arbitral Awards under the Japan
Arbitration Act—Recent Decisions by the Japanese Courts

Professor, Doshisha University

Naoshi Takasugi

Ⅰ．Introduction
The year 2018 saw the launch of the Japan International Mediation Center in Kyoto (JIMC-

Kyoto) by the Japan Arbitration Association (JAA), on the beautiful campus of Doshisha

University, steps from the Imperial Palace. In the same year, the Japan International Dispute

Resolution Center (JIDRC) was also established as the entity to be charged with promotinginternational arbitration in Japan in addition to the Japan Commercial Arbitration Association(JCAA). That led, in 2020, to the JIDRC’ s opening of advanced facilities for arbitration

hearings in central Tokyo. It is now more accessible than ever for Japanese companies tosettle international commercial disputes in Japan, without having to go to, for example,
Singapore or Hong Kong.

As is well known, the internationally-preferred mechanism for the resolution of internationalcommercial disputes is not litigation before national courts but arbitration at leading
arbitration institutions; accordingly, it is commonplace for international contracts to include anarbitration clause. Arbitration is based on these agreements to arbitrate, and is therefore

private by nature. Most arbitral tribunals consist of one or three arbitrator(s) (according to theparties’ arbitration agreement), and the arbitral tribunal’ s decision is called an “arbitralaward” . Enforcement of arbitral awards is a straightforward matter in almost all countries

across the world due to the 1958 Convention on the Recognition and Enforcement of Foreign
Arbitral Awards ( “New York Convention” )1）.

The reason why it is possible to accept that an arbitral award might be treated as having aneffect similar to that of a judgment of a national court is that the arbitrators can be expected

to be as independent, impartial and fair as domestic judges, and arbitral proceedings are
expected to be conducted with procedural fairness and to afford due process to the parties, as
is generally guaranteed in court proceedings. These expectations derive, at least in part, from

1）See, the UNCITRAL website: https://uncitral.un.org/. The number of parties to the New York Convention is 162(browsed on March 15, 2020).

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Setting Aside of Arbitral Awards under the Japan Arbitration Act—Recent Decisions by the Japanese Courts—

an overarching expectation that the country of the place of arbitration, i.e. the arbitration’ s
legal seat, supervises the arbitral proceedings to ensure their fairness. In principle, a petition

to set aside an arbitral award shall be filed only in a court of the country where the arbitration
had its legal seat and in which the arbitral award was made2）.

Each country generally has its own laws to govern arbitral proceedings taking place under

its jurisdiction; these laws will typically also set out the grounds for a party to the proceeding

to seek to have the arbitral award set aside—i.e., declared invalid. In Japan this law is the
Arbitration Act ( “AA” ), which derives from the 1985 version (not the 2006 version) of the

UNCITRAL Model Law. Promulgated in 2003, it provides the grounds for a Japan-seatedarbitral award to be set aside in its Article 44(1)3）.

The purpose of this paper is to analyze the current state of the law concerning the setting

aside of an arbitral award under Article 44 of the AA. In this paper, after introducing two

recent relevant decisions by Tokyo High Court, I will then assess the current state of the law
concerning the setting aside of arbitral awards in Japan.

Ⅱ．Recent Decisions
2.1. Tokyo High Court Decision of August 19, 2016(a) Summary of Facts

This case dealt with Article 44(1)(vi) and (viii) of the AA.

In this case, X filed a petition before Tokyo District Court to set aside an arbitral award

dated October 28, 2014, pursuant to an arbitration administered by the Japan Commercial
Arbitration Association (JCAA).

X is a Japanese company that sells the product of its parent company. In 2010, X concluded
2）See, Blackaby et al., Redfern and Hunter on International Arbitration, 6th ed. (OUP, 2015), para.10.05.
3）Article 44(1) of the AA reads as follows:“(1) If any of the following grounds exist, the parties may file a petition with the court to set aside the ArbitralAward:(i) the Arbitration Agreement is not valid due to the limited capacity of a party;(ii) the Arbitration Agreement is not valid on grounds other than the limited capacity of a party pursuant to the laws
and regulations designated by the agreement of the parties as those which should be applied to the Arbitration
Agreement (if said designation has not been made, Japanese laws and regulations);(iii) the petitioner did not receive the notice required under Japanese laws and regulations (if the parties havereached an agreement on the matters concerning the provisions unrelated to public order in such laws and regulations,said agreement) in the procedure of appointing arbitrators or in the arbitration procedure;(iv) the petitioner was unable to defense in the arbitration procedure;(v) the Arbitral Award contains a decision on matters beyond the scope of the Arbitration Agreement or of thepetition presented in the arbitration procedure;(vi) the composition of the Arbitral Tribunal or the arbitration procedure is in violation of Japanese laws andregulations (if the parties have reached an agreement on the matters concerning the provisions unrelated to publicorder in such laws and regulations, said agreement);(vii) a petition filed in the arbitration procedure is concerned with a dispute which may not be subject to an
Arbitration Agreement pursuant to the provisions of Japanese laws and regulations; or(viii) the content of the Arbitral Award is contrary to public policy in Japan.”Japan Commercial Arbitration Journal VOL.1［2020］51

a distributorship agreement ( “Agreement” ) with Y, which granted Y exclusive sales rights in
respect of the product in the United Kingdom and other regions. Key terms of the Agreement

were a minimum purchase quantity provision, and an arbitration clause calling for arbitration
under the auspices of the JCAA. In 2012, X terminated the Agreement, following which Y

submitted a request for arbitration to the JCAA, claiming that X had breached the Agreement
and seeking damages.

The arbitration was conducted in Japan by an arbitral tribunal consisting of a sole arbitrator( “Tribunal” ), using English as the language of the arbitration. The Tribunal applied Japanese law

as the governing law, in accordance with the Agreement. The Tribunal ultimately concluded, in its
Award rendered 28 October 2014, that X had breached its obligations under the Agreement, andordered X to pay to Y the damages resulting from X’ s breach of the Agreement.

X asked the Tokyo District Court to set aside the award, principally on two bases: that (i)the Award violated applicable mandatory law (such as EU Competition Law) and (ii) the

Tribunal had based its award on a misinterpretation of Japanese law. These infelicities, X
argued, constituted grounds for set-aside pursuant to Article 44(1)(vi) or (vii) of the AA (i.e.,
the provisions relating to arbitrability and public policy).

After the Tokyo District Court dismissed X’ s motion in the first instance4）, X appealed to

the Tokyo High Court.

(b) Summary of Decision

The Tokyo High Court dismissed X’ s appeal on the following grounds.

(i) X had asserted that the mandatory provisions of EU Competition Law and the Japanese Act

on Prohibition of Private Monopolization and Maintenance of Fair Trade (the “JapaneseA n t i t r u s t A c t” ) w e r e a m a t t e r o f p u b l i c p o l i c y i n J a p a n a n d t h a t , i n a n y e v e n t ,misinterpretation of Japanese law by the Tribunal should be considered contrary to the public
policy of Japan.

The Tokyo High Court found that whether the content of an arbitral award can be considered

contrary to public policy should be determined not based on whether the tribunal applied laws

and regulations that form part of the public policy of Japan, but based on whether thetribunal’ s application of those laws produces a result that is contrary to public policy;
therefore, the Tokyo High Court reasoned, a tribunal’ s failure correctly to apply thesubstantive law or any applicable mandatory law will not automatically constitute grounds forsetting aside of the award.

Applying that standard, the Tokyo High Court determined that (a) it could not be said thatthe mandatory provisions of EU Competition Law form part of the public policy of Japan, and(b) that the Japanese Antitrust Act could not apply because the exclusive sales rights underthe Agreement related to the markets of the United Kingdom and other (non-Japan) regions.

(ii) X had also argued that the Tribunal’ s allocation of the burden of proof in the Award wasincorrect as a matter of Japanese law, and that the Tribunal’ s mistake created grounds for
set aside under AA Article 44(1)(vi) or (viii).

4）Tokyo District Court Decision of February 17, 2016. See, 2016WLJPCA02176008 [Japanese only].

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The Tokyo High Court dismissed this argument as well, concluding that the allocation of theburden of proof as to substantive matters is substantive in nature, with the result that thistype of mistake, even if established, would not give rise to grounds for setting aside of theaward under (vi) or (viii).

2.2. Tokyo High Court Decision of August 1, 20185）(a) Summary of Facts

This case dealt with Article 44(1)(iv), (v), (vi) and (viii) of the AA.

In this case, X and Y had concluded a patent cross-licensing agreement ( “CL Agreement” )in February 2008. Under the CL Agreement, each of X and Y were permitted exclusive use of

the other’ s patents, with Y additionally to pay royalties to X. The CL Agreement was to be
governed by Japanese law, and contained an arbitration clause providing for the resolution of

disputes through arbitration under the Commercial Arbitration Rules of the JCAA ( “JCAA
Rules” ) seated in Tokyo.

After concluding the CL Agreement, X had a dispute with a separate company Z (which, forthe avoidance of doubt, was not a party either to the litigation under discussion here, or to
the underlying arbitration) concerning X’ s patents, which resulted in a settlement between X

and Z (the Settlement). Y then initiated an arbitration against X, asserting that the Settlement
was effectively a license and therefore violated Y’ s right to exclusivity under the CL
Agreement.

The arbitral tribunal ( “Tribunal” ) rendered an award ( “Award” ) ordering X to pay

damages to Y, and that Y was relieved of its duty to pay royalties.

Then X filed a petition for setting aside of the Award before the Tokyo District Court. The

District Court accepted the petition and set aside portions of the Award under Article 44(1)(viii) of the AA, because the Tribunal had omitted to decide an issue, such omission would
have been serious enough to affect the outcome of the case under the Japanese Code of Civil
Procedure, which caused the Award to infringe what the court considered to be Japaneseprocedural public policy6）.

(b) Summary of Decision

Y appealed to the Tokyo High Court, and the High Court revoked the portions of the District

Court Decision that had set aside the Award, holding as follows.

(i) The Tokyo High Court held that the standard for determining whether there has been aviolation of laws or regulations in an arbitration is not based on the Japanese Code of Civil
Procedure, but on the Arbitration Act, in particular its Article 267）, which refers to the rules of5）Kinyu Shoji (1551) 13 [2018]. As to the English translation of the case, Japanese Yearbook of International Law,
vol.62 (2019), p.462 [by Mathew Harnett].
6）Tokyo District Court Decision of March 28, 2018, Kinyu Shoji (1551) 24 [2018].
7）Article 26(1) of the AA reads as follows:“(1) The rules of an arbitration procedure which the Arbitral Tribunal should observe shall be as provided by theagreement of the parties; provided, however, that such rules shall not violate the provisions concerning public orderprovided in this Act.”

Japan Commercial Arbitration Journal VOL.1［2020］53

procedure chosen by the parties to the arbitration agreement (in this case, the JCAA Rules).

The fact that the arbitral proceedings may be inconsistent with the civil procedure law

applicable in the courts of the seat of arbitration is not, by itself, a violation of Article 44(1)(vi)of the Arbitration Act. This is because the Code of Civil Procedure does not apply (mutatis
mutandis or otherwise) to arbitral proceedings conducted by arbitral tribunals.

(ii) The Tokyo High Court further held that set-aside of an arbitral award is permitted only
where there are grounds as explicitly provided in Article 44(1) of the Arbitration Act. Thisapproach allows for set-aside when procedural guarantees (due process) in arbitration havenot been observed. In interpreting the provisions articulating the grounds for set-aside (Article
44(1)(i) to (viii)), it is not desirable to take an expansive or analogical interpretation, and it isappropriate to interpret them in accordance with the framework of the wording of the Article.

(iii) As to whether the petitioner was unable to present its defense in the arbitration (Article

44(1)(iv)), the Tokyo High Court held that although an award may be set aside where there
has been a clearly unfair proceeding, such as the arbitral tribunal (or arbitrators) actively

interfering with the party's opportunity to present its case or defense, set-aside is notavailable when there is mere dissatisfaction with deadlines, etc. (Article 31 of Arbitration Act
and Articles 36 and 49 of the JCAA Rules) determined by the arbitral tribunal. It is necessary

to ensure that the parties' costs are not inflated by prolongation of the proceedings, and there
is no need to give the parties an opportunity for endless arguments.

(iv) The Tokyo High Court further found that, as the parties had agreed that the JCAA Rules
would be the applicable procedural rules for the arbitration, it was appropriate for those rules

to govern procedural issues (unless their application were to violate public policy provisions inJapanese laws or regulations). Article 25 of the Arbitration Act provides that "(1) The parties
shall be treated with equality in an arbitration procedure. (2) The parties shall be given a fullopportunity to explain his/her case in an arbitration procedure” and Articles 44 and 45 provide
grounds for setting aside the arbitral award and grounds for non-recognition of the arbitralaward, respectively, as “the petitioner was unable to present its defense in the arbitration
procedure” and “the Arbitral Award contains a decision on matters beyond the scope of the

Arbitration Agreement or of the petition presented in the arbitration procedure” . If the award
were to contain any material in conflict with these provisions, the award may be set side,
regardless of the content of the JCAA Rules.

It should be noted here that the standard of interpretation of these provisions is not basedon the Code of Civil Procedure, but on the international standard of the basic principles to befollowed in civil dispute resolution proceedings such as arbitration. The international standard

is, after all, considered to be whether the principles expressed in Article 25 of Arbitration Act

were substantially guaranteed or not. The determination of whether there were substantial
guarantees is left to the wisdom and good sense of the legal profession and not to theelaborate hermeneutics of the domestic civil proceedings of the arbitral forum.

The legislative purpose of the Arbitration Act is to apply general standards (equal treatment,

guaranteed opportunity to explain the case) to individual cases and for judgments to be basedon the wisdom and common sense of lawyers, rather than to impose specific and detailed

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standards. In addition, an argument that would result in a request for substantive review ofan arbitral award should simply be dismissed on a simple wording (e.g., 'the claimant's

argument is, after all, a request for substantive review of the arbitral award and does notamount to grounds for revocation of the arbitral award').

Ⅲ．Some Comments
3.1 The Issues addressed by the Decisions

The points of signif icance in the 2016 Decision are: [1] the cour t found that “theinterpretation of the distribution of the burden of proof as to substantive matters issubstantive in nature” and therefore such an issue cannot constitute a violation of the laws

and regulations of Japan for the purposes of Article 44(1)(vi); and [2] the court found thatwhether the content of the arbitral award is contrary to public policy should be determined
not based on whether the tribunal applied laws and regulations that form part of the public
policy of Japan, but based on whether the tribunal’ s application of those laws produces a

result that is contrary to public policy, and therefore, an arbitrator’ s failure to apply thesubstantive law or any applicable mandatory law would not necessarily constitute grounds forsetting aside of the award with respect to "public policy" in Article 44(1)(viii) of the AA.

The 2018 Decision then clarified that [1] “the standard for determining whether there has

been a violation of the laws and regulations in an arbitration proceeding is not based on theJapanese Code of Civil Procedure, but on the Arbitration Act, in particular its Article 26” withrespect to whether "the arbitral proceedings” can be considered to have been conducted inviolation of the laws and regulations of Japan under Article 44(1)(vi); and that [2] “[t]heinternational standard is, after all, considered to be whether the principles expressed in Article
25 of Arbitration Act were substantially guaranteed” which is to be determined in accordancewith “the wisdom and good sense of the legal profession” .

3.2 Interpretation of “the arbitration procedure is in violation of Japanese laws andregulations” in Article 44(1)(vi)

Both decisions addressed the meaning of the wording “the arbitration procedure is inviolation of Japanese laws and regulations” used in Article 44(1)(vi) of the AA. Reading thedecisions together, we can glean several useful clarifications as to how the set-aside provisionsof the AA can be expected to be applied to challenges based on procedural failures within thearbitral proceedings.

Firstly, the 2018 Decision focused on the meaning of “Japanese laws and regulations” .

