Japan Commercial
Arbitration Journal
VOL.3［2022］

The Japan Commercial Arbitration Association (JCAA)
President

Kazuhiko Bando
Editorial Board
Editor–in-Chief

Professor Kazuhiko Yamamoto, Chief Arbitration and Mediation Officer, JCAA

Aoi Inoue
Anderson Mori & Tomotsune

Editorial Committee

Chié Nakahara
Nishimura & Asahi

Harumichi Uchida
TMI Associates

Hiroki Aoki
Nagashima Ohno & Tsunematsu

Junya Naito
Momo-o, Matsuo & Namba

Mugi Sekido
Mori Hamada & Matsumoto

Shiro Kuniya
Oh-Ebashi LPC & Partners

Professor Shusuke Kakiuchi
The University of Tokyo

Tony Andriotis
DLA Piper

Yoshihiro Takatori
Kasumigaseki International Law
Supporting Law Firms
Anderson Mori & Tomotsune

Kasumigaseki International Law Office / International Arbitration Chambers
Momo-o, Matsuo & Namba
Mori Hamada & Matsumoto
Nagashima Ohno & Tsunematsu
Nishimura & Asahi
Oh-Ebashi LPC & Partners
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© 2022 JCAA

All rights reserved

Japan Commercial Arbitration Journal
VOL. 3 [2022]

Table of Contents
Amendment of JCAA Arbitration Rules and Promulgation of Appointing Authority Rules
Masato Dogauchi, Shinji Ogawa, Jieying Peng

3

New Style of Arbitration – The First Case under JCAA Interactive Arbitration Rules
Masato Dogauchi, Shinji Ogawa, Jieying Peng

7

The Appropriate Role of Burdens of Proof in Document Disclosure Exercises: A Close Reading of
Article 54 of the JCAA Commercial Arbitration Rules
Daniel Allen

11

Comparison in Practice between “Japanese” Arbitration and Foreign Arbitration
Takaaki Nagashima, Tadahiko Yasukuni, Dr. Marc R. Labgold, Megan C. Labgold

18

The Keys to Success: Unlocking Arbitrator Skills, Experience and Qualification Requirements
Peter Harris

32

Enforceability of Interim Measures by Arbitral Tribunal
Ayako Imazu

39

Technology Disputes in Japan: Is Arbitration a Better Option?
David MacArthur

47

Do Mediation Parties Owe Confidentiality in Japan?
Naoki Idei

58

Online Practice and Activation of ADR - Further Progress of Arb. Med. Arb.
Yoshihiro（Yoshi）Takatori64

ODR (Online Dispute Resolution)
─Outline of the Action Plan of the Ministry of Justice and Domestic Trends
MORI Oki, KOMATSU Akira

72

The Possibility of Utilizing Special Conciliation Proceedings as Insolvency ADR—Focusing on
its Use as a Business Revitalization Procedure
Shoichi Tagashira79

How Are Disputes Settled in Japan's Financial ADR?
Statistical Analysis of the Determinative Factors in the Facilitation and Conclusion of
Settlements in FINMAC Mediation
Tomohiko Maeda

91

Civil Litigation in Japan: Too Long from Start to Finish?
A Primer on Recent Timelines and Law Reforms
Junya Naito, Ryota Asakura

105

A Message from JCAA

118

2

Japan Commercial Arbitration Journal VOL.3［2022］

Amendment of JCAA Arbitration Rules and Promulgationof Appointing Authority Rules

Masato Dogauchi

1）

Shinji Ogawa

2）

Jieying Peng

3）

Ⅰ．Introduction
In 2021 the Japan Commercial Arbitration Association (JCAA) revised provisions on

expedited arbitration procedures and administrative fee in its existing Commercial Arbitration
Rules and Interactive Arbitration Rules in order to build up a more user-friendly arbitration

system. The amendments were the same for two sets of rules. Further, to make the most outof the JCAA’ s knowledge and database on arbitrators, the JCAA cropped up the new
Appointing Authority Rules, under which the parties may request the JCAA to appoint one ormore arbitrators even where the arbitration is not administered by the JCAA.

This paper sets out the key features of the revised Commercial Arbitration Rules andInteractive Arbitration Rules (“the 2021 Rules”), and new Appointing Authority Rules. The
article numbers cited in Part II and Part III refer to those in the Commercial Arbitration Rules.

Ⅱ．Amendment of Expedited Arbitration Procedures(1) Broader application of expedited arbitration procedures - increasing the maximum
amount to 300 million yen (approximately, USD 2.2 million) (Articles 84.1 and 84.2).

In 1997, the JCAA introduced its expedited arbitration procedures. Back then, the expedited

arbitration procedures applied where the amount in dispute was under 20 million yen (orapproximately, USD 150,000). After 22 years in 2019, the JCAA increased the threshold

amount to 50 million yen (or approximately, USD 375,000), but which was still significantly

lower than the amount set by other leading arbitration institutions. While the JCAA alreadyacknowledged such difference in the maximum amount of application during the 2019 Rules
amendment process, the amount was only raised by 2.5 times at that time, since sudden and1）Professor, Waseda University, Law School; Attorney-at-Law admitted in Japan, Former Chief Arbitrationand Mediation Officer of JCAA.
2）Manager of Arbitration and Mediation Department of the JCAA.
3）Attorney-at-law admitted in Australia; Former JCAA staff

Japan Commercial Arbitration Journal VOL.3［2022］3

steep increase might cause confusions among users.

After two years of transition, the JCAA has further broadened the application of expedited

arbitration proceedings. The foremost question was how much the proper upper limit would
be. The Rules Amendment Committee made a draft of revised rules, according to which the
maximum amount (the total amount of the claim, counterclaim and set-off defense) was set

at 300 million yen - six times the previous amount. Almost all public comments were in favorof the proposed amount. Taking into account the support by the potential users, the JCAA
decided that 300 million yen, as originally proposed, would be the appropriate upper limit.

(2)“Two-tier” time limits for rendering an award depending on the dispute amount(Article 88).

The next question was whether the time limit for rendering an arbitral award should bechanged in line with the increase in applicable amount, as the former Rules stipulated thestricter time limit - within three months from the date of the constitution of the tribunal.

On one hand, the JCAA saw no need to extend the three-month time limit for cases with adispute amount of less than 50 million yen. Since the entry into effect of the former

amendment, out of 27 arbitration cases filed by the end of 2020, five cases have been
conducted under the expedited arbitration procedures, all of which but one (in this case, thetime limit was extended at the request of both parties, and the arbitral award was renderedapproximately five months after the appointment of the arbitrator) were concluded with anarbitral award within three months. On the other hand, considering that arbitration cases witha dispute amount close to 300 million yen could be rather complicated and time-consuming, it
seems to be unlikely practical to have an arbitral tribunal render an award within threemonths.

For these reasons, JCAA decided to set up “two-tier” time limits; for cases with a disputeamount of less than 50 million yen, the time limit remains to be within three months; forother expedited cases, the new time limit is within six months.

In public comments, while some were in favor of the proposed provision stipulating two-tier time limits, some expressed concerns that such provision might introduce extra

complexity. After weighing up these opinions, the JCAA decided to maintain the proposed
draft.

(3) JCAA’ power to extend the time limit for the award (Article 89)

The provision of time limit discussed above obliges the arbitral tribunal to make reasonable

efforts to render an arbitral award within the prescribed time limit. In the former Rules, thearbitral tribunal had the power to extend the time limit without approval from the JCAA. As

noted above, the practice showed that the arbitral tribunal observed the time limit by issuing
the final award within three months in all JCAA cases but one (where the parties agreed toextend the time limit).

In public comments, some suggested that the decision as to whether to extend the time

limit should lie with the JCAA so that the rules clarify the JCAA commits to strictly managing

the time limit for the benefit of the arbitration users. In response to these comments, the2021 Rules stipulate that only the JCAA, not the arbitral tribunal, can extend the time limit in

4

Japan Commercial Arbitration Journal VOL.3［2022］

Amendment of JCAA Arbitration Rules and Promulgation of Appointing Authority Rules

exceptional circumstances. In practice, JCAA will decide whether to grant an extension after
consulting with the arbitral tribunal and parties.

To ensure the efficiency, the expedited arbitration is conducted on a document-only basis,

unless the arbitral tribunal finds it necessary to hold a hearing after consulting with the parties
or unless all parties so wish. In the event of a hearing, the tribunal should minimize the daysof hearing and use video conferencing or other proper means (Article 87).

(4) Non-application or discontinuation of expedited arbitration procedures (Article
84.3, Article 85)

In the 2021 Rules, the expedited arbitration procedures generally apply when the amount in

dispute falls under the maximum amount (300 million yen). Nonetheless, the ordinary
procedures apply in the following situations:a. all parties agree not to submit the dispute to expedited arbitration procedures and notify
the JCAA of such in writing (Article 84.3.1); or.

b. the JCAA, before the constitution of the arbitral tribunal, finds that the parties’ agreement

concerning the arbitral proceedings contains provisions that are contrary to the provisions
related to the expedited arbitration procedures or other circumstances exist that make it
clearly inappropriate to apply the expedited arbitration procedures (Article 84.3.2).

Even after the JCAA confirms the expedited arbitration procedures apply, they can be

discontinued and transferred to the ordinary procedures if:
a. all parties so agree; orb. the JCAA decides to discontinue the expedited arbitration procedures after consultation
with the arbitral tribunal and the parties (Article 85.1).

All procedures undertaken up until the transfer will remain valid (Article 85.2).

It should also be noted that where the amount of the dispute exceeds 300 million yen due

to an amendment to the claim after the JCAA confirms the application of expedited arbitration
procedures apply, the expedited arbitration procedures will continue to apply unless the JCAA
decides otherwise (Article 84.5).

(5) Removal of prohibition on amendment to claim

The former Rules stipulated that, to avoid procedural delay, amendment to claim wasprohibited after the JCAA confirmed that expedited arbitration procedures applied. In thisrespect, the 2021 Rules - same as in ordinary procedures- leave the arbitral tribunal to decide
whether to approve an amendment to claim. This will enable the arbitral tribunal to resolve
the related disputes in one single proceeding unless the tribunal finds the approval ofamendment to claim inappropriate in view of causing undue delay or any other circumstances.

Ⅲ．Amendment to administrative fee (Article 103)
In the former Rules, where the amount in dispute is less than 20 million yen, theadministrative fee was 500,000 yen (flat rate). This system has been amended in order tomake arbitration more accessible. The 2021 Rules state that the administrative fee for caseswith amount in dispute of less than 5 million yen is 10% of the amount in dispute.

Japan Commercial Arbitration Journal VOL.3［2022］

5

Ⅳ．New Appointing Authority Rules
In some ad hoc arbitration cases, the parties agree to empower an arbitral institution toappoint one or more arbitrator. Even in institutional arbitration cases, the parties may possibly
agree to request another arbitral institution to appoint arbitrators.

The JCAA had received multiple inquiries as to whether the JCAA could undertake theappointment in such circumstances. If such request for appointment arbitrators were really
made, it would be difficult for the JCAA to respond since it had no relevant rules providing forthe arbitrator appointment procedures and the applicable fee schedules. In 2021, to keep
pace with other arbitral institutions, the JCAA launched the new Appointing Authority Rules.

Under the Appointing Authority Rules, the JCAA provides, in response to a request, one ormore following service:a. appointment of a sole arbitrator;

b. appointment of one or more arbitrators if several arbitrators are to be appointed;
c. appointment of the presiding arbitrator; andd. appointment of a substitute arbitrator in the case of challenge, removal, resignation ordeath of arbitrator before the termination of arbitral proceedings.

Additionally, if any party apply for challenging an arbitrator appointed by the JCAA, the JCAA

decides on such application.

As to the manner of appointment, unless otherwise specified in the agreement between theparties or the applicable arbitration rules, the JCAA presents to the parties a list of multiple

candidates. The parties are respectively asked to rank the given candidates, and then the
JCAA appoints an arbitrator, taking into account the parties’ priority (Article 9.2). It is worthyof note that the appointment is not solely determined by the priority-based points. For

instance, where there are five candidates, one candidate is ranked as first by one party and as
fifth by the other (the total points are six), and another candidate is ranked as third by theboth parties (the total points are six), then the latter candidate would usually be appointed.

The fees for appointment of arbitrators are 100,000 yen plus consumption tax per arbitrator.

For decision of challenge application, it is 300,000 yen plus consumption tax per arbitrator.

The Appointing Authority Rules do not apply where the Commercial Arbitration Rules, theInteractive Arbitration Rules or the Administrative Rules for UNCITRAL Arbitration apply, sincerules on the appointment of arbitrator(s) and challenge of them are fully stipulated there.

Ⅴ．Conclusion
The JCAA seeks to provide swift and cost-effective arbitration services to its users and toaccommodate their diverse needs. The JCAA does hope that the 2021 Rules and the
Appointing Authority Rules will contribute to better user experience.

6

Japan Commercial Arbitration Journal VOL.3［2022］

New Style of Arbitration– The First Case under JCAA Interactive Arbitration Rules

Masato Dogauchi

1）

Shinji Ogawa

2）

Jieying Peng

3）

Ⅰ．Introduction
In 2019, the JCAA introduced its new Interactive Arbitration Rules (the “Interactive

Rules” ). The first case under the Interactive Rules has been successfully concluded with aconsent arbitral award. This article highlights how the Interactive Rules well functioned in thefirst case to achieve this satisfactory dispute resolution for the parties involved4）.

First, the distinctive features of the Interactive Rules will be introduced in Part II. Second, inPart III, it will outline the dispute and how the parties agreed to submit their dispute to the JCAAInteractive arbitration. Third, the gist of proceedings and the final resolution, including speed andcost thereof, and the evaluation by the parties and other points will be discussed in Part IV.

Ⅱ．Distinctive Features of Interactive Arbitration Rules
The Interactive Rules are distinctive in that, as the name suggests, they encourage“dialogue” between the arbitral tribunal and the parties. The Interactive Rules oblige thetribunal to share its views on the case with the parties at two different phases of theproceedings. First, the tribunal will provide the parties with its summary of the parties’

positions and a provisional list of factual and legal issues (Article 48). Second, before thetribunal decides whether to examine a witness, it will inform the parties of its non-binding andpreliminary views about the factual and legal issues that it considers important (Article 56).

In both dialogue, the tribunal will present its views in writing on which the parties have an

opportunity to comment. When necessary, the tribunal will elaborate its views and share with

1）Professor, Waseda University, Law School; Attorney-at-Law admitted in Japan, Former Chief Arbitrationand Mediation Officer of JCAA.
2）Manager of Arbitration and Mediation Department of the JCAA
3）Attorney-at-law admitted in Australia; Former JCAA staff
4）This article is based on the interviews conducted with the parties who expressed their consent to makethe general information of this case open to the public.

Japan Commercial Arbitration Journal VOL.3［2022］7

the parties. These two opportunities of interaction between the parties and arbitral tribunal
can give them a clear view of the dispute resolution pathways. This tribunal’s obligation toshare its views create a further positive effect where the tribunal consists of three arbitrators:

Inevitably, the arbitrators will intensively discuss the case from the early stages of theproceedings, which in turn facilitates the interaction between the arbitrators. The "dialogue",in particular the disclosure of the tribunal’s non-binding and preliminary views on the parties’
positions and the issues, was inspired by the traditional civil law practice.

On the other hand, in traditional common law style arbitration, we see basically one way

communication - from the parties to the tribunal without the tribunal’ s suggestion or
implication on its understanding of the case. The parties have almost no chance of figuring

out what issues the tribunal is particularly concerned about. Given the “one shot” nature ofarbitration, it is understandable that the parties are reluctant to narrow down the scope of

their arguments and tend to submit all arguments and evidence that might affect theoutcome. Such strategy comes at a cost. Examining the parties’ massive arguments andevidence places heavy burden on the tribunal and take significantly longer to render the final
award and counsels’ fees soar.

While common law style arbitration would be said to be a standard practice at present,“black-boxing” the process by which the arbitral tribunal's views are formed may not inpractice accommodate the expectation of parties, especially from a civil law background. This
is where the Interactive Rules come in.

The early step-by-step share of the tribunal’s views under the Interactive Rules enables theparties not only to submit arguments and evidence in a timely manner and to the point, butalso to make better informed decision should the parties steer towards settlement negotiation.
These dialogue-oriented processes of building up the arbitral award will create a quality award
with less cost and time, which enhance the users’ satisfaction in all aspects.

Ⅲ．The First Case under Interactive Rules – How the parties selected Interactive
Rules(1) The disputes

A Japanese company (Y) supplied to another Japanese company (X) par ts to beincorporated in the X’ s products. Defects were found in the Y’s final products at the market.

X believed that such defects were caused by flaw in the parts supplied by Y, and claim fordamages against Y. The main issues were (i) whether the parts supplied by Y were defective,

and if yes, (ii) how much the damages should be. The amount of X’s claim was over 1 billion
yen (Approximately USD7,476,000).

(2) The parties agreed to submit the case to arbitration under the Interactive
Arbitration Rules

The contract between X and Y contained a choice-of-court clause but no arbitration clause.

Negotiations between X and Y had lasted for over one year, but these followed the parallel
tracks.

8

Japan Commercial Arbitration Journal VOL.3［2022］

New Style of Arbitration – The First Case under JCAA Interactive Arbitration Rules

Amid the deadlock and following the counsels’ advice, the parties agreed to submit the

dispute to the JCAA arbitration under its Interactive Rules. In addition to the widely indicatedmerits of arbitration, the parties expected that the Interactive Rules would achieve a quicker

and reasonable resolution and cut down the overall costs, as the tribunal shared its views withthe parties. At the same time, the parties agreed that the number of arbitrators should be
three.

Ⅳ．Proceedings and final result(1) Outline of the proceedings

During the proceedings, interaction took place in several times between the tribunal and theparties: The tribunal made the most of the purpose of the Interactive Rules at the very firstmeeting. Having reviewed the X’ s request for arbitration and the Y’s answer, the tribunal
discussed the case with the parties by referring to a document jotting down what the tribunal

is tentatively interested in with regard to the parties’ positions and the provisionally identified
issues. After that, the parties submitted their arguments and evidence corresponding to thetribunal’ s tentative and provisional interests.

At the second meeting, the tribunal presented to the parties a provisional but refinedsummary of the parties’ positions and issues, and exchanged views with the parties.

Later, the parties submitted their written comments on the provisional summary. The

tribunal then emailed a draft of document illustrating the grounds of the parties’ case and thefactual and legal issues that the arbitral tribunal ascertained. Following this, the tribunal
further revised the draft and shared it with the parties, taking into account the parties'
comments and additional documentary evidence.

Subsequently, the tribunal provided to the parties in writing its non-binding and preliminary

views on important issues, along with a detailed explanation. The tribunal at its discretion
shared its preliminary views on a part of the issues on the originally scheduled date, and thenpresented the views on the remaining issues at a later date. The tribunal invited the parties tosubmit their written opinions on the preliminary views and asked them how they wished to
conduct the further proceedings. Through the interaction, both the tribunal and the parties

had reached the same view that witness examination was not needed. The questions left
were whether the parties asked the tribunal to proceed with drafting the arbitral award or
explored a path for amicable settlement by mediation or in any other manner.

The parties preferred the later approach. They agreed to conduct the mediation under the

JCAA Commercial Mediation Rules. They also agreed to appoint the three arbitrators as
mediators. Finally, the parties reached a comprehensive settlement, which includes the shareof losses arising from possible future defects. Upon request by the parties, the tribunal issued
the consent award.

(2) Final result – speed and costs

Speed: This case was settled with the consent award after 12.5 months from the request

for arbitration, or after 12.3 months from the constitution of the tribunal (10 months

Japan Commercial Arbitration Journal VOL.3［2022］9excluding the period of the mediation).

Costs: The total amount of the arbitrators’ remuneration was 9.9 million yen. The

administration fee was approximately 4.2 million yen. The arbitrator's expenses and othercosts were approximately 130,000 yen (consumption tax included in these amount). In

addition to these, the parties bore their own legal fees, the amount of which was unknown to
the JCAA.

In the questionnaire and interview done some weeks after the final resolution, the parties

gave an overall positive evaluation of the Interactive Arbitration. They were content with thetribunal’s early disclosure of preliminary views, the duration of the proceedings, the costs andthe JCAA’s extensive administrative support. In particular, the parties found that the tribunal’s
non-binding and preliminary views on the important issues were helpful to decide the further

course of action that they should take. One party also expressed that while it was not familiar
with arbitration before this case, it would be more open to including an arbitration clause in its
contracts.

Ⅴ．Conclusion
This above case under the Interactive Rules would not have been born without the counsel

who recommended the Interactive Arbitration to its clients with the belief that it would meettheir client’s needs, and the parties who opted for arbitration with which they had no previous
experience and gave the new arbitration rules a try. In addition, the efficient and satisfying

resolution of the case was attributed to the arbitrators who enthusiastically employ theimaginative and creative approach to resolve the case amid unprecedented.

This case illustrated that the new style of arbitration under the Interactive Rules can wellserve certain existing needs of arbitration users. The JCAA hopes that the merits of theInteractive Arbitration will be more widely acknowledged, and the Interactive Arbitration will
become a viable and leading option for dispute resolution.

10

Japan Commercial Arbitration Journal VOL.3［2022］

The Appropriate Role of Burdens of Proof in Document
Disclosure Exercises: A Close Reading of Article 54 of
the JCAA Commercial Arbitration Rules
Mori Hamada & Matsumoto

Daniel Allen

Ⅰ．Introduction
1. Different legal traditions take vastly different approaches to the scope and availability of

document disclosures. On the permissive end of the spectrum is the United States, where
broad disclosure is the expectation. Meanwhile, many civil law jurisdictions (including Japan)
restrict the parties’ ability to obtain document disclosures to an exceptional circumstance,

rather than the rule. As a result, in international commercial arbitration, beginning the
document disclosures phase often can feel like venturing into uncharted waters—particularly
to parties but even to counsel.

2. This article takes a closer look at a particular area of uncertainty: whether and to what
extent (if any) requests for document production must be related to the requesting party’s

burden of proof. Views differ as to whether sources of soft law like the IBA Rules express aposition on this issue, and most arbitral rules are either silent or inconclusive. This article
argues that Article 54 of the JCAA Commercial Arbitration Rules, however, does commit to a
general position that document production in a JCAA Commercial Rules arbitration should be
more focused and limited than has become typical in international commercial arbitration, as

well as a specific position that document requests should not be granted in a JCAA Commercial
Rules arbitration unless their purpose is to contribute to the requesting party’s fulfillment of
its burden of proof.

Ⅱ．The role of soft law in determining approaches to document disclosuresin international commercial arbitrations
1. Sources of soft law like the IBA Rules on the Taking of Evidence provide some guidance as
to what parties might expect in an international arbitration, but leave many practical points

unaddressed. That is by design. Parties and Tribunals therefore enjoy flexibility, which
certainly has its merits. But that flexibility comes at the cost of uncertainty.

2. A particular issue is whether and to what extent requests for production of documents

Japan Commercial Arbitration Journal VOL.3［2022］11

should (or must) relate to the requesting party’s burden of proof. Parties often seek

production of documents that they expect to contradict their opponent’s case. Moreover, atype of request for production that has become commonplace in international arbitration is
one that does not sincerely seek the production of any document at all, but simply

confirmation that a type of document (related to the opponent’s burden of proof) does notexist.

3. In practice, document requests of that nature often do not contribute positively to theefficient resolution of a dispute; the point that these requests seek to make is one that can bemade through advocacy and then addressed, to the extent necessary, by a tribunal whenassessing the weight of evidence (or even through more formal procedural mechanisms suchas adverse inferences). However, absent any rule forbidding such requests (such as a rule
requiring requests for production to advance the requesting party’s burden of proof in someway), they will remain attractive to make. There is little downside for the party making therequest, and there is the potential upside of smoking out an opponent who might have been
holding something important back for later ambush (another unfortunate tactic that has
become all too common in contemporary practice).

4. The IBA Rules, in particular, do not take a clear position on this point. Article 3(b) of the

IBA Rules requires no more than that a party requesting production provide a statement

explaining the requested document’s relevance to “the case” and materiality to “itsoutcome” —with no mention of the parties’ respective burdens of proof. Some consider Article
3(b) to be the end of the matter, taking the view that the IBA Rules simply do not require aparty to demonstrate a link to its burden of proof1）. A number of prominent commentators

endorse that approach in principle—Jeffrey Waincymer, for example, advocates against a“blanket rule” that requests should be tied to a party’s burden of proof, chiefly on the basisthat it can sometimes be difficult for tribunals to determine which party bears the burden of
proof on a particular issue, and to what extent.2）

5. On the other hand, it is not hard to find prominent commentators who disagree, particularly

those writing from civil law perspectives. Yves Derains, for one, wrote a seminal article on the
topic in 2006, in which he argued that a link to the requesting party’s burden of proof should

be considered a “requirement” for a document request to be accepted.3） Bernard Hanotiau
also took up the banner, arguing that requests should generally be denied unless they relate
to the requesting party’s burden of proof.4）

6. The IBA Rules certainly do not forbid (or even dissuade) arbitrators from taking that sort ofapproach. On the contrary, Article 9(2)(g) explicitly permits objections to requests for
1）Burden of Proof as a Prerequisite to Document Production Under the 2010 IBA Rules: An Obituary by M.E.
Jaffe, J.T. Dulani and D.J. Stute2）Waincymer, Procedure and Evidence in International Arbitration (2012), Section 11.7.1.2.
3）Yves Derains, Towards Greater Efficiency in Document Production before Arbitral Tribunals—A Continental
Viewpoint, ICC BULLETIN, SPECIAL SUPPLEMENT 83 (2006).
4）Bernard Hanotiau, Document Production in International Arbitration: A Tentative Definition of ‘Best Practices’,
ICC BULLETIN, SPECIAL SUPPLEMENT 113 (2006)

12

Japan Commercial Arbitration Journal VOL.3［2022］

The Appropriate Role of Burdens of Proof in Document Disclosure Exercises: A Close Reading of Article 54 of the JCAA Commercial Arbitration Rules

production on the basis of “considerations of procedural economy, proportionality, fairness orequality of the Parties” . It does not take too much creative vigor to argue that whether adocument request advances the requesting party’s burden of proof is a valid “consideration ofprocedural economy” , not to mention a factor relevant to “proportionality” and “fairness” .

The interpretation of the IBA Rules on this question tends, therefore, to vary from case to
case.

Ⅲ．The role of arbitral rules
1. Another potential source of guidance on this point could be the rules applicable to thearbitration, but the rules of several of Asia’s most popular institutions (e.g., the ICC, SIAC andthe LCIA) do not address burdens of proof at all, and most institutional rules tend toward
generality on document disclosures. Institutional rules typically affirm that the tribunal shallhave the power to order disclosure of documents, usually with no further restriction than thetribunal’s estimation of “relevance” to the outcome of the dispute.5）

2. That is, to be clear, a perfectly sensible approach, consistent with an emphasis on flexibility

and party autonomy. And, of course, there are exceptions—for instance, reflecting their origin

in the US, the ICDR International Arbitration Rules include a relatively more detailed rule (Rule24) addressing the exchange of information between the parties, although even the ICDRInternational Arbitration Rules prioritize flexibility and the tailoring of specific document
disclosure rules for each dispute.

3. On the issue of burdens of proof, however, there is a bit more of a split—and, whether or

not one agrees with the view expressed by Waincymer and others that burdens of proof cansometimes be slippery creatures, more attention should be paid to what the rules chosen by

the parties have to say on the matter. Notably, the UNCITRAL Rules adopt an approach thatdiffers from many institutional rulesets. Rather than avoiding the issue, Article 27(1) provides

that “Each party shall have the burden of proving the facts relied on to support its claim or
defence” . Perhaps reflecting the divide on this topic between civil and common law traditions,versions of this rule are implemented in the KCAB International Rules and the CIETAC
Arbitration Rules, as well as the JCAA Commercial Arbitration Rules.6）

4. While the rule is phrased as a general proposition, As Paulsson and Petrochilos explain in
UNCITRAL Arbitration (2017), at least part of the idea behind Article 27(1) is to “prevent

parties from making factual assertions without providing evidential support for them” , setting

up the potential for a “trial by ambush” at the main hearing.7） Read in conjunction with
Articles 20(4) and 21(2) of the UNCITRAL Rules, that appears to be right: the parties’
principal pleadings are to be accompanied by all evidenced relied upon (per Articles 20 and

5）See, e.g., SIAC Rules, Rule 27(f); LCIA Rules, Article 22.1(v).
6）The CIETAC Rules notably go even further, including a peremptory warning on the topic in their Article 41(3): “Ifa party bearing the burden of proof fails to produce evidence within the specified time period, or if the produced
evidence is not sufficient to support its claim or counterclaim, it shall bear the consequences thereof.”
7）Paulsson & Petrochilos, UNCITRAL Arbitration (2017), p. 238.

Japan Commercial Arbitration Journal VOL.3［2022］1321), and then Article 27(1) clarifies that those pleadings are to discharge the parties’
respective burdens of proof.

5. Importantly, Paulsson and Petrochilos also identify the relationship between these principles
and the circumstances under which a tribunal may order production of documents—a power
addressed in Article 27(3) of the UNCITRAL Rules.

A number of further points follow. […] Secondly, there are circumstances where
evidence may be unavailable to one party (for example, it has been destroyed) but inthe possession or control of the other party. That is the kind of justified explanation
for a party's failure to adduce evidence, seeking instead the tribunal's intervention tocall for disclosure by virtue of article 27(3).8）

6. In other words, the UNCITRAL rules link a party’s ability to seek production of documents
to the party’s duty, in the first place, to discharge its burden of proof. In that conception, thereal purpose of allowing a party to seek documents in the first place is to allow the party

access to evidence that it would have used for that purpose but for the fact that, for ajustifiable reason, the evidence is not in its possession.

Ⅳ．Applying Ar ticle 54 of the JCAA Commercial Arbitration Rules todocument disclosures
1. Against that backdrop, let us turn to focus on the JCAA Commercial Arbitration Rules—and

Article 54, in particular. The key question is how Article 54 should be brought to bear on thescope of document production, as well as the particular issue of whether requests to produce
must relate to the requesting party’s burden of proof. In the remainder of this article I willargue that, an arbitral tribunal charged with applying Article 54 of the Commercial Rules

should be at all times mindful of holding the parties to their burdens of proof, with principally

the two consequences introduced above and restated here: (i) in general, document

production in a JCAA Commercial Rules arbitration should be more focused and limited thanhas become typical in international commercial arbitration; and (ii) in particular, document
requests should not be granted in a JCAA Commercial Rules arbitration unless their purpose is
to contribute to the requesting party’s fulfillment of its burden of proof.

2. The starting point for an analysis of Article 54 is Article 54(1), which, as mentioned above,tracks Article 27(1) of the UNCITRAL Rules. As Paulsson and Petrochilos have argued, Article
27 of the UNCITRAL Rules is already susceptible to the reading that the tribunal’s power toorder production of documents should be considered linked to the parties’ respective burdensof proof.

3. That interpretation is even more appropriate for Article 54 of the JCAA Rules. While Article
54(1) of the JCAA Rules simply mirrors Article 27(1) of the UNCTRAL Rules, Article 54(4) of
8）Paulsson & Petrochilos, UNCITRAL Arbitration (2017), p. 239.

14

Japan Commercial Arbitration Journal VOL.3［2022］

The Appropriate Role of Burdens of Proof in Document Disclosure Exercises: A Close Reading of Article 54 of the JCAA Commercial Arbitration Rules

the JCAA Rules differs materially from its UNCITRAL counterpart—Article 27(3).

4. Again, Article 27(3) of the UNCITRAL Rules, to which Paulsson and Petrochilos refer in theexcerpt above, provides no more than that “At any time during the arbitral proceedings thearbitral tribunal may require the parties to produce documents, exhibits or other evidence

within such a period of time as the arbitral tribunal shall determine.” It does not restrict thetribunal’s discretion in any way, and does not set any particular standard for a party first tomeet, such as a showing of materiality or relevance.

5. Article 54(4) of the JCAA Rules, on the other hand, does contain such restrictions. Article
54(4) provides as follows.

The arbitral tribunal, at the written request of a Party or on its own motion, may orderany Party to produce documents in its possession that the arbitral tribunal considers
necessary to examine after giving the Party in possession an opportunity to comment,

unless the arbitral tribunal finds reasonable grounds for the Party in possession torefuse the production.

6. The most important language here is “necessary to examine” . In terms, Article 54(4) of

the JCAA Rules requires the arbitral tribunal to make a threshold determination that adocument request seeks production of a document that it is not just relevant or material tothe outcome of the case, but “necessary” for the tribunal to examine. Lest there be any

doubt, the Japanese version of the JCAA Commercial Rules, which prevails over the English
version pursuant to Article 6, uses the word “hitsuyou” . That is not a soft way to say“necessary” —another way to translate the word would be “indispensable” .

7. The requirement of necessity on the one hand should then be balanced against therelatively relaxed standard for a party to meet when refusing production: no more than“reasonable grounds” . In other words, the document must be necessary, and the party on
the receiving end of the document request must have no reasonable basis to refuse.

8. Reading Articles 54(1) and 54(4) of the JCAA Commercial Arbitration Rules together in thesame way that Paulsson and Petrochilos read Articles 27(1) and 27(3) of the UNCITRAL Rules

together points not only to the conclusion that the mechanism of document production ismade available to enable parties to obtain documents that they would have submitted if they
had possessed them, but to the further conclusion that parties should be considered entitledto obtain only what is reasonably “necessary” for them to present to the tribunal, vis-à-vis
their burdens of proof. Put another way, a document should be considered to be “necessary”
for the tribunal to examine (and therefore subject to an order to produce under Article 54(4))

only if there is a reasonable likelihood that a party’s ability to meet its burden of proof as to aparticular fact might depend on the document—and not otherwise.

Ⅴ．Conclusion
1. While the approach advocated here would be less solicitous toward parties hoping to seek

Japan Commercial Arbitration Journal VOL.3［2022］

15

discovery than the approach reflected in the IBA Rules, and that has become customary ininternational commercial arbitration, it is of course perfectly fair. Expansive (and expensive)
discovery exercises are not required for due process, particularly in commercial disputes.

Tribunals and courts alike generally do not need to examine every piece of potentially relevant
evidence to decide a commercial dispute between sophisticated parties.

2. In any event, it is also just a starting point—a default approach for tribunals to take when

the parties have made a bare selection of the JCAA Commercial Arbitration Rules. Parties
would always be free to agree to a more permissive or expansive document production

exercise in any particular instance, notwithstanding the default position articulated in Article

54 of the JCAA Rules. That flexibility is, and always will be, one of the core advantages ofchoosing arbitration.

16

Japan Commercial Arbitration Journal VOL.3［2022］

Comparison in Practice between “Japanese” Arbitration
and Foreign Arbitration
Nagashima Hashimoto & Yasukuni - Attorneys at Law

Nagashima Hashimoto & Yasukuni - Attorneys at Law

Nagashima Hashimoto & Yasukuni - Attorneys at Law

Nagashima Hashimoto & Yasukuni - Attorneys at Law

Takaaki Nagashima

Dr. Marc R. Labgold

Tadahiko Yasukuni
Megan C. Labgold

Ⅰ．Introduction
1. The authors have been involved in numerous domestic and international arbitralproceedings including arbitrations administered by the International Chamber of Commerce(ICC), Japan Commercial Arbitration Association (JCAA), Hong Kong International Arbitration

Centre (HKIAC), Singapore International Arbitration Centre (SIAC) where the places ofarbitration were Tokyo, Osaka, New York, Paris, Amsterdam, Zurich, Tel Aviv, Bangkok,

Singapore, and Hong Kong. In addition, they had the opportunity to be involved as counsel toa party in the first case involving the Interactive Arbitration Rules of the JCAA that came into
effect on January 1, 2019, as well as having experience as an arbitrator before the JCAA.

It is common in Japan for parties to select the Japanese courts (three-tiered court system)as the means of dispute resolution in contracts between domestic companies, although thenumber of cases in which domestic companies agree to arbitration as the method of dispute

resolution for domestic transactions is on the rise. In sharp contrast, arbitration agreements

are routinely used in commercial contracts (other than loan agreements) for internationaltransactions as the means of dispute resolution. There are good reasons for selecting
arbitration as the method of dispute resolution arising from international transactions

including, for example, the ability to conduct the proceedings confidentially, efficiently andwithout having to subject the dispute to national courts. Indeed, arbitral proceedings are
predicated on the principle that they are neutral and fair proceedings. For example, thisconcept is embodied in Article 18 of the United Nations Commission on International Trade
Law ( “UNCITRAL” ) Model Law, which provides: “The parties shall be treated with equality

and each party shall be given a full opportunity of presenting his case. ” Equally, if not more
important, the existence of the New York Convention on the Recognition and Enforcement of

Foreign Arbitral Awards (1958) (the “New York Convention” ), provides a facile method of
enforcing an arbitral award in any of the member states1), thereby obviating many of the1）At the time of this writing, there are 170 contracting states to the New York Convention.

18

Japan Commercial Arbitration Journal VOL.3［2022］

Comparison in Practice between “Japanese” Arbitration and Foreign Arbitration

challenges and impediments encountered when attempting to enforce a foreign judgment.

Despite the goal of neutrality, the place (or “seat” ) of the arbitration is important, as thelaws of the seat, like the rules of a particular institution, will impact upon the conduct of theproceedings. Many, but not all, countries have adopted the UNCITRAL Model Law (in whole orin part) as their national arbitration statute. The Arbitration Act of Japan (Law No. 138 of
2003) has been drafted in accordance with the UNCITRAL Model Law.2)

Considered as a whole, international arbitrations can vary widely in terms of the legal

system at the place of arbitration (e.g. , whether it is a pro-arbitration jurisdiction), thestructure of that legal system (i.e. , civil or common law), the governing law of the contract(and, in some cases, the governing law of the arbitration), and the nationality and experiencelevel of the arbitrators.3) This article broadly describes the characteristics of “Japanese”

domestic arbitral proceedings and foreign (international) arbitral proceedings4) and comparesand contrasts their respective practices.

2. A threshold distinction between “Japanese” domestic and international arbitralproceedings is the choice of the language for both the contract and that of the arbitralproceedings. As a practical matter, it is not common for international transactions to be

conducted in Japanese. Thus, it is uncommon that an arbitration agreement designates
Japanese as either the controlling contractual language or the language used for the arbitralproceeding, even when the place of arbitration is within Japan. On the contrary, in domestictransactions, the controlling contractual language and the language used for the arbitralproceeding is always Japanese and the place of arbitration is always within Japan, with thelimited exception that an overseas corporation that is a subsidiary of a Japanese corporation isa party.

Not surprisingly, domestic arbitral proceedings have advantages that are suited to thecorporate culture of Japanese companies including being conducted in Japanese. In contrast,

it is commonplace that international arbitral proceedings, especially for arbitrators with acommon law background, involve active written and oral arguments made in English. It istherefore necessary to have the sufficient experience practicing as a legal professional in the

English language. In this regard, Singapore and Hong Kong are often chosen as the place of2）The decision of the Tokyo High Court on August 1, 2008 (Hanrei Jihou No. 2415, p. 24), which referred
to various issues regarding the nature of the set aside examination of arbitral awards, also recognized thesame. The arbitration case that this decision dealt with is a dispute between a Japanese company and aEuropean company both of which agreed upon the JCAA rules, and the authors were involved in the caseas counsel.
3）As a general principle, in the case of a single arbitrator, the arbitrator’s nationality should be different
than either party’s nationality, whereas in the case of a three arbitrator panel, each party typically chooses
an arbitrator whose nationality it deems favorable and the presiding arbitrator should be of a different
nationality than either party.
4）In arbitral proceedings conducted by arbitrators with a common law background under the JCAA Rules,
common law litigation practice tends to be strongly reflected in their proceedings. On the other hand,arbitral proceedings conducted by Japanese or other arbitrators with a civil law background under the
JCAA Rules, the Japanese and civil litigation practice are reflected in their proceedings and thus we
described the latter as "Japanese" or “domestic” arbitral proceedings.

Japan Commercial Arbitration Journal VOL.3［2022］

19

arbitration for arbitration agreements in international transactions, especially in Asian
countries5) because, unlike Japan, there are many English-speaking arbitrators from the UK,
the US, Australia, New Zealand, Singapore and Hong Kong.

In order to promote international commercial arbitration in Japan, it is necessary not only to

expand the system and facilities and encourage a pro-arbitration legal system, but also toensure that there are experienced arbitrators and counsel who are qualified to conduct
international arbitral proceedings in English and available to serve in arbitrations in Japan.

Ⅱ．Practical Comparisons in the Procedural Timetable and the Collection of
Evidence
1. Procedural Timetables in foreign arbitral proceedings such as those administered by
the ICC

In any arbitration, the formulation of a procedural timetable is critically important for thefair, expeditious and effective resolution of the dispute. Arbitral tribunals typically issue theprocedural timetable in the form of a procedural order, after consultation with the parties andin accordance with the applicable institutional rules. In international arbitral proceedings, theprocedural timetable is very detailed and rigorous. In general terms, the procedural timetable

will include deadlines for written submissions (i.e. , statement of claim, statement of defense),

written witness statements, documents exchange /requests, expert reports, and a final
evidentiary hearing.

Although the schedule may vary depending on the nature of the case and the issues

presented, an overview of the ICC's typical timetable leading up to the finalization of theTerms of Reference8) is as follows:First, the Request for Arbitration, the Answer to the Request for Arbitration andCounterclaim (if any) and Reply to Counterclaim are alternately submitted to the Secretariat.

Second, the arbitral tribunal is empaneled.9) Once empaneled, the Secretariat forwards therecord to the arbitral tribunal.

Third, the arbitral tribunal conducts a Case Management Conference ( “CMC” ), which is5）Due to the recent political climate, the number of arbitral proceedings in which Hong Kong is the seatof arbitration is reported to be decreasing, with some parties opting instead to seat their arbitrations in
Singapore (e.g. , SIAC), Malaysia (e.g. , AIAC) and Thailand (e.g. , THAC). Even so, Hong Kong, especiallycases administered by the HKIAC remains a popular seat for international arbitrations and, in light ofrecent cooperative agreements, the HKIAC remains a preferred choice for arbitrations involving Chinese
respondents.
6）
As of the time of this writing, the applicable rules are the ICC Rules of Arbitration entered into force on 1
January 2021 (referred to hereinafter as the “ICC Rules” ). Care should be taken to recognize that thearticle numbers of the ICC Rules may be different than those of the earlier issued versions.
7）Article 22 provides generally for procedural measures to be taken by the arbitral tribunal with respect
to case management, Article 24 is specifically directed to case management conferences and theprocedural timetable, and Article 31 sets the time for the issuance of a final award. Similarly, Article 43 of
the JCAA Rules addresses the preparation of the procedural timetable and prescribes the period of time
until the issuance of the arbitral award.

20

Japan Commercial Arbitration Journal VOL.3［2022］

Comparison in Practice between “Japanese” Arbitration and Foreign Arbitrationequivalent to a preparatory meeting under the JCAA rules. At the CMC, the arbitral tribunal

consults with the parties to finalize the Terms of Reference and to hear the parties’ respective

positions on the procedures to be followed and the scheduling thereof. The Terms ofReference is then finalized and the procedural timetable for the entire proceeding is set by thearbitral tribunal. Needless to say, the Terms of Reference, which delineates the scope of theproceedings, is an important document that serves as a premise for the arbitral award, andthis point is discussed in Section III below.

Next, after the Terms of Reference is finalized and the case moves to parties’ submissions

on the disputed issues, there is typically a back-and-forth exchange of arguments and proofs

by both parties (alternating between the Claimant's Statement of Claim, the Respondent’s
Statement of Defense and Counterclaim, Claimant’s Reply to Defense and Defense toCounterclaim and Respondent’s Reply to Defense to Counterclaim, etc.)10). Foreign arbitralproceedings are notably different from domestic proceedings in that the arbitral tribunal

expressly orders the submission of "all" factual evidence and legal authorities in support of theparties’ claims.11)

In cases where there is a dispute over the jurisdiction of the arbitration, such as the scopeof the arbitration agreement, a hearing on the tribunal’s jurisdiction may be held, followed bya Partial Award on Jurisdiction (interim award). Such jurisdictional challenges must be
identified in Terms of Reference and are typically addressed at the outset of the proceedings,
either in advance of or concurrent with the parties’ substantive submissions.

While the ICC Rules do not contemplate discovery, it is common for international arbitralproceedings to include requests for production of documents, whereby a party may request

the other party to disclose evidence believed to be within the other party’s possessions,custody and control. Such procedures are commonly guided by the IBA Rules on the Taking of
Evidence in International Arbitration. Commonly, each party is permitted to request specific8）See Article 23 of the ICC Rules. Although the ICC Rules require the preparation of the Terms ofReference, this is not provided for in foreign arbitral proceedings conducted under other institutional rules
such as those of the SIAC and HKIAC, in which the scope of the proceedings is typically determined by theparties’ pleadings. In either instance, a party seeking to change the allegations in the pleadings (e.g. , toadd a new claim or defense) must file an application and seek the permission of the arbitral tribunal.
Whereas the ICC proceedings limit the addition of new claims beyond the scope of the Terms of Reference(see ICC Rule 23(4)), in non-ICC international arbitral proceedings, particularly those conducted undercommon law procedural law, the scope of the matters to be heard will be strictly determined by thepleadings. See , e.g. , PT Prima International Development v Kempinski Hotels SA and other appeals ,[2012] 4 SLR 98.
9）The number of arbitrators and the method of appointment of arbitrators, unless specified by the parties
in the arbitration agreement, is set forth in Articles 12 and 13 of the ICC Rules.
10）While the ICC Rules do not provide for the parties’ submissions (i.e. , Statement of Claim, Statementof Defense, etc.), such submissions are the normal and all but universal practice in internationalcommercial arbitrations.
11）In foreign arbitral proceedings, the IBA Rules on the Taking of Evidence in International Commercial
Arbitration (IBA Rules) provide guidelines on evidentiary methods, and the Chartered Institute of
Arbitrators' Protocol for the Use of Party-Appointed Expert Witnesses in International Arbitration (CIArb)
provides guidelines on the handling of expert witnesses.

Japan Commercial Arbitration Journal VOL.3［2022］

21

documents or narrowly tailored categories of “relevant and material” documents. The arbitral

tribunal will review the parties’ requests and any objections thereto and issue a procedural
order in which it orders the disclosure of evidence it deems relevant and material to theresolution of the issues in dispute, and the party will be required to disclose evidence inaccordance with such procedural order.12)

In addition to documentary evidence, both parties typically submit written witness

statements and, where applicable, expert reports. It is also common to submit rebuttal/
responsive witness statements and expert reports, respectively. These statements/reports

typically serve in lieu of direct examination at the evidentiary hearing. In particular, if the
dispute is related to intellectual property or contract interpretation, it is often necessary tosupplement the arbitral tribunal’ s knowledge with expert witnesses in the field of theapplicable law or the technology field. The authors have frequently submitted the written

opinions of experts in various technologies, contract interpretation and case law analysis
based on the applicable law, and the calculation of damages.

Prior to the evidentiary hearing, the documents and evidence to be used in the hearing areorganized as a Hearing Bundle. At the evidentiary hearing, the witnesses (those who
submitted a witness statement or exper t repor t) are subjected to intensive crossexamination.13) Often the attorneys are permitted to present opening and/or closing oral

submissions. Following the conclusion of the evidentiary hearing, the parties may be required
to submit written closing submissions and submissions on the parties’ costs.14) The arbitralproceedings are thereafter closed, and the arbitration proceeds to the Final Award.

In this way, in international arbitral proceedings, a detailed procedural timetable isformulated, and throughout the proceedings, the parties frequently raise procedural issues byfiling applications, and the arbitral tribunal may convene CMCs as necessary to address

procedural issues that may arise. This tendency is particularly pronounced in arbitral tribunals

that have their sources in common law procedural law, and in the experience of the authors,
there have been cases in which as many as 30 procedural orders were issued by the time of

the final evidentiary hearing. As will be explained in the next section, in “Japanese” domestic

arbitral proceedings, there is not much aggressive motion from counsel regarding procedural
matters, and the frequency with which the arbitral tribunal holds CMCs and issues procedural
orders is considerably lower.

2. Examination Schedule in“ Japanese” Arbitrations

In “Japanese” arbitral proceedings, as there are no notable differences in the governing12）The failure or refusal to comply with the procedural order to produce documents can result in thearbitral tribunal drawing the adverse inference against the party.
13）In hearings, the differences between Japanese and foreign arbitral proceedings are most pronounced.
This issue will be discussed in Section IV below.
14）The Article 38 of the ICC Rules allows the arbitral tribunal to award reasonable costs of the arbitration
including attorney fees and expenses of the arbitration (e.g. , experts fees, arbitrator fees, administrative
costs, etc.).

22

Japan Commercial Arbitration Journal VOL.3［2022］

Comparison in Practice between “Japanese” Arbitration and Foreign Arbitration

arbitration rules themselves, the general framework of the examination schedule is the sameas in foreign arbitral proceedings. The basic type of examination schedule under the JCAA is

that, after the submission of the Request for Arbitration and the Answer, the arbitral tribunal

will present a draft procedural order, and the arbitral tribunal will hear the positions of bothparties and decide on an examination schedule. Thereafter, in accordance with the schedule ofproceedings, both parties shall first present their arguments and evidence, and the arbitral

tribunal shall organize the content of the arguments in the terms of reference by adjusting theparties’ positions, and shall afford the parties an opportunity to supplement their arguments

and evidence. Depending on the case, methods of proof through witness examination (Article
50(2) of the JCAA Rules), document production orders (Article 54(4) of the JCAA Rules), andexpert witnesses (Article 55 of the JCAA Rules) are considered. Necessary hearings will beheld to conclude the examination and lead to an arbitral award.

Nevertheless, it cannot be denied that in “Japanese” arbitral proceedings, there is atendency for claims and proofs, especially the submission of documentary evidence, to bepresented in the so-called “on and off” style, as in the first instance in litigation practice. In

contrast, in foreign arbitral proceedings, the arbitral tribunal has ordered the submission of"all" facts and methods of proving legal grounds at an early stage of the proceedings, partly
because the arbitrators have an underlying belief that all evidence should be disclosed at an

early stage in order to search for the truth. In some cases, the arbitral tribunal will take strictmeasures, such as excluding or limiting evidence if it is submitted too late.

In contrast, in “Japanese” domestic arbitral proceedings, due to the influence of the practicalexperience of not only the arbitrators but also their counsel in Japanese litigation, there is atendency to be cautious in the selection and submission of evidence, and the arbitral tribunals

do not order submission of all relevant evidence as aggressively as in foreign arbitralproceedings. Although the JCAA provides statutory procedures for the collection of evidence inthe form of examination of witnesses (Article 50, Paragraph 2 of the JCAA Rules), order for
production of documents (Article 54, Paragraph 4 of the JCAA Rules), and expert witnesses(Article 55 of the JCAA Rules), there is a much lower tendency for Japanese counsel toactively employ these procedures to the same extent as is common in foreign arbitralproceedings. Evidentiary procedures in accordance with the IBA Rules and the CIArb Protocol(see footnote 11 above), which are frequently adopted as guidance with respect to the takingof evidence in foreign arbitral proceedings, are not actively utilized in “Japanese” arbitralproceedings.

It is true that voluminous evidence may lead to delays in the proceedings and increase theburden on the arbitral tribunal, which may have a negative impact on the parties seeking an

early resolution in terms of time and costs.15) In this sense, the hearing policy in “Japanese”

arbitral proceedings is influenced in no small part by the national character of not wanting toincur litigation.16) However, the Arbitration Act of Japan provides that an arbitral award can be15）Redfern and Hunter on International Arbitration (6th Edition,2015) pp.36-37 points out the problemof high and prolonged arbitration costs in international arbitral proceedings.

Japan Commercial Arbitration Journal VOL.3［2022］23

set aside only when the grounds for set aside provided in Article 44(1)(i) to (viii) exist.17) The
decision of the Tokyo High Court's on August 1, 2008 stated, as follows:“In a case involving a request for the set-aside of an arbitral award, an examination thatwould result in a substantive review of the arbitral award is not permissible. Even if thefactual findings or legal determinations of an arbitral award appear to be erroneous in theeyes of the national court of the seat of arbitration, the national court of the seat ofarbitration may not intervene and set aside the arbitral award on the basis of mere errors

in factual findings or legal determinations.”

Because of the strong preference to uphold arbitral awards, the basic premise is that theproceedings should be exhausted under the procedural safeguards of the parties, and in“Japanese” arbitral cases, as in foreign arbitral cases, the parties' counsel should actively
exchange positions by e-mail, etc. or make full use of motions/applications, and conduct

CMCs to allow the parties the opportunity to be heard, and resolve procedural issues in each
instance by procedural order.18)

Ⅲ．Comparison of Terms of Reference
1. Importance of Terms of Reference

As mentioned in Section II above, in ICC arbitral proceedings, the Terms of Reference is adocument prepared by the parties and the arbitral tribunal at the outset of the proceedings inorder to clearly identify the claims being raised and the issues the arbitral tribunal must

resolve.19) Once the Terms of Reference has been finalized by the parties and issued by thearbitral tribunal, no new claims may be made by the parties that fall outside the limits of theTerms of Reference unless the party has been authorized to do so by the arbitral tribunal,

16）The aforementioned Tokyo High Court decision of August 1, 2008 stated that "elaboration of theproceedings will lead to a prolongation of the hearing period of the arbitral proceedings and will increase
the costs of the parties required for the arbitral proceedings (unlike court proceedings, the remunerationof the arbitrator is also a procedural cost borne by the parties). It is also contrary to the legislative intent
of the Arbitration Law to promote the use of arbitration. " In Japan's litigation practice, there are cases
where the losing party is made to bear part of the other party's attorney's fees when there is anagreement to such effect. However, in arbitral proceedings (especially international arbitral proceedings),
it is quite common that the losing party is made to bear reasonable attorney's fees incurred by theprevailing party, thereby obviating the Tokyo High Court’ s concern.
17）See Article 34 of the UNCITRAL Model Law, "Application for setting aside as exclusive recourse against
arbitral award. ”18）Shintaro Kato, “裁判実務からみた「インタラクティブ仲裁規則」の評価 [Evaluation of the 'Interactive
Arbitration Rules' from the Perspective of Court Practice]” (JCA Journal, Vol. 67, No. 3 (2020), p. 8) statesthat while it is beneficial to require the procedures to be in writing to ensure clarity of such procedures, it
should be considered whether the use of oral arguments and procedures can increase the efficiency of thisprocess.
19）See Article 23(1) of the ICC Rules.

24

Japan Commercial Arbitration Journal VOL.3［2022］

Comparison in Practice between “Japanese” Arbitration and Foreign Arbitration

which shall consider the nature of the new claim, the stage of the arbitration and otherrelevant circumstances.20) In this way, the contents of the Terms of Reference define the scopeof the arbitral award, and subsequent changes to the claims will not be permitted in principle.

If the arbitral tribunal issues an arbitral award that goes beyond the scope of the parties'
claims, the award may be deemed as exceeding the jurisdiction of the arbitration, rendering
the award subject to set aside.21)

On the other hand, Article 46(2) of the JCAA Arbitration Rules provides that “If the arbitral

tribunal considers it appropriate for promoting efficient arbitral proceedings, the arbitral

tribunal, after giving the Parties an opportunity to comment, may prepare terms of reference

setting forth the matters referred to the arbitral tribunal and a list of major issues. ” As such,the preparation of such terms of reference is discretionary. In addition, the text does not limit

the filing of new claims that exceed the scope of those identified in the terms of reference.
However, if a claim is additionally changed beyond the scope of the terms of reference, thearbitral tribunal is not precluded from rejecting the claim as an untimely claim absent theconsent of the opposing party(ies). Although it depends on the complexity of the case, in“Japanese” arbitral proceedings, there are cases in which a terms of reference is not prepared,

because the parties give priority to hastening the proceedings without regard to the
preparation of terms of reference. However, since the terms of reference defines the scope ofthe hearing and the arbitral award will be rendered within that scope, it is preferable toprepare the terms of reference to ensure the final award addresses all claims of all parties,
and is confined thereto, thereby decreasing the risk the arbitral award will be set aside.

Often in Japanese litigation practice there are parties whose claims at the time of the filingof the lawsuit are vague and who change their claims after receiving a request for clarificationfrom the court, or who change their claims after noticing problems in response to the
opposing party's objections. In the authors' experience in “Japanese” arbitral proceedings,
there have been cases where changes or additions to claims have been made in the course of
the preparation of the terms of reference, but this does not mean that the dispute will

immediately become more complicated or protracted. Rather, in light of the dispute resolutionfunction expected of arbitral proceedings, clarifying the content of the parties' claims at an

early stage of the proceedings, providing opportunities for explanation, etc., and preparing aterms of reference will often contribute to the efficient resolution of the issues.

2. Effectiveness of Arbitral Awards, Perspectives from Grounds for Set Aside of ArbitralAwards

Article 45(1) of the Arbitration Act of Japan provides that "an arbitral award shall have the20）See Article 23(4) of the ICC Rules.
21）Sebastian Perry, Set-aside affirmed after ICC panel upholds “eleventh hour” defence (Global
Arbitration Review, 12 Nov. 2021) introduces a case in which a Singapore court vacated an arbitral award
to the same effect. See, CAI v CAJ & CAK [2021] SGHC 21; CAI v CAJ & CAK [2021] SGCA 102. The
authors were Claimant’s counsel in the underlying arbitration and instructing counsel in the successful
partial set aside of the arbitral award.

Japan Commercial Arbitration Journal VOL.3［2022］

25

same effect as a final and binding judgment. " There is no dispute that this "same effect as a

final and binding judgment " has, at the very least, the res judicata effect. On the other hand,

the grounds for set aside of an arbitral award provided for in Article 44(1) of the Act arelimited. Arbitral awards are not subject to appeal but, instead, the grounds for set aside exist

primarily to address cases in which the procedural safeguards of arbitration are not observed.
However, when analyzing the arguments of the parties to a request for set aside of an arbitralaward in Japan, the grounds for set aside are most commonly subject to: Article 44(1)(iv)(the party making the application was unable to present its case in the arbitral proceedings);
Article 44(1)(v) (the arbitral award contains a judgment on a matter that exceeds the scopeof the arbitration agreement or the scope of the request in the arbitral proceedings); and/or

Article 44(1)(viii) (the content of the arbitral award is contrary to public policy in Japan). In

cases where the terms of reference is not prepared or where the parties’ claims are notadequately described in the terms of reference, set aside is most commonly sought on thebasis of Articles 44(1)(iv) and (v).

The first case in which an arbitral award was set aside on the grounds of a violation of public

policy by a Japanese court seems to be the decision of the Tokyo District Court on June 12,2011 (Hanrei Jihou No. 2128, p. 58). The most significant aspect of the Court's decision is its
acceptance that the dispositive holding that disputed facts were undisputed facts constituted aviolation of procedural public policy. The Court held that rendering an award without deciding

important matters affecting its outcome would be, to parties seeking resolution throughdecisions by the tribunal on allegations or evidence, tantamount to not making a decision. In
contrast, the aforementioned decision of the Tokyo High Court on August 1, 2008 stated thateven if there are arbitral proceedings or arbitral awards that violate the old theory on subject ofdispute (stretitgegenstand in German) and advisory system (which are premised upon a sharp
distinction between the principal facts and indirect facts and a detailed theory of the facts

necessary for establishing the element of claims) in Japanese civil litigation practice, the arbitralaward cannot be set aside on that basis. It may be argued whether the holding of theaforementioned Tokyo District Court decision should be upheld by the decision of the Tokyo High

Court. Leaving this issue aside, what can be said at least is that the parties asserting grounds
for set aside have raised doubts about the principle of equal treatment set forth in Article 25 (1)of the Arbitration Act and the principle of procedural safeguards set forth in Article 25(2) of the
Arbitration Act as the main principles of arbitral proceedings. In any event, it is important toensure that procedural steps are taken to avoid any such doubts.

In Japanese litigation practice, unlike that of the U.S., there are some cases in which theparties' claims are simply arranged in the judgment, based on a sharp distinction between theprincipal facts22) and indirect facts under the theory of the facts necessary for establishing the22）The Tokyo High Court's decision of August 1, 2008 held that “the old theory on subject of dispute anda sharp distinction between the principal facts and indirect facts in Japan cannot be stated to be theinternational standard of basic principles to be observed in arbitration. It goes without saying that anelaborate theory of the facts necessary for establishing the element of claims in Japan is regarded as anoverly elaborate and impractical theory from an international perspective. ”

26Japan Commercial Arbitration Journal VOL.3［2022］

Comparison in Practice between “Japanese” Arbitration and Foreign Arbitration

element of claims. Perhaps due to the influence of this type of litigation practice unique toJapan, in “Japanese” arbitration, even in cases where a terms of reference is prepared, there

are cases where the framework of the claim is simply arranged chiefly based upon theprincipal facts. However, from the perspective of preventing a request for set aside of anarbitral award from triggering on the grounds of a breach of procedural safeguards, steps
should be taken to ensure that the terms of reference sufficiently reflects the claims of theparties, and the parties should more actively express their views on the preparation andcontent of the terms of reference.

Ⅳ．Comparison of Hearing
1. Evidentiary Hearing

The procedural timing of hearings was discussed in Section II above, but it is worth noting

the difference in the evidentiary value of such hearings in “Japanese” and foreign arbitralproceedings. As mentioned above, in foreign arbitral proceedings, not only factual witness

statements, but also expert reports of expert witnesses in the fields of technology, law,economics, etc. are submitted according to the nature of the case and responsive statements

and reports are submitted, respectively, in advance of the evidentiary hearing. The order,schedule, etc. of the examination of factual and expert witnesses in the hearing should be
discussed and decided in advance at a CMC, with the witnesses being subjected to crossexamination during the hearing.

In foreign arbitral proceedings, hearings are typically scheduled for one or two consecutive

weeks, often irrespective of weekends or holidays depending on the schedule of the arbitral
tribunal and counsel.23) In such hearings, time is usually not allocated for direct examination

except for confirming the accuracy of the previously submitted witness statement/expert
report and whether or not they have been corrected. Thereafter, the primary focus is on

cross-examination. In particular, arbitrators with common law backgrounds tend to place
more emphasis on witness examination and oral argument, which tends to prolong hearings,
whereas arbitrators with civil law backgrounds emphasize documentary evidence, which tends

to make hearings relatively more efficient in their arbitral proceedings.24) Cross-examination

may be conducted for extended periods of hours during a day, or even across multiple days insome cases, and if the witness's native language is different from the language agreed uponin the arbitral proceedings, questioning is conducted through an interpreter, thereby causing
the questioning time to be extended. Article 25(2) of the ICC Rules provides that the arbitral

tribunal may decide whether they wish to hear the testimony of the parties’ witnesses, or any

other person, and are permitted to actively interrogate witnesses on the issues it deems
23）The larger the scale of the hearing, the more effort is required for administrative procedures, such as
preparation of the bundle, negotiation with the Arbitration Secretariat for reservation of the hearing roomand prepayment of fees, and securing interpreters and check interpreters.
24）Colin Ong, Case Strategy and Preparation for Effective Advocacy (Global Arbitration Review, 1 Oct2019) analyzes effective procedural strategies and other aspects of international arbitral proceedings.