According to the 2018 Decision, even if an arbitration would (if it had been a Japanese court

litigation) fall under the grounds for retrial prescribed by the Japanese Code of Civil Procedure,such as due to an omission of a serious matter affecting the outcome of the case8）, this does

not mean that the arbitral award may be set aside. In other words, for the purposes of the8）See, Tokyo High Court Decision of March 13, 2012 which approved this approach.

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AA, “Japanese laws and regulations” does not encompass the Japanese Code of Civil
Procedure. Rather, the words of the AA should be interpreted autonomously within the AA.

This interpretation seems correct because arbitration is fundamentally different from litigation,
as the Tokyo High Court pointed out9）.

Secondly, in determining the meaning of the wording “in violation of Japanese laws andregulations” , the procedural principles in Article 25 of the AA—namely, that the parties to anarbitration are to be treated with equality and each to be afforded a full opportunity to present
its case—will be taken into consideration. In this point as well, the 2018 Decision seems to becorrect10）.

Thirdly, for a party’ s dissatisfaction with an arbitral award to give rise to grounds for set-aside under the AA, there must have been an underlying violation of a procedural nature. As
the 2016 decision observed, it was because of the substantive nature of the allocation of theburden of proof that the Tribunal’ s error on that point could not constitute grounds for setaside under Article 44(1)(vi)11）.

Finally, although a breach of procedure is a prerequisite, the mere fact that there has beena procedural breach is not enough to set aside the award under Article 44(1)(vi) of the AA.
The breach must be serious12）.

3.3 Interpretation of “public policy” in Article 44(1)(viii)

Both Decisions also dealt with the interpretation of “public policy” in Article 44(1)(viii), andprovided helpful clarifications on several points.

As a threshold matter, it is uncontroversial that, where Japan is the seat of arbitration, themeaning of “public policy” should be interpreted from the perspective of Japanese law. That
point is clear from the text of Article 44(1)(viii)13）.

In the 2016 Decision, the court confronted the argument that a violation of EU competition

law might constitute a salient public policy violation14）. Certainly, it is straightforward to argue

that competition law is considered a fundamental legal principle in many countries, with theresult that a violation of competition law may implicate public policy considerations, or evenfall within statutory provisions relating to set-aside or enforcement of arbitral awards on public
policy grounds15）. However, because the “public policy” to which Article 44(1)(viii) of the AA

9）See, supra 2.2 (b)(i) and (iv).
10）See, supra 2.2 (b)(iv).
11）See, supra 2.1 (b)(ii).
12）When the result of an arbitral award would be the same as if there had been no violation, the prevailing opinion
says that there is no need to set aside the arbitral award. See, N. Takasugi, "Defect in Determination of Applicable
Law to the Merits in International Commercial Arbitration and Annulment of the Resulting Award", in International
Public Policy Studies, vol.21 (2016), p.51.
13）The text of Article 44(1)(viii) mention “public policy in Japan”.
14）See, supra 2.1 (b)(i).
15）See, H. Kronke et al eds., Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on
the New York Convention (Kluwer, 2010), p. 382 et seq.; R. Wolff ed., New York Convention: Convention on the
Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 - Commentary (Beck, 2012), p. 435.

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refers is the public policy of Japan alone, only a violation of the Japanese Antimonopoly Act

could be at issue in set-aside proceedings under Article 44(1)(viii); a violation of foreigncompetition law is not, without more, a violation of the public policy of Japan. In this case, theJapanese Antitrust Law could not apply to the underlying Agreement, which had granted Sales

Rights in territories other than Japan; as a result, there could be no question of a violation ofJapan’ s Antitrust Law. Therefore, it is fair to say that the above claim by X lacked a basis,and the 2016 Decision’ s analysis on this point appears to be reasonable.

Secondly, “public policy” refers not just to rules of a substantive nature but also to those ofa procedural nature. This interpretation is the prevailing view in Japan16）. Internationally,

interpretation of Article 34 of the UNCITRAL Model Law (on which Article 44 of the AA isbased), ‘public policy’ has been generally consistent with that view17）. Both of the decisions
discussed in this article seem not to present a problem on this point.

Thirdly, although some academic commentators have taken the view that whether there

has been a violation of “public policy’ for the purposes of Article 44(1)(viii) of the AA ought todetermined according to the abstract question of whether or not relevant mandatory law has

been correctly applied in the arbitral award, the 2016 Decision clearly adopts the alternative

approach that it should be determined on the basis of the results flowing from the arbitralaward’ s application of mandatory law. The Decision’ s approach corresponds to the majority
academic opinion in Japan18） and seems in any event to be correct.

Ⅳ．Concluding remarks
Clear legal standards regarding the grounds for setting aside of arbitral awards are essential

for any jurisdiction that aims to achieve popularity as an arbitral seat. As the cases discussed
in this article signify, the circumstances in which Japanese courts might set aside an award fora defect in the underlying arbitral proceedings are becoming clearer, and will continue to doso as further judgments accumulate.

The ability of the local courts to carry out their supervisory function with respect to arbitralproceedings and awards is a critical factor in a jurisdiction’ s viability as a seat of arbitration.
The Japanese courts are among the most credible courts in the world, both in terms of ability

and integrity. This author is therefore optimistic that the Japanese courts will continue torender appropriate arbitration-related judgments in the future, and that confidence in Japanas a seat of arbitration will grow.

16）See, M. Kondo et al., Chusai-ho Commentar [Commentary on Arbitration Act] (Shojihomu, 2003), p.253.
17）See, UNCITRAL, 2012 Digest of Case Law on the Model Law on International Commercial Arbitration (2012),
Art.34, para.130 and the cases from various jurisdictions mentioned there.
18）See, Kojima & Inomata, Chusai-ho [Arbitration Law] (Nippon Hyoronsha, 2014), pp. 517-518.

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How Companies Can Prepare for Global Disputes inthe Era of Japan’s Work Style Reform
Attorney at Law, admitted in N.Y. and Japan/F.C.I.Arb.

Attorney at Law, admitted in Japan

Kasumigaseki International Law Office/International Arbitration Chambers

Orrick, Herrington & Sutcliffe LLP and Orrick Tokyo Law Offices, a gaikokuho joint enterprise

Yoshihiro (Yoshi) Takatori

Yumiko Ohta

Work Style Reform Law
For many years, Japanese labor laws went largely without reform. While businesses

continued to evolve, these laws remained premised on the traditional system of lifetime

employment and time-based wages. This has created entrenched labor issues, such as low
productivity, depressed wages, karoshi (death by overwork), power harassment (bullying),
forced unpaid overtime and the increased use of contingent employees (employees paid on anhourly basis, contract employees and dispatched workers).

To address some of the above issues, Japan passed legislation commonly referred to as the“Work Style Reform Law” ( “WSRL” ) in 2018. Below, we outline the main changes made bythis act.

1. MANAGEMENT OF WORKING HOURS- Upper Limit on Permitted Overtime Hours

Under the WSRL, absent a special agreement, overtime work is generally limited to 45

hours a month and 360 hours a year. Even where a special agreement is in place, it is limited

to 100 hours a month and 720 hours a year, with the average across multiple months not toexceed 80 hours. Here again, the law makes it clear that the monthly maximums should not
be often repeated.

- Required Awareness of Employee Work Hours

Under the WSRL, employers are required to be aware of employee work hours via statutorily

provided means (e.g., through direct observation or other objective means). This iscontradictory to the recent shift to performance-based work and is a huge challenge for many
companies.

- Introduction of “Highly Skilled Professionals” Exemption.

Under the WSRL, “highly skilled professionals” (HSPs) are exempt from regulations related

to work hours. An HSP is defined as any individual (i) whose work requires highly specialized
knowledge and is of a nature such that the amount of time worked and the work product are

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59

typically not highly correlated and (ii) who receives annual compensation of JPY 10.75 million

or more. The types of roles eligible to constitute HSPs are narrow and include developers offinancial products, broker-dealers, analysts, consultants and research and development
professionals.

2. FAIR TREATMENT OF EMPLOYEES, REGARDLESS OF EMPLOYMENT STATUS1）

The WSRL creates a prohibition on unreasonable disparity in treatment between regular andcontingent employees. The reasonableness of disparity in treatment must be consideredagainst the nature and purpose of such disparity. It is expected that contingent employees,
who made up over 38% of the entire employee population in 2019, will bring many lawsuits
for more wages and benefits based on this prohibition.

3. REINFORCEMENT OF THE PROTECTIVE ROLE OF INDUSTRIAL (COMPANY)
PHYSICIANS

Under the Work Style Reform Law, employers are obligated to: (i) provide industrial

physicians2） with information necessary for the proper management of the health of
employees; and (ii) report advice rendered by industrial physicians to the employer’s internal
health committee.

Anti-Power Harassment Law
Until 10 years ago, dismissals were by far the most reported claim for consultation andmediation to Japan’s local labor inspection offices. Over the past 10 years, however, claims inregards to “power harassment” have doubled, thus shooting it to the top of the claim list.

Power harassment is a kind of severe, institutionalized bullying that is difficult to understandwithout knowledge of Japanese societal and workplace norms. It has become quite common
for employees claiming unlawful termination to add power harassment claims against

individuals such as representative directors, direct managers and HR personnel. To prevent
power harassment in the workplace, on May 29, 2019, Japan passed a legislation commonlyreferred to as the “Anti-Power Harassment Law” 3）.

The Anti-Power Harassment Law defines “power harassment” as any action conducted byan employee at the workplace taking advantage of his/her superiority over others, which isbeyond the reasonable scope of work and harms the work environment4）. The most importantfactor in determining whether the alleged conduct constitutes power harassment is whether it1）Applicable to large companies starting April 2020 and to small and midsized companies starting April 2021.
2）Under the Industrial Health and Safety Work Style Reform Law, an employer must have in place an “industrial
physician” (a company doctor) for each place of employment with 50 or more employees employed from time to time.
Such industrial physicians may render advice to the employer on matters regarding the management of the health of
employees.
3）Applicable to large companies starting June 2020, and to small and midsized companies starting April 2022.
4）Article 30, Paragraph 2, Item 1 of Labour Policy Promotion Law.

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How Companies Can Prepare for Global Disputes in the Era of Japan’s Work Style Reformis beyond the reasonable scope of work. Japan’s Ministry of Health, Labour and Welfare issued

Guidelines for Power Harassment5） which define actions beyond the reasonable scope of work

as being those which (1) in light of social standards are obviously unnecessary in theperformance of duty, (2) are largely beyond the scope of work while being inappropriate in
the manner to achieve business objectives or (3) are beyond socially acceptable limits basedon frequency of improper behavior and the number of alleged harassers. This means thatbusiness instructions and negative feedback from managers that are objectively necessary

and are given in a reasonable and appropriate manner are not power harassment. However,

the media and information procured from social networking platforms often mislead people
into thinking that any action that makes employees uncomfortable is power harassment. Thisgap in understanding is creating claims and disputes as well as having a chilling effect onmanagers. This is not a healthy situation, so correctly understanding the scope of power
harassment is very important.

The Anti-Power Harassment Law obligates companies to take preventive measures as wellas to handle reported cases appropriately, using a similar framework as the laws against

sexual harassment in the workplace6）. Namely, employers must clarify what power harassment
is, establish a policy that they do not tolerate power harassment and notify and educate all

employees through measures such as provisions in their work rules, training materials, etc.

Further, employers must establish a written policy imposing strict measures against harassers.
This is typically done through revisions to the work rules. Employers must also clearly advise
and educate all employees of the new rules. In addition, employers must establish a hotline

and notify all employees thereof. As the individuals in charge of monitoring the hotline must

be well trained in dealing with questions related to employment law and privacy matters,
outside law firms are often retained by employers to run such hotlines.

Employers are obliged to take the following actions where an investigation confirms that an

employee has been a victim of power harassment:1) S upport the victim (for example, helping the victim to improve relationship with theharasser, providing support to the victim if he /she is suffering from mental illness,
providing consultation with regard to such employee’s mental health issues);

2) A ctions against proven harasser (for example, transferring the harasser to anotherdepartment, considering disciplinary action, making the harasser apologize to the victim);
and3) Proactive measures to prevent similar events (for example, distribute an anti-harassment
policy, further training).

As a workplace disciplinary action is considered to be rather drastic in Japan, under theJapanese labor laws, disciplinary actions are lawful and effective only when: (i) power

harassment is defined and disciplinary action for power harassment is clearly stated in thework rules or individual employment contracts; (ii) the action in question constitutes power5）“Guidelines Concerning Measures to be Taken by Employers in terms of Employment Management with regard to
Problems Caused by Power Harassment in the Workplace.”6）Article 30 of Anti-power Harassment Law.

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harassment and there is an applicable disciplinary action in the work rules or individual

employment contract; and (iii) a disciplinary action is socially appropriate and is not abusiveof rights. Unlike sexual harassment, power harassment is usually related to the performanceof duties, and it calls for difficult judgments as to whether a certain action should beconsidered power harassment. Thus, employers must always give opportunities to employees

accused of harassment so as to allow them to properly respond to the allegations lodged
against them.

Companies’ Obligations to Maintain a Safe Workplace and Mental Health Care
Article 5 of the Labor Contract Law creates a duty for employers to provide a safe andhealthy working environment to employees.

In Japan, the number of cases of employees claiming damages against employers for thebreach of such a duty has increased substantially. Cases where courts confirm that mental
illness is caused by alleged power harassment are still limited, but if an employee takes
administrative leave due to mental illness caused by power harassment, employers may nottreat them as having constructively resigned, even if they are unable to return to work at the
expiry of the administrative leave, and employers must support their returning to office as apart of such duty. As it takes time to receive recognition for occupational sickness or a
judgment from a court for power harassment, employers inevitably bear the risk of judging

whether such action is power harassment or not and, therefore, employers are advised toassist employees in returning to the office as much as practical, even if the conduct is not
likely to be considered power harassment.

To prepare for possible future disputes, employers should work with the employee todevelop a written “back to work plan,” which might include reassignment to a different

manager or group, gradual increase of responsibility, alterations to the volume of work andwork hours or assignment of a supervisor meant to oversee the employee’s work to ensurethat assignments are not excessively burdensome. Efforts must also be made to draft a Plan
B in case the “back to work plan” is not successfully implemented.

Note that employers are ultimately entitled to determine whether an employee is fit toreturn. When making decisions, however, employers should not simply rely on doctor’scertificates written by the personal physicians of relevant employees but should strive togather additional information where reasonable. This includes, for example, requesting areport from a consolation between both the industrial physicians and the personal physician of
the relevant employee, and in some cases, communicating directly with the family and friendsof said employee.

Mental illness can qualify as an occupational illness. In preparation for possible future claims

for occupational illness by employees and possible lawsuits for damages, employers must
keep all records of measures that they took.

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Enhanced Responsibility for Industrial Physicians
The WSRL strengthens two concepts: 1) industrial physicians’ industrial health care function;and 2) industrial physicians’ face-to-face guidance for employees working long hours.

Employers must provide industrial physicians with the necessary information in order forindustrial physicians to be able to appropriately manage the health of employees, including

the status of the work and working hours of employees. Employers must also report thecontent of the recommendations from the industrial physicians to the Safety and HealthCommittee ( “Committee” ), which must then take necessary measures to ensure the healthof their employees.

These amendments strengthen the relationship and collaboration between the industrial

physician and the Committee, and are meant to strengthen the protection of the safety andhealth of employees.

In light of the current COVID-19 pandemic, the assistance of industrial physicians increating a workplace environment that protects the safety and health of employees isparticularly important. Employers who do not take this seriously thus open themselves up to agreat deal of potential regulatory and legal liability.

Four Aspects of Compliance and Possible Liability for Corporations
Regarding compliance issues, four specific possible liability risks should be considered7）.