Japan Commercial Arbitration Journal VOL.3［2022］27

necessary.

Indeed, the manner in which the evidentiary hearing is conducted in foreign arbitralproceedings is one of the reasons why the cost of international arbitral proceedings is so high.
Prior to an evidentiary hearing, a great deal of effort is required to prepare for the hearing,
including reorganizing the documents to be used as the hearing bundle and holding repeatedmeetings for the preparation of witness testimony. The hearing itself focuses primarily on theexamination of witnesses, which increases the costs of the arbitrators and the counsel.25)

Nevertheless, in order not to mislead the arbitral tribunal's decision in the one-time resolution

method of arbitration, it is necessary to make the arbitral tribunal fully understand thedetailed facts and expert knowledge, including the background of the case. As mentioned

above, in foreign arbitral proceedings, especially those governed by common law and involving
arbitrators with common law backgrounds, the tribunal will not be biased toward fact-finding

based on documentary evidence, but rather will place more emphasis on evidence elicitedthrough the cross-examination of witnesses. It should be said that this is the cornerstone forthe arbitral tribunal to hear the testimony of witnesses, discover the truth, and reach not only
formal conclusions drawn from legal arguments, but also substantively fair arbitral awards. It

is necessary for both parties and their counsel to be careful not to neglect the examination of
witnesses out of concern for cost.

2. Hearings in “Japanese” Arbitral proceedings

In Japanese litigation practice, except for some types of litigation cases such as domestic

relation cases, labor cases, and other cases where documentary evidence is scarce, theevidentiary value of documentary evidence is given more weight than the subjective evidenceof human testimony. In civil litigation proceedings, witnesses are never accused of perjury,

and under the principle of free evaluation of evidence, the credibility of witnesses' testimony isroughly and briefly excluded based on the facts found by documentary evidence, which

practice is often seen in Japanese judgments. In addition, in litigation practice, when there isa wide range of applications for witness examinations by the parties, the time allocated for
examination of witnesses is limited, as the court suggests, in order to narrow it down to thenecessary number of witnesses and time for examination of each such witness. Article 182 of

the Code of Civil Procedure of Japan provides for intensive hearing of witnesses, and althoughsuch intensive hearing has become widespread in practice, the time for examination isnaturally limited, and it is rare to examine a single witness for an entire day or across days incivil litigation proceedings.

Such practice in Japan is strongly reflected in “Japanese” arbitral proceedings involving

arbitrators and counsel who are experienced in Japanese litigation practice, and there is atendency to scrutinize the necessity of examining evidence, to focus only on important

witnesses, and to keep the time for examination relatively short. In “Japanese” arbitral
25）The hourly rates for arbitrators, as well as common law background counsel, can often exceed
US$1,000.

28Japan Commercial Arbitration Journal VOL.3［2022］

Comparison in Practice between “Japanese” Arbitration and Foreign Arbitration

proceedings, counsel limit their evidence to the necessary scope as much as possible, and thearbitral tribunal does not endorse the treatment of examining many witnesses over a long
period of time. However, in order to concentrate on effectively proving the case, it is beneficial
to look to the foreign arbitral practice concerning the conduct of hearings.

Article 54(2) of the Interactive Arbitration Rules provides for the examination of evidence ex

officio, and Article 55(1) of the same Rules provides for the appointment of expert witnessesby the arbitral tribunal. Although there is still a scarcity of interactive arbitral proceedings, it isexpected that if arbitrators and counsel are involved in litigation practice in Japan, they will be

reluctant to use the ex officio principle, and to what extent these provisions will be effectively
applied is one of the issues imposed on “Japanese” arbitral proceedings.26)

Ⅴ．Revitalization of IP cases and Other International Commercial Arbitration
The authors and their colleagues have experienced an increase in the number of foreign

arbitral proceedings involving issues such as infringement of patents and copyrights, misuse
of intellectual property, and interpretation of license agreements and plant export agreements.

The ability to conduct arbitral proceedings and maintain the resulting awards in confidence

makes arbitration a particularly attractive method of resolving intellectual property disputes.27)

Additionally, arbitration provides an added advantage of allowing a global resolution (i.e. ,claims arising in multiple countries) in a single dispute as opposed to having to litigate claims

on a country-by-country basis. That said, the unique nature of intellectual property disputes,

often involving highly complex and specialized technical expertise increases the need forexperienced and technically qualified counsel and arbitrators, particularly those that are fluent
in English and having experience in international arbitral proceedings.

Japan has the opportunity to become a preferred seat of arbitration given the judicial

respect for arbitral awards. As noted above, the Tokyo High Court decision of August 1, 2008
states, “If the elaborate interpretation of laws and precedents in the domestic civil court

proceedings in the place of arbitration applies to the grounds for the set-aside of arbitralawards, the place of arbitration with such domestic courts will be avoided in international
26）As one of the features of interactive arbitration (Article 56 of the same Rules), it provides for thepresentation of the arbitral tribunal's provisional approach, which while familiar to civil law-type legal
practice, may not be suitable for arbitrators with a common law background.
27）See Article 22(3) of the ICC Rules and Article 42 of the JCAA Rules. In addition, Article 9 of the
Arbitration Act stipulates restrictions on inspection of case records for setting aside an arbitral award. In
addition to such confidentiality, in the U.S., in order to avoid the risk of a jury's decision in an intellectual
property case, there is also the advantage of choosing arbitration as the dispute resolution method whereexpertise in intellectual property is warranted. The Amended Hong Kong Arbitration Ordinance of 2017
allows for arbitration of intellectual property disputes and confirms that such arbitral awards are
enforceable. Similarly, the United States Patent Statute (35 U.S.C. § 294) specifically provides for thearbitration of patent infringement disputes, whereas the WIPO Arbitration Rules contemplate thearbitration of all intellectual property disputes. The American Intellectual Property Law Association (AIPLA)
maintains a list of qualified arbitrators and mediators who are experienced in the resolution of intellectual
property disputes.

Japan Commercial Arbitration Journal VOL.3［2022］

29

contracts, to the extent that such interpretation goes beyond the international standard ofbasic principles to be observed in civil dispute resolution procedures such as arbitration. ” Thecourt’ s reasoning is critically important to Japan’ s standing as a preferred place forinternational arbitrations. A court system that fails to respect the sanctity of arbitral awards
would obstruct development of international commercial arbitration in Japan, which in turnwould hinder the development of Japan's national economy. This is also contrary to thelegislative intent of the Arbitration Act of Japan. The authors, who were involved in the caseas counsel, believe that such holding is not limited to the nature of examination for the set
aside of arbitral awards, but also includes expectations for the development of foreigncommercial arbitration in which Japan is the seat of arbitration.28) Steps should be taken toincrease the number of qualified arbitrators and arbitration counsel in Japan who areexperienced in international commercial arbitration and fluent in English. Doing so will help
promote Japan as a preferred arbitral seat in Asia.

28）In February 2018, the Japan International Dispute Resolution Center was established, and the “Liaison
Conference of Relevant Ministries and Agencies for the Revitalization of International Arbitration ”
established in the Cabinet Secretariat compiled the “Possible Measures for the Revitalization ofInternational Arbitration (Interim Summary) ” dated April 25, 2018 and the “Direction for Further
Promotion of Measures for Awareness-raising, Public Relations, and Human Resources Development for
the Revitalization of International Arbitration ” dated July 4, 2019. However, in comparison to Japan,
Singapore, Hong Kong, and more recently South Korea, Malaysia and Thailand have been more proactive
in promoting arbitration institutions in Asian countries.

30

Japan Commercial Arbitration Journal VOL.3［2022］

The Keys to Success: Unlocking Arbitrator Skills,
Experience and Qualification Requirements
Registered Foreign Lawyer, Clifford Chance

1）Peter Harris

Ⅰ．Introduction
The ability of a party to an international arbitration agreement to select an arbitrator with

relevant skills, experience and qualifications is regularly cited as a key advantage ofinternational arbitration as a dispute resolution process.2） However, in the field of internationalcommercial arbitration, it is becoming very rare for arbitrator skills, experience or
qualifications requirements to be 'hard-coded' into an arbitration agreement.

One of the reasons behind this trend is nervousness around the enforceability of qualification

requirements and their potential to give rise to challenges (of arbitrators or arbitral awards).
At the same time, parties seem to be growing in confidence that arbitral institutions andexperienced counsel will ensure the appointment of a tribunal that has the skills, experienceand qualifications required to provide a high quality of justice. Consequently, parties havetended towards arbitration clauses which are as simple as possible, without specifying skills,

experience or qualification requirements. This approach is reflected in the simple, standard
form wording promoted by arbitral institutions in their model clauses.3） But does this trendmean that parties are losing out by not taking advantage of the opportunity to set baseline
requirements for their arbitrators?

From the perspective of an arbitration practitioner based in Japan, this article considers thepotential risks, rewards and systemic impacts of clauses which require arbitrators to have1）Peter Harris is qualified in the laws of England & Wales. Peter is a Registered Foreign Lawyer practising in the
Dispute Resolution Group at Clifford Chance, Tokyo. The views expressed in this article are the personal views of
the author alone and shall not be attributed to Clifford Chance.
2）See , for example, F. Solimene 'Dispute resolution in energy-related agreements: how to choose the right meansand draft a proper clause,' International Energy Law Review (2015), Vol. 3, 108-122 who notes in a section
summarizing the advantages of arbitration that "the parties can choose from the outset the skills that the arbitrator(s)should be able to demonstrate in order to be appointed. "3）For example, the JCAA Model Clause: "All disputes, controversies or differences arising out of or in connection
with this contract shall be finally settled by arbitration in accordance with the Commercial Arbitration Rules of The
Japan Commercial Arbitration Association. The place of the arbitration shall be [city name], [country name]."32

Japan Commercial Arbitration Journal VOL.3［2022］

The Keys to Success: Unlocking Arbitrator Skills, Experience and Qualification Requirements

certain skills, experience or qualifications. It also examines the contrast between prescriptive
arbitrator requirements and attributes frequently required by in expert determination clauses.

Ⅱ．Skills, Experience and Qualification Requirements in Context
In recent years, there has been an increasing focus by the arbitration community on

conflicts of interest, availability issues, ethics and diversity in terms of arbitrator appointments.
This focus has been driven in part by the frequency of bias challenges as well as concerns byparties and practitioners that the existing pool of arbitrators is too narrow or dominated by asmall set of practitioners with similar backgrounds.4） This trend has been accompanied by agrowth in codes of conduct5）, international guidelines6）, arbitral rules and national legislation

all aimed at managing issues with conflicts of interest or arbitrators whose conduct isquestionable.

So skills, experience and qualifications, the focus of this article, must be treated differently

because these relate directly to the core competency and quality of arbitrators. However, it isacknowledged that these requirements may overlap with suitability and diversity issues. For

example, if parties start to adopt clauses with requirements that arbitrators have over 15
years' experience that will obviously impact the range of eligible arbitrator candidates – but
this can go both ways. For example, some requirements may create opportunities for
emerging arbitrators who have particular skills, for example, if the parties require an arbitrator
that speaks, English, French and Japanese.

Unfortunately, many practitioners have anecdotes to tell of arbitrators whose capability tounderstand and deal with the issues in dispute – while being of a high enough standard to

render their conduct or the award safe from a legal challenge – was, nevertheless,disappointing. Poor quality arbitrators can result in inefficiency as well as potentially erroneousfindings of fact or law. On their own, these failures are unlikely to provide sufficient grounds

for challenging an award in most jurisdictions.7） It is only when the competency level is solow, or it is combined with a failure to follow a fair or proper procedure, that we tend to see
successful challenges to the award (or the arbitrator).

But whether we are talking about a procedure that is disappointing or legally flawed, therisk of both these outcomes is mitigated by having an arbitrator who has relevant skills,4）As noted by Dr S Luttrell, "it was the clients who noticed the problem first: parties to a large international arbitration
may well be alarmed to enter the room and find that everybody (including their own lawyers) knows one another except
them " – S. Luttrell, Bias Challenges in International Commercial Arbitration (WoltersKluwer, 2009), p. 6.
5）Most recently, ICSID and UNCITRAL have been collaborating towards the production of a 'Code of Conduct for
Adjudicators in International Investment Disputes.'6）For example, the IBA Guidelines on Conflicts of Interest in International Arbitration.
7）For example, in the English case of Schwebel v Schwebel [2010] EWHC 3280 (TCC) where, dealing with anapplication to set aside an award for "serious irregularity " under s68 of the Arbitration Act 1996, Akenhead J held"[i]t will be a very rare and exceptional case for the Court to interfere pursuant to Section 68 on the grounds that thearbitrator reached the wrong findings of fact, should have reached different factual conclusions, given greater weight
to some evidence or failed to explain why weight or importance was not given to some evidence. "Japan Commercial Arbitration Journal VOL.3［2022］

33

experience and qualifications – and these attributes can be included in the arbitrationagreement. As other commentators have observed, "[i]t is a truism of arbitration that theprocess is only as good as the quality of the arbitrators conducting it. "8） While, parties can try
and agree on quality criteria once a dispute arises, it is generally easier for parties to agree onsuch topics at the front end.

Ⅲ．Arbitrator requirements and the arbitration agreement
Given that parties are likely to agree that any tribunal appointed to resolve a dispute

between them should have appropriate skills, experience and qualifications, it is perhaps
surprising that it is becoming less common to see arbitration agreements that specify thesekinds of requirements. In fact, none of the model clauses of the major arbitral institutions
include wording or prompts to encourage parties to specify such requirements, and this in
itself explains the general absence of such wording.

The most obvious explanation for the general absence of arbitrator requirements in modern

arbitration clauses is that arbitral institutions and practitioners are wary of them because oflegal challenges that have arisen in relation to such clauses. Crucially, the New York

Convention and UNCITRAL Model Law9） contemplate that arbitral awards may not be enforced
or can be set aside if the composition of the Tribunal was not in accordance with theagreement of the parties. So, if an arbitration agreement requires an arbitrator to speak

Japanese and Italian, and have engineering as well as legal qualifications, it may create a risk
to an award if the arbitrator appointed does not possess those requirements.

Generally, problems tend to arise from a lack of certainty or problematic drafting. For

example, in the English case of Pan Atlantic v Hassneh 10）, the arbitration agreement required

the arbitrator to be a disinterested executive officer of an insurance or reinsurance company.
While the arbitrator fulfilled these requirements at the time of his appointment, he ceased to

become an officer of the company during the course of the arbitration. One party applied tocourt to have the arbitrator removed on the basis that he was not qualified. Whileunsuccessful on appeal, the application caused disruption and delay.11）

8）D Bishop and L Reed 'Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed
Arbitrators in International Commercial Arbitration,' Arbitration International Vol. 14(4) (LCIA, 1998).
9）New York Convention, Article V(1)(d) provides that recognition and enforcement of an award may be refused if "[t]he composition of the arbitral authority … was not in accordance with the agreement of the parties. " The UNCITRAL
Model Law on International Commercial Arbitration (1985) (with amendments adopted in 2006), provides at Article
34(2)(a)(iv) that an arbitral award may be set aside if "the composition of the arbitral tribunal or the arbitralprocedure was not in accordance with the agreement of the parties " and Article 36(1)(iv) provides the same issue as aground for a court to refuse enforcement of an award.
10）[1992] 2 Lloyd’s Rep. 120.
11）In another English case, Jivraj v Hashwani [2011] UKSC 40, an arbitration clause which required the arbitrators
to be "respected members of the Ismaili community and holders of high office within the community " resulted in achallenge on the basis that it was invalid because it contravened employment laws (which require non-discriminationon the basis of race or religion). While the Supreme Court ultimately upheld the validity of the clause, the challenge
prolonged and destabilised the arbitration process.

34

Japan Commercial Arbitration Journal VOL.3［2022］

The Keys to Success: Unlocking Arbitrator Skills, Experience and Qualification Requirements

Similarly, in the case of Allianz v Tonicstar 12）, the arbitration agreement (by incorporation ofstandard insurance industry terms) required the arbitrator to have "not less than ten years'

experience of insurance or reinsurance. " Tonicstar challenged the appointment of a lawyer as

arbitrator on the basis that he only had experience of insurance and reinsurance law, not of

the business of insurance or reinsurance. While ultimately the Court of Appeal upheld theappointment of the lawyer, this was not without significant disruption to the arbitration
process.

It is understandable why, reflecting on the cases above, practitioners and institutions tend

to avoid including skills, experience or qualification requirements in arbitration agreements.
However, when scrutinised, the number of successful challenges to arbitrators or awards on

the basis that arbitrator requirements have not been satisfied or resulted in a pathologicalarbitration clause, is relatively low. This suggests that if the parties can agree on skills,
experience or qualification requirements, courts will support their applicability where possible.

Arguably, for parties involved in complex business sectors where disputes are likely torequire the tribunal to deal with complicated technical issues, specification of skills, experienceor qualification requirements is particularly important. Language skills and relevant local legal
qualifications may also be crucial, particularly for parties who are outside the anglophone/common law world.

Ⅳ．The role of counsel
Unless arbitration is a regular feature of their business and their legal team is well-experienced in arbitration, most parties will look to their lawyers to provide lists of potential
candidate arbitrators. The benefit of this approach is that a party's lawyers will be able toprovide suggestions of candidates who they think fit the profile required by the case (whichusually takes account of a range of substantive and strategic factors).

Many firms have large arbitration practices including senior lawyers who also sit as arbitrator– so they are well placed to mine their collective experience in making recommendations.

However, this does not mean that big firms will get it right every time and they may

sometimes be constrained in recommending some arbitrators due to conflict issues.13） At thesame time, where the party's preference is to use a smaller firm, no matter how good thefirm, it may not have the collective experience to consider as many possibilities as larger

firms. So there are limitations for parties in relying entirely on their external counsel for

arbitrator selection purposes. In these circumstances, including some basic arbitrator
requirements in the arbitration clause may be advisable, particularly for parties working insectors where the issues are likely to be technical or challenging for arbitrators who have notexperienced them previously.

12）[2018] EWCA Civ 434.
13）For example, the IBA Guidelines on Conflicts of Interest in International Arbitration at 3.3.8 state it is an
Orange List item if "[t]he arbitrator has, within the past three years, been appointed on more than three occasions by
the same counsel, or the same law firm. "Japan Commercial Arbitration Journal VOL.3［2022］

35

Ⅴ．The role of appointing authorities and arbitral institutions
While there is much to recommend agreement by parties on tribunal members, or at least

the process for their appointment, it is common that an arbitral institution is required to stepin to appoint at least one tribunal member (usually the presiding arbitrator or sole arbitrator).
In doing so, institutions or other bodies accepting the role of appointing authority will

generally take into account the skills, experience or qualifications of potential arbitrators.
Indeed, most arbitral institutions formally commit to doing so. For example, the JCAA’ s
Appointing Authority Rules promise that "[w]hen appointing the arbitrator, the JCAA shallconsider the arbitrator candidate’ s background, nationality, place of residence, language skill,

expertise, experience as arbitrator, availability, and any other relevant factors. "14）

Nevertheless, while many institutions are very knowledgeable and take astonishingly

diligent steps to ensure an appropriate appointment, unless there are substantive
requirements in the arbitration agreement, or they are notified jointly by the parties to theappointing authority during the appointment process, the appointing authority will haveflexibility and discretion to select the arbitrator it considers most appropriate. By contrast,

where the parties have specified that the arbitrators must have particular skills, experience or

qualifications in the arbitration agreement, the appointing authority is typically bound to takethem into account or otherwise risk the stability of the award, given the Model Law and New
York Convention provisions set out above. This requirement is reflected in Article 9(1) of JCAA’s Appointing Authority Rules (2021), which confirm that "the JCAA shall appoint an arbitrator

in accordance with the agreement of the Parties. "15）Consequently, where parties agree that they want their tribunal to have particular skills,

experience or qualifications, they can generally be confident that these will be respected byarbitral institutions or other appointing authorities, if they are included in the arbitrationagreement.

Ⅵ．Comparison with expert determination
Despite the trend for arbitration clauses to dispense with specific skills, experience or

qualification requirements, expert determination clauses frequently stipulate these kinds ofrequirements. For example, ship sales agreements providing for expert determination
frequently require that the expert be a qualified marine surveyor.16） More generic expert

determination clauses (e.g., for valuation issues) require the expert to be "a partner in an14）JCAA’s Appointing Authority Rules (2021), art. 9(3).
15）Other institutions make similar comments, for example, the Singapore International Arbitration Centre (SIAC)
Practice Note 01/14 provides that when the President of the SIAC Court makes appointments, "[t]he criteria for
appointment shall follow the provisions specified in legislation or the contract between the parties. "16）For example, in the English case of Schulte & Others v Nile Holdings Limited [2004] EWHC 977(Comm) the shipsales contract provided that the expert must be "an independent marine surveyor with experience in the survey ofships similar to the Ships to be nominated by the Chairman for the time being of Bureau Veritas. "36

Japan Commercial Arbitration Journal VOL.3［2022］

The Keys to Success: Unlocking Arbitrator Skills, Experience and Qualification Requirements

independent firm of internationally recognised chartered accountants "17） or, more generally
still, an "independent expert who is qualified by experience and education to determine thematters in issue. "18）This is not surprising given that a key rationale for selecting expert determination is toensure the dispute is resolved, literally, by an expert. But it is surprising that parties opting forarbitration are not similarly concerned to specify such requirements for arbitrators. This isparticularly striking given that the technical and complex subject matter of contracts

containing expert arbitration clauses is often the same or substantially similar to thosecontracts in which we typically find expert determination, e.g., complex cross-border sale andpurchase agreements, construction contracts, gas sales agreement or sophisticatedtechnology supply agreements.

It is also notable that Japanese parties (or parties in the Asia-Pacific region more generally),

continue to include expert determination clauses despite the relative dearth of bodies andinstitutions in the region that have experience of acting as appointing authority for expert
determiners. For example, while the Chartered Institute of Accountants of England & Wales

appoints expert determiners almost every day and has created its own rules for governing theprocess19）, the Japanese Institute of Certified Public Accountants does not routinely provide

such services. Combined with the difficulties of setting aside a poor expert determination(harder than setting aside an arbitral award in most jurisdictions), it is surprising thatJapanese and other parties in Asia do not instead opt for a bespoke arbitration clause which
covers decision-maker expertise. A further advantage of adopting this approach would beaccess to the enforcement mechanism for international arbitral awards – so a party may get
the best aspects of expert determination and arbitration in one process.

Regional arbitration institutions could potentially support parties who are weighing up the

choice between expert determination and arbitration by providing additional guidance, more
specialised appointment services, suggested model clauses and bespoke rules (for parties

seeking to gain the perceived benefits of expert determination within the context of anarbitration). In any event, parties should not consider they have to make a binary choice
between having their dispute resolved by an expert on the one hand or an arbitral tribunal on
the other.

Ⅶ．Conclusion
This paper has considered some of the advantages and risks associated with specifying

skills, experience and qualification requirements in arbitration agreements.

Interestingly, the approach in international commercial arbitration may be compared to the17）This was the clause in the agreement that was the subject of dispute in the English case of Barclays Bank v
Nylon Capital [2011] EWCA Civ 826.
18）This wording forms part of the standard expert determination clauses found in contract forms issued by the
Associated Institute of Petroleum Negotiators (AIPN).
19）Rules for Expert Determination of the Institute of Chartered Accountants in England & Wales.

Japan Commercial Arbitration Journal VOL.3［2022］

37

approach taken in investment treaty arbitration where it is more common to see requirements
specified in the treaty. For example, some treaties require tribunals to have expertise or

experience in public international law20） and Article 14(1) of the ICSID Convention requires
that: "[p]ersons designated to serve on the Panels shall be persons of high moral characterand recognized competence in the fields of law, commerce, industry or finance, who may berelied upon to exercise independent judgment. Competence in the field of law shall be ofparticular importance in the case of persons on the Panel of Arbitrators. " While suchrequirements are not without controversy, an appropriately worded clause may act as a safety
net to ensure the tribunal has the skills, experience and qualifications necessary to resolve thedispute properly, efficiently and to a high-quality standard.

Specifying such arbitrator requirements may also create a viable alternative to expert

determination, particularly for parties in jurisdictions where there are limited institutions

available to play the role of an appointing authority or supervisor for expert determination
processes.

20）See, for example, Article 35(2) of the ASEAN Comprehensive Investment Agreement.

38

Japan Commercial Arbitration Journal VOL.3［2022］

Enforceability of Interim Measures by Arbitral Tribunal

Associate Professor, Graduate School of Law, Tohoku University

Ayako Imazu

Ⅰ．Introduction
According to Article 24(1) of the Arbitration Act, an arbitral tribunal “may order any party totake interim measures or provisional measures as the Arbitral Tribunal may consider
necessary in respect of the subject matter of the dispute, upon the petition of a party.” This

provision provides an arbitral tribunal the authority to order a party to take necessary
measures prior to the issuance of an arbitration award.

However, the wording of the provision does not make it clear what specific actions fall under

the phrase “interim measures or provisional measures” (hereinafter, “interim measures” 1）).
Further, since interim measures are not recognized as having the same force as an award
made by an arbitral tribunal, they are not necessarily an effective option.

As a result, members of the legal profession and scholars have demanded that the system

be reviewed. Consequently, a study and deliberations on the revision of the Arbitration Act

began in 2019. New rules are expected to be established on points that have not beenclarified by past interpretations and which require a legislative interpretation. This will resultin a major turning point for Japanese arbitration law.

In this paper, I will present an examination of the concept of interim measures ordered byarbitral tribunals—with a particular emphasis on the ability to enforce them— with reference
to the progress of the efforts to revise the system that are currently underway.

Ⅱ．Discussions on the Enactment of the Arbitration Act
In many civil cases that are subject to an arbitration agreement, there is a need to impose

interim measures to maintain the status quo, or prevent or mitigate damages prior to anarbitration award. One measure that can be taken by the parties to such cases is to require
1）Since arbitral tribunals make no distinction between “interim measures” and “provisional measures” in terms of
their requirements or effectiveness, there is no practical benefit in distinguishing them. In fact, in the Model Law [asdefined later], they are just referred to as “interim measures.”

Japan Commercial Arbitration Journal VOL.3［2022］

39the court to issue a provisional order (as prescribed in the Civil Provisional Remedies Act).

In contrast, opinion has been divided over whether or not an arbitral tribunal can orderinterim measures. Since there were originally no provisions in the Japanese arbitration law
that addressed this point as well as the fact that courts are allowed to impose provisional

orders, some thought it would be sufficient to use that method (provisional remedies) whenpreservation was needed. Hence, they thought an arbitral tribunal did not have the authority
to order such type of measures.

However, if one considers the fact that a party may have no choice but to partially utilize acourt regardless of it having opted for a resolution of its dispute by an arbitral tribunal and thefact that there are interim measures that are not provisional orders that are available (e.g.,
for evidence preservation2）), it is difficult to opine that the parties’ needs can be adequately

met by the allowance of provisional orders alone. Moreover, Article 17 of the 1985 United

Nations Commission on International Trade Law (UNCITRAL) Model Law on International

Commercial Arbitration (hereinafter, “the “Model Law” ) makes clear the purport ofrecognizing the right of an arbitral tribunal to order interim measures.

Hence, when the Arbitration Act was enacted in 2003, it was clearly indicated therein thatthe presence of an arbitration agreement would not preclude the issuance of provisional
orders by courts (Article 15). The Arbitration Act also established provisions that allowed forthe issuance of interim measures by an arbitral tribunal (Article 24). The former is based on
Article 9 of the Model Law while the latter is based on Article 17 thereof.

Ⅲ．The Status of Discussions about the Current Arbitration Act
The Arbitration Act went no further than indicating that arbitral tribunals have the authority

to order interim measures. Since it did not establish specific provisions, many aspects wereleft up to interpretation. Below is a presentation of several debates surrounding the applicationof the Arbitration Act that is currently in force.
1. Terms, requirements and effectivenessThe specific terms of an interim measure are established based on the discretion of thearbitral tribunal on a case-by-case basis. Those who were in charge of drafting the Arbitration
Act seem to have expected interim measures such as maintaining the status quo and thevalue of the dispute subject matter to ensure the effectiveness of the eventual arbitration

award or ordering certain payments to be made and actions to be taken to reduce thedisadvantages that may occur during the period of time before an arbitration award is made.

Further, the Arbitration Act uses the term “any party.” Hence, an arbitral tribunal may issue anorder not only to the petitioner but also to the respondent. However, it would be difficult to2）In the Japanese legal system, the term “evidence preservation” refers to a procedure taken in a civil action (notfor the purpose of preservation in the literal sense, but rather to accelerate the evidence-gathering process under
Article 234 of the Code of Civil Procedure). In this paper, contrary to the above concept, I will assume that “evidence
preservation” entails measures that order the parties to preserve items that will be used as evidence.

40

Japan Commercial Arbitration Journal VOL.3［2022］

Enforceability of Interim Measures by Arbitral Tribunal

conceive of an order of an arbitral tribunal that seeks to apply to and bind a third party apartfrom those who are subject to the arbitration agreement.

As to situations where interim measures are to be ordered, when one considers the cases

where a court has issued an order for a provisional remedy, one would see that the probabilityof success of a claim and the need for preservation are required conditions therefor.

Unlike an award of an arbitral tribunal that has “the same effect as a final and binding

judgment” (Arbitration Act, Article 45(1)), there are no provisions that recognize the special
force and effect of an interim measure. It seems that there was also a discussion on granting
interim measures such enforceability when the Arbitration Act was enacted. However, at thetime the Model Law was in the process of being revised and there were many issues that wereleft unresolved, such as the treatment of cases that did not conform to the Civil Provisional

Remedies Act in Japan, and the relationship of such interim measures to the provisional
orders issued by courts. Thus, the provision concerning the enforceability of interim measuresof arbitral tribunals was postponed. Regarding this point, one view is that the vast majority ofparties abide by interim measures regardless of whether or not the arbitral tribunal has thepower to enforce such measures. The reason they obey interim measures is to prevent
damages from being claimed for breach of the arbitral agreement or losing the arbitral

tribunal's credibility and being disadvantaged in subsequent proceedings. In contrast, there
are those who argue for the need to examine the grant of the power to enforce suchmeasures as a matter of legislative theory.

2. The relationship of interim measures to provisional orders

As a result of the Arbitration Act allowing arbitral tribunals to issue interim measures,

parties who want protection in a civil dispute that is subject to an arbitration agreement are

given two options, namely: interim measures and provisional orders. This creates a new
problem, that is, what is the relationship between these options?

In terms of theory, there are two stances. One holds that the interim measures of arbitral

tribunals should be given preference, while the other states that the two are in competition
with each other.3） However, even those who advocate the former view consider it is notdesirable to be unable to provide prompt temporary relief owing to the emphasis on thepriority of interim measures. Therefore, it is unlikely that the outcome of the case will differ

depending on which view one agree with. The parties may use the two procedures of theirchoice.

Ⅳ．The Effect of the Revised UNCITRAL Model Law
In 2006, the Model Law was partially revised. The definition of interim measures(types

thereof), the requirements for orders granting the same, and provisions regarding issues such3）In addition to those already mentioned in this paper, there is a view that gives preference to courts. For example,
under German law, an interim measure cannot be enforcer in case where an order for a provisional remedy has
already been issued (ZPO, Article 1041(2)).

Japan Commercial Arbitration Journal VOL.3［2022］

41

as recognition and enforcement were established. These affected the interpretation of the
Arbitration Act. In particular, the terms and requirements for issuance that were presumed forinterim measures were explained in accordance with the provisions of the Model Law.