1- Civil liability, such as tort liability under Article 709 of Japanese Civil Code. For example, if
an employer fails in managing possible risks in relation to the COVID-19 pandemic or any

other workplace risk where causation is proved, employees, and, at times, even their families,
may be entitled to monetary damages.

2- Criminal liability, such as negligence. To illustrate, when employers fail to protect employees
from possible harm in contravention to the advice of their industrial physicians, suchnegligence may be beyond a criminal level.

3- Administrative liability, including possible sanctions imposed by government agencies suchas the Ministry of Health and Welfare, which has authority to put appropriate administrative

sanctions against corporations that do not implement due care in regards to the safety andhealth of employees in compliance with the relevant laws and regulations.

4- Reputational/Media Risk, such as negative press reports or general market views, has thepotential to be even more damaging than the negative effects.

Proper Utilization of Industrial Physicians
According to Article 14-3, provisions 3 and 4 of the Ordinance on Industrial Safety and

Health ( “Ordinance” ), employers must report the contents of the recommendations of7）Yoshihiro Takatori “20 Rules for Dispute Resolution between Corporations,” Chuo Keizai, 2012.

Japan Commercial Arbitration Journal VOL.1［2020］63industrial physicians to the Committee.

Based upon the above obligation and the strengthened role of industrial physicians to takecare of safety and health issues, including gathering environmental/medical information andrecommending any necessary/efficient countermeasures to employees and employers,

employers shall be liable for any failure to consult with, or follow the recommendations of,their industrial physicians in terms of the above four aspects of possible liabilities.

As the basis for such significant liabilities on employers, the Ordinance imposes specificrequirements on employers in respect of retaining industrial physicians and appointing theCommittee. Article 14-4 of the Ordinance requires employers to provide their industrial
physicians with the authority to:a) Provide opinion/advice to the employer or the Committee;b) Gather information from employees to implement necessary countermeasures for safety
and health; andc) Instruct/direct employees to conduct any necessary emergency countermeasures for theprotection of employees’ health.

Article 23 (5) of the Ordinance provides that the industrial physician shall have the power torequest the Committee to conduct discussions and related inspection in regards to theprotection of the health of their employees.

Additionally, Article 104 (1) to (4) of the Industrial and Safety Act ( “Act” ) provides that

employers shall make effor ts to consult with employees and implement necessar ycountermeasures to respond to any needs, so that industrial physicians can create anenvironment for further efficient activities and utilize their expertise to put in place appropriate
health controls for employees.

In order to maximize positive effects and encourage efficiency amongst industrial physicians,

it is important for employees to be aware of the role of the industrial physicians and themethods that are available to obtain helpful advice and information on safety and health.

Along these lines, Article 101 (2) of the Act provides that employers clearly advise andnotify employees of the duties, goals and responsibilities of their industrial physicians.

Cross-Border Dispute Resolution in JapanThe Japanese labor laws, including the Act, impose various mandatory obligations on

employers and they apply to Japanese affiliates of global companies. Section 6, Article 3-7 of
the Civil Procedure Code, allows for employees in Japan to bring lawsuits against employers inJapanese courts notwithstanding exclusive jurisdiction outside of Japan if it was agreed to in
the employment contracts. Thus, if employees choose Japanese courts, the above issues will
be resolved in Japanese courts.

While arbitration agreements for labor-related disputes directly between individual

employees and corporations are invalid under the Japanese Arbitration Act (by-laws Article 4),

civil disputes, such as claims for monetary damages due to the failure of an employer toproperly manage the safety and health of its employees through an industrial physician and

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How Companies Can Prepare for Global Disputes in the Era of Japan’s Work Style Reform

other required means, can be resolved through arbitration, especially in the case where both
employers and employees would prefer to keep the dispute confidential. Foreign parent

companies with Japanese affiliates, such as subsidiaries, should thus make an effort tofamiliarize themselves with both Japanese labor law and the procedural rules of Japanesecourts and Japan-based ADR mechanisms, such as JCAA arbitration and mediation. Note,however, that even though the governing law for these types of employment disputes must

be Japanese, the utilization of ADR mechanisms would allow parties to dispute flexibility as tothe ultimate place of dispute settlement.

From June 2020, disputes concerning power harassment can be resolved throughmediations by dispute resolution committees established at each prefecture’s Labour
Standards Bureau and by local Labour Standard Bureaus. These mediation bodies are capableof conducting investigations by interviewing alleged harassers and victims in private, and theuse of these mediation bodies could be useful for companies when employees refuse tocooperate with company-initiated investigations because of fear of retaliation. This can be an
efficient option for employment-related dispute resolution, or as an amicable solution even forcases involving cross-border aspects, such as foreign affiliated companies.

Japan Commercial Arbitration Journal VOL.1［2020］

65

Kasumigaseki International Law OfficeInternational Arbitration Chambers

Kasumigaseki Building, 23F, 3-2-5,
Kasumigaseki, Chiyoda-ku
Tokyo, 100-6023, Japan
TEL: +81-3-5157-1218

In addition to corporate/business rehabilitation, we have strengthened International
Arbitration/Mediation practice, by establishing International Arbitration Chambers. Including
both domestic and international dispute resolutions, we can provide best/efficient legal service
for large, middle, and small sized companies, on various commercial/civil area, such as
intellectual property, anti-trust, product liability, compliance investigation and cyber-securities.
Not only representing our clients for international/domestic ADR and cross-border litigations,but also we can be appointed as arbitrator/mediator, which is quite unique service in Japan.

Shinichiro(Shin) Abe
Attorney at law, admitted to Japan

Yoshihiro(Yoshi) Takatori

Kiyotaka MatsuiAttorney at law, admitted to N.Y. and Japan
Arbitrator/Mediator, F.C.I.Arb.

Attorney at law, admitted to Japan

Orrick, Herrington & Sutcliffe LLP,
Orrick Tokyo Law Offices,a gaikokuho joint enterpriseWith over 25 offices worldwide, we are a modern, inclusive, global law firm serving
the Technology & Innovation, Energy & Infrastructure and Finance sectors.
Orrick’s International Dispute Resolution and Arbitration practice handles complex
commercial disputes and has a long track record in numerous venues undermany laws and arbitration/mediation rules. The Tokyo team of lawyers and legal
professionals provides clients with comprehensive legal services in both English
and Japanese in various jurisdictions through our global platform.
Izumi Garden Tower, 28th floor, 1-6-1 Roppongi, Minato-ku,
Tokyo 106-6028, Japan
Email: Orrick_Tokyo@orrick.com
Phone number: 03-3224-2900
AMERICAS | EUROPE | ASIA

orrick.com

JIMC-KYOTO —An Attractive Option for International
Mediation
Vice President, the Japan Association of Arbitrators Chief Director, the Japan International Mediation Center in Kyoto

Haruo Okada

I．Introduction
International mediation is attracting worldwide attention as an effective means of dispute

resolution. In November 2018, the Japan International Mediation Center in Kyoto (JIMC-

Kyoto)1） was established in the city of Kyoto, Japan, by the Japan Association of Arbitrators(JAA), a public interest incorporated association. Traditional Japanese culture has a highaffinity for mediation. Against this background, JIMC-Kyoto provides mediation services in
Kyoto, a symbolic city known for its traditional Japanese culture. JIMC-Kyoto offers both

“software” and “hardware” consistent with global standards of mediation practice. In thisarticle, the Chief Director of JIMC-Kyoto introduces some of the features and fascinating
aspects of international mediation in Kyoto administered by JIMC-Kyoto.

Ⅱ．Background to the Establishment of JIMC-Kyoto
1. International Mediation is Gathering Global Attention

Mediation is a voluntary process whereby parties to a dispute select an independent andimpartial third person (mediator) to assist them with their negotiations.

Mediation can be extremely effective not only for domestic disputes, but also forinternational commercial disputes. For a long time, the primary method of resolving

international commercial disputes has been international arbitration. In the future, acombination of international mediation and international arbitration may well become themainstream. A clear advantage of mediation is that it costs far less and can be completedmuch faster than arbitration. The disputing parties also have control of the process, because
they, not the mediator, will decide whether to settle their dispute. Mediation is also lessadversarial than arbitration (which is very important to maintaining business relationships),and it makes a win-win solution possible by focusing on the common interests of the parties.
1）https://www.jimc-kyoto.jp/

Japan Commercial Arbitration Journal VOL.1［2020］67

From this perspective, positive-sum results are possible, compared to the zero-sum result ofadversarial proceedings that yield a winner and a loser.

Mediation enjoys a high success rate with the participation of experienced and highly skilledinternational mediators. Asian jurisdictions, including Singapore, Hong Kong (SAR), Malaysia,
Korea, and mainland China, are eagerly putting infrastructure in place with the goal of

becoming hubs for international mediation. Examples of established dispute resolution centersthat offer international mediation services in Asia are the Singapore International Mediation
Centre (SIMC) and the Hong Kong International Arbitration Centre (HKIAC).

On August 7, 2019, a signing ceremony for the Singapore International Commercial

Mediation Convention was held, marking a significant step in the internationalization ofmediation. The Convention aims to grant international enforcement power to settlementagreements reached via international commercial mediation with similar effect to the New

York Convention for arbitration. The number of signatories has gradually increased since then,and, at the time of publication of this article, 52 countries, including the United States, China,
India, Singapore, and South Korea, have signed the Convention.

The signing ceremony of the Convention was a symbolic and historic event that marked amajor shift in attitudes toward the mediation of international commercial disputes. It may not

be too bold to suggest that international mediation is gaining traction as a principal method ofresolving international commercial disputes.

2. Traditional Japanese Culture Has a High Affinity with Mediation

The spirit of mediation is inherent in Japanese culture, whose origin can be traced back to

the Seventeen-Article Constitution of A.D. 604, said to be the first constitution of Japan. The
first article provides “Cherish the harmony among the people.”

Mediation has long been used to resolve a wide range of disputes in Japan. Domestic

mediation practice has developed to meet the expectations of domestic Japanese parties.
JIMC-Kyoto draws on this tradition of mediation while offering mediation services consistent
with global standards of mediation practice.

Before JIMC-Kyoto was established, Japan did not have the needed infrastructure to support

international mediation. It lacked the “hardware,” such as dedicated facilities, as well as the“software,” such as an international panel of mediators. With international mediation gaining

traction in the world, JIMC-Kyoto was established to fill this void in November 2018 as Japan's
first permanent organization specializing in international mediation.

Ⅲ．Attractive Features of Mediation at JIMC
JIMC-Kyoto enables international mediation by supplying the necessary hardware andsoftware infrastructure in line with international standards in the city of Kyoto.
1. Setting in Kyoto - Why Kyoto?

Settlement is most likely when disputing parties are committed to the mediation process.

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JIMC- KYOTO – An Attractive Option for International Mediation

Mediations can normally be completed in a short period of time, often one or two consecutive
days. It is critical that mediations be held in the right environment. The venue should beneutral and, ideally, away from outside distractions. The right venue will encourage parties tocommit themselves fully to the process.

Kyoto is the ideal international mediation venue for these reasons. The peaceful atmosphereof the city – with its gardens, temples, and shrines – creates a favorable atmosphere foramicable negotiations. This will give mediation the greatest opportunity of success.

Kyoto benefits from easy access to foreign and Japanese parties alike. The rail network inJapan is considered by many to be the most reliable, frequent, and comfortable in the world.
The Kyoto city center is connected directly by high-speed train to Kansai Airport in Osaka.

Kyoto is an attractive and safe tourist destination with excellent accommodations, food, andtransportation services.

2. Hard Infrastructure (Facilities)(a) Doshisha University

JIMC-Kyoto benefits from the support ofDoshisha University. The JAA (on behalf of
J I M C- Kyo t o ) s i g n e d a m e m o ra n d u m o f

understanding with Doshisha that gives
mediation parties access to excellent

Doshisha University

facilities, including private rooms for parties,
printing facilities, and mediation rooms, oneof which contains a simultaneousinterpretation booth. There are also onsite

cafes and restaurants that offer diverse
global cuisine. These facilities match thequality of other leading dispute-resolution
centers and are offered at an extremely low

Interpretation Booth

cost.

Doshisha University is located in the centerof Kyoto, a short distance from the central
Kyoto train station. The wooded campus,

j u s t a c r o s s t h e s t r e e t f r o m t h e Ky o t oImperial Palace, is beautiful, calm, andremoved from bustle and distraction.

Mediation Room(b) Kodai-ji

A unique feature of the mediation

administered by JIMC-Kyoto is the option of
conducting mediation at temples and shrines
in Kyoto. Temples and shrines have been

historically important venues for resolving

Mediation and Party Rooms

Japan Commercial Arbitration Journal VOL.1［2020］69

disputes. Kodai-ji, a temple located at ashort distance from the central train station

at the foot of the mountains, is now available
as a mediation venue. Kodai-ji wasestablished in 1606 and is renowned for its

Buddhist architecture and gardens. Rooms in
the temple can be used for mediation. JIMC-

Kyoto is working to secure similararrangements with other area shrines andtemples.

3. Soft Infrastructure(a) Mediator PanelMediators are the key to a successful mediation. JIMC-Kyoto is very proud to have an

excellent mediator panel with a highly experienced, diverse group of mediators. Currently, we

have 51 non-Japan resident mediators from various jurisdictions across the world in addition

to approximately 70 Japan resident mediators. Please refer to JIMC-Kyoto’ s website fordetails.

The international composition of the panel has been acknowledged by leading commentators.

In Nadja Alexander and Shouyu Chong (eds)’ s “The Singapore Convention on Mediation: A
Commentary (Kluwer Law International, 2019),” a leading commentary on the Singapore
Convention, JIMC-Kyoto is cited as one of three institutions with an international and diverse
panel of mediators, together with the ICC and SIMC.
(b) Mediation Rules

JIMC-Kyoto has published mediation rules that are consistent with global standards. They

are suitable for use in mediations of all sizes and degrees of complexity. Please refer to JIMCKyoto’ s website for details.

Consistent with global standards, the rules protect confidentiality. Information relating to

the mediation, party statements, and documents are protected from disclosure in any
subsequent proceedings, including litigation or arbitration. This confidentiality requirement

contributes to the high success rate of international mediation. Without the assurance of strict
confidentiality, parties would not be able to speak freely to the mediator and might even avoid
mediation altogether.

(c) Expedited Procedures

Procedural details, including deadlines, are provided in the mediation rules. We expect themediation process for most mediations to be completed within three months from the initial
filing.

(d) System Design for “User-friendly” Procedures

JIMC-Kyoto features inexpensive and predictable costs. For example, the filing fee is JPY

50,000, and the administrative fee (including facility use) is JPY 100,000 (per party), if theamount of the dispute is JPY 20,000,000 or below, and JPY 150,000 (per party), if the70

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JIMC- KYOTO – An Attractive Option for International Mediation

amount of the dispute is JPY 20,000,000 – 100,000,000.

JIMC-Kyoto facilities can also be used for ad-hoc mediations not administered by JIMC-

Kyoto.

Please refer to JIMC-Kyoto’ s website for details.

(e) Organization Specializing in Mediation

JIMC-Kyoto is dedicated exclusively to mediation and does not administer arbitration

proceedings. Hybrid dispute mechanisms, including “med-arb” (i.e. mediation followed byarbitration if the mediation does not resolve all claims), can be provided in dispute-resolution

clauses or otherwise agreed by disputing parties. Mediation under JIMC-Kyoto’ s auspices canbe paired with ad-hoc arbitration or arbitration administered by any institution. This option is
not limited to Japanese institutions, such as the JCAA, but extends to foreign institutions, suchas the SIAC or the ICC.

The JIMC-Kyoto mediation rules provide that mediators will not act as arbitrators unless the

disputing parties clearly agree otherwise. This default provision is consistent with international

mediation practice. It is intended to encourage disputing parties to speak freely and openly
with their mediator without concern that their statements could later be used against them,should the mediator be called on to decide the underlying claims as an arbitrator. Parties whowish to have the same person act as mediator and arbitrator may agree to derogate from thisrule.

3. Operating Organization of JIMC-Kyoto

JIMC-Kyoto is operated by the JAA, a public interest incorporated association, with members

who are legal practitioners, scholars, businesspeople, and others familiar with international
alternative dispute resolution. JIMC-Kyoto also enjoys the support of prominent international
advisors.

Ⅳ．JIMC-Kyoto Mediation Alternatives
Mediation can be used alone or in combination with other dispute resolution mechanisms,

including arbitration.

1. Providing for Mediation Alone

Parties may wish to agree to mediation as a stand-alone procedure. This can be achieved byincluding a mediation clause in a contract or by concluding a mediation submission agreement

after a dispute has arisen. The advantage of an agreement to mediate without a corollaryagreement to arbitrate is that it may be easier to reach agreement by mediation alone. This isparticularly true after a dispute has arisen. Mediation is comparatively inexpensive andefficient. The parties have no obligation to settle their dispute by mediation, and either party
may end the mediation proceedings at any time. By contrast, the preferences of parties about

arbitration are unlikely to be the same. Parties may have different ideas about the choice oflaw, the place of arbitration, and administering institutions. This will make it more difficult toJapan Commercial Arbitration Journal VOL.1［2020］71

agree on the terms of an arbitration clause in a contract than on a stand-alone mediation

clause. Once a dispute has arisen, the problem of agreeing to arbitration is exacerbated,because the goodwill between the parties is likely to have broken down.
JIMC-Kyoto’ s model clause for mediation alone is as follows:
Model clause for using mediation alone for use in contracts“All disputes, controversies or differences which may arise between the parties hereto, outof or in relation to or in connection with this contract shall be first submitted to Japan
International Mediation Center in Kyoto (the “Center” ) for resolution by mediation inaccordance with the Mediation Rules of the Center.”Model clause for using mediation alone after a dispute arises“The parties hereby agree to submit the following disputes between the parties to Japan

International Mediation Center in Kyoto (the “Center” ) for resolution by mediation inaccordance with the Mediation Rules of the Center.
[Description of the disputes] ”

2. Providing for Mediation and Arbitration

Mediation and arbitration are not “either-or” processes but can work together. Where parties

can agree, it may be preferable to include a dispute resolution provision in a contract thatprovides for both mediation and arbitration. This commonly takes the form of an escalation
clause, which provides for arbitration if mediation fails. An escalation clause will ensure thatparties commit themselves to mediation before arbitration.

As mentioned above, parties may combine JIMC-Kyoto mediation with ad hoc arbitration or

arbitration under any institutional rules, not just the rules of Japanese institutions.
JIMC-Kyoto’ s model clause for med-arb is as follows:
Model clause for med-arb for use in contracts“All disputes, controversies or differences which may arise between the parties hereto, outof or in relation to or in connection with this contract shall first be submitted to Japan
International Mediation Center in Kyoto (the “Center” ) for resolution by mediation inaccordance with the Mediation Rules of the Center. If the dispute has not been settled

pursuant to the said Rules within 60 days following the filing of a Request for Mediation orwithin such other period as the parties may agree in writing, such dispute shall thereafter be

finally settled by arbitration in [name of city and country], in accordance with [name of
Arbitration Rules] [e.g., the Commercial Arbitration Rules of the Japan Commercial Arbitration

Association; the Rules of Arbitration of the International Chamber of Commerce; or the
UNCITRAL Arbitration Rules then in force].”

Ⅴ．Conclusion
Japan has a culture and history that are highly compatible with mediation. Building on thisfoundation, JIMC-Kyoto was established as a permanent institution to administer global
standard mediation in Kyoto, the symbolic city of Japanese tradition. JIMC-Kyoto has excellent

72Japan Commercial Arbitration Journal VOL.1［2020］

JIMC- KYOTO – An Attractive Option for International Mediation“hardware” and “software” to support the mediation process in line with international

standards. JIMC-Kyoto offers administered mediation and ad hoc mediation services and canaccommodate hybrid processes that incorporate mediation and arbitration. As such, JIMCKyoto seeks to be an attractive choice for international mediation involving Japanese parties
as well as foreign parties with no connection to Japan.

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73

The ADR Act —Purpose, Actual Situation and Future

Professor of Law, Hitotsubashi University

Kazuhiko YamamotoⅠ

Introduction

The purpose of this article is to explain the purpose, actual situation and future of the Act

on Promotion of Use of Alternative Dispute Resolution (Act No.151 of December 1, 2004)(hereinafter “ADR Act” or “Act” ). This Act came into being as one of the results of the

discussion regarding comprehensive reform on the judicial system at the end of the last
millennium. After more than 15 years’ practice of this Act, now is an appropriate time to
discuss its meanings and limits.

This article starts with the background of ADR in Japan before the introduction of the Act(see II) and continues with its legislative history (see Ⅲ). It further explains the purpose andcontents of the Act (see Ⅳ) and focuses on its actual situation and problems (see Ⅴ). Finally
it provides some comments on the future of the Act and the Japanese ADR system (see Ⅵ).
Hopefully this article can contribute to further understanding of Japanese ADR.

Ⅱ

Situation of ADR in Japan before ADR Act

The merits of ADR are now generally recognized in Japan. As compared with the mutual

negotiation between parties in conflict, ADR, through intervention of a neutral third party,
may provide the parties with more neutral and fair proceedings, especially for a weak party.

Dispute resolution providers can rebalance the inequality between parties by caseadministration. When compared with court proceedings, ADR may provide a simpler, more
rapid, cost-effective, flexible and confidential proceeding. These merits are very important as

Japanese civil procedures are known as complex, long, expensive, rigid and open to the
public.

Despite these unignorable merits, the ADR system was not well-developed in Japan for along period of time. Looking back on the history of Japanese ADR, early development of

judicial and administrative ADR (public sector ADR) shaped the characteristics of our ADR

system. Judicial ADR, referring to conciliation at court, was first implemented in 1922 and74

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The ADR Act – Purpose, Actual Situation and Future

soon expanded to many types of conflicts. Administrative ADR developed in post World War Ⅱ
Japan, where the presence of the administration was stronger. Up to the end of the lastcentury, public sector ADR played a leading role in Japan.

On the other side, private ADR institutions were established on a patchwork basis, many ofwhich did not go well. Many problems are attributable to this malfunction: limited publicity,
scarce providers, insufficient funding, defective legal rules, etc. These problems were so
intricately intertwined that it was significantly difficult to solve them and to promote private
sector ADR in Japan.

Ⅲ

Legislative History of ADR Act

The turning-point was the discussion of judicial reform which began in 1999. This discussion

took place in the Council of Judicial System Reform (CJR) which concerned the entire judicial

system in Japan including ADR. The final report of CJR in 2001 stated that ADR was expected

to be an attractive and real alternative to the civil procedure for constructing an efficient civil
justice system in Japan. The CJR report called for fundamental reform of the legal system forthis purpose.

To this end, the Japanese Government established 11 working groups, one of which was the

ADR working group. It consisted of 11 members with various backgrounds (the author was

one of the members) and devoted to the reform of the ADR legal system. It took the groupmore than three years to finalize a concrete plan of reform. The biggest issue in the discussion
was for which type of ADR a new legislation was needed. As set out in the sections that
follow, the conclusion of this discussion was to create a certification system for ADR providers.

After presentation of the report by the working group, a bill was submitted to the Diet by

the Government and was approved in 2004. The Government carefully prepared for theenforcement of the Act and on April 1st of 2007, the ADR Act finally came into effect after
nearly 10 years’ discussion.

Ⅳ

Purpose and Contents of the ADR Act

The purpose of the ADR Act is stipulated in Article 1. This article recognizes first of all that

ADR has become an important means of dispute resolution in Japanese society and defines
ADR as “procedures for resolution of a civil dispute between parties who seek, with the

involvement of a fair third party, a resolution without using litigation” . It then establishes theoverarching purpose of the Act is to enable parties to choose the most suitable method for

dispute resolution. To achieve this purpose, the ADR Act is divided into two parts: the generalpart of the Act and the part addressing certification issues.

The general part has great significance because it clarifies the purposes, basic concepts andprinciples of ADR for the first time in Japanese history. This part is applicable not only toprivate sector ADR but also to public sector ADR. Article 2 defines key concepts of this Act:
private dispute resolution procedures, dispute resolution providers, certified dispute resolution

Japan Commercial Arbitration Journal VOL.1［2020］75

procedures and certified dispute resolution business operators. Article 3 lays down the basic

principles of ADR: legitimacy, fairness, voluntariness, swiftness, specialty and flexibility.
Among these principles, the principle of legitimacy is often debated and sometimes criticized.

It is my understanding that this principle does not mean strict conformity with law, but simply

means exclusion of clearly illegal resolution. This principle should be read in light of Japanesedispute resolution history where anti-social groups often intervened in this field and led toillegal resolution. Article 4 declares the responsibilities of the government were to research

and analyze domestic and foreign ADR procedures as well as to provide relevant information

to promote public awareness of ADR. It manifests the recognition of legislators that theGovernment plays a critical role in promoting ADR in Japan.

The part addressing certification issues provides for standards, procedures and effects ofpublic certification of ADR operators. While giving some legal effects that are equal to judicial

procedure to ADR is indispensable to promote ADR, it is impracticable to give such effects toall resolutions made by various ADR operators. Consequently, it is essential to certify the ADR
operators which fulfil the minimum requirements, and legal effects should only be given to

their resolutions. According to the Act, to be certified, ADR operators shall apply to the
Minister of Justice (Articles 5 and 8). Only those operators who satisfy the standards (Article6) and are not disqualified (Article 7) can obtain certification after certain procedures (Articles

8 – 13). Some obligations are imposed upon certified ADR operators: adequate explanation to
ADR parties (Article 14), prohibition of use of crime group members (Article 15), preservationof procedure records (Article 16), etc. Certification is accompanied with certain legal effects:
renewal of prescription (Article 25), suspension of legal proceedings (Article 26), exemption ofsome obligations to use conciliation before bringing litigation (Article 27), and permission ofreceiving fees and remunerations for services provision (Article 28). The last effect is of great

importance, because provision of remunerated legal services by non-lawyers is strictly

prohibited and punished in Japan by Article 72 of the Attorney Act. This prohibition has
restrained the activity of ADR in the private sector for such a long time that this exception
admitted in the ADR Act has opened up new possibilities for Japanese ADR.

Ⅴ

Actual Situation and Problems of the ADR Act

Regarding the actual situation of Japanese ADR, the overall utilization of ADR is still low, but

ADR work relatively well in some areas. For example, financial ADR handles more than 1,000

cases every year, and 30 to 40% of which are successfully settled. Similarly, the nuclear
accident ADR which was established after the 2011 Fukushima nuclear power plant accident
handled more than 5,000 cases in its most active year. However, two points must be raised.

One is that this number is still small when compared with that of judicial ADR, namely court

conciliation. In the judicial conciliation system in 2018, 34,019 cases were registered, and

57% of which were successfully conciliated (28% were concluded without conciliation and
13% were withdrawn). As these statistics demonstrate, even today public sector ADR still has
overwhelming presence in Japan.

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The ADR Act – Purpose, Actual Situation and Future

Furthermore, the current situation of ADR gives us some insight of the direct effect of the

ADR Act. At the end of 2019, 158 certified ADR operators were active, and 1,071 cases had

been registered. 36% cases were successfully conciliated (30% were refused by another party
before the commencement of the process, 23% were concluded without conciliation and 11%

were withdrawn). That is to say, the rate of success was up to 51% (excluding cases wherean opposing party refuses to commence the process). In regard of the duration of process,
50% cases were resolved in less than three months, and 74 % in less than six months.

The ADR Act has achieved three positive results. The first is the increased number ofcertified ADR operators. 158 operators would have been unthinkable without this Act. On topof that, these private ADR operators are handling cases of diverse areas: medical, border,

environment, sports, housing, pet, etc. Conflicts in most of these areas would have been left

unresolved in the absence of the ADR Act. The third achievement is the high quality ofcertified ADR. The rate of success (after acceptance of the procedure by opposing parties) isalmost equal to that of judicial ADR, and the procedure is speedy. Most users of ADR are
satisfied with the provided services as user surveys show.

However, three significant problems still exist in the certification system. The first problem

is the limited number of cases handled by private sector ADR. A thousand cases a year is only

one thirtieth of that of judicial ADR. In addition, most cases are resolved by a few specific
ADR operators, and 83% of certified operators are handling less than five cases per year.

Another issue is that ADR supported by professional or industry group takes up an absolutemajority and the true private sector is a minority. In other words, certified ADR is half-public,

and the ADR Act is not adequate to enhance pure private ADR sector. The last problem is the
low rate of acceptance of the procedure by opposing parties. It is not an obligation to accept
ADR procedure, but in order to fully utilize ADR, efforts have to be made to enhance theacceptance rate.

On the whole, the ADR Act has achieved its purposes to some extent, but it is just halfway

to its final goal.

Ⅵ

Future of the ADR Act

To improve the above-mentioned current situation of Japanese ADR, several proposals forthe reform of the ADR Act have been made.

The most comprehensive proposal was the one submitted by the Japan ADR Association(JADRA) to the Minister of Justice in April 2018. This JADRA report titled “Proposals to Reform
ADR Act” puts forward 15 radical points of reform. What follows will outline the principal
proposals.

Concerning the general par t of the Act, the JADRA repor t proposes to make theresponsibilities of the Government clearer. At present, the Act sets forth responsibilities about
research and information, but this report suggests to extend the governmental responsibilities

to educate conciliators and to enhance the cooperation between the courts and ADR
providers, etc. In addition, the JADRA report urges financial support to ADR providers by theJapan Commercial Arbitration Journal VOL.1［2020］77

government. Considering the financial challenges faced by private sector ADR, such support
seems to be essential, but it is difficult to convince tax payers that this is the case.

Concerning the part dealing with certification, the JADRA report also presents several

reform proposals. One is to enable the court to suggest the parties to use the ADR process. If
the parties of litigation do not know of the ADR system, the court may advise them ofalternative dispute resolution which is more favorable not only to the parties but also to thesociety as a whole. Additionally, because obligation to negotiation is now accepted in several
ADR like financial ADR and the nuclear accident ADR that operate relatively well among
Japanese ADR, the JADRA proposes to obligate ADR parties to accept negotiation.

The most important proposal of the JADRA report is to enforce the ADR settlement.

Currently, an ADR settlement is not enforceable. If a party does not abide by a settlement,
another party has to bring litigation before the court. Such approach largely lessens theattraction of ADR, especially taking into account that the settlement of judicial ADR isenforceable as a matter of course. Without enforceability, lawyers cannot advice their clientsto opt for ADR with confidence. For this reason, the JADRA report calls for a new scheme inwhich a party can obtain court exequatur that makes a settlement of ADR enforceable. This
scheme will lighten the burden of ADR parties to obtain enforceability and to enhance the useof private sector ADR.

Ⅶ

Conclusions

The CJR report should be reaffirmed as the origin of the ADR Act, which identifies that “ADR

shall be an attractive alternative to court litigation” . This proposal is still meaningful even in
today’ s context, therefore the ADR Act should be improved progressively and the JADRA
proposals should be carried out as rapidly as possible.

In the near future, the Japanese ADR system might face some external factors that canhave considerable impact on it. First, Japan will soon have to decide whether to ratify theSingapore Convention that enables an enforceable transnational commercial conciliationagreement. If this Convention was ratified, the problem of enforceability of domestic ADR
settlement, which is an outstanding issue of the ADR Act, could presumably be solved.

Second, attention should be given to the impact of the Online Dispute Resolution (ODR) trend.
For example, eBay is said to resolve 60 million conflicts all around the world per year by ODR.
This figure is striking for Japan where only 500,000 litigations are brought to the court per
year. The Japanese government has just started the discussion to enhance ODR which will
surely have a huge influence on the entire landscape of ADR before long.