Meanwhile, however, the existing interpretation of the legal enforceability of interim

measures remained. Since it is not possible to recognize the existence of a title of obligationthat is not stated in the law, there is no room under the current Arbitration Act that recognizes
the enforceability of interim measures. Still, it is believed that the revisions made to the Model
Law will eventually lead to revisions of the Arbitration Act. As a result, there is increased
expectation of a legislative resolution.

In September 2020, the Minister of Justice inquired on the revisions to the Arbitration Act,

which led to the establishment of an Arbitration Act Subcommittee in the Ministry of Justice’s

Legislative Council. The Arbitration Act Subcommittee is working on basic policies to reflect
the revisions to the Model Law in the Arbitration Act. At the same time, it is considering therelationship of the Arbitration Act to the Japanese legal system. In October 2021, thesubcommittee completed its draft outline, which after being passed by the Legislative Council,

was submitted as a report to the Minister of Justice and entitled “Draft Outline regarding
Revisions to the Arbitration Act” (hereinafter, the “Outline” ).4） Currently, the Ministry ofJustice is working to create a draft, and the resulting bill will be submitted to the Japanese
Diet.

Ⅴ．Enforceability of Interim Measures by Arbitral Tribunal
Among the revisions made to the Model Law, the provisions related to recognition andenforcement (Article 17(H)) are believed to have a particularly large impact on the Japanese
Arbitration Act.5） The theoretical and legal issues related to adopting the revisions include

whether or not interim measures can be granted enforceability (basis), how they would be
enforced (method), and how to view their relationship to provisional orders.
1. The basis for granting enforceability

The first basis for granting enforceability is to clarify externally the adoption by the

Arbitration Act of the revised Model Law (and the policy judgment designed to increase theresulting activity of international arbitral tribunals). Then, what else can be shown as a more
substantive basis?

The Arbitration Act both recognizes that arbitration awards of arbitral tribunals have “thesame effect as a final and binding judgment” and establishes a system to provide for
enforceability via execution orders (Articles 45 and 46). The basis for recognizing theenforceability of awards rendered by arbitral tribunals is the fact that, as long as thegovernment (public authority) recognizes the arbitration process as a method for resolving4）The draft Outline, materials used in the deliberations, and records of the proceedings are all available for viewing
at the Ministry of Justice’s website: www.moj.go.jp/shingi1/housei02_003006.html.
5）The matter of recognition is not stipulated in the Outline.

42

Japan Commercial Arbitration Journal VOL.3［2022］

Enforceability of Interim Measures by Arbitral Tribunal

disputes, then it is required that the award of the arbitral tribunal be as effective as the
judgment of the court and that the compulsory realization of the content is guaranteed.

The next question then is “is it possible to make the same interpretation for interim

measures?” If we consider the fact that an interim measure is a temporary measure that istaken as part of the process of arriving at an arbitration award, and as such, is not a final

judgment that resolves the dispute, then we can see that the two should not be treated in thesame manner. In fact, judgements of foreign courts are distinguished in Japan in terms of
their recognition and enforcement based on whether they are final judgments or not (cf. Civil
Execution Act, Articles 22(6) and 24(5)).

On the other hand, the idea that the decisions (orders) of arbitral tribunals at all stages of aproceeding should be equally respected by the government is also possible. In domestic

Japanese courts, the enforceability of both final judgments (judgments on the merits) andinterim judgments (provisional orders) are recognized (Civil Execution Act, Article 22(1), Civil

Provisional Remedies Act, Article 43(1)). In addition, it is believed to be illogical to distinguishjudgments of foreign courts according to whether they are decisive, final judgments or not.

As a result, efforts to allow the compulsory enforcement of non-final decisions of foreign

courts are currently underway. Thus, the idea that awards of arbitral tribunals should be
distinguished between those that are final and those that are temporary, where only theformer carries enforceability, is likely to be considered inappropriate. If we compare this to the
purpose of the Arbitration Act, which attempts to guarantee that awards that are rendered byarbitral tribunals will be respected and that their effectiveness will be guaranteed, we can thensee that this disproportionate relationship should be rectified. This then implies the necessity
and legitimacy of granting interim measures enforceability as well.
2. Methods of enforcement

If one place importance on the fact that interim measures are aimed at maintaining thestatus quo, then one would assume that the same procedures in the Civil Provisional
Remedies Act would be followed. However, since the enforcement of interim measures isbased on the judgment of an arbitral tribunal, it seems not appropriate to use the procedurein accordance with the Civil Provisional Remedies Act, which presupposes the existence of acour t order, and even if it can be used, there is a limit. For example, under suchcircumstances, it would be difficult to utilize the registration procedure, the procedures forhaving the court execution officer retain possession of a real property, and the procedure for
issuing orders to third parties who are not parties to the arbitration agreement. Therefore,

when this enforcement method is used, the practical benefit of granting interim measures
enforceability is almost lost.

If we consider the potential methods of enforcing interim measures, then the following two

methods are conceivable. One method is to enforce the property benefits ordered by thearbitral tribunal in the interim measure. The other method is to order to pay a financial

penalty when the party who was ordered to take or refrain from taking certain actions does

not perform the indicated act or performs the prohibited act. The former can be considered aJapan Commercial Arbitration Journal VOL.3［2022］43

case of provisional disposition that determines a provisional status (the enforcement of which“is governed by the rules on [...] compulsory execution;” Civil Provisional Remedies Act,
Article 52(1)), while the latter can be considered a case of enforcement of an obligation ofaction or inaction ( “indirect compulsory execution;” Civil Execution Act, Article 172) . Thus,
as a method of enforcing interim measures, it seems that the procedures stipulated in the
Civil Execution Act can be used.

However, in the context of the Japanese legal system, there is a sense of discomfort inlinking interim measures aimed at maintaining the status quo to the procedures stipulated by

the Civil Execution Act aimed at the final realization of rights. In addition, particularly in thesecond case above, performing the procedures for indirect compulsory execution as a way of

enforcing an interim measure is a roundabout way to achieve the purpose. If this is so, theninstead of simply utilizing the civil execution procedures, there could be a third option of
establishing a method of enforcement that is unique to interim measures.

It was initially presumed during the Arbitration Act Subcommittee deliberations that the civil

execution procedures would be utilized after an execution order (meaning an order allowing

the civil execution based on an interim measure) is issued. However, the implementation of

the following systems was subsequently proposed, namely: an interim measure that
corresponds to a provisional disposition that determines the provisional status is to be

enforced via a civil execution after an execution order, and other interim measures are to be
enforced via a civil execution based on a judicial decision (a court order) ordering the paymenta certain amount of money due to a violation of the subject interim measure.6） Finally, aslightly modified version of this content was approved as a draft Outline. Thus, it can be said

that the Outline adopts an enforcement method that is in harmony with existing legislation
while giving consideration to effectiveness and expediency.

3. The relationship of interim measures to provisional orders of courts

One of the advantages of obtaining provisional orders of courts was the enforceability, but ifinterim measures are granted the enforceability, the advantage will be diminished. However,this does not mean the significance of court orders is denied. Since court orders are different
in content and enforcement method from interim measures, and it may take time to constitutean arbitral tribunal or a petition for an execution order may be dismissed, it makes sense toleave the option to use court orders.

Even if the interim measures and provisional orders of courts are coexisted, it seems thatsome adjustments are needed. For example, in cases where a party files a petition for aninterim measure while also filing a petition for a provisional remedy, or where a petition for aprovisional remedy is filed after an interim measure has been issued (or vice-versa), it seems

appropriate to think that one procedure will affect the other procedure. In some countries, the6）Initially, the system envisioned was one where payment of a financial penalty due to a violation of an interim
measure would be ordered by the arbitral tribunal (not by the court) and the order to make the payment in question
would be enforced. However, since this did not conform with the premise of allowing the enforcement of the interim
measure itself, it was revised accordingly as described above.

44

Japan Commercial Arbitration Journal VOL.3［2022］

Enforceability of Interim Measures by Arbitral Tribunal

priority of both of them is determined in the law.7） However, the Outline does not have any

rules for the relationship between interim measures and court orders. Considering that asystem that grants enforceability to interim measures will soon be realized, further researchon the relationship between the two is urgently needed.

Ⅵ．Conclusion
The provisions on enforceability of interim measures that were temporarily shelved during

the deliberations to establish the Arbitration Act will finally be realized. This is a welcome
development for the Japanese business and legal communities.

However, the degree to which the effectiveness of interim measures will be improved under

the new provisions of the Arbitration Act remains unknown. It is also unclear whether this willlead to the promotion of the use of arbitration procedures. Therefore, it is important toobserve the operation status of the new provisions, and furthermore, a continued examinationof the relationship of interim measures to provisional orders as well as other theoreticalproblem is requested.

7）Under German law, when a court procedure has already been implemented first, an interim measure cannot be
enforced (Supra note 3), and under the system adopted in Germany, it is possible for a court to revise an order issued
by an arbitral tribunal to the extent necessary to enforce an interim measure (ZPO, Article 1041(2)).

Japan Commercial Arbitration Journal VOL.3［2022］

45

OH-EBASHI

LPC & PARPARTNERSTNERSTokyo Office
Kishimoto Building 2F
2-2-1 Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan
TEL : +81 -3-5224 -5566

FAX : +81 -3-5224 -5565

Osaka OfficeNakanoshima Festival Tower 27F
2-3-18 Nakanoshima, Kita-ku, Osaka 530 -0005, Japan
TEL : +81 -6-6208 -1500

FAX : +81 -6-6226 -3055

Nagoya Office
Nagoya Crosscourt Tower 16F
4-4-10 Meieki, Nakamura-ku, Nagoya 450-0002, Japan
TEL : +81 -52 -563 -7800 FAX : +81 -52 -561 -2100

Shanghai, China Office
Hang Seng Bank Tower 13F, 1000 Lujiazui Ring Road Pudong
New Area, Shanghai 200120, China
TEL : +86 -21 -6841 -1699 FAX : +86 -21 -6841 -1659

ht t p s : //www. ohebas hi.c o m

Ohebashi LegalTechnology Disputes in Japan: Is Arbitration a Better
Option?

1）David MacArthur

Ⅰ．Introduction
Japan has long been a global leader in technology in areas as diverse as biomedical/lifesciences, vehicles, consumer electronics, robotics, medical devices, space exploration, andphotography/film, among others. Although it has seen increasing competition from otherregional jurisdictions like Korea, China, and Taiwan in recent years, Japan has remained a key

player in the technology arena in part by moving upstream into critical deep-tech inputs andadvanced materials and components.2） For example, a 2011 study revealed that some 34% of
the production value of the iPhone came from Japanese companies supplying high tech partsand components.3） Similar statistics reportedly hold true for China’s Huawei mobile phones.4）

The electronics industry is but one example – Japan has strength in a range of technology
sectors. Indeed, Japan has repeatedly been in the top 3 countries globally in patent filings,

including in patent filings abroad, reflecting Japanese inventors and businesses’ ambition to1）David MacArthur is Co-head of the International Arbitration practice of Anderson Mori & Tomotsune, where hejointly oversees a diverse team that spans the firm’s pan-Asian office network. A US national who began his career in
US commercial litigation, David has spent nearly two decades practicing in both common law and civil law
jurisdictions. Since moving his practice to the Far East in 2006, he has specialized in international arbitration as amember of a globally top-ranked practice. He has represented clients in a variety of industries in disputes that often
involve intellectual property and other technology-related issues. In addition to commercial cases, he advises andrepresents clients in investor-state disputes and is also active as arbitrator. He speaks conversationally proficientJapanese and Korean.
2）Schaede, U., The Business Reinvention of Japan: How to Make Sense of the New Japan and Why It Matters(Stanford University Press, 2020). See also Fingleton, E. “It Is Japan, Not The U.S., That Leads In Serious
Technology, Says Top Reagan Technology Advisor,” Forbes Magazine (Nov. 22, 2015) (available at: https://www.
forbes.com/sites/eamonnfingleton/2015/11/22/it-is-japan-not-the-u-s-that-leads-in-serious-technology-says-topreagan-technology-advisor/?sh=56f6cfae4023).
3）Xing, Y., and N. Detert. 2010 (revised May 2011). How the iPhone Widens the United States Trade Deficit with
the People’s Republic of China. ADBI Working Paper 257. Tokyo: Asian Development Bank Institute (available at:
http://www.adbi.org/workingpaper/2010/12/14/4236.iphone.widens.us.trade.deficit.prc/).
4）West, J. “The Japanese Economy Has Reinvented Itself,” Brink News, Feb. 15, 2022 (available at: https://www.
brinknews.com/the-japanese-economy-has-reinvented-itself/).

Japan Commercial Arbitration Journal VOL.3［2022］47

operate in overseas markets.5） Research and development expenditures as a percentage ofGDP have hovered well over 3% for many years,6） placing it consistently in the top fivecountries in the world by this metric.7）

Given the ongoing and projected prominence of technology-driven sectors in the Japanese

economy, it is a matter of course that legal disputes will arise. And as every business person

knows, disputes can consume substantial human (time) and financial resources. In somecases, they can put at risk core assets or business divisions. Dispute strategy therefore should
be considered carefully to maximize the company’s commercial and legal advantages while
minimizing its risks.

For various reasons, national courts have been the forum of choice for many intellectual

property and other technology-related disputes.8） Yet for international commercial disputes

generally, arbitration has become the dominant dispute resolution process.9） While arbitration
has become more common in technology-related disputes as well, there is still growthpotential for arbitration in this area.

Likewise, data suggests that Japanese parties are less likely to resort to international

arbitration than many of their foreign counterparts.10） However, that, too, seems to be slowly

changing.11）

With these factors in mind, this article considers the question: Should companies in Japanopt for international arbitration over civil litigation for technology-related disputes? The shortanswer is: yes, more often than now; but not always. The longer answer, which is elaborated
below, attempts to respond to the question from the specific perspective of Japan-based

parties in the context of intellectual property and other technology-related disputes. Many of
the observations in this article can be applied more widely as well.

5）See World Intellectual Property Organization reports: “World Intellectual Property Indicators 2021” (available
at: https://www.wipo.int/edocs/pubdocs/en/wipo_pub_941_2021.pdf) and “World Intellectual Property Indicators
Report: Worldwide Trademark Filing Soars in 2020 Despite Global Pandemic” (available at: https://www.wipo.int/
pressroom/en/articles/2021/article_0011.html).
6）“Results of the Survey of Research and Development – Summary of Results (2021)” by the Statistics Bureau ofJapan (available at: https://www.stat.go.jp/english/data/kagaku/1548.html). See also “Research and development
expenditure (% of GDP) – Japan” by the UNESCO Institute for Statistics data, as of September 2021 (available at:https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?locations=JP). Indeed, the Japanese government has
proposed a 100-billion-yen fund to support private-sector companies’ research and development activities foradvanced technologies, and efforts to prepare a business environment for such technologies. “Japan planning ¥100
billion tech fund for economic security,” The Japan Times , October 17, 2021 (available at: https://www.japantimes.
co.jp/news/2021/10/17/business/economy-business/japanese-technology-economic-security-fund/).
7）See https://www.theglobaleconomy.com/rankings/research_and_development/ (based on data provided by theUnited Nations).
8）John V. H. Pierce, and Pierre-Yves Gunter, eds., The Guide to IP Arbitration (Global Arbitration Review 2020).
9）Gary Born, International Commercial Arbitration , 3rd ed., p. 1 (Wolters-Kluwer).
10）https://www.paulhastings.com/ja/publication-items/client-alerts/the-current-international-arbitration-practiceand-challenges-for-japanese .
11）See, “International Arbitration 2021 (Japan): Trends and Developments” (available at: https://practiceguides.
chambers.com/practice-guides/international-arbitration-2021/japan/trends-and-developments).

48

Japan Commercial Arbitration Journal VOL.3［2022］

Technology Disputes in Japan: Is Arbitration a Better Option?

Ⅱ．Why consider arbitration for technology disputes?
Arbitration offers a range of features that distinguish it from civil litigation. Key aspects thatshould be considered by any company considering arbitration as an alternative to civil litigation
for technology disputes include the following.

1. Confidentiality. In disputes involving sensitive technical information, parties may wish to
keep details, or even the existence of the dispute, away from the public. By default,

however, court procedures are public. Of course, national courts may have procedural

devices such as protective orders or court-ordered restrictions on inspection12） to protect
submitted materials as confidential; however, this varies by jurisdiction. And, even wheresuch tools are available, if the matter goes to trial, for instance, sensitive details may be
exposed.13） On the other hand, arbitration is private and can be made strictly confidential.
For example, confidentiality obligations may be established in the parties’ chosen arbitration

rules. The arbitration rules of many prominent international commercial arbitration
institutions, such as the Singapore International Arbitration Centre (SIAC)14） and the Hong

Kong International Arbitration Centre (HKIAC)15） impose confidentiality obligations bydefault. Likewise, the Arbitration Rules of the World Intellectual Property Organization(WIPO) contain a comprehensive confidentiality regime, including appointment of aconfidentiality adviser, protocols for the disclosure of trade secrets and other confidential
information, and for the confidential treatment of various aspects of the proceedings.16） In

addition, parties may separately undertake to keep the proceedings confidential by
including such obligations in the arbitration agreement, or by separate agreement.

2. C ross-border enforceability. Compared to enforcement of foreign court judgments,
arbitration offers relative ease of enforcement of foreign awards in most countries under

the United Nations Convention on the Recognition and Enforcement of Foreign ArbitralAwards (known as the “New York Convention”). The New York Convention requires thatcourts in signatory countries directly enforce any arbitral award issued in another signatory12）E.g. Code of Civil Procedure of Japan, art. 92.
13）See, e.g., Jeffrey W. Sheehan, “Confidences Worth Keeping: Rebalancing Legitimate Interests in Litigants’
Private Information in an Era of Open-Access Courts,” Vand. J. Ent. & Tech. L. (addressing the issue as it concerns
litigation in U.S. courts).
14）Article 39.1 of the SIAC Arbitration Rules provides that “Unless otherwise agreed by the parties, a party andany arbitrator, including any Emergency Arbitrator, and any person appointed by the Tribunal, including any
administrative secretary and any expert, shall at all times treat all matters relating to the proceedings and the Award
as confidential. The discussions and deliberations of the Tribunal shall be confidential.”15）Article 45 of the HKIAC Administered Arbitration Rules provides that “Unless otherwise agreed by the parties,
no party or party representative may publish, disclose or communicate any information relating to (a) the arbitration
under the arbitration agreement; or (b) an award or Emergency Decision made in the arbitration.”16）Article 54 of the WIPO Arbitration Rules addresses the protection of trade secrets and other confidential
information to be disclosed during arbitration. See Ignacio de Castro/Andrzej Gadkowski, “Switzerland
Confidentiality and Protection of Trade Secrets in Intellectual Property Mediation and Arbitration” (available at:https://www.wipo.int/export/sites/www/amc/en/docs/confidentialitytradesecrets.pdf)

Japan Commercial Arbitration Journal VOL.3［2022］49

country, with limited exceptions. This provides a streamlined mechanism of enforcementthat in principle is available throughout most of the world.17） By contrast, enforcement offoreign court awards falls under the more complex, uncertain, and time-consuming Hague

Convention on Foreign Judgments in Civil and Commercial Matters (known as the “Hague
Convention” )18） and domestic legislations of each jurisdiction.

3. Customization. Arbitration is inherently flexible. Parties may, for example, choose a locationthat is neutral to both parties rather than the national courts of either. The proceduralschedule and format of an arbitration can also be tailored to the needs of the particularcase. For example, parties may agree to an expedited timeline or a more robust briefing

schedule, depending on the contract or the case. They can also agree to limit or omit
discovery procedures, or request an award based on the documents only, without holding ahearing, if they desire. As a result of the COVID-19 pandemic, virtual proceedings havebecome common and are increasingly accepted as a valid alternative to in-person

hearings.19） The flexibility inherent to arbitration makes these variations, and others,possible. On the other hand, courts generally impose more standard procedures andpractices that arise from the local legal system, be it common law or civil law, and tend to
be much less flexible or subject to party control. If a court docket fills up, matters may bedelayed. By contrast, in arbitration, the solution to an expanding numbers of cases is
simply to find an available arbitrator and a suitable venue.

It is also worth noting that customization also allows parties from different legal systems tofind neutral procedural ground. For example, while a Japanese party in US court will bestrictly subject to the rules of that forum, including its broad discovery procedures,
arbitration permits customized procedures that balance the norms and expectations of theparties involved. Indeed, due to the inherently international nature of the system,

international arbitration has developed various practices and protocols (which parties arefree to adopt or not), that often fall between the practices typical in common law and civil
law courts. One example is the widely used International Bar Association Rules on the

Taking of Evidence in International Arbitration (generally referred to as the “IBA Rules” ).

Among other elements, the IBA Rules provide for a scope of document discovery that isgreater than one often finds in most civil law courts, but much more restrained than inmany common law systems.

17）See the United Nations map of signatory countries at https://newyorkconvention1958.org/index.php?lvl=cmspage&pageid=4&menu=671&opac_view=-1 .
18）See David H. Herrington et al, “Why Arbitrate International IP Disputes?,” p. 14 in The Guide to IP
Arbitration , (Global Arbitration Review 2020) (“The relative ease of recognition and enforcement of arbitral awards
is juxtaposed against the comparative difficulties in seeking to enforce foreign court judgments internationally…. In
this context, prevailing parties in complex cross-border IP litigation often face lengthy and costly battles to enforce
national court judgments in foreign jurisdictions.”).
19）According to a joint report of a survey conducted by KPMG and Baker and McKenzie in late 2020, over 90% of
those who had experienced a virtual hearing had “a positive experience” although most would still prefer to havehearings in person or in a hybrid mode (https://www.bakermckenzie.com/-/media/files/insight/publications/2021/02/
are-virtual-hearings-here-to-stay--baker-mckenzie-and-kpmg-report_010221.pdf).

50

Japan Commercial Arbitration Journal VOL.3［2022］

Technology Disputes in Japan: Is Arbitration a Better Option?

4. Curated decision-makers. Another key feature of arbitral flexibility is that arbitrators can beselected for their expertise relevant to the subject matter or other desired qualities, case bycase. To aid in arbitrator selection, many arbitration organizations curate lists of vetted

arbitrators, though parties are also free to appoint arbitrators who are not on such lists.20）

This ability to influence the appointment of arbitrators on a given case can be especially
useful in cases with highly technical subject matter. Indeed, a growing number of

institutions, including WIPO, HKIAC and JAMS, maintain a list of arbitrators with substantial
expertise in intellectual property or other specialized areas. By contrast, court judges

cannot be selected by the parties and are usually generalists that hear and decide all
manner of cases. And in the United States, for instance, disputes are often decided byjuries, who generally will not possess technical expertise and are not permitted to ask
questions of witnesses or experts to clarify their understanding. Of course, technicalexpertise is only one factor that parties may prioritize in selecting arbitrators, but theoption to do so is available. Parties should also be aware that where they fail to agree on

arbitrator appointments, the appointments may be made by the arbitral institution or an

appointing authority. However, even in such cases, the parties can submit, jointly or
separately, requests for certain qualities or background in the arbitrator, which can be taken
into account in the selection process.

5. Consolidation. Unlike courts, which can exercise only jurisdiction prescribed by legislation,
arbitration is based on parties’ agreement. Therefore, it is possible to resolve disputes

relating to multiple jurisdictions or parties in a single arbitration procedure rather thanundertaking various parallel national court proceedings. In addition to the obvious savingsin time and cost, this also has the benefit of reducing the risk of conflicting decisions. (Theenforcement scheme for foreign arbitral awards under the New York Convention generally

makes them binding in most countries.) Accordingly, in any technology dispute that involves
or may involve multiple jurisdictions, this feature may be appealing.

6. Costs recovery. National courts differ on the question of costs recovery. In the U.S., forexample, parties typically must bear their own legal costs, while in other jurisdictions the

successful party may be entitled to an award of part or all of its costs incurred in thedispute. In international arbitration, the widespread practice and expectation are that awinning party will receive an award of its costs, although this is typically in the discretion of

the tribunal in consideration of the overall circumstances of the case. This feature ofarbitration should be considered along with other factors in deciding between litigation andarbitration for a particular transaction or dispute.

While the factors above are often viewed as advantages of arbitration, the relative benefits

will vary case by case. In addition, there are also areas of potential disadvantages comparedwith court litigation. For example:20）Natalia Gulyaeva, “Patent, Copyright and Trademark Disputes,” p. 134 in The Guide to IP Arbitration , (Global
Arbitration Review 2020).

Japan Commercial Arbitration Journal VOL.3［2022］51

1. Interim measures not always enforceable. Interim measures (also referred to by otherterms such as “emergency relief” or “provisional orders”) can be a vital tool in sometechnology disputes. For example, in cases of trade secret misappropriation, a provisional
injunction can place a swift, if temporary, halt to any disclosure of the trade secret, which
may be essential to preserving its value. However, interim measures issued by arbitral

tribunals are not enforceable in many countries, leaving parties to depend on voluntarycompliance. That said, in the end, parties often do voluntarily comply, likely because they
prefer to avoid upsetting the tribunal that will ultimately decide the case on the merits. And

there are cases where an emergency relief order from a tribunal may be preferred, forinstance where a party fears bias or local favoritism from domestic courts. It is also worth
noting that there is a recent trend of countries amending the domestic law to make interim

measures by tribunals in locally seated arbitrations enforceable in the courts.21）Therefore,

parties can make use of this by choosing a seat where interim relief from arbitral tribunals
is enforceable in court.

2. Non-arbitrability of certain issues. National laws often exclude certain issues from being
subject to arbitration. Most pertinently, some countries do not permit arbitration tribunals
to decide patent validity issues. Other countries allow it, but generally the tribunal’s
decision is binding only on the parties.

3. No appeals. National court systems generally have a built-in system for appealing decisions

rendered by first-instance courts. While adding to the potential time and costs involved,
such mechanisms provide a significant buffer against bad decisions. This can be asignificant benefit in relation to questions of patent validity, for instance. International

arbitration generally does not permit appeals in the usual sense. The New York Convention
and most modern arbitration laws permit a final arbitration award to be challenged only onvery limited and unusual grounds, such as where the arbitration agreement was invalid or

inapplicable or procured by fraud, or where the award is against a country’s public policy.

This finality of arbitration is often viewed as a positive feature, but in some cases, parties
will prefer the appeals system of national courts. It should be noted that there are arbitralinstitutions, such as the International Centre for Dispute Resolution (ICDR) (theinternational division of the American Arbitration Association), that offer an option forappeals of arbitral awards.22）

Ⅲ．Is arbitration a better choice for some kinds of technology disputes?
The features of arbitration mentioned above can make it a suitable or even better choicethan civil litigation for some technology disputes. But it depends on the nature of the case and21）See James E. Castello and Rami Chahine, “Enforcement of Interim Measures,” in The Guide to Challenging and
Enforcing Arbitration Awards (Second Edition) (available at: https://globalarbitrationreview.com/guide/the-guidechallenging-and-enforcing-arbitration-awards/2nd-edition/article/enforcement-of-interim-measures).
22）See “AAA/ICDR Optional Appellate Arbitration: A Step-by-Step Guide” (Practical Law) (available at: https://uk.practicallaw.thomsonreuters.com/w-013-0215).

52

Japan Commercial Arbitration Journal VOL.3［2022］

Technology Disputes in Japan: Is Arbitration a Better Option?

the objectives and interests of the parties involved. The technology sector includes a wide
variety of industries, and includes companies in varies sizes and stages of maturity, operatingin various jurisdictions. In addition, a range of different types of technology-related disputes
can arise. Understanding when and how arbitration can be a potentially preferable alternative

to court litigation is something that savvy in-house counsel of companies dealing in technology
business and assets should scrutinize. A brief analysis of a selection of common technologyrelated disputes follows below.
A. Patent-related disputes

Developing a new, patentable technology can be time-consuming and costly. Additional timeand costs are required in actually securing a patent. Commercialization of products that use

those patented technologies is yet another phase that can be protracted and costly. For thesereasons, patents can be extremely valuable and therefore worth enforcing against potential

infringers. While civil litigation tends to be the preferred forum for resolving patent disputes,

arbitration is becoming increasingly popular. According to the WIPO, 25 percent of disputes
handled by its Arbitration and Mediation Center are patent disputes.23）

Broadly, a patent-related dispute can arise in two ways: within a pre-existing contractual

arrangement such as a license agreement or a joint R&D agreement, or as an action against
accused infringers. The former provides an opportunity for the parties to consider and choose
arbitration as the resolution method for any disputes, or for a sub-set of disputes, by including

an arbitration clause to the contract. Renewal of such agreements is another opportunity toconsider adding such a provision.

When a patent dispute arises outside a contractual relationship, such as when a patent

holder brings a claim against an accused infringer, no arbitration agreement exists. However,parties may nevertheless decide to arbitrate such a dispute at the time it arises (known as a“submission agreement” ). While it is unusual for parties to do so in the heat of a dispute,sophisticated parties sometimes are able to see mutual benefits in doing so.

One important thing to consider before agreeing to arbitrate patent disputes is the extent towhich it is allowed in the jurisdictions where the arbitral award might be enforced. Somejurisdictions require questions of patent validity to be decided in national courts or administrative

bodies. Other jurisdictions may permit patent validity determinations to be made in arbitration,

but usually only with inter partes effect. Thus, arbitrability of patent validity in relevant

jurisdictions must be considered before deciding to arbitrate a patent-related dispute.

That said, the procedural flexibility of arbitration may allow for creative and custom-fit

solutions. For example, even where the applicable law does not allow arbitration of patentvalidity, the parties could agree that in the event that the arbitral tribunal concludes that thepatent is in fact invalid, the resulting award would simply order the patent holder to grant aroyalty-free license in perpetuity to the other party.24）23）WIPO Caseload Summary: WIPO Arbitration, Mediation, Expert Determination Cases and Good Offices
Requests (available at: https://www.wipo.int/amc/en/center/caseload.html).
24）Thomas Legler, Arbitration of Intellectual Property Disputes, 37 ASA Bull. 273, 296-97 (2019).

Japan Commercial Arbitration Journal VOL.3［2022］

53

Putting aside arbitrability concerns, parties in a patent dispute may be interested in theconfidentiality features of arbitration, the opportunity to resolve multi-jurisdictional issues in asingle forum for efficiency, ease of enforceability, and the ability to ensure that arbitrators with

relevant technical expertise are appointed, among other qualities. Indeed, it is somewhat

surprising that more patent holders do not seek to take advantage of arbitration as a hedging
strategy. For example, a patent holder who is successful on claims of infringement could

benefit from the cross-border enforcement mechanisms of international arbitration. On theother hand, any finding of invalidity of the patent would be subject to applicable principles ofconfidentiality and may be binding only as between the parties to the arbitration, thus
mitigating against the risk of a public and globally binding decision finding the patent invalid.

In sum, there are potential benefits to arbitrating patent-related disputes that are worth

considering.

B. SEP/FRAND royalty disputes

A sub-category of patent-related disputes with unique features is that of FRAND disputes inconnection with SEP licensing. “SEP” stands for Standard-Essential Patent. Many hightechnology sectors are subject to industry-wide standards set by a designated standards-

developing organization (SDO). For example, in cellular wireless technology, “LTE” represents
a set of industry standards, as does “5G” . The technologies necessary to comply with suchstandards, like any technology, are often patented. The SDOs typically require that any
company holding such an SEP must make it available to license on “fair, reasonable and nondiscriminatory” (FRAND) terms.

Such SEPs will often become the subject of enforcement across various jurisdictions where

the applicable standards are required to be followed. In the absence of an agreement toarbitrate, they are typically resolved in national courts. Even where a SEP holder has provided ageneral declaration regarding FRAND terms to the SDO, it usually does not include an arbitration

clause. Therefore, if arbitration is to be employed in such cases, the parties will have to agree toit at the onset of the dispute. There are reasons for parties to consider doing so.