2019, the first year of the Reiwa era, started a new epoch for Japan. Japanese ADR may

also see a new epoch. A close eye should be kept on the development of ADR in Japan.

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Japan Commercial Arbitration Journal VOL.1［2020］

An Introduction to Japan International Dispute
Resolution Center
Executive Director & Secretary General of JIDRC (Japan International Dispute Resolution Center), Professor of Law at Rikkyo University, Partner at Uryu & Itoga

Yoshihisa Hayakawa

Ⅰ．Japan as Seat of Arbitration
Domestic Japanese commercial disputes are often resolved throughnegotiated settlements. Where, however, settlement is impossible, suchdomestic disputes are usually effectively resolved via the Japanese courts y s t e m . W h e n d e a l i n g w i t h i n t e r n a t i o n a l d i s p u t e s , h o w e v e r,

jurisdictional issues often arise, and, partly as a result, the use ofinternational arbitration has emerged as a means of avoiding suchdisputes within a dispute.

When negotiating international arbitration clauses for contract

inclusion, Parties often differ on their preferred arbitral seat. Often the

Party with the upper-hand in the negotiations is, however, differed towhen making this decision. Other times, the Parties draft their dispute

resolution clause hastily and without much thought, as they are instead

concentrating on the primary focus of the contract. Though many international arbitrations

involve Japanese parties, and Japan is often in the stronger negotiating position, Japan israrely selected as a seat of arbitration. Often arbitration clauses proposed by the non-Japanese Party are used “as-is” without much consideration in regard to the designation of
the seat of arbitration due to lack of expertise or experience in international arbitration.

Additionally, many pundits have pointed to Japan’ s historical lack of a state of the art
arbitration facilities, such as Maxwell Chambers in Singapore, as well as a general lack ofinternational arbitration professionals residing in Japan.

Ⅱ．Recent Changes
In furtherance of their mandate to investigate Japan’ s positioning in the sphere ofinternational ADR, in June of 2017 the Research Commission on the Judiciary System ofJapan’ s governing Liberal Democratic Par ty (the LDP Commission) proposed theJapan Commercial Arbitration Journal VOL.1［2020］79

establishment of a Japan based international arbitration center. In that very same month theGovernment of Japan (GOJ) announced its Basic Policy on Economic and Fiscal Management

and Reform which declared the development of a foundation to build up and encourageinternational arbitration would be considered to be of great policy importance. Along said

policy directive, in 2018 and 2019 the LDP Commission further proposed to have the country
expeditiously move forward in strengthening its position globally in regard to ADR.

Additionally, in April 2018 a GOJ panel representing several different Ministries and Agencies

published an interim report which encouraged cooperation between both the public andprivate sectors in the development of Japan based specialized personnel such as arbitratorsand practitioners while also calling for action to increase awareness of the GOJ’ s goals
amongst domestic Japanese corporates, as well as the international community at large.

Ⅲ．The Establishment of Japan International Dispute Resolution Center (JIDRC)
On the basis of the above, Japan International Dispute Resolution Center (JIDRC) wasestablished – at least on paper- in February 2018.In May 2018, a pilot project utilizing
commercial space in the Nakanoshima Godo Chosha district of Osaka commenced, whichallowed for the holding of seminars, as well as arbitration hearings.

It can be used, in principle, on weekdays: Morning Set: from 9:00am to 1:30 pm, and/or

Afternoon Set: from 1:30 pm to 6:00pm. The service charges per four and half hours for theuse of the facilities are: Main room: 50,000 JPY, Medium room: 10,000 JPY and Small room:

5,000 JPY. It is easily accessible to Kansai International Airport and Osaka International
Airport.

Furthermore, the Ministry of Justice (the MOJ) gave the JIDRC a five year mandate, startingin 2019, to investigate means of cooperating with other international arbitral organization

while encouraging the development of Japan based world class arbitration personnel with thegoal of forwarding Japan’ s positioning in the international ADR sphere.

Ⅳ．Tokyo Facilities for Arbitration Hearing of JIDRCThe Tokyo Facilities for Arbitration Hearing of

JIDRC have already been established in Toranomon,

To k y o a s t o p l e v e l f a c i l i t i e s e x c l u s i v e l y f o rinternational arbitration and ADR in the world, which
may be used, in principle, everyday: Morning Set:

from 9:00am to 1:00 pm, Afternoon Set: from 1:00
pm to 5:00pm and/or Evening Set: from 5:00pm to9:00pm.

The facilities are equipped with the latest

conferencing technology available for international

arbitration hearings at a reasonable price, such as

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An Introduction to Japan International Dispute Resolution Center

videoconferencing and simultaneous interpretation
systems. The service charges per four hours for theuse of the facilities are: Main room: 50,000 JPY,
Medium room: 25,000 JPY and Small room: 20,000
JPY.

It is directly accessible to Narita International

Airport and Haneda International Airport bylimousine bus, and various forms of public transit.

T h e b u i l d i n g w h i c h h o u s e s J I D R C To k y o i sconveniently connected to a Metro station.

Moreover, JIDRC provides many training sessions

and seminars in the area of international arbitrationand other types of ADR. JIDRC will alsointernationally promote Japan as the Seat of
Arbitration.

Through these activities, it would become easier

to make proposals to designate Japan as the seat ofarbitration in future contract negotiations withforeign countries, by making Japan a more so
hospitable location for dispute resolution.

Ⅴ．Concluding Remarks on Japan as a Seat of Arbitration
Japan’ s appeal as a seat of arbitration is expected to increase further in the future due toall the reasons laid out above. In addition, I list below other key factors in regard to theviability of Japan as a successful seat for international arbitration.
1)World Standard Legal Arbitration System

Japan’ s Arbitration Act is based on the United Nations Commission on International Trade

Law (UNCITRAL) Model Law on International Arbitration, and Japan, like most of the world, isa signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards(New York Convention). As there is no equivalent treaty in place in regard to the enforcementof foreign judgements with any substantial amount of signatories, the New York Convention isa primary factor in the popularity of arbitration in the settlement of international disputes.

Additionally, Japanese law, with few exceptions, is very open to allowing non-JapaneseJapan Commercial Arbitration Journal VOL.1［2020］81attorneys to act as both advocates and arbitrators in arbitral proceeding seated or venued inJapan. Furthermore, Japanese courts do not excessively interfere with arbitration proceedings
and take a cooperative stance towards the recognition and enforcement of arbitral awards.
2)Advanced Facilities exclusively for Arbitration Hearing at a Reasonable PriceJIDRC offers advanced conferencing facilities at a reasonable rate in both Tokyo and Osaka.

3)System for Promoting International Arbitration Supported by the Public and Private
Sectors

Various training seminars related to international arbitration are convened by JIDRC andother arbitration related organizations, and the development of personnel with sufficientabilities in effectively and efficiently processing international arbitration proceedings in the
English language is being speedily promoted.
4)Safety and Splendid Tourism Resources

It should be noted that Japan is a convenient country in various terms as well as a safe andsecure place. There are many direct f lights with various countries worldwide andtransportation from the airport to the center of cities is rather simple. Tokyo and Osaka havesufficient organized infrastructures and multitudes of excellent hotels and restaurants in thevicinity of JIDRC facilities.

It should particularly be noted that Japan, being a safe country, is a place where one may

stay safe, secure and sound during the hearing period. Of course, there is no difficulty invisiting splendid tourism locations if there is room in time during the period of stay.

I would be delighted if this paper could work for your better understanding of the present

situation of international arbitration in Japan and if it would become easier to make proposals

to designate Japan as the seat of arbitration in future contract negotiations and to perform
arbitration hearing proceedings in Japan.

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New IP Conciliation Proceedings at Japanese Courts

Judge, Tokyo District Court

Yoshiaki Shibata

1. An overview of the new IP conciliation proceedings at Japanese courts
As of October 1, 2019, the intellectual property divisions of the Tokyo District Court andOsaka District Court (the "IP Divisions") began implementing a new practice for conciliation
proceeding concerning intellectual property rights (hereinafter referred to as "IP conciliation").
The purpose, features and model proceedings of IP conciliation are described below. Some IP
conciliation cases have already been filed under this new practice.

At Japanese courts, intellectual property disputes have been disposed by litigation

proceedings or provisional disposition proceedings. In Japan, almost all patent infringement
lawsuits fall within the exclusive jurisdiction of the Tokyo District Court and Osaka District

Court, and the IP Divisions thereof have disposed of such lawsuits. Appeals therefrom areunder the exclusive jurisdiction of the Intellectual Property High Court. Lawsuits against

appeals from administrative decisions of the Japan Patent Office ("JPO") also fall within the
exclusive jurisdiction of the Intellectual Property High Court. These courts have prepared andpublished guidelines for their proceedings.1) As a consequence of such efforts, in both systemand practice, the time interval from the commencement of a case to its disposition by a courtof first instance hovers around 15 months. It can be said that intellectual property litigation in
Japan has been highly regarded in terms of the quality and expeditiousness of the process in
conducting hearings and rendering judgments.

Furthermore, nowadays, alternative dispute resolution ("ADR") has been drawing muchattention as a resolution tool in the area of intellectual property disputes. Under suchcircumstances, in order to promote more effective dispute resolution, the IP Divisions of theTokyo District Court and the Osaka District Court started a new practice of IP conciliation, withthe main objective of resolving intellectual property disputes that arise in the context ofbusiness. IP conciliation aims to make proceedings accessible, expeditious and highly1）For the English translation of such guidelines, please refer to www.ip.courts.go.jp/eng/info/Guidelines_for_
Proceedings/index.html.

Japan Commercial Arbitration Journal VOL.1［2020］83specialized, and parties can take advantage of this form of ADR.

With this development, it has been said that Japanese courts now provide the third

resolution tool for intellectual property disputes, in addition to litigation and provisional
disposition proceedings.2)

2. Features of IP conciliation proceedings
IP conciliation proceedings have the following features.

(1) Flexibility

The parties in an IP conciliation have the flexibility to fix the object for resolution in view of

the circumstances of their negotiations. The primary objective of IP conciliation is for theparties to solve a dispute through mutual consultation at court. However, the parties can alsochoose to return to out-of-court negotiations after receiving the advice from the conciliationcommittee. They can also consider the option of filing a lawsuit while considering thedevelopments in the IP conciliation proceedings.
(2) Expeditiousness

Any of the negotiating parties may file a petition for IP conciliation with either the Tokyo

District Court or the Osaka District Court based on the parties’ agreement on jurisdiction. At
this point, the disputing parties have likely identified the issues to a certain extent throughnegotiations and have in their possession the relevant documents. In the IP conciliation, theparties will then be asked to submit their allegations and evidence by the first date forproceedings. In principle, the conciliation committee will also be expected to express its

opinion verbally by the third date for proceedings. The IP conciliation proceeding is thus
designed to result in a speedy (expeditious) resolution of the subject dispute.
(3) Expertise

The IP conciliation will be administered by a conciliation committee composed of the judgeof the IP Division and two expert conciliators such as lawyers and patent attorneys who arevery experienced in handling IP cases. Judicial research officials may also be tasked by theconciliation committee.
(4) Confidentiality

The IP conciliation proceedings, including the fact that a petition therefor has been filed, are

not disclosed to the public. This allows the parties to resolve the dispute privately and keepfrom the public the existence of the dispute itself.

2）Guide to IP Conciliation Proceedings at the Tokyo District Court and Guidelines of IP Conciliation Proceedings
at the Osaka District Court , p. 1.

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New IP Conciliation Proceedings at Japanese Courts

3. Cases covered by and suitable for IP conciliation(1) Cases covered

The matters that may be submitted for IP conciliation are basically the same as those thatare subjects of litigation concerning intellectual property rights, such as disputes involving
patent rights, utility model rights, design rights, trademark rights, copyrights, layout-design

exploitation rights, unfair competition acts under the Unfair Competition Prevention Act, andthe unauthorized use of another person's name or portrait for advertising or commercial
purposes.

(2) Cases suitable for IP conciliation

Cases that can be suitably addressed or resolved in an IP conciliation include disputes thathave arisen during the negotiations of the parties, involving simple issues or issues whichhave been identified by the parties through their negotiations, and which the parties wish to
resolve through mutual consultation.

Disputes suitable for IP conciliation include the following:

(i)

(ii)

Disputes over the similarity of trademarks;

Disputes over the existence or non-existence of a prior user's right to a trademark;(iii) Disputes over the existence or non-existence of copyright infringement;(iv) Disputes over the amount of damages caused by an infringement of intellectual property(v)rights;

Disputes over the existence or non-existence of a wrongful acquisition of trade secrets;(vi) Disputes over the existence or non-existence of an imitation of the configuration of
goods;(vii) Disputes over the existence or non-existence of an infringement of patent rights (onlycases with simple issues or issues that have been identified through the negotiations of
the parties);(viii) Disputes over ownership of patent rights; and(xi) Disputes over licensing fees.

4. Composition of the conciliation committee
The conciliation committee is composed of three members, namely, one judge of the IP

Division and two experts such as lawyers and patent attorneys experienced in IP cases. Suchexperts include retired Chief Judges of the Intellectual Property High Court. If technicalmatters are involved in the dispute, such as when the dispute concerns a patent right, ajudicial research official may be tasked by the conciliation committee to administer some of
the affairs.

Japan Commercial Arbitration Journal VOL.1［2020］85

5. Procedural flow
The parties will be required to submit their respective allegations and relevant evidence by

the first date for proceedings. The conciliation committee is expected to express its opinion

verbally by the third date for proceedings but it may present a conciliation proposal earlier
than such date. In more difficult cases where it takes more time to coordinate the contents ofan agreement between the parties, the committee may hold four or more hearings, taking
into consideration the wishes of the parties.

The proceedings may be held using a video conference system or other similar devices if aparty is located in a remote place.

The conciliation committee will express an opinion that includes its determination on theissues as well as its view, if so, that litigation or provisional disposition would be a moresuitable way to resolve the dispute in light of the difficulty of proof and the complexity of thecase. Taking into consideration the committee's opinion, the parties have the option ofcontinuing consultations through the IP conciliation proceedings, or terminating suchproceedings (due to the unsuccessful conciliation or withdrawal of the petition for conciliation),and returning to out-of-court negotiations, or filing a lawsuit or seeking a provisional
disposition.

After the IP conciliation ends unsuccessfully or the petition therefor is withdrawn, withrespect to the Tokyo District Court, if a lawsuit is filed therewith regarding the same or similar

claim as the claim that was the subject of the IP conciliation, then the litigation proceedings ofsuch lawsuit will be administered by a judge of a division other than the IP Division to which
the judge who served as a member of the conciliation committee belongs.

A model of the IP conciliation proceedings is set out below. The proceedings in actual cases

may vary depending on the policy of the conciliation committee and other factors.
IP Conciliation Proceedings Model 3
After the filing of the petition for IP conciliation (“Petition”) before the first date for proceedings

On the second date for procee○ If the parties submit sup

will hold discussions wit○ The petitioner submits to the court a written Petition stating the object thereof andconciliation proposal, in

the points of the dispute, the annexed documents, including the agreement on○ In some cases, the conci

jurisdiction, documentary evidence, a description of the evidence, and othera possible solution on thnecessary documents.
○ The respondent submits to the court a written answer, documentary evidence, aContinue

description of the evidence, and other necessary documents ten days prior to the firstdate for proceedings (about six weeks after the filing of the Petition).
○ When a Petition is filed, the court designates conciliation commissioners, and if theOn the third date for proceedcase merits the involvement of a judicial research official, then the court issues an○ In principle, the conciliati

investigation order to a judicial research official. The court then adjusts the schedulethe third date for proceeding

and designates a date for proceedings on which the counsels of both sides can appear

whether it is appropriate toat court.

disposition.

○ If the conciliation commit3）Id., Attachment 3.