Given the highly technical and industry-specific nature of SEPs, parties may see a particular

benefit in being able to appoint arbitrators with that specific technical background. Arbitratorswith that background will likely be in a better position to advance efficiently through theprocess while also providing more reliability on determinations of fact (which are often
technical in nature) and on the often central question of what is a fair and reasonable royalty
rate. A randomly assigned judge in a national court is unlikely to have such specialized

expertise (and a jury perhaps even less so). Even in a specialized court or administrative bodyset up to address patent-related disputes, adjudicators are likely to be generalists in the field.
It is worth noting that WIPO offers arbitration procedures specifically designed for FRAND
royalty calculations.25）25）See “WIPO Arbitration for FRAND Disputes” (available at: https://www.wipo.int/amc/en/center/specificsectors/ict/frand/).

54

Japan Commercial Arbitration Journal VOL.3［2022］

Technology Disputes in Japan: Is Arbitration a Better Option?

Additionally, where a FRAND dispute involves multiple jurisdictions, arbitration can provide

the time and cost efficiencies of single-forum resolution and ease of enforceability under the
New York Convention.

Thus, parties in FRAND disputes should give thought to the relative merits of arbitration.

C. Disputes involving trade secrets or other sensitive technical information

Trade secrets are another form of intellectual property that is often the subject of dispute.

Contrary to patents, which are by nature the subject of public records, trade secrets must be

protected from public disclosure. Indeed, trade secrets acquire legal protection only so long as

the rightful holder of the information takes reasonable steps to keep it secret (i.e., known only
to a limited number of people). Such measures may include the use of confidentiality

agreements for business partners and employees.26） Given this, the privacy and confidentiality
features of arbitration may be especially well-suited to trade secret disputes.

Of course, in cases where trade secrets are illicitly obtained through means of hacking or

economic espionage, there is unlikely to be an arbitration agreement in place. However, thereality is that a large percentage of improper trade secret disclosures are made by employees

or former employees. Accordingly, by including an arbitration agreement in the employment
contract of all employees who may have access to trade secrets, employers can effectively

require such disputes to be resolved in arbitration and can include strict requirements ofconfidentiality for those arbitration proceedings.

Likewise, joint ventures and manufacturing or supply agreements are another commons c e n a r i o i n w h i c h t ra d e s e c r e t s a r e s h a r e d a n d m ay b e s u b j e c t t o i m p r o p e r u s e ,misappropriation, or disclosure, giving rise to a dispute. These cases also involve a contract,in which an arbitration clause can be included.

Because parties in a contractual relationship can more readily enter into arbitrationagreements for dispute resolution, they can thereby capitalize on the useful features ofarbitration such as confidentiality as mentioned above. Depending on the nature of the
dispute, the opportunity to resolve multi-jurisdictional disputes in a single forum may also be

useful. More generally, parties can customize the proceedings and select arbitrators with
relevant technical background and other desired qualities and recover costs in the event of afavorable decision. In addition, they can make use of the effective cross-border enforcement
mechanism that is available pursuant to the New York Convention.

Accordingly, there are abundant opportunities in connection with trade secrets to submit

disputes to arbitration and to make effective use of its unique features.

Ⅳ．Conclusion
Whether the decision to arbitrate a technology-related dispute takes place at the formationof a contract relationship or the outset of a dispute, such decision should be made in view of26）See, e.g., the WIPO definition of “trade secrets” at https://www.wipo.int/tradesecrets/en/.

Japan Commercial Arbitration Journal VOL.3［2022］

55

the relative advantages of arbitration and civil litigation. This analysis must compare thefeatures of international arbitration with those of the specific national court systems that may
be used to resolve disputes. Civil litigation in the United States, for instance, has a different
set of advantages and disadvantages to litigation in, say, China, Vietnam, or Japan. Of course,

the experience of international arbitration can vary according to jurisdiction and institution as

well, but due to its inherent flexibility, parties have more control over the contours ofproceedings in arbitration than they do in civil litigation.

The nature and circumstances of a given transaction or dispute setting, and the objectives

and preferences of the parties involved, should dictate the choice between litigation andarbitration. As noted, where an enforceable provisional injunction, an appealable final decision
or a public decision on a patent validity or similar issue is considered essential or paramount,then civil litigation may be the right choice. However, where confidentiality, a specialist
adjudicator or the relative ease of enforceability of arbitral awards across jurisdictions isviewed as especially important, parties should give serious consideration to use ofinternational arbitration in connection with technology-related disputes.

As mentioned, Japanese parties have been relatively reluctant to make full use ofinternational arbitration and this may be especially true in the area of technology disputes.
Although this is changing, there may be significant commercial benefits being missed, which
could have been remedied simply by giving greater consideration to the option of arbitration.

56

Japan Commercial Arbitration Journal VOL.3［2022］

Do Mediation Parties Owe Confidentiality in Japan?

Attorney-at-law (Japan), Kojima Law Offices

Naoki Idei

Ⅰ．The Issues
While the privacy of institutional mediation and ad-hoc private mediation proceedings arewell honored by mediators and mediation institutions, sometimes, during the mediation

proceedings or after the proceedings, in various circumstances and out of various motives, aparty to the mediation discloses the contents or results of the mediation process to third
parties such as friends, relatives, supporters, consultants, or to the wider public throughmass-media or the internet.

Between the parties, such disclosures may cause a new dispute or aggravate the existing

dispute. For the mediator and/or the mediation institution, such disclosures may lead to a
separate complaint or grievance whether the mediator takes action to rectify the disclosure or
fails to take action to rectify the disclosure.

The first issue to consider in this context is whether parties to mediation owe an obligation

not to disclose the contents of the mediation proceedings to third parties, including the public.
The second issue is whether mediators can or should take measures to control party’s conduct

with respect to confidentiality. This article presents basic guidance in the Japanese context byidentifying the legal framework in Japan for these issues. This article also tries to respond withsome practical considerations and suggested measures for mediators carrying out mediation
proceedings.

Ⅱ．Legal Framework in Japan for Confidentiality in Mediation
Unlike arbitration1）, there is no legislation generally applicable to mediation proceedings inJapan2）. Mediations are conducted as voluntary proceedings, which means almost everythingis up to the agreements among the parties, and mediators and/or mediation institutions.

For a general legal framework, one needs to look into the rules of the mediation institutions
1）The Arbitration Act of 2003 governs arbitration proceedings.

58

Japan Commercial Arbitration Journal VOL.3［2022］

Do Mediation Parties Owe Confidentiality in Japan?

in Japan3） and, based on almost all those rules, one can confidently say that privacy for theparties is secured in mediation proceedings. To be more specific, (a) non-parties are excluded
from proceedings, unless all parties consent to their participation, and (b) mediators,

mediation institutions, and their officers and employees are prohibited from making thecontents of the proceedings public or otherwise disclosing to third parties. This is, so to speak,“privacy for the parties” , and not “privacy by the parties” .

Speaking of privacy by the parties, the rules with respect to confidentiality obligations owed

by the parties, as opposed to that owed by the mediator and the institution, need to beanalyzed separately from the general legal framework above. They are, unfortunately,
sometimes unclear. While some mediation institutions adopt rules providing for the parties’
confidentiality obligations4）, others are silent on this issue5）.

From a mediation practitioner’s standpoint, it is safest to take a strict interpretation

approach, i.e ., the parties are not under an obligation of confidentiality absent a confidentiality
agreement or provisions in the rules on the parties’ confidentiality obligations. Whileconfidentiality obligations could arguably be implied between parties based on the mediation

proceeding’s confidential and private nature6）, in light of the fact that mediations are

conducted based on voluntary agreement of the parties, we should be cautious in finding thatthe parties are under an obligation without an express undertaking or agreement to that
effect.

Several additional points need to be mentioned. First, even if the rules are silent, the parties

can agree to confidentiality obligations and, such an explicit agreement makes the obligation

beyond dispute. Such agreements to confidentiality beyond the rules of the mediation
institution can be: (a) in a mediation agreement, (b) agreed separately before or (c) during2）The ADR Promotion Act of 2004 provides for certain conditions for the certification of mediation proceedings
and privacy of the proceedings is one of those conditions. However, mediation can be conducted without certification
under that Act, provided that, without the certification, mediation in exchange for fees can only be conducted byattorneys (Article 72 of the Attorneys Act).
3）It is difficult to examine under what rules ad-hoc private mediations, as opposed to institutional mediations, areconducted. However, the author does not believe that the rules for ad-hoc private mediations in Japan are very
different from the rules under the institutional mediations.
4）For example, the Commercial Mediation Rules of the Japan Commercial Arbitration Association provide that “TheMediator, the Parties, their counsels and assistants, the JCAA’s officers and other staff, and other persons involvedin the mediation proceedings shall not disclose facts related to or learned through the mediation proceedings.”(Article 23 of the Commercial Mediation Rules).
5）For example, the Daini Tokyo Bar Association Arbitration and Mediation Center’s Procedural Rules are silent on
the parties’ confidentiality obligations while privacy of the proceedings and the confidentiality obligations ofmediators and staffs are provided for (Article 4 of the Procedural Rules). Most of ADRs operated by bar associationsin Japan adopt the similar rules regarding the privacy of the proceedings and confidentiality.
6）As for arbitration, many national laws based on the UNCITRAL Model Law are silent on the confidentiality
obligations of the parties (they are silent on the privacy of the proceedings as well), but there are arguments as towhether or not confidentiality obligations on the parties are implied. Some institutional rules explicitly provide for an
obligation of confidentiality on the parties (e.g. , the Commercial Arbitration Rules of the Japan Commercial
Arbitration Association). The International Chamber of Commerce Arbitration Rules do not. See G. Born
“International Arbitration Law and Practice” (2nd Edition) pages 202~206.

Japan Commercial Arbitration Journal VOL.3［2022］

59the mediation proceedings, or (d) in any resulting settlement agreement.

Second, while the parties are not under the mediation rules prohibited from third party

disclosure, sometimes such disclosure or other improper use of the information exchanged in

the mediation proceedings will constitute a tort, such as invasion of privacy, or infringement of
the other party’ s right under the unfair competition law, such as misappropriation of trade
secrets. This will of course depend on the nature of the disclosed information and the mannerof disclosure.

Third, even where the parties are found to be under explicit or implied confidentiality

obligations, there may be occasions where the party has, or arguably has, legitimate reasons

for resorting to a third-party disclosure, such as to share it with their friends and close
supporters7）, consultants8）, or government authorities.

Ⅲ．Practical Considerations & Suggestions(1) The Desirability of Confidentiality

It is generally desirable that the parties refrain from making the contents of mediation

proceedings public or otherwise disclose those contents to third parties. Because mediation
proceedings are considered private and confidential, such a disclosure often surprises, andsometimes offends or does harm to, the other party. Moreover, such events also jeopardize

candid discussion between the parties (and the mediator) and may lead to a breakdown of
the mediation, in extreme cases.

With such basic considerations, it may be wise for a mediator to remind the parties of thedesirability of confidentiality and encourage them to explicitly agree to confidentiality
obligations9）. Further, even if the rules of the mediation institution provide for the parties’

confidentiality, it may be useful for the mediator to explicitly remind the parties of suchobligation, depending on the nature of the information exchanged in the mediation.

As set out above, there is at least an argument about whether or not the parties’

confidentiality obligations are implied, it may be worthwhile for mediation institutions to

consider adopting the provisions in the mediation rules specifically providing for the parties’
confidentiality obligations.

(2) How Should the Mediator Cope with Undue Disclosure that May Occur?

Without explicit confidentiality obligations, when one of the parties intends to make thecontents of the mediation proceedings public through mass media or the internet, and the7）Sharing information with a party’s family members or close relatives is usually tolerated.
8）There is no doubt that sharing information with one’s legal advisors should be permitted; although there may bearguments over whether parties may share information with other non-legal consultants or advisors.
9）For mediation proceedings on the Hague Convention on the Civil Aspects of International Child Abduction held at
the Daini Tokyo Bar Association Arbitration and Mediation Center, it is the practice (though not a rule) that, at theoutset of the proceedings, the mediator recommends that the parties enter into a confidentiality undertaking. Most
parties adhere to such recommendation.

60

Japan Commercial Arbitration Journal VOL.3［2022］

Do Mediation Parties Owe Confidentiality in Japan?

other party protests, how should the mediator cope with the situation? The mediator faces adifficult situation, given the lack of explicit obligations.

The mediator may remind the party intending such disclosure: (a) of the importance ofcandid discussion in the mediation proceedings and (b) that such undue disclosure is not
usually constructive and tends to become an obstacle to a smooth and meaningful mediation
process.

(3) Parties’ Recordings of the Proceedings

Related to the issues of privacy and the parties’ confidentiality is the issue of recording of

the mediation sessions by a party (sometimes by both parties) and the subsequent use ofsuch records. While long a matter of less urgent debate, the development of recording
technology has recently made recordings (often hidden recordings) easier and, under the

Covid-19 situation, the spread of remote hearings using video conferencing systems seems tohave made it physically and psychologically easier still.

Conducting mediation with one of the parties recording the proceedings may, in manyoccasions, make candid and natural conversation psychologically difficult for the other party(and sometimes for the mediator) and, if it is afterwards revealed that hidden recording was

conducted by one of the parties, the other party may feel that the fairness of the process has
been offended. Further, once recorded, the contents of the proceedings can easily be sharedwith third parties or in extreme cases be made public through the internet. At the least, suchrecordings lack an affinity with the private nature of mediation proceedings.

The issue is less clear than it seems. The problem in many circumstances is the use of therecording, and not the recording itself. A party, particularly a party not represented bycounsel, may need a recording of the proceedings in order to accurately understand what was
discussed/proposed. Further, as discussed above, sharing the contents of the proceedings

with non-parties may, in some cases, be legitimate and should be tolerated. A party may needto consult with family, friends, supporters, or consultants based on accurate records of thehearings.

So, should the parties be prohibited from recording the mediation proceedings or isrecording to be permitted /tolerated under certain circumstances and conditions? The

prevailing general view, the author observes, is that due to the private nature of the mediation
proceedings, parties ought to be prohibited from recording, whether hidden or not. When the
mediator is asked by one of the parties if such party can make recording of the proceedings,

most mediators ask the party to refrain from doing so. When a mediator becomes aware of aparty’s hidden recording, most mediators request that it be stopped.

That said, mediation is a voluntary process where not only the result but also the procedure

is constructed by the parties’ agreement. It may be desirable for the mediator to address thisissue and try to seek agreement, at the outset of the proceedings, to make it clearly
understood by the parties that recording is not allowed and both parties must comply. And, if
it is allowed, the mediator should seek to specify under what conditions10）.

Japan Commercial Arbitration Journal VOL.3［2022］

61

(4) Voluntary Use of Mediation Information in Litigation and Arbitration

Whether or not the parties are restricted from using the contents of the mediation

proceedings in other legal proceedings such as litigation or arbitration needs further

consideration. For illustration, the contents of a mediation relevant to a litigation or arbitration
may include: (a) information and materials provided by the other party in the proceedings; (b)a settlement proposal from the other party; (c) the other party’s reaction to a settlement

proposal; (d) mediator’s comments and opinions on the parties’ positions; and (e) the
mediator’s recommended settlement.

The general rule is that, in the absence of the provisions in the mediation rules providing for

confidentiality and/or “without prejudice” obligations, or the parties’ agreements/undertakings
the parties are free to use such information in arbitration and litigation11）. Even if themediation rules provide for such restrictions, or “without prejudice” obligations, or the parties
separately enter into these arrangements, it is ultimately up to the court or arbitral tribunal

whether such arrangements are honored, and courts and tribunals may take a different
approach from the parties’ agreements or the rules of mediation institutions.
(5) Compelled Disclosure & Lack of “Mediation Privilege”

Whether or not the parties, mediators, and mediation institutions may be compelled toshare the contents of a mediation when ordered by the court or the arbitral tribunal is aseparate issue.

For the parties to a mediation, if subsequently required to testify in litigation about what

was discussed/proposed in a mediation, a party cannot refuse to testify12）. Articles 19613） and19714） of the Japanese Code of Civil Procedure providing for legitimate grounds for refusing totestify do not cover information exchanged in a mediation. Even if confidentiality was agreed
between the parties or the rules of the mediation provided for the parties’ confidentiality, the10）At the ODR Promotion Review Committee established in the Ministry of Justice in 2020 (and the discussion at
the Committee still going on as of the writing of this article), the rules regarding recordings were discussed.
However, setting forth any rules or even recommended rules were avoided in that Committee’s products.
11）The Commercial Mediation Rules of the Japan Commercial Arbitration Association effective February 1, 2020
provide for articulated rules which are somewhat equivalent to “without prejudice” arrangements (Article 24 of theCommercial Mediation Rules). Under these provisions, the parties are generally prohibited from giving or seeking
testimony in judicial, arbitral, or similar proceedings between the parties relating to: (1) the fact that the other party
proposed to conduct mediation proceedings or accepted the proposal to mediate; (2) the fact that the other party madeadmissions or any other statements as to specific matters during the mediation proceedings; (3) any proposals forsettlement made by the other party or the mediator; (4) views expressed or suggestions made by the other party inrespect of the proposal for settlement; and (5) the fact that the other party indicated its willingness to accept a
proposal for settlement (Article 24.2). The parties are also generally prohibited from introducing as evidence ormaking a request for disclosure regarding: (1) a document or any other materials provided for in Article 24.2; and (2)a document or any other materials prepared solely for purposes of the mediation proceedings (Article 24.3).
12）This is about litigation in national courts and not about arbitral proceedings conducted in Japan (which isgoverned by the Japanese Arbitration Act). In the arbitration, it is generally up to the tribunal.
13）It provides for self-incrimination privilege.
14）It provides for (i) public officer’s right to refuse to testify, (ii) doctors, attorneys, and clergymen’s right torefuse to testify, and (iii) refusal to testify to avoid disclosing trade secrets and other occupational secrets.

62

Japan Commercial Arbitration Journal VOL.3［2022］

Do Mediation Parties Owe Confidentiality in Japan?

obligation to testify under the national law overrides a confidentiality agreement15）. Although
the relevance and necessity of such testimony may need to be scrutinized, nothing like
mediation privilege has been established by law or litigation practice.

For mediators, as there is no mediation privilege, the mediator cannot refuse to testify

about the contents of the mediation. However, if the mediator is an attorney, they can (andmust) invoke a lawyer’s right to refuse to testify under Article 197, Paragraph 1, Item 2 of theJapanese Code of Civil Procedure.

Given that, as described, mediation rules and the parties’ agreement cannot create a rightto refuse to testify in litigation or arbitration, it would require legislation for somethingequivalent to mediation privilege to be introduced in Japan. Examination of the feasibility ofsuch legislation should be promoted in order to create a legal framework more favorable tomediation in Japan.

15）When a party testifies about the contents of a mediation, that party is absolved from liability for breaching theirconfidentiality whether under the mediation rules or under a separate agreement.

Japan Commercial Arbitration Journal VOL.3［2022］

63

Online Practice and Activation of ADR- Further Progress of Arb. Med. Arb.
F.C.I.Arb.

Attorney at Law, admitted in N.Y. and Japan

Yoshihiro（Yoshi）Takatori

Ⅰ．Acceleration of Online Practice Under COVID-19
As many arbitration practitioners and users recognize, the last few years under the

COVID-19 pandemic saw an acceleration of the use of online ADR facilitated by developments
in both the technological/hard aspects and operational/soft aspects of delivering online ADR.

For example, following extensive studies of the Web Hearing Committee set up by the Japan

International Dispute Resolution Centre (JIDRC)1) and in consideration of proposals made by

the Web Hearing Committee on the hard and soft aspects, JIDRC has developed equipment
for high-quality online/virtual hearings and is making available and operating facilities forthese purposes.2) Due to these institutional efforts to facilitate online operation of international
arbitration and mediation, online ADR continues to be active especially on cross-border

platforms, including examination of witnesses who are located overseas, even though such
remote witness examinations do not tend to be accepted in the courts of many jurisdictions.

The practice of online ADR appears to be getting more common and more broadly utilized

than expected before the COVID-19 pandemic. Some positive factors or elements of online
ADR can be listed as follows:1）Flexible and easy to schedule hearings and various meetings, such as procedural/prehearings, internal meetings of the parties, as well as meetings of the tribunal or mediators

to internally discuss or deliberate, among busy arbitrators, mediators, legal counsel andusers.

2）For a party who does not prefer to attend in person at the same location as an adverse

party, it may be more preferrable to meet online rather than in person at the same
location, for example, in cases where there is an emotional aspect, such as those involving
family matters or disputes involving serious damages caused by malicious torts.

1）JIDRC English web-site at https://idrc.jp/en/ The author is the chair of the Web Hearing Committee of JIDRC.
2）JIDRC has published the committee’s report and proposals at its web-site “https://idrc.jp/wp-content/
uploads/2020/11/reportandrecommendation_webhearing.pdf”

64Japan Commercial Arbitration Journal VOL.3［2022］

Online Practice and Activation of ADR - Further Progress of Arb. Med. Arb.

3）A lso, although subject to debate, some mediators are of the view that online ADR isactually more effective for observing behavioral reactions compared to in-person meetings,
thanking to the ability to zoom in/out of screen views and other features of online/virtual
meeting technology. Depending upon further advancements in technology and practice,such observations might become more broadly accepted, even though the in-person
hearing may continue to be the default practice.

Especially for cross-border ADR, which may involve multiple jurisdictions and players

overseas, the practice of online ADR is expected to be accepted as main stream in the dispute
resolution market, based upon various advantages or merits, as mentioned above.

Ⅱ．Advantages /Merits of Combination of Arbitration and Mediation -Arb.
Med. Arb.
The combination of arbitration and mediation, especially which is known as Arb.Med.Arb., isbecoming increasingly popular and more broadly utilized by various ADR institutions such as
the Japan Commercial Arbitration Association（JCAA）and the Singapore International

Arbitration Centre（SIAC）/Singapore International Mediation Centre（SIMC）, as flexible ADR

methods. Although Med.Arb., which takes the approach of mediation first before filingarbitration, is also broadly utilized, some practitioners or arbitrators/mediators have concernson this combination order in terms of cost and timing, and some legal issues which may
trigger pre-requirement issues to be satisfied before filing arbitration. Compared to this, theprocedural order of Arb.Med.Arb. may not raise such concerns or issues, and, depending upon
the progress of the arbitration proceeding and nature of the dispute, may work efficiently andflexibly to resolve a case faster, taking into account business factors and the interests of theparties/users involved.

The following can be considered some advantages and merits of Arb.Med.Arb.:

1）Saving cost and time through early settlement/resolution

If a settlement can be reached faster by moving the case into mediation from an ongoingarbitration, this can save potentially significant costs, not only with respect to arbitration
expenses, including arbitrators’ fees, but also, more substantially with respect to attorneyfees, which may accumulate as long as the dispute continues on.

2）M aximization of advantages of seeking common interests of both parties as win-win
resolution not only for legal interests but also for business interests.

While arbitration can resolve and determine only legal issues which are caused by past

incidents or certain facts, by combining arbitration with mediation, related issues can be

resolved, including business issues which may include future possible business and acontinuing relationship between the parties.

3）Where a dispute is settled through mediation combined with arbitration, the settlement
can be enforced by implementing the settlement through the format known as the“consent award” if the consent award is recognized as an enforceable award in thejurisdiction in which the targets of enforcement are located. The consent award has been

Japan Commercial Arbitration Journal VOL.3［2022］

65

utilized broadly, by Arb. Med. Arb. resolution to secure enforceability, by various institutions
and tribunals such as JCAA and SIAC/SIMC. However, if the state in which the target
assets are located is a signatory who ratified The Singapore Convention on Mediation (the"Singapore Convention")3), the settlement agreement can be enforced in such state /jurisdiction smoothly without taking the form of a consent award.

While mediation style is said to differ depending upon legal culture; i.e., common law

culture tends to proceed with facilitative methods, and civil law culture tends to proceed withevaluative methods, the recent trends of international mediation appear to be moving more
toward a hybrid style featuring both facilitative aspects and evaluative aspects to maximize

the advantages of each, depending upon the nature of the case and the respective legal
backgrounds of the parties and the legal counsel involved. For example, if the concerned

dispute pertains to a sophisticated high-tech transaction and the lifetime of the relevant

technology is very short in the relevant market, unless the dispute is resolved or settled
speedily, i.e., at least within a few months, the possible resolution or settlement may bemeaningless in the market by the time that it is reached because of the lifetime limitation of

the technology. To avoid this, a technology expert or other neutral party should be involvedin the ADR process so that resolution can be reached swiftly and in time for the result to be
regarded as useful/valuable in the market4).

Ⅲ．First Case under Joint-Protocol by SIMC and JIMC-Kyoto
As one of the great honors of my career, I was appointed as a co-mediator for the very first

mediation case under the joint-protocol of the Singapore International Mediation Centre

5)（SIMC）and the Japan International Mediation Centre-Kyoto（JIMC―Kyoto）, which was

uniquely implemented to handle cross-border cases online under the COVID-19 pandemic

situation6), for time and cost saving. This protocol mediation is to be handled or facilitated,
unless otherwise agreed by parties, by two co-mediators, one of whom is to be appointed by

JIMC and the other by SIMC. Such co-mediation can provide various advantages or merits
including the following:1）Especially for cross-border dispute resolution, this co-mediation may be able to respond to
the different legal cultures of the parties, such as differences between common law andcivil law culture.

2）Co-mediators, whose native language might be the same as that of one of the parties, can3）The Singapore Convention is a uniform and efficient framework for international settlement agreements resulting
from mediation. It applies to international settlement agreements resulting from mediation, concluded by parties toresolve a commercial dispute. Cited from https://www.singaporeconvention.org/
4）For disputes relating to high-tech transactions, in the course of the 2019 UNCITRAL Commission, Japan and
Israel submitted a proposal entitled: “Possible future work in the field of dispute resolution in international high-tech
related transactions”（https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/a-cn9-liiiinf-3.pdf）
5）JIMC’s home page is at https://www.jimc-kyoto.jp/
6）The joint protocol is introduced at https://www.jimc-kyoto.jp/serviceandfees/index.php

66

Japan Commercial Arbitration Journal VOL.3［2022］

Online Practice and Activation of ADR - Further Progress of Arb. Med. Arb.

work as bridge for language differences, provided that the co-arbitrators do not function as
mere translators or messengers for the parties, but instead function as a single unit of “comediators” to facilitate settlement negotiations.

3）Having two experienced professionals from different backgrounds is helpful to maintain theappearance of fairness and credibility on which the parties rely. As a result of thisdiversity, even if one or both of the parties might not agree with the thinking of one of theco-mediators , the parties may be more accepting of the process for having a combinationof two professionals from differing backgrounds.

For this type of co-mediation, the following should be the key turning points to facilitate

settlement:

1）The pre-mediation meeting is a helpful step that can be utilized to persuade parties to shift
from a dispute or arbitration mode to collaboration or mediation mode so that they canmake efforts to identify common interests rather than remain entrenched in their own
legal assertions.

2）An efficient and speedily operating online platform, by which the hearings and meetings
can be easily scheduled, can facilitate the availability of the mediators and parties involved,
as the online format obviates the need to physically travel between countries.

3）An efficient combination of joint sessions and private/caucus sessions, is very helpful not

only for sorting through legal arguments but also for identifying common business interests
between the parties, including the business objectives of each of the parties to facilitate awin-win resolution.

For this first co-mediation case, we co-mediators utilized what is to be known as the “Greg/

Yoshi Schedule7)” to facilitate the settlement negotiation. This is a chart/schedule by which

the co-mediators organize and compose the following topics: ① commercial objectives, ②common interests, and ③ agreed/yet to be agreed points.

①Commercial Objectives: Having the parties identify their respective commercial objectives
establishes a starting point whereby a clear understanding can be gained of each party’s

fundamental direction, including future business and/or separation of the parties. This canbe a common goal for the parties to discuss how to reach or achieve, depending upon thenature of their mutual relationship and their business plans for the future based on a
possible settlement.

②Common Interests: Common interests identified not only by the parties but also by the

mediators should be the key factors and basis for the parties to understand settlement
conditions and how to develop them.

While the cost and time savings of a swift resolution can be identified as a common interest,
looking beyond can also be meaningful. If the parties look to the future they may gain a7）While the Redfern Schedule is broadly used for discovery practice of arbitration, we co-mediators developed ourschedule, for our convenience and efficient facilitation.

Japan Commercial Arbitration Journal VOL.3［2022］67

clear understanding that their common interests might also include maintaining a profitablebusiness, preserving reputation/credibility in the market, as well as conditions under which
each party can focus on its respective business during or post COVID-19.

③Agreed/Yet to be Agreed Points: Visualization of already agreed items, steps for possible
further collaboration between the parties, and yet to be agreed items with reasons why

they cannot agree on the differences they assert, in the form of schedule is very effective
for working out points to be resolved.

Utilizing this schedule, co-mediators can facilitate the progress of settlement negotiation,and depending upon the yet to be agreed points and the reasons, a mediator may propose or

suggest his or her own idea, including his or her evaluation of certain subjects. Suchcombination of evaluation and facilitation can function as a hybrid of common law and civil
law styles for mediation proceedings8).

The reasons for the success of this seminal co-mediation proceeding can be described asfollows and these points can be regarded as possible know-how for settlement negotiation
practice.

1）Efficient and smooth combination of and communication by co-mediators with a mutual
understanding of their roles2）The Greg/Yoshi Schedule was efficiently utilized to track progress and each milestoneachieved, as well as points to be resolved and the gaps to be closed, thereby allowing theparties to be aware of their progress towards reaching a possible settlement goal.

3）R easonable and amicable communication between the parties involved, including

experienced and capable legal counsel of the parties, despite of some hurdles including
different legal backgrounds on each side. This shows how important the role of counsel
for each party is, in addition to the function of the mediators.

4）T he appearance of reliability and credibility of two co-mediators from different legal

backgrounds, helps the parties to be persuaded and feel comfortable with the work of themediators, as compared to a case in which there is only one mediator whose thinking
might not be compatible with the thinking or mindset of the parties.

5）Efficient logistical and technical support and operational support from SIMC and JIMCKyoto, including facilities for the online proceedings, such as break-out rooms for privatesessions, parties’ rooms, and a room for the mediators to discuss matters confidentiallybetween themselves.

U tilizing such know-how based upon my experience as a co-mediator, I would like topromote further international mediation and educate/train more mediators, not only forJapanese users but also for cross-border ADR practice, including online ADR practice.

8）A recording and transcript of an interview of the co-mediators can be found on the SIMC Home Page（https://
simc.com.sg/blog/2021/09/22/meet-the-co-mediators-who-overcame-cultural-odds-under-the-jimc-simc-covid-19protocol/）You Tube（https://m.youtube.com/watch?v=kQPKomjwE6g）

68Japan Commercial Arbitration Journal VOL.3［2022］

Online Practice and Activation of ADR - Further Progress of Arb. Med. Arb.

Ⅳ．Outlook for the Post COVID-19 Era
While it is unclear when the world can fully emerge from the COVID-19 pandemic, it is now

actively discussed whether and how online ADR practice, as above, will continue to be utilized

by users in the market. Considering the many advantages and merits of online ADR as
mentioned above, I believe this should still be a strong option going forward, especially forcross-border cases, particularly those involving jurisdictions of differing legal systems andtraditions.

Before online ADR, it was very difficult to schedule hearings or meetings with highly sought

after arbitrators/mediators with strong experience and reputations in the legal or businessindustries, who were called upon frequently to travel across Europe, U.S. and /or Asia
countries to sit down for various hearings and meetings. Due to the great advances made in
online ADR, such availability issues have been minimized, thereby making it much easier toflexibly schedule hearings and meetings with busy arbitrators and mediators as well as busy
businesspeople and their respective legal counsel, across borders. However, even if travelissues can be resolved by holding proceedings online, attention should also be given to timezone differences in order to avoid unreasonableness or unfairness in scheduling. For example,
a remote witness examination scheduled at a time that would be in the middle of the night for
one of the parties or other players may be regarded as an unfair or unreasonable lack ofaccommodation for time zone differences, which in turn may trigger a future challenge against
any decisions made through such proceeding.

Further, for online arbitration proceedings, some due process issues have been actively

discussed as follows, for example:

1）Coaching risk in witness examinations conducted online/remotelyIt has been actively discussed how to avoid witness coaching during examination by anadverse party/opposing counsel. Some protocols or agreement9) by parties on preventative

measures, including the use of 360 degree cameras and/or multiple cameras so as todetect and deter coaching, have been discussed and implemented.

2）Opportunity to object

E ven when a party (either directly or through legal counsel) raises an objection to aquestion during a witness examination or other important proceeding, if such interjection
is not promptly acknowledged in real time due to the online environment, this may resultin a party being treated unequally or unfairly, which in turn can be a possible basis forchallenge of an award rendered under such circumstances.

3）Translation/Interpretation issues

For remote communication, including witness examination, where the speaker must

communicate in the proceedings through a translator, it is critical to establish theconditions for accurate, uninterrupted and timely translation. This requires not only

9）JIDRC has published its form of protocol for the online protocol/agreement to be provided by the parties. The
form was drafted by JIDRC’s Web Hearing Study Committee, chaired by the author.（https://idrc.jp/images/link/
JIDRC_sample_agreement_for_a_virtual_hearing_ENG.pdf）

Japan Commercial Arbitration Journal VOL.3［2022］69

logistical support such a translator’s booth, quality audio equipment, and transcription
services, but also consideration of soft aspects including a decision on whether consecutive

or simultaneous translation should be utilized as well as special instructions to the
speakers, such as keeping questions and answers concise. The above aspects are essential

to ensure timely and accurate translation and to ensure that each party has theopportunity to raise any concerns regarding the timeliness or accuracy of the translation.

In contrast to the above due process or soft aspects of arbitration, mediation can be more

flexible and the above issues may not be substantial concerns for mediation, because
mediation hearings do not usually involve witness examinations and therefore the need toraise objections during testimony is obviated. Also, detailed transcripts are not necessary formediation, and translation or interpretation can be taken care of by the party counsels and/or

mediators flexibly, if practitioners having an international background are so appointed.
Considering the nature and flexibility of mediation, at least online mediation proceedings cancontinue to be a very realistic option for users in the market, and if legal concerns surrounding
cyber-security are addressed, arbitration combined with flexible mediation and online ADR

may become main stream especially for cross-border dispute resolution and grow with theprogress of Arb. Med. Arb. practice.

70

Japan Commercial Arbitration Journal VOL.3［2022］

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 legal counsel practice, representing clients for cross-border dispute resolution
including international litigation, arbitration and mediation, we serve as independent arbitrator
and mediator, to be appointed on Ad Hoc basis, and/or by arbitration/mediation institutions,such as JCAA, ICC, SIAC, KCAB, JIMC-Kyoto and SIMC. Our practice area includes both domestic
and international dispute resolutions, for large, middle, and small sized companies, on various
commercial/civil area, such as intellectual property, anti-trust, product liability, complianceinvestigation and cyber-securities, and corporate/business rehabilitation related matters andprojects.

Shinichiro(Shin) Abe

Yoshihiro(Yoshi) Takatori

Kiyotaka MatsuiAttorney at law
Arbitrator

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

Attorney at law

If you need any assistance for appointment and/or selection of arbitrators andmediators, or any service as legal counsel to represent you or your company,
for any institutional international ADR or Ad Hoc ADR, please contact us(International Arbitration Chambers), through the following.

International Arbitration Chambers
E-mail: secretary@kiaal.com
URL:

https://kiaal.com/en/

Through the above contacts, we also provide legal consultations on various
commercial matters, not only for cross-border dispute resolution, but also for
corporate/business rehabilitation matters, compliance investigation, andcybersecurity/data protection matters, such as GDPR.

ODR (Online Dispute Resolution)

─ Outline of the Action Plan of the Ministry of Justice and Domestic Trends

Nagashima Ohno &Tsunematsu

Nagashima Ohno &Tsunematsu

MORI Oki

KOMATSU Akira

Ⅰ．Introduction
On March 31, 2022, the Ministry of Justice announced the “Basic Policy on the Promotion of

ODR - Action Plan for making ODR familiar to citizens” (hereinafter referred to as the “Action

Plan” )1）. We introduce what ODR is, and then outline the Action Plan and trends of ODR in

Japan.

Ⅱ．What is ODR?
ODR is an abbreviation for Online Dispute Resolution. It is not defined by law, however, ODR

generally refers to on-line dispute resolution procedures using advanced technologies such as IT

and AI. The term “dispute resolution procedures” generally refers to procedures in courts suchas civil litigation, and dispute resolution procedures such as ADR (alternative dispute resolution).
However, in the context of ODR, it is commonly used to include the previous stages.

Based on the Growth Strategy Follow-up (approved by the Cabinet on June 21, 2019), theODR Revitalization Panel, which was established in the Cabinet Secretariat, published a reporton March 16, 2020, which classified the general flow of resolution, from the occurrence oflegal disputes to the resolution itself, into the following five phases.2）(1)

Review
Phase(2) Consultation
Phase(3) Negotiation
Phase(4) ADR Phase(5) Civil
litigation
Phase1）https://www.moj.go.jp/housei/adr/housei10_00187.html
2）The Growth Strategy Follow-up states: “As part of the development of our country’s businessenvironment in response to the diversification of disputes, we will examine the expansion of the use andenhancement of functions of civil dispute resolution, such as alternative dispute resolution using IT and AI
including online dispute resolution (ODR), and we will reach a conclusion on the basic policy in fiscal
2019.”

72

Japan Commercial Arbitration Journal VOL.3［2022］

ODR (Online Dispute Resolution)─Outline of the Action Plan of the Ministry of Justice and Domestic Trends

The above report also covers legal services and dispute resolution procedures that utilize IT

and AI in phases (1) to (3) above. In this way, ODR should be recognized to include not only“(4) ADR Phase” and “(5) Civil litigation Phase (5)” , but also legal services and dispute
resolution procedures utilizing IT and AI in each phase of the review, consultation, andnegotiation, which are the preliminary stages of phases (4) and (5). The specific image foreach phase is summarized as follows according to the stage of development of ODR.

(As excerpted from the above report)

Ⅲ．Significance of ODR
The above report states that advantages of the penetration of ODR include the following.
・Online consultation and dispute resolution can significantly reduce the time and economic
costs of visiting consulting and ADR organizations.

・ODR can provide diverse support to a wide range of users, including those with mental or

physical disabilities and foreign nationals, in response to their needs, thereby easy to accessto the dispute resolution.

・Dispute resolution can be promoted even when it is difficult to carry out in-person activities,
such as when a pandemic occurs or when travel is difficult due to a large-scale disaster, etc.

The first and second bullet points are also attracting attention from the perspective ofefforts in respect of SDGs efforts. In the area of dispute resolution, SDGs indicates the target

that of “Promote the rule of law at the national and international levels and ensure equal

Japan Commercial Arbitration Journal VOL.3［2022］73

access to justice for all.” 3） ODR is expected to be a tool towards this target. For companies,
providing ODR for their own services can lead to SDGs initiatives.

The third bullet point will attract attention from the perspective of online development due

to the impact of COVID-19 infections. It can be said that ODR efforts in each country areaccelerating worldwide.

In addition, the implementation of ODR, which entails low time and economic costs toresolve problems, can be said to lead to increased customer satisfaction and loyalty towards acompany’s services, and ultimately to the securing of trust for the company. In this way, it issaid that there is significance from a variety of perspective in respect of introduction of ODR
by companies.

Ⅳ．Outline of the Action Plan of the Ministry of JusticeIn order to promote ODR as described above, the Ministry of Justice has compiled the Actin

Plan. Among the phases (1) to (5) above, “(4) ADR Phase” is positioned as ODR on a non-consolidated basis, and the Action Plan draws up promotional measures with a broad
perspective in conjunction with other phases. The goals for promoting ODR are divided into
short-term targets (while supporting the participation of private sector businesses in ODR,

establishing the basis for promoting ODR by causing as many citizens as possible to know ofand use ODR and gain a feel for its convenience, etc.), and medium-term targets (byimplementing the world’s highest-quality ODR in terms of function, design, etc., in the social

sphere, and realizing a society in which people can receive effective support for the resolutionof disputes anytime, anywhere, if they have a smartphone or the like), and the Action Planputs together measures to promote the realization of these respective short-term andmedium-term target.

The table below outlines the measures to be taken to achieve each goal.

<Promotion measures to achieve short-term targets>・Dissemination and publicity of ADR①Penetration of
ODR into thedaily lives ofcitizens(making ODR alifestyleinfrastructure)

Proactive and effective・Intensive and integrated public relations

activities by setting ODR (ADR) weeks, etc.

information dissemination ・Promotion of understanding of ODR by
to increase ODR awareness

Development of

information infrastructure

to facilitate access to ODR
informationcompany complaints officers, counselors, etc.

・Promotion of efforts with public recognition
of ODR as KPI・Visualization of dispute resolution cases andenhancement of convenience of ODR search・Provision of ODR introduction videos

3）SDGs 16.3 https://www.mofa.go.jp/mofaj/gaiko/oda/sdgs/statistics/goal16.html

74

Japan Commercial Arbitration Journal VOL.3［2022］

ODR (Online Dispute Resolution)─Outline of the Action Plan of the Ministry of Justice and Domestic Trends

Securing of leads fromconsultation to ODR②Improving

ODR

counsel organizations to ODR organizations

・Information coordination from counselingorganizations to ODR organizations

・Improvement of usability through evaluation

access to ODR
and quality of・Establishment of referral routes fromby users and counseling organizations, etc.

Improvement of ODRusability・Promotion of horizontal collaboration amongODR organizations

・Support for entry into ODR with pre-ADR
phase・Response to cost burden for ODR use
Technical support, etc., tobusinesses wishing toenter into ODR③Support forentry into ODRbusiness

Enhancement of ODR for

handling digital platformrelated disputes

Acceleration of Certification
Procedures, etc.

・Provision of technology and design-related
information necessary for chat ODR・Provision of training programs for the

training of dispute resolution providers

・Approach to digital platform operators
・Formulation of rules of model procedure・Simplification of certification procedures

when certified ADR Operators engage in
ODR4）・Acceleration of certification procedures<Promotional measures mainly aimed at achieving medium-term targets>①One-stop

consultation,negotiation,and mediation②To facilitate anenvironment

where world-class ODR canbe provided

Creation of an environment
for providing one-stop・Review of data and formats, etc.

Supporting ODR・Research on the world’s most advanced

that incorporate cutting-・ODR demonstration experiment throughservicesdemonstration experiments
edge technologies

Participation in a global
network of ODRODR technology

public-private partnership・Construction of networks with foreign
stakeholders

・Participation in discussions on

standardization of ODR standards

4）“ADR Operator(s)” means private ADR business operators who can implement private dispute
resolution procedures certified by the Minister of Justice under the Act on Promotion of Use of Alternative
Dispute Resolution (Article 2, sub-para.4 of the said Act).

Japan Commercial Arbitration Journal VOL.3［2022］

75

③Infrastructure
Development
for Use of AI

Technology in
ODRDevelopment of adatabase

Examination of issues
related to use of AI

・Verification of databases that contribute to
the use of AI technology

・Creation of database of civil judgment
information

・Examination of ideal ethics and systems fortechnology and ethics, etc.

the use of AI technologies

In addition, as a promotion and follow-up framework, an organizational structure is

expected to be formed in which the public, private and academic sectors work together tocontinuously carry out measures to promote ODR and deliberations on normative, ethical, andtechnical issues.

Ⅴ．Trends in JapanODR can be classified into three categories from the viewpoint of the provider: (1) the

judicial type, (2) the administrative type, and (3) the private type. In Japan, the introductionof judicial and administrative ODR is in the stages of further study and progress. The

electronic submission of civil court documents (so-called “mints” ), which was launched incourts, is an example of ODR.

In Japan, as in Europe and the United States, the private sector is ahead of the judicial andadministrative sectors, and there are a variety of private-sector ODR initiatives. For example,
there are companies that provide ODR services, such as Middleman Corporation, which

provides Teuchi , a service for mediating disputes online; Civitas Inc, which provides dispute
resolution services arising from online transactions; and Deloitte Tohmatsu Financial Advisory

LLC, which provides Smart Judgment , a service enabling them to negotiate, mediate, andsettle disputes online. In addition, Dai-Ichi Tokyo Bar Association has introduced “Simple
settlement procedures” using an online chat system for some types of disputes.

Further, Japan Association for Online Dispute Resolution (JODR) was established in September

2020 with the aim of ensuring the sound and fair development of ODR in Japan. This organization

has also been adopted as organization with which the Ministry of Justice collaborates in the Action
Plan, and their activities are expected to support the promotion of ODR.5）

Ⅵ．Concluding remarks
It can be said that the formulation of the Action Plan indicated the direction of the national

government’s efforts toward the promotion of ODR. The promotion of ODR is a noteworthy5）MORI Oki, one of the authors of this article, is the Chairman of the Operation Committee of the
Arbitration Centre of Dai-Ichi Tokyo Bar Association and servs as a director of the Japan ODR Association
at the time of writing.

76

Japan Commercial Arbitration Journal VOL.3［2022］

ODR (Online Dispute Resolution)─Outline of the Action Plan of the Ministry of Justice and Domestic Trends

trend in corporate activities, and we believe that the likelihood of occasions for discussion of

the services offered by the company will increase. Therefore, it is necessary to keep a close
watch on ODR trends in the future.

Japan Commercial Arbitration Journal VOL.3［2022］

77

The Possibility of Utilizing Special Conciliation
Proceedings as Insolvency ADR—Focusing on its Use
as a Business Revitalization Procedure
Professor of Law, Sophia University

Shoichi TagashiraⅠ．Introduction
Alternative dispute resolution (ADR) is defined as, according to Art. 1 of the Act on

Promotion of Use of Alternative Dispute Resolution [Saiban Gai Funsōkaiketsu Tetsuzuki noRiyō no Sokushin ni kansuru Hōritsu ], “procedures for resolution of a civil dispute between
parties who seek, with the involvement of a fair third party, a resolution without using

litigation.” “Insolvency ADR [Tōsan ADR ]” comprehensively refers to a dispute resolution

procedure related to adjustments of debts for individuals and corporations that are likely to
become unable to pay debts.1） When combined with the definition of ADR, insolvency ADR canbe defined as a procedure that arranges the debtor's debts, liquidates its assets or revitalizes
its business (or rebuilds his or her life) in a flexible and swift manner with the involvement ofa neutral third party without the resort to “formal” insolvency proceedings (i.e., Bankruptcy,
Special Liquidation, Civil Rehabilitation, and Corporate Reorganization).2）

Insolvency ADR is classified into the following three types according to the nature of theestablisher or operator of each procedure: (1) judicial (e.g., Special Conciliation), (2)administrative (e.g., rehabilitation support procedures by the “SME Revitalization Support
Council” [reorganized into “SME Vitalization Council” from April 1, 2022]) and (3) private (e.g.,*This is an English version of my Japanese article published in Chūsai to ADR [Journal of Japanese Arbitration and
ADR], No.16, pp 1-9 (June 2021). The original article has been summarized and updated in this version.
1）See Kazuhiko Yamamoto and Aya Yamada, ADR Chūsai Hō [ADR Arbitration Law](2nd ed., 2015) at 392-93. For
English translations of Japanese laws, see http://www.japaneselawtranslation.go.jp/?re=02 (last visited Feb. 22,2022).
2）Of course, it is possible to process insolvency cases through negotiations and agreements on the basis of private
autonomy. This is called a “pure private arrangement [Junsui Shitekiseiri ].” Because insolvency ADR is based on
certain rules including the involvement of a neutral third party, it overlaps with the procedure which is called the“rule-based [Junsoku Gata ] private arrangement” to a considerable degree (Special Conciliation is usually categorized
into this type too). However, the rule-based private arrangements can also be done without a fair third party. For
example, a private arrangement led by the “Regional Economy Vitalization Corporation of Japan (REVIC)” is not an
ADR because REVIC invests in or finances the debtor companies. As a result, insolvency ADR and the rule-based
private arrangements are not exactly the same.

Japan Commercial Arbitration Journal VOL.3［2022］

79Business Revitalization ADR). Although the nature of the procedure is not determined only by

its type, each has its own characteristics. For example, in the judicial procedure, theenforceability of the agreement and clear taxation rules for inclusion in deductible expenses
are recognized based on the credibility of the court's proceeding.

In this article, I focus on Special Conciliation [Tokutei Chōtei ], which is classified as a judicial

insolvency ADR. This procedure is, on the one hand, a judicial process because judicial powers
are available for measures like the stay of civil execution proceedings (Art. 7 of the Act on

Special Conciliation for Promotion of Adjustment of Specified Debts, etc. (hereinafter referred

to as the “Special Conciliation Act” ) and “an order in lieu of conciliation” (hereinafter referred

to as the “Art. 17 Order” ) (Art. 22 of the Special Conciliation Act, Art. 17 of the Civil
Conciliation Act). On the other hand, it has an element of private arrangement in that theproceedings are carried out privately and through flexible negotiation forms such as limiting
the extent of creditors affected. Thus, Special Conciliation has a hybrid nature thatencompasses various kinds of usability depending on how it is designed and operated. In

recent years, as several rule-based private arrangements have been established for the
purpose of debt adjustments and revitalizations of businesses and as the experiences of theiroperations accumulate, there has been a movement that tries to integrate a rule-based
private negotiation (before the final agreement) with judicial elements of Special Conciliation.

In this article, I briefly trace the outline of the Special Conciliation procedure (Ⅱ.) anddescribe the development of various ways of utilizing it (Ⅲ.). I then discuss future possibilities
for Special Conciliation, with the focus on it as a business revitalization type of procedure (IV.).

Ⅱ．Outline of Special Conciliation procedure
1. Purpose of Establishment

In accordance with the Special Conciliation Act, Special Conciliation aims to expedite thearrangement of interests pertaining to monetary debts of the “Specified Debtor [Tokutei

Saimusha ]” in order to contribute to their economic rehabilitation (Art. 1 of the Special
Conciliation Act; for definitions of “Specified Debtor,” see Art. 2 Para.1 of the Act.). Special

Conciliation is regarded as an exception to Civil Conciliation under the Civil Conciliation Act,and is commenced by the request, at the time of filing of conciliation, of the Specified Debtor(Art. 3 Paras. 1 and 2 of the Special Conciliation Act). Since there are no particular restrictions
on the attributes of Specific Debtors, Special Conciliation can be widely used by individuals
and corporations facing economic difficulty.3）3）Research Group on Special Conciliation (ed.), Ichimon Ittō Tokutei Chōtei Hō [Q&A the Special Conciliation Act]
(2000) at 5-6, 12 -13. Right after the enforcement of the Special Conciliation Act, it was reported that a little morethan 10% of the cases in the Tokyo Summary Court were filed by business entities (see Wataru Kobayashi, Tokyo
Kansai ni okeru Tokutei Chōtei no Dōkō to Jisshi Jōkyō no Kenshō [Trends and Analyses of Implementation ofSpecial Conciliation in the Tokyo Summary Court], 594 Ginkō Hōmu 21 (2001) at 28.

80

Japan Commercial Arbitration Journal VOL.3［2022］

The Possibility of Utilizing Special Conciliation Proceedings as Insolvency ADR—Focusing on its Use as a Business Revitalization Procedure

2. Key features of the Special Conciliation procedure(1) Petition of Special Conciliation

A petitioner who requests conciliation to be implemented in accordance with Special

Conciliation shall submit a detailed statement indicating financial conditions, any othermaterials clarifying that the petitioner is a Specified Debtor, and a list of the “Entitled Persons

Concerned [Kankei Kenrisha ]” (those who have the rights to property claims against theSpecified Debtor and who possess a security interest on the property of the debtor [Art. 2,
Para. 4 of the Special Conciliation Act]) (Art. 3, Para. 3 of the Special Conciliation Act). In

addition, when the petitioner is a business entity, the pre-petition progress of negotiations
with the Entitled Persons Concerned and the outline of the conciliation clauses desired by thepetitioner must be clarified at the same time as the petition (Art. 1, Para. 1 of the Special
Conciliation Rule). Thus, it is basically assumed (recommended) that negotiations between
the business debtor and creditors, etc. have begun before the time of filing.

The filing fee is determined according to the value of the matter for which a conciliation issought (Art. 3, Para. 1 of the Act on the Costs of Civil Proceedings, Row 14 of Appended Table1). In general practices of Special Conciliation in Summary Court, the fee is deemed to be 500

yen in the case of a petition by an individual (value of matter: 100,000 yen), and 5,000 yen in
the case of a petition by a business entity (value of matter: 1,000,000 yen), for the reason

that the remaining debt cannot be calculated unless the conciliation proceeds.4） However, adetermination of the value of the matters for conciliation shall be determined also by the way

to count the number of petitions for conciliation (whether or not a debtor's petition involving
multiple creditors can be treated as one), the court having jurisdiction (Summary Court orDistrict Court) and the content of the conciliation (whether or not it includes debt forgiveness).

Therefore, there are some differences among courts as to calculation standards for filing fees. 5）(2) Conciliation Agencies

In the case of conducting Special Conciliation by the Conciliation Committee, the court shalldesignate two or more (normally two) persons as the conciliation committee members who
have the necessary expert knowledge and experience pertaining to laws, taxation, finance,

corporate finance, asset evaluation, etc., according to the nature of the case (Art. 8 of theSpecial Conciliation Act).

Conciliations, when the court finds it appropriate, may be carried out by a judge only(Art.

22 of Special Conciliation, Art. 5, para. 1, proviso of the Civil Conciliation Act). In practice, if

the rationality verification of the business revitalization plan by the Commission of Examination[Chōsa Shokutaku ] (see below) is the main purpose of Special Conciliation, it is often

conducted by the judge only (especially in the case of Conciliation by a District Court6）).
(3) Various Measures for Special Conciliation4）Iwata Kazutoshi, Kiso kara Manabu Kan’i Saibansho no Sho Tetsuzuki [Learning from the Basics: Proceedings of a
Summary Court] (2017) at 160.
5）For example, the amount of filing fee is differently decided as to petitions under “Guidelines for Managers’
Guarantees” discussed later. See generally Nobuaki Kobayashi and Yasuyuki Nakai, Keieisha Hoshō Gaidorain no
Jitsumu to Kadai [Practices and Issues of Guidelines for Managers’ Guarantees] (2nd ed. 2020) at 268-270.

Japan Commercial Arbitration Journal VOL.3［2022］

81

In principle, Special Conciliation is a procedure between the petitioner and the other party (acreditor). However, heavily indebted debtors, whether individuals or corporations, assume
debts from multiple creditors, and debt adjustments with those creditors should be carried out

interrelatedly and collectively. Therefore, Art. 6 of the Special Conciliation Act stipulates that “ifmultiple cases of Special Conciliations pertaining to the same petitioners are pending in thesame court separately, conciliation proceedings pertaining to these cases must be consolidated

and processed to the extent possible.” When, as a prerequisite for consolidation, a transfer ofa case to a proper court is necessary, it can be done under looser requirements ( “when it isdeemed appropriate to handle the case” ) (Art. 4 of the Special Conciliation Act; cf. proviso ofArt. 4, Para. 1 of the Civil Conciliation Act).

As a means to promote Special Conciliation, the conciliation committee or a judge(hereinafter referred to as the “Conciliation Committee, etc.” ) has the authority to request

the disclosure or submission of information, documents or property from the parties, etc.

(Arts. 10, 12 and 19 of the Special Conciliation Act; see also Arts. 4 and 6 of the Special

Conciliation Rule). When the Conciliation Committee, etc. finds it particularly necessary for
conciliation, it, upon the petition by a party, may issue an order to prohibit the respondent or
any other person concerned with the case from changing the present state of any property, ororder them to cease and desist from any act that would make it impossible or extremely
difficult to achieve the conciliation ( “Measures prior to Conciliation [Chōteimae no Sochi ],”Art. 22 of the Special Conciliation Act, Art. 12, Para. 1 of the Civil Conciliation Act). There is afine for violation of the orders (Art. 35 of the Civil Conciliation Act).

In addition, the Special Conciliation Court, under certain requirements, may, upon petition,order the stay of civil execution proceedings pertaining to the right that is the subject ofSpecial Conciliation (main text of Art. 7, Para. 1 of the Special Conciliation Act). The order istypically issued to stay compulsory execution against the debtor's important property
commenced by a creditor in order to obtain an unreasonably favorable conciliation.7）

In some cases of Special Conciliation involving business revitalization, the main purpose of

the procedures is to confirm the rationality of the business revitalization plans throughexamination by lawyers and other experts on the basis of the Commission of Examination(Art. 9 of the Special Conciliation Rule and Art. 16 of the Civil Conciliation Rule). Such methodof Special Conciliation proceedings is different from the normal conciliation process in whichconflicts between the parties are mediated through the above-stated authorities of theConciliation Committee, etc. Instead, it seems that this kind of proceeding aims at securing
the fairness and rationality of the revitalization plan by intensive examination and verification

by neutral experts.8） When such business revitalization Special Conciliations are linked to theconclusion of proceedings by the Art. 17 Order described earlier, it appears to be a simplified

6）As described below, in a judge-conciliation case in the District Court, an examiner, usually an attorney, attends
the conciliation dates and substantially mediates between the parties. For the practice in the Osaka District Court,
see Masafumi Kawabata et al., Hai Rokumin desu, Okotae shimasu [Yes, Civil Affairs, Division 6, We Will Respond](2nd ed. 2018) at 644.
7）Iwata, supra note 4 at 176.

82

Japan Commercial Arbitration Journal VOL.3［2022］

The Possibility of Utilizing Special Conciliation Proceedings as Insolvency ADR—Focusing on its Use as a Business Revitalization Procedure

judicial insolvency (revitalization-type) proceeding which consists of an examination of arevitalization plan by qualified experts and a court's confirmation of the legality and rationalityof the plan.

(4) Successful conciliation and its effects

When the Conciliation Committee, etc. present the proposed terms of conciliation to theparties, those terms shall be fair, appropriate, and economically reasonable from theperspective of contributing to the economic rehabilitation of the specified debtor (Art. 15 of

the Special Conciliation Act). Here, “fair” means that it is fair among persons with an interest,

and that it does not violate laws and regulations. “Reasonable” means that the content isappropriate for the economic revitalization of a debtor. Further, “economic reasonableness”

means that the terms of conciliation are economically reasonable to both parties, and, inparticular for creditors, that the debtor's rehabilitation can provide them with an economicallymore advantageous solution than bankruptcy [Hasan ] proceedings.9）

When an agreement is reached between the parties and it is entered into a court record,

the conciliation is deemed successful, and this entry into the record shall have the same effectas a judicial settlement (Art. 22 of the Special Conciliation Act and Art. 16 of the Civil

Conciliation Act; see also Art. 22, item (ⅶ) of the Civil Execution Act). If the parties do notreach an agreement, the court may, by its authority and to an extent that does not contradict
the objectives of the parties' petitions, issue the Art. 17 Order to resolve the case. The court
may do so only after hearing the opinions of the conciliation committee members, giving

consideration to the equitable treatment of the interests of both parties, and taking into
account all relevant circumstances (Art. 22 of the Special Conciliation Act and Art. 16 of the

Civil Conciliation Act). The content thereof, as is the case of terms of conciliation, shall be “fair,reasonable, and economically rational” (Arts. 20 and 17, para. 2 of the Special Conciliation
Act). The Art. 17 Order shall have the same effect as the judicial settlement unless the parties

file an objection within two weeks from the day on which the party receives notice of theorder (Art. 22 of the Special Conciliation Act, Art. 18, paras. 1 and 3 of the Civil Conciliation
Act). Thus, the Art. 17 Order, in spite of a limit that it expires due to an objection by theparties, is regarded as a merit of the use of the Special Conciliation proceeding for reasonsthat it sometimes makes it easy for creditors (financial institutions, etc.) to obtain internal

approvals, and that there are cases where creditors who were against the conciliation switch
in favor of it due to credibility of the court order.10）

Ⅲ．Function of special conciliation as an insolvency ADR
As mentioned above, the original dispute resolution process of a Special Conciliation is to8）Akimitsu Takai and Akihiko Inuzuka, Tokuteichōtei [Special Conciliation], Junichi Matsushita and Mitsue Aizawa(ed.), Jigyōsaisei Tōsanjitsumu Zensho [Complete Guides on Business Revitalization and Insolvency Practices] (2020)
at 61.
9）See Research Group on Special Conciliation Law (ed.), supra note 3 at 99-101.
10）See Takai and Inuzuka, supra note 8 at 60-61.

Japan Commercial Arbitration Journal VOL.3［2022］

83reach a rational agreement for a revitalization and a debt adjustment of an individual or a
corporate debtor on the verge of economic collapse through special measures for collective
resolution and through the involvement of conciliation committee members. Recently,
however, along with the development of various rule-based private arrangements in the fieldof business revitalization, there seem to be changes in the way of using the Special
Conciliation proceeding. Let us take a closer look.

1.“ Parallel” and “continuous” use with other rule-based private arrangements

Special Conciliation has been operated not only as a self-contained insolvency ADR, but also

as part of unique scheme particularly for business revitalization purposes in conjunction withother rule-based private arrangements. Here I take up two rule-based private arrangements:(1) private arrangements pursuant to the Guidelines for Private Arrangement [Shiteki Seiri ni

kansuru Gaidorain ] (and Q&A) (2001), and (2) Business Revitalization ADR [Jigyō Saisei ADR ](introduced in 2007 and now revised by the Act on Strengthening Industrial Competitiveness[Sangyō Kyōsōryoku Kyōka Hō ] (hereinafter referred to as the “Industrial CompetitivenessAct” )).

According to the Guidelines for Private Arrangement, which were the first instance ofguidelines for a rule-based private arrangement, when target creditors (usually financial

institutions) confirm the suspension of debt collection acts at the first creditors' meeting (andbefore the second one), the Special Conciliation proceeding can be used in parallel with theprivate arrangements. More specifically, the Guidelines state that, where it is more likely thatan agreement will be reached by using Special Conciliation due to various reasons, the debtor
may file for Special Conciliation in addition to the preceding private arrangement. Then, whenapproaching an agreement through measures provided for by the Special Conciliation Act, thedebtor can withdraw the conciliation and reach a final agreement as a result of the privatearrangement.11）

Next, the relationship between the Business Revitalization ADR (intended for considerablylarge debtor corporations) and Special Conciliation can be described as follows. According toArt. 50 of the Industrial Competitiveness Act, if Business Revitalization ADR was undertakenwith respect to the same case prior to the application for Special Conciliation, the court is tomake a judgment as to whether it is appropriate for the conciliation to be undertaken only bya judge “in consideration of the fact that” Business Revitalization ADR was undertaken.