86

parties have started consulta

On the first date for proceedings (about 6 weeks after the filing of the Petition)with their consultation, w○ The court confirms the issues and identifies the facts based on the written Petition, theconciliation is unsuccessful

2020］
Japan Commercial
Arbitration
writtenanswer and Journal
the items VOL.1［
of documentary
evidence submitted, and hears both parties'

parties to reach an agreem

wishes and requests, toward resolving the dispute through consultation between the parties.

conciliation proceedings, th○ From the viewpoint of ensuring fruitful proceedings from the first date for proceedings, it is○ If the conciliation commit

proceedings, then the partie

case merits the involvement of a judicial research official, then the court issues an○ In principle, the concil

investigation order to a judicial research official. The court then adjusts the schedulethe third date for proceedand designates a date for proceedings on which the counsels of both sides can appear

whether it is appropriate

New IP Conciliation Proceedings at Japanese Courts
disposition.

at court.

○ If the conciliation com

parties have started cons

On the first date for proceedings (about 6 weeks after the filing of the Petition)with their consultation,○ The court confirms the issues and identifies the facts based on the written Petition, theconciliation is unsuccesswritten answer and the items of documentary evidence submitted, and hears both parties'

parties to reach an agre

wishes and requests, toward resolving the dispute through consultation between the parties.

conciliation proceedings○ From the viewpoint of ensuring fruitful proceedings from the first date for proceedings, it is○ If the conciliation com

preferred that persons who are familiar with the dispute (e.g., persons in charge of the IP

proceedings, then the pa

divisions) appear in court.

committee's determinatio

the parties wish to conti○ In some cases, if the issues are simple and can be judged from the written allegations andcontinued.

documentary evidence submitted by the parties, then the conciliation committee may present
its opinion or suggest the direction of a possible solution on the first date for proceedings.

○ Having heard the conc

○ If the conciliation committee finds any points that need to be supplemented in the allegations

stop using the conciliatio

and evidence of the parties, then it will instruct the parties to submit supplementary○ If the conciliation commallegations and evidence.

litigation or provisionalterminate due to the uns

Continue● Successful conciliation● Unsuccessful conciliation / Withdrawal of Petition⇒ Out-of-court negotiations between the parties⇒ Litigation / Provisional disposition

On the second date for proceedings (3 weeks to 1.5 months after the first date for proceedings)

efore the first date for proceedings

ing the object thereof anduding the agreement on

the evidence, and other○ If the parties submit supplementary allegations and evidence, then the conciliation committee
will hold discussions with the parties, and continue to hear the parties' wishes and consider acan consider filing a law(Continue)● Successful conciliation● Unsuccessful conciliation / W⇒ Out-of-court negotiation⇒ Litigation / Provisional dconciliation proposal, in an effort to encourage the parties to reach an agreement.
○ In some cases, the conciliation committee may present its opinion or suggest the direction ofa possible solution on the second date for proceedings.

documentary evidence, aContinues ten days prior to the firste Petition).

● Successful conciliation● Unsuccessful conciliation / Withdrawal of
Petition⇒ Out-of-court negotiations between theparties⇒ Litigation / Provisional dispositioncommissioners, and if theOn the third date for proceedings (3 weeks to 1.5 months after the second date for proceedings), then the court issues an○ In principle, the conciliation committee will verbally present its opinion to the parties bythen adjusts the schedulethe third date for proceedings, with regard to the committee's determination on the issues ors of both sides can appear

whether it is appropriate to pursue a resolution of the dispute by litigation or provisional
disposition.
○ If the conciliation committee has already presented its determination on the issues and theparties have started consultation about the conciliation proposal, then the parties will go onof the Petition)with their consultation, with the aim of reaching a successful conciliation. Even if

the written Petition, theconciliation is unsuccessful by the third date for proceedings, if there is a prospect for thed, and hears both parties'

parties to reach an agreement through consultation and the parties wish to continue thetion between the parties.

date for proceedings, it isrsons in charge of the IP

he written allegations andon committee may present

t date for proceedings.

emented in the allegations

o submit supplementary

conciliation proceedings, then the proceedings will be continued.
○ If the conciliation committee presents its determination on the issues on the third date forproceedings, then the parties will hold discussion on the conciliation proposal based on thecommittee's determination, with the aim of reaching a successful conciliation on that date. If
the parties wish to continue the conciliation proceedings, then the proceedings can also be
continued.

Japan Commercial
JournalVOL.1［2020］○ Having heard the conciliation committee's determination,
the partiesArbitration
can also choosetostop using the conciliation proceedings and go back to out-of-court negotiations.
○ If the conciliation committee presents a view that the case is suitable to be resolved through87the written Petition, thed, and hears both parties'

tion between the parties.

date for proceedings, it isrsons in charge of the IP

parties to reach an agreement through consultation and the parties wish to continue theconciliation proceedings, then the proceedings will be continued.
○ If the conciliation committee presents its determination on the issues on the third date forproceedings, then the parties will hold discussion on the conciliation proposal based on thecommittee's determination, with the aim of reaching a successful conciliation on that date. If

he written allegations andthe parties wish to continue the conciliation proceedings, then the proceedings can also be

on committee may present

continued.

t date for proceedings.

emented in the allegations

o submit supplementary○ Having heard the conciliation committee's determination, the parties can also choose tostop using the conciliation proceedings and go back to out-of-court negotiations.
○ If the conciliation committee presents a view that the case is suitable to be resolved throughlitigation or provisional disposition proceedings, then the conciliation proceedings willterminate due to the unsuccessful conciliation or withdrawal of the Petition, and the partiesn / Withdrawal of Petition
ations between the parties
nal disposition

can consider filing a lawsuit or petitioning for an order of provisional disposition.

(Continue)● Successful conciliation● Unsuccessful conciliation / Withdrawal of Petition⇒ Out-of-court negotiations between the parties⇒ Litigation / Provisional disposition

88

Japan Commercial Arbitration Journal VOL.1［2020］● Successful conciliation● Unsuccessful conciliation / Withdrawal of
Petition⇒ Out-of-court negotiations between theparties⇒ Litigation / Provisional disposition

Recognition and Enforcement of Business Dispute
Resolutions in Japan in the Age of Global Cooperation
Professor of Law, Hitotsubashi University

Keisuke Takeshita

Ⅰ．Introduction
In 2019, two important conventions relating to the recognition and enforcement of dispute

resolutions in civil and commercial matters were concluded. One was the Judgments
Convention1） of the Hague Conference on Private International Law (HCCH), and the otherwas the Singapore Convention on Mediation2） of the United Nations Commission on

International Trade Law (UNCITRAL). When considered together with the New York

Convention on Arbitration3） and the HCCH Convention on Choice of Court Agreements4）, it

appears that international cooperation in this aspect of private international law will continue

to strengthen and gain momentum in the coming decades. Japan should also contribute tosuch international cooperation, though of all four above-mentioned conventions, Japan is only
a contracting state of the New York Convention.

This paper introduces and analyzes the current Japanese rules regarding the recognitionand enforcement of business dispute resolutions, that is, foreign judgments, arbitral awards,
and mediated settlement agreements. Through this analysis, I clarify the key elements
important for Japan to endorse such international cooperation.

Ⅱ．Recognition and Enforcement of Foreign Judgments
1. Overview of the Rules

Japan has concluded almost no international instrument addressing the recognition and
1）HCCH Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters(concluded on July 2, 2019).
2）UN Convention on International Settlement Agreements Resulting from Mediation (adopted on December 20, 2018
and opened for signature on August 7, 2019).
3）UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (opened for signature on June 10,1958).
4）HCCH Convention on Choice of Court Agreements (concluded on June 30, 2005).

Japan Commercial Arbitration Journal VOL.1［2020］89

enforcement of foreign judgments, and is a contracting state to only a few conventions thatdeal with the recognition and enforcement of judgments rendered by courts of contracting

states5）. The rules specified in these conventions cover only specific matters. Therefore, in

general, Japan recognizes and enforces foreign judgments in accordance with its nationallaws6）.

Article 118 of the Code of Civil Procedure (Act No. 109 of 1996, hereinafter referred to as“CCP” )7） provides for the recognition of foreign judgments. If a judgment by a foreign court,

which is final and binding in that foreign state, fulfills the requirements for recognition

provided in Article 118, that judgment is “automatically” recognized in Japan. That is, it
becomes effective in Japan without undergoing any Japanese court procedure.

However, if a party wants to enforce a foreign judgment in Japan, that party needs to bringan action in a Japanese court seeking an enforcement judgment (exequatur ) as provided in

Article 24 of the Civil Execution Act (Act No. 4 of 1979, hereinafter referred to as “CEA” ).
During the proceeding seeking an enforcement judgment, the Japanese court confirms only
the fulfillment of the specified requirements for recognition of the foreign judgment without
reviewing the judgment’ s merits (Article 24 (4) of the CEA). If fulfillment of the requirements

is confirmed, the court renders an enforcement judgment declaring the enforceability of theforeign judgment in Japan. Such a foreign judgment with the issuance of a Japanese
enforcement judgment becomes “saimu meigi ” (Title of Obligation), and thereafter the holderof the “title” (i.e., the judgment creditor) can apply to an execution court for compulsory
execution of the foreign judgment (Article 22 of the CEA).

It is noteworthy that the Japanese word “shikkou ” is used for both “enforcement” and“execution,” whereas “shounin ” is used for “recognition.” In Japan, “recognition” is usually

understood to mean the acceptance of the legal effects (including, but not limited to, res

judicata ) that a foreign judgment has as a judicial determination in its state of origin (i.e., thecountry/jurisdiction whose court rendered the judgment).8） “Enforcement” and “execution”

are merged into a single concept “shikkou ” that refers to all the procedural steps followed forthe realization of judgments in Japan. As fulfillment of the requirements for recognition of aforeign judgment is necessary for the judgment’ s enforcement in Japan (Article 24 (5) of the5）Convention on Supplementary Compensation for Nuclear Damage (adopted on September 12, 1997 and opened forsignature on September 29, 1997); International Convention on Civil Liability for Oil Pollution Damage, replaced by
the 1992 Protocol (adopted on November 27, 1992); and International Convention on the Establishment of anInternational Fund for Compensation for Oil Pollution Damage, superseded by the 1992 Protocol (adopted on
November 27, 1992). Article 10 of the Bunker Convention (International Convention on Civil Liability for Bunker Oil
Pollution Damage, adopted on March 23, 2001) also provides for the recognition and enforcement of judgments. The
Japanese Diet approved ratification of the Bunker Convention on May 5, 2019.
6）For more information on the rules for the recognition and enforcement of foreign judgments under Japanese law,see, e.g. , Elbalti Béligh, “Foreign Judgments Recognition and Enforcement in Civil and Commercial Matters in Japan,”
Osaka University Law Review , Vol. 66 (2019), p. 1; Anselmo Reyes (ed), Recognition and Enforcement of Judgments
in Civil and Commercial Matters (2019), pp. 97-117 [Kazuaki Nishioka]; Adeline Chong (ed), Recognition and
Enforcement of Foreign Judgments in Asia (2017), p. 105 [Toshiyuki Kono].
7）The names of Japanese Codes and Acts referred in this paper are the unofficial English translations by the
Ministry of Justice of Japan, which are available at <http://www.japaneselawtranslation.go.jp/>.

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Recognition and Enforcement of Business Dispute Resolutions in Japan in the Age of Global Cooperation

CEA), recognition is often regarded as a precondition for the enforcement of such judgments
in Japan.

2. Requirements for Recognition and Enforcement of a Foreign Judgment

Article 118 of the CCP lists four requirements for the recognition of a foreign judgment inJapan that is final and binding in the state of origin.

Item (i) of Article 118 specifies the requirement of indirect jurisdiction. However, the text of

item (i) does not specify the details of the grounds of indirect jurisdiction, leaving such details

for interpretation through case law. In this regard, the Supreme Court of Japan, in a judgment
issued in 20169）, ruled as follows: “With respect to the issue of whether a court of therelevant foreign country has indirect jurisdiction over the relevant claim (other than claims

concerning personal status), it is reasonable to construe that such issue should be determinedby applying the provisions regarding international jurisdiction set out in the Code of Civil
Procedure of Japan, having due regard to specific circumstances of each individual case, inlight of reasonableness and from the perspective of whether it is appropriate for Japan torecognise the judgment of the relevant foreign court.” 10） Based on the existing case law, it isgenerally understood that the “mirror image principle” (Spiegelbildprinzip )11） is adopted for theequal treatment between Japan and other foreign countries. In accordance with this principle,

grounds for indirect jurisdiction should be considered basically by the same criteria as applied
when determining the grounds for direct jurisdiction.

Item (ii) of Article 118 specifies the requirement of an appropriate service of process. To

fulfill this requirement, a summons or an order necessary for the commencement of litigationneeds to be served to the losing defendant. This requirement remains unfulfilled if the serviceof process is effected through publication and other similar means. According to a Supreme

Court Judgment issued in 199812）, if Japan and the state of origin are both contracting states

to a convention on service of process13）, the documents should be served through the8）In Japan, some scholars have argued that the period of prescription should be characterized as a matter ofsubstantive law and a judgment’s effect in relation to the applicable period of prescription is to be determined basedon the applicable law relating to the relevant rights on which the judgment ruled. According to their arguments,
recognition of a foreign judgment in Japan should not involve consideration of period of prescription. Cf. Akira
Takakuwa, “Gaikoku Hanketsu no Shounin [Recognition of Foreign Judgments],” in Akira Takakuwa and Masato
Dogauchi (ed), Kokusai Minji Sosho Ho (Zaisan Ho Kankei) [International Civil Procedure (Property Law)] (2002), p.
312.
9）Supreme Court Judgment, April 24, 2014, 68 Minshu (Saikou Saiban Sho Minji Hanreishu ) (4) 329 [2014]. An
English summary is available in Japanese Yearbook of International Law , Vol. 58 (2015), p. 463. Also see, Béligh
Elbalti, “The Jurisdiction of Foreign Courts and the Recognition of Foreign Judgments Ordering Injunction: The
Supreme Court Judgment of April 24, 2014,” Japanese Yearbook of International Law, Vol. 59 (2016), p. 395.
10）Japanese Yearbook of International Law , Vol. 58 (2015), p. 464.
11）Cf. Heinrich Nagel/Peter Gottwald, Internationales Zivilprozessrecht (7. Aufl., 2013), p. 611.
12）Supreme Court Judgment, April 28, 1998, 52 Minshu (3) 853 [1998]. An English summary is available in JapaneseAnnual of International Law, Vol. 42 (1998), p. 155.
13）For example, HCCH Convention on Civil Procedure (concluded on March 1, 1954); Convention on the Service
Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (concluded on November 15, 1967).

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methods provided for in such conventions. Item (ii) also provides that, in cases whereappropriate service of the relevant document for the commencement of litigation is notaccomplished, this requirement is deemed to be fulfilled if the defendant formally takes part in
the foreign court proceeding from which the judgment results.14）

Item (iii) of Article 118 specifies the requirement of public policy. If the recognition of aforeign judgment is contrary to the public policy in Japan, such foreign judgment cannot berecognized in Japan. The public policy includes both substantive and procedural aspects. For
example, recognition of a foreign judgment ordering the payment of punitive damages would

be contrary to Japanese substantive public policy and thus, for such judgment, thisrequirement is not fulfilled.15） As for the procedural aspect of the Japanese public policy, aSupreme Court Judgment16） in 2019 referred to this requirement. In this judgment, theSupreme Court ruled that, as an important process constituting the foundation of theJapanese civil procedural order, the CCP ensured the opportunity of parties to file an appeal

by notifying them of the contents of judgments or giving them the substantive opportunity to
become aware of the contents of judgments. It also ruled that if a foreign judgment became

final and binding without giving such an opportunity to file an appeal to the parties, the court
proceedings contradicted the fundamental principles or doctrines of Japanese judicial order,
and thus, did not satisfy the requirement provided in Item (iii).