Typically, if Business Revitalization ADR turns out to be unsuccessful due to the disagreementof a small number of creditors, a Special Conciliation by a judge only can be used in order toobtain their agreement. Moreover, according to the rules of the Business Revitalization
Practitioners Association [Jigyō Saisei Jitsumuka Kyōkai ], currently the only Specified Certified

Dispute Resolution Business [Tokutei Ninshō Funsō Kaiketsu Jigyōsha ] (Art. 2, Para. 15 of theIndustrial Competitiveness Act), a petition for Special Conciliation can be filed in parallel with
the Business Revitalization ADR proceeding.12） In that case, Special Conciliation may be11）See Appendix 2 of Guidelines for Private Arrangement: “On the Use of Special Conciliation Procedures.”84

Japan Commercial Arbitration Journal VOL.3［2022］

The Possibility of Utilizing Special Conciliation Proceedings as Insolvency ADR—Focusing on its Use as a Business Revitalization Procedurecommenced only against the opposing creditors while maintaining the Business Revitalization

ADR procedure.13） Therefore, Special Conciliation (judge-only) is, under the Industrial

Competitiveness Act, designed to take over from unsuccessful Business Revitalization ADR(which is a “continuity” or “bridging” type of relationship), while the ADR agency's rules of
implementation assume that both procedures proceed concurrently ( “parallel” type of

relationship). In either type of relationship, it is very hard to persuade opposing creditors tochange their minds in Special Conciliation. The case is more likely to go to formal insolvency
proceedings with majority rule. There have not been many cases where the two procedures
worked well together.14）

2. Procedures that integrate the results of rule-based private negotiations with Special
Conciliation

Recently, Special Conciliation has been used at the final stage of rule-based privatearrangements after business revitalization plans are agreed by almost all financial creditors

through negotiations with close involvement of lawyers and other experts. In this kind ofprocedure, the Special Conciliation procedure itself is supposed to end within a short period oftime by a successful conciliation or the Art. 17 Order. The characteristic of such procedure isthat the revitalization plan itself is substantially completed by way of a private agreement inorder to avoid damage to the value of the debtor's business, and that, by going throughSpecial Conciliation as a judicial ADR, both the debtor and the creditors enjoy benefits likefavorable tax treatments. This procedural framework is, unlike the “continuity” type, designed
as an integral combination of private negotiation and Special Conciliation from the beginning.

In such a procedural framework, the negotiation process before filing a petition for Special

Conciliation is important. The Japan Federation of Bar Associations (JFBA), therefore, hasestablished a number of manuals, including the “Manual for the Use of the Special Conciliation
Scheme as a Method to Support Business Revitalization [Jigyōsha no Jigyō Saisei wo Shiensuru Shuhō toshiteno Tokutei Chōtei Sukiimu Riyō no Tebiki ]” (originally released in 2013 andrevised in 2020). The scheme implemented pursuant to the Manual15） has the following

features: (1) the basic targets are relatively small business entities (corporations or sole
proprietors), (2) the terms of conciliation or revitalization plan are most likely to be agreed toby all financial creditors before filing a petition of Special Conciliation (hence pre-conciliation
measures pursuant to Art. 12 of the Special Conciliation Act are not expected to use), (3) the

jurisdiction shall be given to the Summary Courts (handled by the Conciliation Committee)
located in the same place as the main offices of the District Courts, (4) the Art. 17 Order is12）Art. 25, Para. 8 of Rules concerning Business Revitalization Procedures through Specified Certified ADR[Tokutei Ninshō ADR Tetsuzuki ni motozuku Jigyō Saisei Tetsuzuki Kisoku ]. For the text of the Article see Business
Revitalization Practitioners Association (ed.), Jigyō Saisei ADR no Subete [Everything about Business Revitalization
ADR] (2nd ed. 2021) at 619.
13）Business Revitalization Practitioners Association (ed.), supra note 12 at 155.
14）Of 81 business revitalization ADR applications (253 debtor corporations) from 2008 to 2020, there were 20
cases of transition to other procedures, and only two of them were transferred to Special Conciliation. See Business
Revitalization Practitioners Association (ed.), supra note 12 at 426.

Japan Commercial Arbitration Journal VOL.3［2022］

85

supposed to be actively utilized, and (5) tax treatments are clarified regarding debt
forgiveness for both debtors and financial institutions.16） Since the Commission of Examination

is not scheduled in this procedure, the cost of Special Conciliation is limited to a filing fee(6,500 yen per case no matter how many creditors are involved or 500 yen per creditor) andpostal stamp cost, and the conciliation is deemed to end, in principle, after only two
conciliation dates. Thus, emphasis is given to the simplicity, speed, and inexpensiveness of theconciliation process.17）

3. Development of Special Conciliation procedures in district courts

The district courts (prominently the Tokyo District Court and the Osaka District Court) havedeveloped their own methods of the Special Conciliation proceeding for revitalization of

considerably large corporations.18） It is a procedure handled by judges of the insolvency
division of large-scale district courts that is closer to a formal rehabilitation procedure than theSummery Court Special Conciliation. As such it is appropriate to characterize it as a uniquetype of Special Conciliation.

The Civil Affairs, Division 8 (Commercial Division) of the Tokyo District Court, originally inresponse to the enactment of the “Guidelines on Private Arrangement” in 2001, introduced a
new model of Special Conciliation in cooperation with the Civil Affairs, Division 22 (Conciliation,etc. Division). This procedure attempted to assume cases in which private arrangements were

not successful due to opposition by minority creditors, and as the result of conciliation, basedon the examiner's report on rationality of the rehabilitation plan, voluntary approval to theplan or the Art. 17 Order is encouraged.19） Lately, since April 2020, the Civil Affairs, Divisions

8 and 20 (Bankruptcy and Rehabilitation Division) of the Tokyo District Court havecollaboratively started new operations of Special Conciliation. Even in the new operation, themain targets are cases where a business revitalization plan was not successful through rulebased private arrangements (Business Revitalization ADR and the like), and the Art. 17 Order

15）In addition to this guideline, the JFBA prepared and published two more guidelines: (1) “Manual for the Use ofSpecial Conciliation Scheme as a Method of Guarantee Debt Arrangement pursuant to the Guidelines for Managers’
Guarantees” (2014) and (2) “Manual of the Use of Special Conciliation Scheme as a Method of Supporting the Closureand Liquidation of Business Entities” (2017). Both were also revised in 2020. Apart from these manuals, the“Organization for the Operation of the Debt Arrangement Guidelines for Victims of the Great East Japan Earthquake
and Natural Disasters” established a guideline for debt adjustment of individuals or sole proprietors affected bynatural disasters including special provisions for those affected by Covid-19 infection, where Special Conciliation is
an important part of the procedural scheme. See http://www.dgl.or.jp/guideline/ (last visited Feb. 22, 2022).
16）For the tax treatment relating to JFBA’s Special Conciliation Schemes see https://www.nichibenren.or.jp/
activity/resolution/chusho/tokutei_chotei.html (last visited Feb. 22, 2022).
17）Takai and Inuzuka, supra note 8 at 63, 69.
18）The average number of the debtor filings is just 1 to 3 cases a year (Akimitsu Takai, Revitalization andLiquidation through Special Conciliation, Matsushita and Aizawa, supra note 8 at 632.
19）Yasushi Kanokogi, Tōkyō Chisai Dai 8 Bu niokeru Tokutei Chōtei no Unyō Jōkyō [Operation of Special
Conciliation in the Civil Affairs, Division 8 of the Tokyo District Court], Jigyō Saisei to Saiken Kanri No. 119 (2008)
at 65ff. Then the amount of advance payment was, considering the costs for full-scale investigation activities oflawyers and certified public accountants, set at a higher level, around 12 million yen.

86

Japan Commercial Arbitration Journal VOL.3［2022］

The Possibility of Utilizing Special Conciliation Proceedings as Insolvency ADR—Focusing on its Use as a Business Revitalization Procedure

is encouraged to be used. Additionally, some features have been newly introduced: (1) asmaller amount of an advance payment at the time of petition to make Special Conciliationeasy to use,20） (2) the standard number of conciliation dates is just three and the conciliation

is supposed to end within seven weeks or so, and (3) Special Conciliation for a debtor
corporation can be operated jointly with that of the debtor's guarantor(s) in accordance with
the Guidelines for Managers' Guarantees. In the new operation, while emphasizing theimportance of the examiner's report, an efficient and low-cost Special Conciliation is aimed atby limiting and simplifying the items of the report.21）

The Osaka District Court, the second largest district court in Japan, has also established asystem in which the Insolvency Division (Civil Affairs, Division 6) and the Conciliation etc.
Division (Civil Affairs, Division 10) cooperate to handle some cases of the business

revitalization type of Special Conciliation.22） This procedure is also premised on the pre-petition

existence of a proposed revitalization plan for a business corporation. The case is distributed

formally to the Civil Affairs, Division 10, although a judge of the Civil Affairs, Division 6
handles the case as a judge of the Civil Affairs, Division 10.

With regard to the new operation of the Tokyo District Court, we must wait for future

developments. But, apparently, the Special Conciliation procedures in two district courts havea number of points in common. For example, the main targets in both procedures are cases
which were not successful through the preceding rule-based private arrangements. Further,both procedures try to reduce the amount of the advance payment by streamlining theexamination process, etc. and reach a successful conciliation within a shorter period of time.

Ⅳ．Conclusion—Present and future of Special Conciliation
As we have seen in this article, Special Conciliation, in addition to its original function as anindependent insolvency ADR, has progressed “in parallel” with other pure or rule-based

private arrangements, or has been utilized as a successor to these processes. In addition,
recently, there is an increasing number of procedures that use Special Conciliation as acompletion stage following the rule-based negotiation process. That kind of procedure could

be called the “integration” type in order to distinguish it from the idea of Special Conciliation
focused on “continuity” after other rule-based private arrangements fail.

I have argued that relationships between private arrangements and formal insolvency

proceedings can be reduced basically into three perspectives: (1) “strengthening continuity,”(2) “mutual entr y” and (3) “integration.” 23） This analysis seems to of fer a clue for20）The maximum amount of the prepayment is set as much as that of a Civil Rehabilitation proceeding (one of theformal revitalization insolvency proceedings) and 60% of that amount as a standard. On the other hand, the filing fee
was clearly set at 6,500 yen per the other party (based on the idea that economic benefits cannot be calculated). See
Takeshi Ebara et al., Tokyo Chihō Saibansho ni okeru Kigyō no Shitekiseiri ni kansuru Tokutei Chōtei no Arata naUnyō no Gaiyō [Outline of New Operation of Special Conciliation regarding Private Arrangements of Businesses in
the Tokyo District Court], Kinyū Hōmu Jijō No. 2133 (2020) at 24.
21）Ebara et al., supra note 20, at 25-26.
22）Kawabata et al., supra note 6, at 643-45.

Japan Commercial Arbitration Journal VOL.3［2022］

87understanding the relationship between Special Conciliation and other rule-based privatearrangements too.

First, if there are a small number of opposing creditors in the business revitalization ADR

and no agreement is reached, the company will, under “strengthening continuity” policy,smoothly proceed to Special Conciliation (especially in the district courts) and come to a

successful conciliation through mediation by conciliation committees or the use of the Article

17 Order, etc. based on an examiner's report. Second, “mutual entry” is an idea that evenduring a private arrangement the statutory measures like the stay of civil executions should

be available under certain conditions24） (see “parallel use” of Special Conciliation with theprivate arrangements under the Guidelines for Private Arrangement and with Business
Revitalization ADR).

Finally, there are procedures which aim to conclude an agreement by Special Conciliation of

the court (or conclusion by the Art. 17 Order) based on the existence of a business
revitalization plan compiled with the assistance of lawyers according to the various “manuals”
established by the JFBA, etc. This type of procedure can, unlike the “strengthening continuity”
and “mutual entry” types of procedures, be described as “integration" of the rule-based
private negotiation and completion of the reconstruction plan through the Special Conciliation.

Given the diversified functions of Special Conciliation mentioned above, though, there still isa need for Special Conciliation to return to its original function as an independent insolvency
ADR and strengthen such function. It is impor tant to expand the possibility of therehabilitation of business debtors even without a sufficient prior preparation through Special

Conciliation by making the most of various measures stipulated by the Special Conciliation
Act. This is an independent judicial insolvency ADR which is simpler and more flexible than aformal insolvency proceeding and more reliable than a rule-based private arrangement.

While the number of Civil Conciliations per year has been decreasing recently, the numberof new cases assumed as Special Conciliation has decreased much more sharply (according to

the Annual Report of Judicial Statistics, the numbers of new cases of the Special Conciliationsin the Summary Courts was 55,904 in 2009, and 2,959 in 2019). With regard to businessrevaitalization Special Conciliation, even though various attempts have been made in practice,there seems to be more pessimism about the active use of it.25） However, Special Conciliation

as a judicial-type ADR that can be connected in various ways not only with other rule-based23）Shoichi Tagashira, Saiken Gata Shitekiseiri Tetsuzuki to Hōteki Seiri Tetsuzuki no “Tōgō” Shiron[“Integration”of Out-of-Court and In-Court Corporate Restructuring Processes: A Proposal], Jōchi Hōgaku RonshūVol. 60, Nos. 3 and 4 (2017) at 165-69.
24）See Tomonori Miyakawa, Saimusha Kōsei Hō Kōsō: Sōron [The Concept of Debtor Rehabilitation Law: General
Theories] (1994) at 370-72.
25）See e.g ., Hiromasa Nakajima, Jigyō Saisei Shuhō toshite no Tokutei Chōtei ni tsuite: Shihō Gata Tōsan ADR no
Genjō to Kadai [On Special Conciliation as a Business Revitalization Method: Current Status and Prospects of
Judicial Insolvency ADR], Hiroshige Takata et al. (eds.), Minji Soshō Hō no Riron [Theory of Law of Civil Procedure](2018) at 1279, Tōru Masuichi, Shihou Gata Tousan ADR to shite no Tokutei Choutei: sono Igi to Mondai Ten[Special conciliation as Judicial Insolvency ADR: Its Significance and Problems], Ginkō Hōmu 21 No. 821 (2017) at
35-36.

88

Japan Commercial Arbitration Journal VOL.3［2022］

The Possibility of Utilizing Special Conciliation Proceedings as Insolvency ADR—Focusing on its Use as a Business Revitalization Procedure

private arrangements but also with formal insolvency proceedings has the potential to be themother body that produces new operations or statutory schemes. In the immediate future, I
would like to pay close attention to the direction of the JFBA schemes introduced above.

Japan Commercial Arbitration Journal VOL.3［2022］

89

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
https://www.tmi.gr.jp
TOKYO / NAGOYA / OSAKA / KYOTO / KOBE / FUKUOKA / SHANGHAI / BEIJING / HO CHI MINH CITYHANOI / YANGON / SINGAPORE / PHNOM PENH / BANGKOK / SILICON VALLEY / LONDONHow Are Disputes Settled in Japan's Financial ADR?

Statistical Analysis of the Determinative Factors in the Facilitation and Conclusion of
Settlements in FINMAC Mediation

Professor of Law, Meijo University

Tomohiko Maeda

Ⅰ．Introduction
This paper presents findings from a statistical analysis of mediation cases at FINMAC(Financial Instruments Mediation Assistance Center), a leading certified financial ADR

organization in Japan. I analyzed cases mediated using the FINMAC mediation process from
Fiscal Year 2011 and 2016 to answer three main research questions: (1) what kind of cases

are more easily settled; (2) what kind of cases settled involving higher settlement figures; (3)what kind of changes the process has seen, if any.

To that end, Part 1 will provide the background to the analysis, namely, the success story offinancial ADRs and recent shadows of doubt over it. Part 2 will explain the working hypotheses
and methods for the analysis, and Part 3 will present the findings from it. Finally, in Part 4, I
provide explanatory hypotheses elucidating the findings.

Ⅱ．Background to the research
1. ADR, civil justice capacity, and judicial system reform

During the latter half of the 20th Century, ADR processes served as instruments of “Small

Sized Justice” of Japan, at least in some sense. In the context of Japan's low litigation rate fortraffic accidents, Ramseyer and Nakazato, and Tanase concurred in their analysis that ADR

processes specialized in traffic accidents provided efficient and meaningful alternatives tolawsuits in Japan.1) More generally, Frank Upham pointed out that the creation of institutional

mediation is one consistent response to social conflict in any form in Japan. According toUpham, a Japanese response to social changes, characterized as bureaucratic informalism andinstitutionalized mediation, is a vehicle to regain control over the specifics and pace of a socialchange endorsed by court decisions.2) These scholars differed in their nuances but concurred

1）Ramseyer, J. M.、& Nakazato, M. “ The rational litigant: settlement amounts and verdict rates in Japan,” The
Journal of Legal Studies, 18(2), 263-290 (1989). Tanase, T., “The management of disputes: automobile accident
compensation in Japan,” Law and Society Review, 651-691 (1990).

Japan Commercial Arbitration Journal VOL.3［2022］

91that institutionalized mediation has facilitated Small Sized Justice in Japan, reducing the civil
litigation caseload and settling conflicts out of court.

While justice system reforms in 2000s aimed at breaking-away from the traditional Small

Sized Justice and the expansion of the rule of law, the Justice System Reform Council

nevertheless recommended the promotion and institutionalization of ADR.3) The Council
seemed to have assumed that ADR can serve as venues for negotiation “in the shadow oflaw” and can expand the scope of available dispute resolution guided by rules and standards
developed in courts.4)

Based on the recommendations, Japan legislated wholesale revision of theh Arbitration Act(Act No. 138 of 2003) and the Act on Promotion of Use of Alternative Dispute Resolution (ActNo. 151 of 2004), for example, the latter of which introduced Certified ADR Institutions.

These recommendations and legislation prompted a remarkable number of start-ups of ADR
institutions in the 2000s. However, many of these start-ups (and especially those qualifying as

Certified ADR Institutions) saw only small number of cases.5) It is quite doubtful that thepromotion of ADR expanded the rule of law in a meaningful manner.
2. Codification of Financial ADR

In order to promote ADR in Japan's financial markets, the Financial Service Agency set up

the Financial Service Dispute Resolution Liaison Group, where lawyers, academics, andrepresentatives from financial businesses held discussions to develop and promote models for

ADR processes hosted by industry organizations. However, with the notable exception of themediation process provided by the Japan Securities Dealers Association (hereinafter JSDA),

and its successor FINMAC, ADR mechanisms attached to industry organizations saw few
cases.6)

While justice system reforms and the liberalization of financial markets ignited discussions

over so-called financial ADR (i.e. an ADR system specifically designed to resolve disputes overfinancial instruments), the financial crisis of 2007–2008 brought the final momentum
necessary to the revision of the Financial Instruments and Exchange Act and other statutes(Act No. 58 of 2009), which institutionalized financial ADR through Designated Dispute

Resolution Organizations (hereinafter abbreviated as DDRO). Below the term “financial ADR”
2）Upham, F. K., Law and Social Change in Postwar Japan, Harvard Univ. Press (1987), pp. 15-22.
3）Shiho-Seido-Kaikaku-Shingikai (Justice System Reform Council), “Shiho-Seido-Kaikaku-Shingikai Ikensho: 21
Seiki-no Nihon-wo Sasaeru Shiho-Seido (Recommendations from Justice System Reform Council: Justice System toSupport 21th Century’s Japan)” https://www.kantei.go.jp/jp/sihouseido/report/ikensyo/index.html （2001）(retrieved on Nov. 20, 2017) pp. 35-38.
4）For the concept of negotiation “in the shadow of the law,” please refer Mnookin, Robert H, and Lewis
Kornhauser, "Bargaining in the Shadow of the Law: The Case of Divorce." The Yale Law Journal88, no. 5, 950-97(1979).
5）Ministry of Justice, “ADR-Ho Kentokai Ikensho (The Report from the Study Group on ADR Act),” https://www.
moj.go.jp/content/000121361.pdf (2014)（retrieved on Mar. 18, 2022）p. 55.
6）Financial Service Agency, “Un’yo-Men-no Jokyo-ni tsuite (About the Operations of the ADR Programs),”
https://www.fsa.go.jp/singi/singi_trouble/siryou/20050603_sir/03.pdf (2005)（retrieved on Mar. 18, 2022）.

92

Japan Commercial Arbitration Journal VOL.3［2022］

How Are Disputes Settled in Japan's Financial ADR?

refers specifically to these DDROs.

The statutory framework for these DDROs contemplates that they provide both complaint

processing and mediation services, which FINMAC calls “kujo-shori ” and “assen ” respectively.

In complaint processing, a DDRO secretariat relays the complaint to the respondent dealer/trader and monitors the progress made. In mediation, a DDRO will select one (or a panel of)
mediator(s) from its register. It needs to be mentioned that the “Basic Contract” , which ismandatory for businesses operating in the said market to enter into with a DDRO, gives the
respondent businesses the duty to cooperate with the mediation process, including the duty

to agree to be subject to mediation and the duty to accept a special settlement offer from themediator(s) (in effect creating a unilateral arbitration clause).

In addition to these mandated processes, most DDROs, including FINMAC, also provide free(or cheap) consultation services for customers, which usually precedes complaint processing
and any mediation.7)

3. Quantitative and Qualitative Success of Financial ADR

Financial ADR, upon undergoing the institutionalization explained above, saw a considerable

numbers of cases, in strong contrast to the low uptake of other private ADR processes. (Fig. 1

and 2)8) As for FINMAC, though the spike in 2018 was attributed to the invoking of a callprovision in a particular financial instrument, (which provoked more than 600 mediation filings

at FINMAC) there have been more than a hundred mediation filings in each year other than2018. The case counts are comparable to those arising in civil litigation disputes concerning
financial instruments. As for mediation filings with the Japan Bankers Association (abbreviatedas JBA hereinafter) over securities disputes, its first three years of operation saw distinctively
high numbers of filings, which was attributed to customers' losses incurred from currency

derivatives products sold by banks in circumstances where there were drastic currency
fluctuations during the global financial crisis in 2007-08. Even after that boom, the number offilings of securities disputes with JBA mediation surpasses that of civil litigation every year,
according to the mandatory reports from member banks to the JSDA.

The case numbers shown above illustrate the exceptional success of financial ADR among

private ADR mechanisms in a quantitative sense.

7）FINMAC, “Sodan-to-no Nagare (The flow of Processes at FINMAC) https://www.finmac.or.jp/flow/ (publication
date unknown) (retrieved on Nov.20, 2017).
8）The figures are compiled using the data from the following business reports from FY 2010 to FY 2018. JSDA,
Gyomu-Hokokusho (Annual Business Report), https://www.jsda.or.jp/about/gaiyou/houkokusho.html（2010-）(retrieved on Mar. 15, 2022), Zenginkyo-Sodanshitsu (JBA Counseling Bureau), Gyomu-no Jisshi-Jokyo (Annual andQuarterly Business Report) https://www.zenginkyo.or.jp/adr/conditions/year/（2010-）(retrieved on Mar. 15, 2022)
Japanese banks are not only members of JBA, but also special members (tokubetsu-kaiin ) of JSDA in their capacity of
securities business. Based on that capacity, the banks reports their litigation and conciliation cases to JSDA. The
numbers for “JBA Mediation Cases (Securities)” are the sums of the mediation filings in “derivatives cases” and“securities cases (over-the-counter-sales)” categories which correspond to litigation and conciliation cases appearedin JSDA reports. (The categories representing banking business, such as deposits and savings, money transfer, andforeign exchanges, are excluded from the figures.

Japan Commercial Arbitration Journal VOL.3［2022］

93

800
700

692

600

597

500

485

400

375

300 310

100

75

0

361

377

360

308

239

200

402

222
128

35

2011

31

2012

177

101

118

31

27

2013

2014

2015

239
133

154

24

107
10

2016

2017

204
136
29
2018

Court Conciliation Filings

Civil Litigation Filings

FINMAC Mediation Filings (against FSDA members)

Aﬃrmation of Errors by FSDA

Fig.1

321
302

208

45

2010

387

341

Numbers of filings initiating dispute resolution processes against securities businesses

1000
913

900
800
700

693

600
500
400
300
200 211

168

100
0

2010

2011

2012

2013

Civil Litigation Filings

124

2014

58
2015

101

2016

51
2017

79
2018

Court Conciliation Filings

JBA Mediation Filings (related to Securities)

Fig.2

Numbers of filings initiating dispute resolution processes against banks (securities

94

Japan Commercial Arbitration Journal VOL.3［2022］

related)How Are Disputes Settled in Japan's Financial ADR?

Now, we turn to the question of whether the financial ADR mechanisms serve to expand theRule of Law, as expected by the Justice System Reform Council, in a qualitative sense.

In this respect, the follow-up committee gave a positive evaluation of financial ADR

mechanisms in that they had been playing a certain role in troubleshooting matters forcustomers and therefore had been serving to protect customers in financial markets. It citedthe facts that (1) the system captured potential demands for dispute resolution and that (2)the organizations boasted a relatively high rate of successful settlements.9)

I also contended in my article, co-authored by Andrew Pardieck, that Japan's financial ADR

mechanisms have functioned to expand the domain of the Rule of Law, based on the following

arguments. Unlike securities arbitrations in the United States, filings for mediation at afinancial ADR institution does not prevent customers from bringing their cases also to court.
And the financial ADR mechanisms employ lawyers specialized in securities law as their

mediators and also allow attorneys to represent customers. In short, financial ADR

mechanisms do not exclude but necessitate the involvement of attorneys. During themediation process, the attorneys (either mediating or representing clients) analyze and argue

the disputes within the frameworks developed through lawsuits and precedents relevant tosecurities and other financial instruments. Further, a large part of the cases submitted tofinancial ADR mediations in the past were disputes over smaller stakes and/or brought byelderly investors. The financial ADR mechanisms provide cheaper and faster dispute resolution
based on the laws, regulations, and precedents relevant to such cases where the use of

attorneys and the courts would not pay off. In the manner explained above, financial ADR
mechanisms have served to expand the domain of influence of the courts and lawyers into awider range of disputes over financial instruments.10)
4. Recent Worries

However, there have been a few disturbing developments concerning financial ADR

mechanisms in recent times. In the late 2010s, some of the organizations began to reportthat the situation of their handled cases worsened with respect to the numbers of filings andthe settlement rates. The organizations themselves attributed this trend to the increase incases unsuitable to mediation, such as those disputed already for years, and the fact that theeasier cases, as typified by those over currency derivative products, had been cleared away
and the remnant cases are relatively harder to settle.11)

From another point of view, it can be speculated that the recent situation is in fact a return

to normalcy and the favorable conditions at the birth of Japanese financial ADR mechanisms
9）Financial Service Agency, “Kin’yu-ADR-Seido-no Foroappu-ni Kansuru Yushikisha-Kaigi-ni-okeru Giron-no
Torimatome (Report of Discussions at Follow-Up Committee for Financial ADR system),” https://www.fsa.go.jp/
singi/adr-followup/20130308/02.pdf (2013) (Retrieved on Mar. 18, 2022).
10）Maeda, Tomohiko, and Andrew M. Pardieck. "ADR in Japan's Financial Markets & the Rule of Law." NEULJ 10,
p, 400 (2018).
11）Financial Service Agency, “Dai-48-kai Kin’yu Toraburu Renraku-Chosei-Kyogikai Gijiroku (The Minute for the
48th Financial Dispute Resolution Liaison Group Meeting), https://www.fsa.go.jp/singi/singi_trouble/gijiyoroku/20141204.html (2014) (Retrieved on Mar. 18, 2022).

Japan Commercial Arbitration Journal VOL.3［2022］

95

were an exception, which fortunately bestowed a successful beginning on the system. As forthe cases over currency derivative products, it is reported that the administrative guidance(gyosei-shidou ) made the banks inclined to accept customer bailouts through privately

negotiated settlements or through the financial ADR mechanisms.12)

Ⅲ．Subject and Methods of the Analysis
With these situations in mind, I conducted statistical analysis, more specifically regressions,of the data from mediations at a financial ADR, to verify the following two hypothesis. The
first hypothesis (HA) is that dispute resolution in the financial ADR mechanisms have changed

because of the loss of the favorable conditions present at the time of their startup. The second
hypothesis (HB) is that court precedents have guided dispute resolution in financial ADR
processes.

1. Subject of the Analysis

I chose the mediation process at FINMAC as the subject of statistical analysis for thefollowing three reasons.

First, FINMAC has distinctive capabilities given by securities regulations. FINMAC deals withdisputes over financial instruments such as securities, where the dealers are prohibited fromcompensating customers for their losses, with several exceptions (Financial Instruments andExchange Act, Art. 39). FINMAC and other DDROs have the legal capability to legitimize
settlements compensating customers' losses (Order for Enforcement of the Financial

Instruments and Exchange Act Art. 16-5).13) This legal framework pushes securities dealers toprefer mediation at financial ADR institutions over one-on-one negotiations, even when they areotherwise inclined to negotiation and settlement. If the banks were willing to settle the disputes

over the currency derivatives products, they should have brought considerable number of “easy”
cases to the financial ADR institutions dealing with financial instruments (i.e. FINMAC and JBA)
at the start of the system. This in turn should have led to a decline in the rate of “easy” cases
and thus a decline in settlements as the currency derivatives dispute boom waned.

The second reason for choosing to examine the mediation process at FINMAC is the detailed

statistics available from the Japan Securities Dealers Association, one of the parent
organizations of FINMAC. It has broad and strong regulative authority over its member

dealers and publishes detailed annual and quarterly reports, which include the numbers ofdisputes between the member dealers and their customers and their disposition, filings, andterminations of civil litigations and conciliations (Minji Chotei ). Therefore, we can compare thenumber of cases amongst civil litigation, conciliation, and the financial ADR mechanisms12）For the news coverage about the said administrative guidance, please refer to Asahi-Shinbun, “DeribatibuKeiyaku-no Chusho-Kigyo, Cho-Endaka-de Sonsitsu-Uttae Yonbai: Sakunendo Funso-Kikan-ni (Small-to-Medium
Businesses who Bought Currency Derivatives Products Report Files Quadruple Cases to Dispute Resolution
Organizations under Super-Strong Yen, Compared to the Last Year),” Jun. 7, 2012 (Morning Ed.) p. 1, for example
13）See, Maeda & Pardieck, supra n. 10 for the details.

96

Japan Commercial Arbitration Journal VOL.3［2022］

How Are Disputes Settled in Japan's Financial ADR?

(being mediations at FINMAC and JBA) involving the member dealers (including the banks
brokering financial instruments).

The third and last reason is that FINMAC discloses its information more thoroughly thanother DDROs and discloses even the approximate amount of awards for each case settled
through its mediation process. This allows us to analyze not only the probability of successful
settlements, but also the probable or expected amounts of such awards.
2. FINMAC Mediation Cases Seen Through Numbers

When we compare the composition of mediation cases submitted to FINMAC by theamounts of the claims and the awards, it is apparent that high stake cases involving ten
million yen or more has decreased both in numbers and rates (Fig. 3).
160
140
120
100
80
60
40
20
0

No

award

1 to 1
Mil.

to 2
Mil.

to 3
Mil.

2011 Claims

Fig.3

to 4
Mil.

to 5
Mil.

2011 Awards

to 6
Mil.

to 7
Mil.

to 8
Mil.

2016 Claims

to 9
Mil.

to 10

More

Mil. than 10
Mil.

2016 Awards

Distribution of Amounts of Claims and Awards of FINMAC Mediation Cases (in JPY)

(Filed by Non-Corporate Customers) Terminated in 2011 and 2016.
3. Working Hypotheses

Based on the data available for analysis, the author verified three working hypotheses

deduced from the two hypotheses above (HA and HB). The first working hypothesis (WHA) isthat when we compare the cases from 2011 and 2016, the settlement rate and the award

rate (being the amount of the award divided by the amount of the claim for each settled case)is lower in 2016. The second working hypothesis (WHB) is that in cases where the dealers
admitted that they were at fault or showed a willingness to settle, the parties are more likely

Japan Commercial Arbitration Journal VOL.3［2022］97to settle and the award rate is higher with an absence of discount from comparative fault(WHB1). Another element of the hypothesis is that claimants older than 75 and/or female
claimants would be more likely to reach settlements and they would settle at higher award

rates, for such attributes are associated with having less experience with investments and/or
having insufficient knowledge necessary to appropriately judging investments, and therefore

this enhances the dealers' level of accountability (WHB2). The third working hypothesis is that
disputes over currency derivatives products has a higher likelihood of settlement and showshigher award rates for settled cases, when we compared cases filed both by individual
customers and corporate customers (WHC).