Item (iv) of Article 118 specifies the requirement of reciprocity. According to a Supreme

Court Judgment issued in 198317）, reciprocity means that “in the country where the foreign

court rendering the judgment in issue is situated …, the same type of the judgment as that
rendered by a Japanese court would have effect under the conditions which are not different

in the important points from those as prescribed in Items of Article 200.” 18） There have been

judgments in which Japanese courts have recognized reciprocity with Hong Kong, Germany,

the United Kingdom, Singapore, Switzerland, the Republic of Korea, and certain states andjurisdictions of the United States (Hawaii, Washington DC, Nevada, Texas, etc.).19） However,as reciprocity between Japan and the People’ s Republic of China does not exist, Chinese

judgments are not recognized in Japan20） and vice versa.21） There are arguments against thisrequirement of reciprocity because it is irrelevant to the protection of rights of private
14）According to the above-mentioned Supreme Court Judgment issued in 1998, the requirement of Item (ii) is
fulfilled not only when the defendant argues the merits of the case without contesting jurisdiction, but also when the
defendant appears in the court for the purpose of contesting the court’s jurisdiction.
15）Supreme Court Judgment, July 11, 1997, 51 Minshu (6) 2537 [1997]. An English summary is available in JapaneseAnnual of International Law , Vol. 41 (1998), p. 104. In this judgment, only the compensatory part of the foreign
judgment was recognized and enforced.
16）Supreme Court Judgment, January 18, 2019, 73 Minshu (1) 1 [2019].
17）Supreme Court Judgment, June 7, 1983, 37 Minshu (5) 611 [1983]. An English summary is available in JapaneseAnnual of International Law , Vol. 27 (1984), p. 119.
18）Ibid ., p. 120. The rules currently stipulated in Article 118 were set out in Article 200 of the CCP at that time.
19）See, Reyes, supra note 6, p. 107.
20）Cf. Osaka High Court Judgment, April 9, 2003, 1841 Hanrei Jihou [Law Case Reports] 111; 1141 Hanrei Times[Law Tiems Reports] 270. An English summary is available in Japanese Annual of International Law , Vol. 48 (2005),
p. 171.

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Recognition and Enforcement of Business Dispute Resolutions in Japan in the Age of Global Cooperation

persons.22） However, from the viewpoint of judicial cooperation between countries, therequirement of reciprocity is necessary for the protection of private persons’ procedural rights
as discussed below.

Ⅲ．Recognition and Enforcement of Decisions and Agreements Reached
Using Alternative Dispute Resolution
1. Arbitral Awards

In Japan, the Arbitration Act (Act No. 138 of 2003) implements the New York Convention on

Arbitration. Article 45 (1) of the Act provides that an arbitral award shall have the same effectas a final and binding judgment irrespective of whether the place of the arbitration is in Japanor in another country. Article 45 (2) sets out the grounds for refusal to recognize an arbitralaward. The grounds are almost the same as those provided in Article V of the New York

Convention, although some differences exist, such as the clarification of the applicable law.23）

In order to enforce and execute an arbitral award, the party invoking the award needs to filea petition for an enforcement order. Once a Japanese court issues an enforcement order, thearbitral award becomes “saimu meigi ” (Title of Obligation) and can be executed in Japan.

There are not many cases of enforcement orders reported in law journals. However, there isthe case of the Osaka District Court Order dated March 25, 201124）, in which an enforcement

order was issued for a China International Economic and Trade Arbitration Commission(CIETAC) arbitration award. Article 8 (4) of the Japan-China Trade Agreement (January1974)25） provides that the contracting states are obliged to enforce arbitral awards issued by

the relevant authorities in accordance with the law of the country where enforcement issought. The court considered that this trade agreement prevailed over the New York
Convention to which both countries were contracting states.26） Applying the relevant provisionsof the Japanese Arbitration Act, the court decided to issue an enforcement order, thus,
recognizing and enforcing a Chinese arbitral award.27）
2. Mediated Settlement Agreements

The Singapore Convention deals with international settlement agreements resulting from
21）Cf. Qisheng He/Yahan Wang, “Resolving the Dilemma of Judgment Reciprocity: From a Sino-Japanese Model to a
Sino-Singaporean Model,” Yearbook of Private International Law , Vol. 19 (2017/2018), p. 217.
22）For this discussion, see Béligh, supra note 6, pp. 25-29.
23）Item (iii) of Article 45 (2) of the Arbitration Act clarifies the applicable law which governs the proper notice of
the appointment of the arbitrator or the arbitration proceedings. Cf. Article V(1)(b) of the New York Convention.
24）2122 Hanrei Jihou 106; 1355 Hanrei Times 249.
25）(Japanese) Treaty No. 4 of 1974.
26）Cf. Article VII (1) of the New York Convention.
27）Also, in the Tokyo District Court Judgment of March 24, 2014, the enforcement of a CIETAC arbitral award
was discussed. Because the plaintiff’s liability under the award had already been extinguished through a set-off
arrangement, the plaintiff commenced an action to oppose enforcement of the award for which an enforcement order
had been already issued. The court confirmed the plaintiff’s claim in relation to such action. For an English summaryof this case, see Japanese Yearbook of International Law , Vol. 60 (2017), p. 506.

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mediations. At this point, Japan has neither ratified nor signed the Singapore Convention. In
Japan, such settlement agreements are usually regarded as contracts. If a party to asettlement agreement wants to enforce and execute the agreement, it is necessary for theparty to commence a court action and acquire a judgment in its favor compelling enforcementof the agreement. To be a contracting state of the Singapore Convention, Japan would needto revise the rules stipulated in the CEA.

An exception to this is a settlement agreement before a Japanese court28） ( judicial

settlement/transactions judiciaires ): such agreements have enforceability in Japan. Article

267 of the CCP provides that, if a settlement is recorded in a juridical document, such record

has the same effect as a final and binding judgment.29） In addition, if a settlement agreementthat addresses the payment of a certain amount of money or any other fungible thing orrights to a certain amount of securities is documented by a Japanese notary in an authentic

instrument with a statement essentially providing that the obligor agrees to immediate

compulsory execution, such an instrument is enforceable in Japan. Such special authentic
instrument is called “shikkou shousho ,” and is also listed as “saimu meigi ” (Title of Obligation)

in Article 22 of the CEA.

However, a settlement achieved during a foreign court proceeding does not haveenforceability in Japan. Also, similar instruments prepared by foreign notaries are notregarded as “saimu meigi ” (Title of Obligation) and cannot be enforced and executed directlyin Japan. At least currently, there is a strict distinction between such settlements andinstruments in Japan and in foreign countries.

Ⅳ．Analysis
It can be understood that Japanese rules relating to recognition and enforcement of dispute

resolutions in civil and commercial matters are based on a general policy of equal treatment

between Japan and other relevant countries. As stated above, to confirm the grounds forindirect jurisdiction of a foreign court, which is a requirement for recognition of a foreign

judgment, Japanese courts basically use the same criteria as applied when determining the
grounds for direct jurisdiction. As for arbitral awards, Japan does not treat foreign awards

differently from Japanese awards. The same rules for recognition and enforcement apply to allarbitral awards, irrespective of the place of arbitration. With the principle of equal treatment
as the foundation, it seems that Japan has adopted a “generous” policy in this regard. Such a

policy reflects internationalism that has been an important doctrine of Japanese privateinternational law.30）

28）There are two types of judicial settlements under Japanese law. First, the settlement reached during a Japanesecourt proceeding, and second, the settlement entered into prior to the filing of an action (Article 275 of the CCP).
29）However, there are different views on whether such settlement agreements have res judicata . Cf. Makoto Ito,
Minji Sosho Ho [Code of Civil Procedure] (6th ed., 2018), pp. 499-501.
30）Cf. Keisuke Takeshita, “Sadajiro Atobe and Kotaro Tanaka: The Universal Private International Law School ofThought in Japan,” Japanese Yearbook of International Law , Vol. 56 (2013), p. 217.

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However, there are rules that seem to contradict this generous policy, such as the reciprocity

requirement for recognition and enforcement of foreign judgments and the treatment offoreign judicial settlements and settlements documented in authentic instruments. It isnecessary to consider how to understand these contradicting rules.

In my opinion, the key element in understanding these rules is compatibility. If a foreign

dispute resolution is not compatible with its Japanese counterpart, recognition and /orenforcement of such resolution in Japan based on the doctrine of equal treatment is

problematic. If Japan recognizes and enforces a foreign judgment, it means that the same
dispute will not be adjudicated in a Japanese court proceeding. Therefore, if Japan wants toensure that private persons have the right of access to justice to the same extent as offeredby the Japanese courts, the foreign court procedure should at least share the same
fundamental principles and doctrines as those of Japan, such as independence of judges andnon-discrimination on the basis of nationality. In other words, compatibility is a prerequisite

for the equal treatment of Japanese and foreign judgments. The foreign country would also

not recognize and enforce a Japanese judgment if such compatibility does not exist.

Therefore, compatibility is essential to establish reciprocity between Japan and foreigncountries, and I think this is the reason why reciprocity is still a requirement for therecognition and enforcement of foreign judgments in Japan. Article 29 of the HCCH Judgments

Convention provides rules for the establishment of relations pursuant to the Convention. This

provision might work to avoid undesirable recognition and enforcement of judgments in theabsence of compatibility between two contracting states. As for arbitration, the rules

worldwide are in much more harmony, and an arbitration the place of which is in a foreigncountry is usually compatible with an arbitration in Japan. Therefore, Japan can recognize andenforce arbitral awards, irrespective of whether the place of arbitration is in Japan or in aforeign country. Regarding settlements agreements, at least currently, foreign judicial
settlements and authentic instruments prepared by foreign notaries are not regarded ascompatible with Japanese judicial settlements and “shikkou shousho ” prepared by Japanesenotaries. Thus, it is necessary to discuss the eligibility of “the mediator” provided in Article
2(3) of the Singapore Convention before Japan becomes its contracting state.31） Because of

Article 72 of the Attorney Act (Act No. 205 of 1949), persons other than attorneys licensed inJapan usually cannot serve as mediators in a legal dispute settlement procedure for the

purpose of obtaining fees. This Article aims to offer appropriate legal services in Japan.
Therefore, it would be consistent with such rules to make it a requirement for the enforcementof international settlement agreements that the mediator involved in achieving the settlementagreement must possess qualifications equivalent to those possessed by Japanese attorneys
from the viewpoint of compatibility.32）

It is important to establish international cooperation frameworks for the realization of justicefor private persons. However, it should be kept in mind that compatibility among the dispute31）Article 2(3) of the Singapore Convention referred to “mediators” just as “third person or persons” and does notdefine in detail the term. Cf. Nadja Alexander/Shouyu Chong, The Singapore Convention on Mediation: A
Commentary (2019), paras. 2.18-2.42.

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resolution regimes of different countries is necessary if a country wants to ensure that private
persons’ procedural protections are equivalent to those in other countries.

Ⅴ．Conclusion
Until now, Japan has not actively sought to become a member state of the various

conventions relating to the recognition and enforcement of dispute resolutions in civil andcommercial matters, which serve as the framework for international cooperation in this aspectof private international law. Since this international cooperation framework might bestrengthened and promoted in the coming decades, Japan should support and contribute to it.
For this purpose, it is necessary for Japan to consider the possibility of becoming a contracting

state of such conventions. However, Japan cannot be a member of such a framework without
realizing the compatibility between Japanese and foreign judicial rules for dispute settlements.
Discussions should be held in Japan to consider whether and how Japan’ s national rules on

disputes should achieve compatibility with international standards of such rules for dispute
resolutions.

32）One can argue that fulfilling this requirement would not be a problem because parties have the right to choose
their mediator. This is a matter relating to party autonomy in international dispute resolution and should be studied
further.

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Interim and Provisional Measures in Japanese Courtsfor Disputes Involving Agreements with Arbitration
Clauses
Attorney-at-law, TMI Associates

Kazuhide Ueno

Attorney-at-law, TMI Associates

Akihiro Goda

1)

With the growing awareness that international arbitration provides a more workable option

for resolving international disputes than lawsuits in national courts, it has become a popular

option for business entities, including those established in Japan, to include mandatory
arbitration clauses in their contracts. That being said, there may be instances in which

involvement of a national court is necessary in order to ensure the proper conduct of thearbitration, such as when interim or provisional measures of protection are required. Although

the arbitral tribunal itself may have the power to issue such measures, it is often the case thatinterim or provisional measures are not enforceable in national courts. While some countries-- such as Israel, Malaysia and New Zealand -- have made legislative efforts to make interim

measures by arbitral tribunals enforceable,2） the Japanese Diet has not taken any similaraction.3） Accordingly, it is necessary for Japanese courts to get involved in situations whereinterim measures with respect to Japanese entities are necessary, such as those involving thepreservation of assets. Under this backdrop, this paper (i) introduces Japanese civil

proceedings in general (in Section I), (ii) explains Japanese arbitration laws concerning interim
and provisional measures (in Section II), and (iii) delves into the requirements for provisional

remedies under relevant Japanese law (in Sections III and IV). This paper also discusses
examples where provisional remedies may be sought in a Japanese court.

1）The authors’ opinions are personal, and are based on their research findings and do not reflect the opinions of
TMI Associates or its partners. Further, this paper is not, and should not be construed as, legal advice.
2）Nigel Blackaby et al., Redfern and Hunter on International Arbitration (Oxford University Press, 6th ed. 2015) at
p.423 citing Israel Arbitration Law of 1968, s. 1; Malaysian Arbitration Act 2005, s. 2; and New Zealand Arbitration
Act 1996, Sch. 1, art. 171.
3）Regarding this point, the Japanese Federation of Bar Associations has made a proposal to amend the relevant laws
to make interim measures by an arbitral tribunal enforceable, by its opinion letter dated June 21, 2019. Accessible athttps://www.nichibenren.or.jp/library/ja/opinion/report/data/2019/opinion_190621.pdf (Japanese only).

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Interim and Provisional Measures in Japanese Courts for Disputes Involving Agreements with Arbitration Clauses

Ⅰ．Overview of Jurisdictional Procedure and Civil Provisional Remedies in Japan
Japan's judicial system is based on a civil law framework, and as such is based on codified

laws. In civil trials in Japan, the jury system is not used, and professional judges examine thefacts, apply the law and render judgments in all cases. The first trial in most civil cases is held
at a District Court. While the majority of civil trials are conducted by one judge, trials
regarding disputes involving special statutory matters or which the court deems to besignificant are conducted by a panel of three judges.4）

In addition to these trial proceedings, civil preservative relief in Japan enables early binding

court decisions. The procedures for civil preservative relief are handled by a single judge,
whose duty is to decide the case as soon as possible. Although the decisions of civilpreservation can be appealed, they take effect immediately when the orders are issued. The

procedures for this relief involves, depending on the nature of the relief sought, either a trial
or a hearing, and often are held ex parte . Since civil preservative relief is only a temporary

remedy with the ultimate outcome to be determined in a later trial, it is common that deposit
be ordered to be provided as a condition for the civil preservative orders to be issued. The

requirements for issuing the orders are set forth in the criteria in the Civil Provisional

Remedies Act (Act No.91 of 22 December 1989) (the “CPRA” ), which governs actions forprovisional remedies in Japanese courts. We will discuss these requirements in detail later in
Section III.

Ⅱ．Arbitral Tribunal or Domestic Court – Alternatives Interim and Provisional
Measures in JapanThe needs of interim and provisional measures taken by the Japanese court would depend

on what alternative exists for the potential users of the measures – namely the arbitral

tribunal’ s interim and provisional measures. Rules concerning arbitrations in Japan are set
forth in the Japanese Arbitration Act (Act No. 138 of 2003) (the “JAA” ). The JAA came into

ef fect on March 1, 2004. The JAA is largely based on the UNCITRAL Model Law onInternational Commercial Arbitration (1985) (the “Model Law” ).

Article 24(1) of the JAA provides that an arbitral tribunal may, unless the parties agree

otherwise, order a party to take such interim or provisional measures as the tribunal considers
necessary in respect of the subject matter of the dispute. The JAA does not specify orotherwise limit the types of remedies that an arbitral tribunal may order. Thus, arbitral4）The average period for a trial in a court of first instance in a regular proceeding in 2018 was 13.2 months
according to the Court Data Book (http://www.courts.go.jp/about/databook2019/index.html) (Japanese only). One of
the common criticisms of the civil court system in Japan is that court proceedings are slow. In comparison with theUnited States, the delays in the Japanese system have been attributed to the fact that (i) hearings and trials are notheld consecutively, (ii) new evidence can be submitted with almost no restrictions to an appeals court, and (iii) grounds
for appeal are often found. (See Hideo Tanaka, The Japanese Legal System , University of Tokyo Press, (1976),
p.475.)

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tribunals may, under its rules, such as Article 71 of the Japan Commercial Arbitration
Association’ s Commercial Arbitration Rules 2019 ( “JCAA Rules” ), grant interim measures,for example, to maintain or restore the status quo, provided that the tribunal is satisfied that

harm not reparable by a damages award would occur in the absence of such an order andthat the applicant has a reasonable possibility of succeeding on the merits. Also, emergency

arbitrators may, under the JCAA Rules (Articles 75 to 79) or the rules in other arbitration
institutions, grant interim measures.5）

The JAA empowers an arbitral tribunal to make a broad range of interim orders, such as forsecurity for costs or the preservation of assets or evidence, but such orders are notenforceable by a Japanese court.6） Although such orders cannot be enforced by a court, inpractice, they are commonly followed by the parties, due to the fear of the arbitral tribunal
forming a negative opinion of a non-compliant party.

On the other hand, Article 15 of the JAA allows parties to request an “interim measure ofprotection” from a court in relation to any civil dispute which is the subject of an arbitrationagreement. The relevant provision states:[i]t is not incompatible with an arbitration agreement for a party to request, before or

during arbitral proceedings, from a court an interim measure of protection and for a court

to grant such measure in respect of any civil dispute which is the subject of the arbitrationagreement.

This is consistent with Article 9 of the Model Law, which states that applying to a court for

an interim measure is not incompatible with an arbitration agreement. While the JAA generally

applies only to arbitrations seated in Japan, pursuant to Article 3(2) of the JAA, Article 15 also
applies when the place of the arbitration is outside of Japan or is unspecified.

Article 15 of the JAA confirms that the parties to an arbitration agreement are not prohibitedfrom seeking interim and provisional measures from a court in the same dispute. As Article 15

does not specify or otherwise limit the types of remedies that a court may order, the CPRA

instead governs the substantial and procedural requirements for obtaining interim andprovisional measures.

Therefore, a Japanese court has the power to grant interim relief in aid of foreign-seatedarbitrations as long as the criteria in the CPRA are met.

5）As mentioned elsewhere, the ability of the court to intervene in arbitrations, including the appointment ofemergency arbitrators, is restricted to the powers given to it under the JAA, pursuant to Article 4. Since the JAA
does not mention emergency arbitrators, it is unlikely that the court would be able to intervene.
6）Those interim orders by the title of obligation (saimumeigi ).

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Interim and Provisional Measures in Japanese Courts for Disputes Involving Agreements with Arbitration Clauses

Ⅲ．Requirements of Interim or Provisional Measures in Japanese Courts
under the CPRA
1. Substantive Requirements

The CPRA provides for two types of provisional remedies. First, a provisional seizure order(karisashiosae ) may be issued to attach the respondent’ s property to secure applicant’ smonetary claim. Second, a provisional disposition order (karishobun ) may be issued topreserve the status quo of disputed subject matter or to establish an interim relationshipbetween the parties. Preserving evidence is not within the scope of the CPRA, but rather falls
under the scope of the Code of Civil Procedure (Act No. 109 of 1996).7）

To obtain an order of provisional seizure or provisional disposition, an applicant must

demonstrate a prima facie case for the claims to be preserved and the practical need forpreserving them in an ex parte procedure.8） On the other hand, to obtain a provisional

disposition order to establish an interim relationship, an applicant must show a prima faciecase for (i) the claims to be preserved and (ii) the need to avoid any substantial detriment or
imminent danger that would otherwise occur to the applicant regarding the relationship of therights in dispute. The latter requirement is called the “necessity requirement” .
2. Procedural Requirements

In principle, the court is required to hear oral arguments or hold a hearing at which the

respondent may be present. In all provisional remedy cases, an applicant must also provide
security as a condition for the court to issue an order.

In practice, an applicant can obtain an order of provisional seizure or provisional disposition

for disputed subject matter in an ex parte procedure. In order to obtain a provisional

disposition order to establish an interim relationship between the parties, oral arguments or ahearing at which the respondent may be present are generally required unless thecircumstances are such that the objectives of the petition for provisional disposition cannot be
achieved if such proceedings are held.

If an applicant’ s claim is simple and can easily be proven by sufficient documentary

evidence, an order of provisional seizure or provisional disposition to preserve the status quo
may be obtained within a few days of filing the petition. However, in the case of a provisional

disposition order to establish an interim relationship, the proceedings tend to last far longer
because the court is required to hold oral arguments or a hearing at which the respondent
may be present.

A provisional injunctive remedy order can be obtained only against a respondent, or an

asset owned thereby, such as cash in bank accounts. In the case where there is an asset
under the name of a third party, which in fact belongs to the respondent, the applicant canobtain a provisional remedy order against such asset if the applicant succeeds in proving that

7）Although interim measures are often discussed in the context of evidence collection, we do not discuss this in thispaper.
8）Articles 13 and 20(1) of the CPRA.

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the real owner of such asset is the respondent. If a provisional seizure order relates to a claimby the respondent for payment of a debt, the debtor is prohibited from paying such debt.
3. Liability of the Applicant for Damages and Security for the Measure

If the respondent can later discharge the injunctive relief, the applicant can be held liablefor damages suffered by the respondent. Thus, the applicant must also provide security as acondition for the court to issue an order. The court determines the amount of the required

security at its own discretion by taking into consideration the amount of the claim, the valueof the assets to be provisionally seized and other facts.9） On a case-by-case basis, orders
generally fall in the range of 10 percent to 40 percent of the value of the property.
4. Consequences of a Respondent’ s Non-Compliance

If a respondent fails to comply with an order for provisional seizure or provisional disposition

to preserve the status quo of any disputed subject matter, the applicant may obtain a title ofobligation (saimumeigi ) through a judgment or otherwise and enforce it. If a respondent fails

to comply with an order of provisional disposition to establish an interim relationship between

the parties regarding any disputed subject matter, the applicant can enforce the order (e.g. ,in cases where the provisional disposition order is to deliver an item or items of movable

property), or can obtain an order requiring the respondent to pay a specified sum to theapplicant until the respondent complies with its obligations under the provisional disposition
order (e.g. , in cases where the provisional disposition order is to build a building on a certain
parcel of land).

Ⅳ．Interim or Provisional Measures in Japanese Courts for Agreements with
Arbitration Clauses
Under Japanese law, provisional measures can be ordered by a court as long as thesubstantive and procedural requirements under the CPRA are met. However, whether a prima

facie case is demonstrated depends on the practice of each court. Moreover, each justice has
wide discretion to make decisions regarding these requirements, and their decisions depend

largely on the facts of the case. As a practical consideration,10） Japanese courts may besupportive of issuing provisional measures in cases involving arbitration clauses even if interim
and provisional measures otherwise exist in the relevant arbitration rules. Because interim

and provisional measures by the arbitration tribunal are not enforceable under Japanese law,
9）In addition to the court's ability to order security for costs under the CPRA, Article 24(2) of the JAA provides
that an arbitral tribunal may also order any party to provide appropriate security in connection with any interim orprovisional measures ordered pursuant to Article 24(1).
10）Other jurisdictions may have relevant laws making clear that any application should be made first to the arbitral
tribunal, and only then to the court of the seat of the arbitration (Nigel Blackaby et al ., Redfern and Hunter on
International Arbitration (Oxford University Press, 6th ed. 2015) at p.425). The JAA and the CPRA do not have thisconcept.

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Interim and Provisional Measures in Japanese Courts for Disputes Involving Agreements with Arbitration Clauses

actions by a court regarding these measures are seen as necessary to preserve assets inJapan. In addition, whenever an emergency and ex parte process is necessary to preserve
assets in light of risks of such assets being hidden or disposed, a court likely will grant theprovisional measure.11）

That being said, Japanese courts are reluctant to grant provisional relief in certain types ofcases. First, if granting such relief would be virtually equivalent to resolving the actual claim of
the arbitration, a Japanese court typically would not grant the order. For example, if a
claimant requests provisional relief ordering delivery of goods to the claimant when thesubject matter of the dispute concerns the respondent’ s obligation to deliver the goods, thesubject of the provisional relief is to be resolved by the arbitration in accordance with theagreed arbitration provisions in the agreement and the institutional rules applicable to thearbitration. In such a case, the court may find, prima facie , that neither (i) the claims need to
be preserved nor (ii) the “necessity requirement” has been met, unless there is someextenuating circumstance whereby the arbitration proceeding would not be able to provide
relief in a timely manner.

Second, the same applies to relief that would be equivalent to deciding claims in parallel

proceedings. Take an example of an arbitration agreement that exists between a Japanesecompany and a foreign company and the foreign company brings an action before its homecourts in breach of the agreement. In that case, the first thing the Japanese company would

do is to file a request for arbitration with an arbitration body and argue for and seek todemonstrate the validity of the arbitration agreement. At the same time, the Japanesecompany would have to seek dismissal in the foreign court on the basis of the existence of thearbitration agreement. However, the court proceedings in the foreign court likely would bequite burdensome for the Japanese company. It also has to face unpredictability of theoutcome in such foreign court. Accordingly, the Japanese company might consider filing anapplication for provisional disposition in a Japanese court to seek a provisional measure under
the CPRA. Given the existence of a valid arbitration agreement, the Japanese company could

be considered to have a contractual right to stop the foreign company from filing a lawsuit in
its home jurisdiction. Therefore, it seems theoretically possible for the Japanese company toseek an order of provisional disposition from a Japanese court under the CPRA to cause theforeign company to provisionally suspend its lawsuit in the foreign court. If such a provisional

disposition is issued, the foreign company would be in breach of its obligations under thearbitration agreement and be subject to fines determined by the Japanese court.

Although the above scenario is theoretically possible, the “necessity requirement” must be

met for the court to issue the provisional disposition order. It is likely that the court will noticethat the Japanese company has made the arbitration request to an arbitration body, and it willbe less keen on imposing provisional measures in Japan compelling the foreign company towithdraw the lawsuit in its own country and impose fines on the foreign company.

11）Arbitration proceedings on the other hand do not have ex parte proceedings for granting interim and provisional
measure (Ibid at pp.423-424).

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It is important to monitor the development of case law in this area as well as proposed

legislative action to give enforcement power to interim and provisional measures of arbitral

tribunals in order to better predict how provisional measures will be handled in cases involving
agreements with arbitration clauses where a party is Japanese.

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TMI Associates constantly endeavors to meet the needsof its clients and society as a whole by utilizing its
comprehensive internal and external networks in newand emerging legal practice areas.

23rd Floor, Roppongi Hills Mori Tower, 6-10-1 Roppongi, Minato-ku
Tokyo 106-6123, Japan
Tel: +81(0)3-6438-5511 Fax: +81(0)3-6438-5522
E-mail: info_general@tmi.gr.jp
http://www.tmi.gr.jp/english/
TOKYO / NAGOYA / OSAKA / KYOTO / KOBE / FUKUOKA / SHANGHAI / BEIJING / HO CHI MINH CITY /HANOI / YANGON / SINGAPORE / PHNOM PENH / BANGKOK / SILICON VALLEY / LONDONA Message from JCAA
President

Kazuhiko Bando
Since its inception in 1950, JCAA has offered first-class arbitration andmediation dispute resolution services for the domestic and international
community. In addition, recently the Japanese government has injected
its resources to make Japan a preferred seat of arbitration andmediation in order to strengthen the rule of law for the benefit of global

businesses. In line with such policy, JCAA is committed to carefully
gathering information on the needs of international business and legal
practitioners and is reforming all JCAA services based on those needs.

Among other changes made, JCAA has decided to publish a new

English journal. JCAA hopes that this journal will help legal practitioners around the globe
obtain information on dispute resolutions in Japan.

In planning and editing this journal, JCAA was supported by the following Supporting Law

Firms:■Anderson Mōri & Tomotsune■Momo-o, Matsuo & Namba■Mori Hamada & Matsumoto■Nagashima Ohno & Tsunematsu■Oh-Ebashi LPC & Partners■Orrick Tokyo Law Office■TMI Associates■Kasumigaseki International Law Office/International Arbitration Chambers

JCAA takes this opportunity to express its sincerest gratitude for their assistance.

Chief Arbitration and Mediation Officer

Masato Dogauchi

JCAA is changing. In January 2019, three sets of JCAA arbitration rules came into force:first, the UNCITRAL Arbitration Rules, supplemented by the JCAA Administrative Rules, ensure
world-standard proceedings with a high degree of flexibility and autonomy for arbitrators;

second, the Commercial Arbitration Rules provide clear solutions to some contentious
procedural issues in order to facilitate smooth proceedings; third, the Interactive Arbitration

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A Message from JCAA

Rules provide more predictable, faster dispute resolution by stipulating

communication from the arbitral tribunal to the parties and a system of
fixed remuneration for arbitrators.

In February 2020, JCAA’s new Commercial Mediation Rules came into

effect. Under these new rules, parties have more options to flexibly

adapt to the specifics of their case. Mediation has strong potential toresolve disputes promptly and cost effectively.

Working with colleagues in the international legal community going

forward, JCAA will play a more significant role in arbitration andmediation in Japan and throughout the world.

External Supporting Lawyers
Public Relations Officer

Hiroko Nihei
Japan has great potential for developing into an ADR hub. I hope tocontribute to raising awareness in the global community of theattractiveness of JCAA arbitration/mediation and Japan as a seat. It is

my pleasure to be able to support JCAA with its challenge to the nextstage.

Professional & Institutional Relations Officer

Tony Andriotis

Japan has a solid and internationally well respected legal system, astable political system, and an incredible infrastructure; all elementsthat make Japan an ideal seat for the settlement of international
disputes. I am thus extremely grateful to have been approached by the
JCAA to assist them in their further growth and internationalization.

Japan Commercial Arbitration Journal VOL.1［2020］107

* Ms. Nihei and Mr. Andriotis provide support to the JCAA on a part-time basis and continue towork full-time at their respective law firms. They will not be involved in the JCAA's caseadministration and will be kept isolated from information thereof. They serve as Public

Relations Officer/ Professional & Institutional Relations Officer of the JCAA solely in theirindividual capacity, and not as lawyers or representatives of their respective law firms.

Staff, Arbitration& Mediation Department

Shinji Ogawa, Manager

JCAA provides quick and comprehensive support throughout its arbitration and mediation

proceedings, and has established a reputation as being efficient and user-friendly. We will
make every effort to meet the real needs of our users and provide dispute resolution services
that go beyond global standards.

Jieying Peng, Staff

As the sole commercial arbitral institution in Japan, JCAA endeavors to provide cost-effective

and streamlined dispute resolution ser vices. I hope to contribute to raising JCAA’s

international profile as a dispute resolution center and assisting more people from around theworld in resolving disputes through arbitration and mediation.

Other staff members

There are three other staff members in arbitration and mediation division.

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Japan Commercial Arbitration Journal VOL.1［2020］The Japan Commercial Arbitration Association (JCAA)
www.jcaa.or.jp