The data for the analysis is those of all cases terminated in fiscal years 2011 and 2016. I

coded all of the cases according to the criteria set to represent such attributes discussed in
the working hypotheses, based on the description in the FINMAC quarterly reports.14)

Ⅳ．Analysis
1. Factors Contributing to the Success of Settlements and Award Rates in Settled Cases
First, I conducted a logistic regression analysis using the data only from the cases filed byindividual claimants with odds of successful settlements set as the explained variable. The

Tab.1

Logistic Regression for Successful Settlement in Mediation Cases Filed by Individual

Claimants.

Variables in Equation
95% ConﬁdenceInterval of Exp(B)

B

S.E.

Wald

Early Cases

.362

.227

2.550

1

.110

1.437

.921

2.241

Admission / Willingness

2.564.343 55.895

1.000 12.988

6.631

25.436

Solicitation

-.248

.271

.838

1

.360

.781

.459

1.327

Older

-.186

.237

.618

1

.432

.830

.522

1.321

Female.737.216 11.678

1

.001

2.090

1.369

3.189

Constant

-.700

.307

1

.022

.496

5.216

df

Sig

Exp(B)MinMax14）For the detailed criteria for the coding, see Maeda, Tomohiko, “Kin’yu ADR ni-okeru Funso-Shori Jokyo-no
Tokei-teki Bunseki: FINMAC no Assen-Tetuduki-ni Miru Wakai-Seiritsu-Yo’in to Sousouki-karano Henka (AStatistical Analysis of Dispute Resolutions at Financial ADRs: Factors Contributing to Successful Settlements andChanges Thereof Observed from Mediation Cases at FINMAC),” Ho-to Shakai-Kenkyu, vol. 3, p. 71.

98

Japan Commercial Arbitration Journal VOL.3［2022］

How Are Disputes Settled in Japan's Financial ADR?

explaining variables set for the regression model are “case from 2011 (Early Cases),”“admission of liability and/or respondent(s)' willingness to settle (hereinafter Admission/
Willingness),” “disputes over solicitation of deals (hereinafter Solicitation),” and “female(hereinafter Female) and/or older (75 years old or older, hereinafter Older) claimant(s).”Among these hypothetical explaining variables, Admission/ Willingness and Female hadsignificant effects on the odds of successful settlements (Tab. 1; χ2 = 99.440、df = 5、p=.000；Cox-Snell R2=.199）.

Second, we conducted multiple regression analysis using the data from the cases filed byindividual claimants and settled, with award rates set as the explained variable (Tab. 2; F =10.205、df = 5、p =.000; Adjusted R2 = .163). The hypothetical explaining variables in the

regression model are the same as in the first analysis above. Among those, three variables
turned out to be significant. Early Cases and Admission/ Willingness have positive beta values,

which means they add to the award rate; Solicitation has a negative beta value, which means
it reduces the award rate.
Tab.2

Linear Regression for Awarding Rates in Settled Cases Filed by Individual Claimants

Coeﬃcients

Unstandardized Standardized

95% Conﬁdence

Collinearity

CoeﬃcientsInterval of B

Statistics

Coeﬃcients

Tolera
B

S.E.

Beta

t

Sig

Min

Max

6.786

.000

.260

.473

nce

VIF

(Constant)

.367

.054

Early Cases

.109

.041

.163

2.681

.008

.029

.189

.957

1.045

Admission/ Willingness

.198

.038

.316

5.250

.000

.124

.273

.976

1.025

Solicitation

-.122

.045

-.166 -2.737

.007

-.210

-.034

.955

1.047

Women

-.061

.038

-.098 -1.611

.108

-.135

.014

.959

1.043

Older

-.004

.042

-.005

.933

-.086

.079

.968

1.033

-.085

As for the WHA, a regression analysis of cases filed by individual claimants showed thatcases from 2011 and 2016 were not different in settlement rates, but award rates dropped
during the five years interval between them.

As for the WHB, when the dealer admitted fault or were willing to settle (as written in thecase reports), it increased both the odds of a successful settlement and the award rates whensettled. Female claimants had higher odds of settling their cases: although no significant

difference was found in the award rates between them and their male counterparts. Being
Older had no significant effect on the odds of settlement or award rates.

Japan Commercial Arbitration Journal VOL.3［2022］

992. Effects of Currency Derivatives Products Disputes

We now investigate cases to verify the WHC about the effects of the booming and waning ofdisputes over currency derivatives. Because all of the cases over currency derivatives werefiled by corporate customers, I used all cases for the analysis and added a dummy variable toindicate disputes over currency derivatives (Derivatives hereinafter) to the explaining
variables, while excluding the variables concerning the attributes of individuals (i.e., Female

and Older). The logistic regression analysis showed that only the Admission/ Willingness had
significant effects on the odds of successful settlements. (Tab. 3; χ2 = 87.922、df = d、p =.000; Co-Snell R2 = .141) Contrary to the self-analysis reported by the JBA to the Liaison

Group, disputes over the currency derivatives were not so easy to settle, at least at FINMAC.
Tab.3

Logistic Regression for Successful Settlements in All Mediation Cases.

Variables in Equation

95% ConﬁdenceInterval of Exp(B)

B

S.E.

.172

.247

.484

1

.487

1.188

.732

1.928

Admission/ Willingness

2.073.261 63.004

1

.000

7.947

4.763

13.258

Solicitation

-.307

.249

1.525

1

.217

.735

.451

1.198

Constant

-.102

.228

.201

1

.654

.903

Derivatives

Wald

df

Sig

Exp(B)Min

Max

Multiple regression with the same variables set as the explaining variables and the award

rates set as the explained variable showed significant effects of all the variables in the model(Tab. 4; F = 16.383、df = 3、p = .000; Adjusted R2 = .136). Derivatives and Admission/

Willingness raised the awarding rates, while Solicitation lowered them.
Tab.4

Linear Regression for Award Rates in All Settled Cases

Coeeﬃcients

Unstandardized Standardized

95% Conﬁdence

Collinearity

CoeﬃcientsInterval of B

Statistics

Min

B

S.E.

Beta

9.598 .000

.304

.461

B

Beta

t

Sig

(Constant)

.383

.040

Derivatives

.185

.048

.219

3.896 .000

.092

.279

.948

1.055

Admission/ Willingness

.199

.034

.321

5.832 .000

.132

.266

.983

1.018

-.090

.042

-.121 -2.159 .032

-.173

-.008

.950

1.052

Solicitation

100

S.E.

CoeﬃcientsJapan Commercial Arbitration Journal VOL.3［2022］

How Are Disputes Settled in Japan's Financial ADR?

Therefore, cases brought over currency derivatives were not easier to settle, but customers

received higher awards when they settled their cases. It seems that the currency derivatives

disputes set a rather generous “market price” for settlements through the financial ADR
mechanisms.

Ⅴ．Arguments and Implications
Based on the statistical analysis presented above, I examine in this section if the financial

ADRs have served to expand the rule of law.

As for the guidance available from the legal principles established in securities law

precedents, the analysis illustrated that comparative fault applies to the cases mediated at
FINMAC. Admission of fault by the dealers minimizes the application of the principle and thus
raises the value of awards. In the cases over solicitation of deals, the dealers appear not soclearly erroneous or negligent as they do in cases like those over technical errors, such as

placing orders for the wrong number of shares, forgetting to place an order for a customer intime, and similar matters. The troubles over solicitation often involved the customers'

carelessness and/or a lack of their own research, which led to sharp discounts arising due tocomparative faults reasoning being applied.

As for the factors considered in jurisprudence concerning the enhanced accountability of thedealers, there is no result supporting the hypothesis. It is not verified that securities law
precedents have guided not only the words but also the results of mediation cases, from thispoint of view. The adjusted R squares were small throughout the analysis, indicating that themodels explain no more than 20 percent of the distributions. It is quite possible that thesimple classifications (age or gender) used in the statistical models in this paper do not
represent the experiences and capabilities of the customers observed by the mediators.

The most important finding from the analysis is the fact that the award rates dropped over

the years. The waning of the disputes over the currency derivatives partially explains thedecrease for corporate cases. However, it does not apply to the drop in the awards forindividual customers, for all the currency derivatives cases were filed by corporate customers.

Considering a hypothetical factor to explain the drop, it came to my attention thatreferences to the internal records of the dealers appeared to work differently in considerationsof comparative fault in 2011 and 2016. So, I conducted another set of multiple regressions ofcases from each year, adding a dummy variable for “reference to internal records (Internal
Records hereinafter)” to the explaining variables (and excluding Early Case from them.)

First, for the cases from 2011, Internal Records was significant on a 10% significance level;

its B value was .256, which means that if the report referred to internal records, the customer
was awarded 25% more (Tab. 5; F = 9.067、df = 5、p = .000; Adjusted R2 = .196）.

In contrast, in 2016, no hypothetical explaining factor was significant other than Internal

Records, which has negative B value and lowered the awards by 20% if applicable（Tab. 6; F
= 1.987、df = 5、p = .092; Adjusted R2 = .065）.

Japan Commercial Arbitration Journal VOL.3［2022］

101

Tab.5

Linear Regression for Award Rates in Cases (Filed by Individual Claimants) Settled in

FY 2011

Coeeﬁcients
Unstandardized Standardized
CoeﬃcientsTab.6

Coeﬃcients

B

S.E.

Beta

(Constant)

.492

.057

Admission/ Willingness

.234

.045

.365

Solicitation

-.157

Women

95% Conﬁdence

Collinearity

Interval of B

Statistics

t

Sig

Min

B

S.E.

Beta

8.632

.000

.379

.605

5.163

.000

.145

.324

.973

1.028

.056

-.197 -2.784

.006

-.268

-.046

.976

1.025

-.073

.046

-.115 -1.601

.111

-.163

.017

.938

1.066

Older

-.014

.053

-.018

-.260

.796

-.119

.091

.963

1.039

Internal Records

.256

.144

.125

1.781

.077

-.028

.540

.988

1.013

Linear Regression for Award Rates in Cases (Filed by Individual Claimants) Settled in

FY 2016

Coeeﬁcients
Unstandardized Standardized
Coeﬃcients

Coeﬃcients

B

S.E.

Beta

(Constant)

.373

.086

Admission/ Willingness

.104

.070

.182

Solicitation

-.100

Women

95% Conﬁdence

Collinearity

Interval of B

Statistics

t

Sig

Min

B

4.328

.000

.201

.546

1.483

.143 -.036.244 .876

1.141

.075

-.165 -1.341.185 -.250.049 .873

1.146

-.002

.068

-.003

-.023

.981 -.137.134 .950

1.053

Older

-.011

.068

-.019

-.163

.871 -.146.124 .970

1.031Internal Records

-.208

.120

-.205 -1.735.087 -.448.031 .944

1.059

S.E.

Beta

Therefore, the effects of the references to the internal records on the award rate reversedin the two periods. The records of phone calls and conversations between the customers anddealers came to prove due diligence by the dealers in the forms of disclosure of risks,
explanations of the deals understandable to the said customer, and like recently, althoughsuch records tended to evidence in the early days of FINMAC mediations the negligence of the102

Japan Commercial Arbitration Journal VOL.3［2022］

How Are Disputes Settled in Japan's Financial ADR?

dealers in form of guaranteeing profits from the deals, pushing the deals too strongly, and thelike.

One of the possible explanations for this reversal is that the dealers have improved theirlegal compliance by setting guidelines and internal codes of practice for the deals with
consumer customers and the elderly; they have also become well prepared for disputes
brough through ADR mechanisms. In the early days of FINMAC, the dealers were not awareof litigation /mediation risks and their representatives tended to act negligently. As the

disputes at financial ADR institutions took root, the dealers and their representatives became
more aware of such risks, and the new guidelines and codes were set to offer stronger

defenses in case of a dispute by recording the reasonable explanations they had offered andthe valid confirmation of the will of the customers (and their family in the case of elderly
customers or inexperienced investors.)

Remaining Issues for Further Research

The analysis presented above is “external” in the sense that the author, an external andindependent scholar, analyzed open data published and available on the Internet as quarterly

reports. The analysis, especially regarding the cause or background of the drop in award
rates, needs more support through quantitative and qualitative data. As for quantitative

follow-up, more sequential analysis based on all the cases from a several year period should
be conducted. And as for qualitative follow-up, the internal views of market participants on
the phenomena are necessary to supplement the external analysis.

Japan Commercial Arbitration Journal VOL.3［2022］

103

Civil Litigation in Japan: Too Long from Start to Finish?
A Primer on Recent Timelines and Law Reforms
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

Ryota Asakura

Ⅰ．Introduction
Litigation in Japan is often viewed by companies and attorneys outside Japan as lengthy

and inefficient, as well as lacking transparency. In our experience, it is not uncommon forforeign companies to express hesitation in using Japan's litigation system to resolve a dispute.

This article intends to provide more transparency on the procedural aspects of Japaneselitigation, including what to expect in terms of duration. We present Japanese civil procedurefrom our viewpoint as Japanese attorneys along with statistics provided by the Supreme Court
of Japan.

Section II. provides an overview of the Japanese civil procedure and also describes thecharacteristics of the Japanese court and judges, including their sanctioned and active role infacilitating settlement, which can be different from that in common law countries such as theUnited States.

In Section III., we present and analyze the timeline of the civil procedure in Japan based on

the latest statistics of Japanese district courts, comparing it to the statistics of the federal
district courts in the U.S. Specifically, the analysis based on the statistics in the last five years

illustrates that the litigation timelines from filing of complaints to disposition in the civil
procedure in Japan are within a reasonable period.

Section IV. introduces the latest reforms of the civil procedure in Japan, aiming to promote

and accelerate the process. We touch on the topic of digitalization in the civil procedure andthe newly-introduced expedited procedure.

Ⅱ．Outline of the Civil Procedure in Japan
Three-Tiered System

Figure 1 shows the jurisdiction and procedure of civil cases under the Japanese civil

litigation system. All courts are national courts, and there is no difference between a state
court and a federal court. Japan adopts a three-tiered system, under which a party has theJapan Commercial Arbitration Journal VOL.3［2022］

105

right to appeal to a higher court up to twice.1) One element is that questions of fact arereconsidered and re-determined in the appellate court, i.e., during the first appeal, both theappellant and appellee may alter or add allegations and defenses, including submission offurther evidence.2)

Figure 1: Jurisdiction and Procedure of Civil Cases in Japan(The Supreme Court of Japan, Outline of Civil Procedure in Japan, 6 (2022)3))
Brief Overview of Civil Procedure in First Instance

Figure 2 shows the flow of civil proceedings in first instance courts, which roughly consistsof the three phases—the beginning phase: submission and examination of a complaint,
service, and default judgment; the middle phase: "issue-evidence management procedure";

and the final phase: an intensive examination of witnesses and parties. The court then issues
a judgment (or solicits settlement).

1）Although either a summary court or a district court has the jurisdiction of the first instance based on
the amount of claim as stated in Figure 1, the summary court may decide to transfer the case to a district
court by a petition of a party or at the discretion of the summary court. Saibansho-hô [Court Act], Art. 33(Japan); Minji Soshô-hô [Minsohô] [Code of Civil Procedure ("COCP")], Art. 18 (Japan).
2）See Minsohô [COCP], Art. 298, Para. 1; see also Minsohô [COCP], Art. 321, Para. 1 ("[f]acts
legitimately found in the original judgment shall be binding upon the court of last resort."). See thetranslation of Minsohô [COCP], Henderson, D. F. et al., Civil Procedure in Japan , 977 (3d ed. 2018).
3）https://www.courts.go.jp/english/vc-files/courts-en/file/Outline_of_Civil_Procedure_in_JAPAN_2022.
pdf

106

Japan Commercial Arbitration Journal VOL.3［2022］

Civil Litigation in Japan: Too Long from Start to Finish? A Primer on Recent Timelines and Law Reforms

Figure 2: Flow of Court Proceedings in the First Instance(The Supreme Court of Japan (2022), at 74))
Beginning Phase: Submission and Examination of a Complaint, Service, and Default
Judgment

Civil proceedings are commenced by submitting a complaint to a court. After examining thecomplaint as to whether it satisfies the statutory requirements, the court sets a date for the

first oral session, and a court clerk conducts service with a counterpart of the complaint. If a
defendant fails to appear at the first session and to submit an answer, the court may, at its
discretion, conclude the proceedings and render a default judgment with prejudice.
Middle Phase: Issue-Evidence Management Procedure

When the defendant rebuts the plaintiff's allegation before the court in factual and/or legal

aspects, the court usually initiates the "issue-evidence management procedure" (sôten seiri

tetsuzuki ).5) This is a procedure where the court narrows down the issues to be determinedby examination of witnesses and parties with exchanging allegations and evidence of bothparties. It is important to note that these sessions are not held consecutively. Rather, thesessions are non-consecutive and generally held at monthly intervals.

4）Id .
5）The COCP stipulates three proceedings: (i) a preparatory oral proceeding (junbiteki kôtô benron ); (ii) a
preparatory proceeding (benron junbi tetsuzuki ); and (iii) a preparatory proceeding based on documents(shomen ni yoru junbi tetsuzuki ). A preparatory proceeding, (ii), where only both parties and the court
can attend for discussion, is the most frequently used of the three types. Under the Covid-19 situation, afull-remote web conference (via Microsoft Teams, usually) under a preparatory proceeding based on
documents, (iii), has also been widely held.

Japan Commercial Arbitration Journal VOL.3［2022］

107Final Phase: Intensive Examination of Witnesses and Parties

After the issues are narrowed down, an intensive examination of witnesses and parties is held.

In practice, both parties request the examination of witnesses and parties to the court withsubmission of a statement of each witness or party. The court then decides to examine witnesses

and parties to the extent necessary to resolve the issues. After examination, in most cases, theparties submit a final brief that summarizes their allegations and highlights the results of theexaminations. Finally, the court closes the oral arguments and renders a final judgment.
Settlement Before the Judge

In addition to the right of parties to terminate the instant case by settlement, the Code ofCivil Procedure in Japan (Minsohô ) provides a judge with the authority to attempt, at any
stage of the procedure, to induce the parties to enter into a settlement.6) In our experience, ajudge oftentimes asks the parties about the possibility of settlement or suggests settlement,

especially before the intensive examination (i.e., after the issues are narrowed down) or
thereafter (i.e., when the judge is ready to decide the case). The judge's positive attitude andits role as mediator are prominent characteristics of civil litigation in Japan.7)

Japanese Court and Judge: Institutions Ensuring Capability of Rendering a Reasonable
Decision in an International Dispute

Although it is admittedly difficult to objectively evaluate decisions rendered by Japanesecourts, from a business viewpoint, the Japanese judiciary system, generally speaking, has

several systems that ensure reasonable decisions on a dispute. The first one is the career

system of Japanese judges and the uniformity of training of judges stemming from thissystem. A dispute will be assigned to judges who have been trained from their twenties in the

judiciary career system. Judges build their careers as a judge after being appointed by theSupreme Court after graduation from the Legal Training and Research Institute.8) 9)

Second, Japanese courts, especially some large courts such as the Tokyo District Court or the

Osaka District Court, assign a dispute to a particular civil division with the relevant experience6）Minsohô [COCP], Art. 89. The statutory effect of a settlement within the procedure is the same as a
final binding judgment. See Minsohô [COCP], Art. 267.
7）See Henderson, at 489; see also Yoshiro Kusano, A Discussion of Compromise Techniques, 24 LAW
JAPAN 138 (1991); Yoshiro Kusano, Shin Wakai Gijutsu Ron [A New Discussion of CompromiseTechniques] 10-17 (Tokyo: Shinzansha 2020) (stating that most judges positively think of settlement as adispute resolution mechanism and explaining five merits of settlement: a final and binding resolution; theflexibility of agreement-based settlement; probability of voluntary enforcement; swift resolution; and thecost-efficiency of the court).
8）To be accurate, they are appointed and serve as an assistant judge (hanjiho ) for the first ten years,
and an assistant judge becomes a judge (hanji ) after ten years' experience. Before promotion to a judge,
an assistant judge with over five years' experience will be promoted to the status of an assistant judge
with special status (tokurei-hanjiho ), who basically has the same power as a judge (hanji ). Saibansho-hô[Court Act], Art. 27; Hanjiho no shokken no tokurei tô ni kansuru hôritsu [Law Concerning Special
Treatment of the Authority of Assistant Judges], Law No. 146 of 1948, Art. 1, Para. 1 (Japan).
9）No jury system in Japanese civil procedure may also serve the uniformity and stability of court decisions.

108

Japan Commercial Arbitration Journal VOL.3［2022］

Civil Litigation in Japan: Too Long from Start to Finish? A Primer on Recent Timelines and Law Reforms

and expertise depending on the type of the dispute. For example, when filed to the Tokyo
District Court, disputes regarding corporate laws are allocated to the 8th Civil Division, which
specializes in such disputes. The Tokyo District Court also has Divisions specializing in disputes

concerning intellectual property, bankruptcy, labor/employment, construction, medical, etc. In
practice, additionally, the district courts in Japan have come to assign more cases not to a single
judge but to a panel bench (gôgitai ), which consists of three judges.10)
The Active Role of the Court in Japan to Resolve the Dispute

In some cases, the Japanese judge plays a more active role in resolving the case compared

to a common-law judge, whose role is, oftentimes, limited to deciding on the issues (of law, if

in a jury trial) and rendering a judgment.11） More specifically, judges in Japan, at the beginningstage, usually question the parties to obtain a better understanding of the allegations,12) and,at a later stage, partially disclose their inclinations or impressions on the case (zantei tekishinshô kaiji ) to the parties and discuss the issues and evidence.13) The extent of such judicial
activism, needless to say, depends on the nature of each case14) and the individual
characteristics of each judge.

The court often plays an active role in settlement during litigation. Some, in particular

lawyers with a common-law background, may think it unfair that a judge having authority to
decide the case also attempts to settle (mediate) as if they were a mediator. However, it isalso noteworthy that the inducement of settlement by a judge is based on their thoughts
about the merits of the case, i.e., a possible judgment. This serves as an incentive for theparties to consider settlement seriously.15)

Ⅲ．Timeline of the Civil Procedure in the First Instance in Japan
Introductory Remarks

This part III. describes the timeline of the civil procedure in the first instance in Japan withthe latest statistical data based on the annual judicial statistics and detailed analysis reports

published every two years by the Supreme Court of Japan.16) 17) The Law for Acceleration of

Judicial Proceedings mandates this report.18) This statute also stipulates the non-binding10）Saibansho-hô [Court Act], Art. 26.
11）Legal professionals in common law jurisdictions traditionally have assumed that a separate neutral
should be necessary as a mediator, and a judge or an arbitrator should avoid wearing two hats. See, e.g.,
Rule 3.9 of the Model Code of Judicial Conduct of the U.S.
12）See Minsohô [COCP], Art. 149, Para. 1 (authorizing a judge to ask for an explanation to the parties).
13）See The Supreme Court of Japan, Dai 8 kai Saiban no Jinsokuka ni kakaru Kenshô ni kansuru
Hôkokusho [The Eighth Report for the Verification of Judicial Acceleration] ("Eighth Report") 72 (2018)(explaining the practice in the text as the usual practice of Japanese courts). https://www.courts.go.jp/
toukei_siryou/siryo/hokoku_08/index.html (only available in Japanese).
14）Id .
15）See supra note 7. This is the rationale of the ordinary timing of a judge's inducement of settlement(before or after the intensive examination). See also Kusano (2020), supra note 7, at 28 and 34(introducing the majority's practice).

Japan Commercial Arbitration Journal VOL.3［2022］

109

target of a litigation timeline in the first instance as "the shortest period within two years,"19)

which we will verify in this part.

Statistical Data and Analysis on the Civil Procedure in the First Instance in Japan:

Average Timeline is Not Much Different from the United States, Tends to be Prolonged,
and Approximately Two Years in Actuality

Figure 3-1 shows the trend in the number of civil cases filed to the district court in Japan as thefirst instance and the average timeline from filing to disposition, from 2016 to 2020. The number ofcivil filings tends to be slightly decreasing (from 148,307 in 2016 to 133,427 in 2020) while theaverage timeline tends to be prolonged (from 8.6 months in 2016 to 9.9 months in 2020).20)

Figure 3-3 shows the comparison with the U.S. There is no significant difference between the

average timeline of the Japanese district courts and that of the U.S. federal district courts, whose datain the five years from 2016 to 2020 is within the range from 8.9 months to 10.4 months (Figure 3-2
shows this).21) The major factors directly causing this trend of lengthening of the proceedings in Japanare lengthening of the issue-evidence management procedure and increase in number and proportionof the cases that have not reached disposition after more than two years.22) The background factor, tothe authors' view, is the fact that civil cases are becoming more complex, especially the increasing
complexity of specialized cases that take more time than other types of civil cases.23)

Figure 3-1: District Courts in Japan—Number of Civil Cases Filed and Average Timelines from
Filing to Disposition

Number of Cases Filed

Ave ra g e T i m e l i n e s f r o m F i l i n g t oYear of 2016

2017

2018

2019

2020

148,307 146,681 138,444 134,935 133,427

Disposition (months)

8.6

8.7

9.0

9.5

9.9

(*) This number does not include the cases filed to the summary courts.

16）This Article is essentially based on the data available in March 2022.
17）As for the judicial statistics, see https://www.courts.go.jp/app/sihotokei_jp/search (only available inJapanese, and the data in English is limited. See https://www.courts.go.jp/english/publications/index.html).
As for the report, see https://www.courts.go.jp/toukei_siryou/siryo/index.html (only available in Japanese).
18）Saiban no jinsokuka ni kansuru hôritsu [Law for Acceleration of Judicial Proceedings], Law No. 107 of 2003,
Art. 8, Para. 1 (Japan). This statute is one of the reforms of the Japanese judiciary system since the 1980s.
19）Id , Art. 2, Para. 1.
20）The data in 2020 is affected by the Covid-19 pandemic and the suspension or reduction of judicial
business due to the pandemic, which led to a decrease in cases filed and lengthening of the proceedings.
However, the trend can be still observed even if we set aside the data in 2020.
21）The median timelines of the civil cases filed to the federal district courts are described in Table C-5.
See https://www.uscourts.gov/statistics-reports/caseload-statistics-data-tables.
22）See The Supreme Court of Japan, Dai 9 kai Saiban no Jinsokuka ni kakaru Kenshô ni kansuru
Hôkokusho [The Ninth Report for the Verification of Judicial Acceleration] ("Ninth Report") 11, 55 (2021);
the Eighth Report, supra note 13, at 7, 17. https://www.courts.go.jp/toukei_siryou/siryo/hokoku_09_
hokokusyo/index.html (the Ninth Report: only available in Japanese).

110

Japan Commercial Arbitration Journal VOL.3［2022］

Civil Litigation in Japan: Too Long from Start to Finish? A Primer on Recent Timelines and Law Reforms

Figure 3-2: Federal District Courts in the U.S.—Number of Civil Cases Filed and MedianTimelines from Filing to Disposition
Number of Cases FiledYear of 2016

2017

2018

2019

2020

215,273 230,412 233,595 250,058 220,097

Median Timelines (months)

9.7

10.4

10.1

9.9

8.9

(*) This number consists only of the cases filed to the federal district courts (i.e., it does notinclude cases filed to the state courts).

Figure 3-3: District Courts in Japan and the U.S.—Number of Civil Cases Filed and Average

300,000

12

250,000

10

200,000

8

150,000

6

100,000

4

50,000

2

0

2016

2017

2018

2019

0

2020

Number of Cases Filed (JPN)

Number of Cases Filed (US)Average Time Interval (JPN)

Average Time Interval (US)Month(s)Number of Cases

Timelines from Filing to Disposition

For a more precise description, the average timelines in Japan in 2018 and 2020 by theactions taken by the courts or parties that caused the termination of the litigation are as

follows in Figures 4-1, 4-2, and 4-3.24) The timelines of the cases resolved by final judgment
23）The specialized cases described in the Ninth Report are medical-related cases, construction-relatedcases, intellectual property-related cases, labor/employment-related cases, and administrative cases. The
Ninth Report, supra note 22, at 73-114. Most of these specialized cases have the same tendency of
becoming lengthened. See id , at 11 and 55, and the table below.
Medical-Related Cases

Construction-Related Cases

Intellectual Property-related Cases

Labor/Employment-related Cases

Administrative Cases

Year of 2018 (months)

24.4
18.4
12.9

14.5

14.5

2019

26.1

2020

18.9

15.2

15.5
16.2

26.7
19.7

15.4

15.9
15.9

24）The Eighth Report, supra note 13, at 25; and the Ninth Report, supra note 22, at 64.

Japan Commercial Arbitration Journal VOL.3［2022］

111

and settlement are: 13.2 months (2018) and 13.9 months (2020) by final judgment, and11.5 months (2018) and 13.0 months (2020) by settlement, respectively. Based on that, it isreasonable to say that ordinary cases in Japan take approximately two years on average,
consistent with the target required in the statute25) and our experience.

Figure 4-1: District Courts in Japan—Civil Case Resolutions and Average Timelines, by Action
Taken

Year of 2018

Disposition by Number ofCases

Judgment(*)

Default Judgment

Year of 2020
138,683

122,749

57,370 (41.4%) / 9.0 months

53,084 (43.2%) / 9.4 months

33,486 / 13.2 months

28,747 13.9 months

23,840 / 3.1 months

Final Judgment24,306 / 4.1 months

Settlement

51,445 (37.1%) / 11.5 months 43,364 (35.3%) / 13.0 months

Dismissals by Parties

19,800 (14.3%) / 5.9 months

22,372 (18.2%) 6.3 months

Others

10,061 (7.3%) / 2.1 months

3,929 (3.2%) 4.5 months(*) "Judgment" in the original data consists of "Default Judgment," "Final Judgment," and"Others"; therefore, the sum of the two former categories is not identical to the total amountof "Judgment."

Figure 4-2: Proportion of Action Taken in Resolved Civil Cases in JapanYEAR OF 2018

Others8%

Dismissals
by Parties
14%

Settlement
37%

Default
Judgment
17%

Final
Judgment
24%

YEAR OF 2020

Others3%

Dismissals
by Parties
18%

Settlement
35%

Default
Judgment
20%

Final
Judgment
24%25）Supra note 19. The statistics also show certain types of complicated and specialized cases do notnecessarily satisfy the target (within two years). See supra note 23.

112

Japan Commercial Arbitration Journal VOL.3［2022］

Civil Litigation in Japan: Too Long from Start to Finish? A Primer on Recent Timelines and Law Reforms

Figure 4-3: Average Timeline by Action Taken in Japan (months)
16

13.9

14

13.0

13.2

12

11.5

10
8

6.3

6

2
0

3.1
Default Judgment Final Judgment

4.5

5.9

4.1

4

2.1
Settlement
2018

Dismissals

others2020

Ⅳ．Recent Reform for Improvement of Accessibility to Judiciary – Digitalization
and Newly-Introduced Expedited Procedure
A draft of a significant amendment to the Code of Civil Procedure (Minsohô ) was published on

January 28, 2022. This amendment aims to digitalize the current civil proceedings that areprimarily paper-based and in-person.26) This is one of the attempts at legal reforms triggered by
the negative evaluation on the automation and digitalization of the Japanese judiciary system in

the World Bank's Doing Business 2017 .27) The Draft of Amendment (or updated one) has beenreportedly submitted to the 208th Ordinary Diet session. This Section IV. will present a brief

introduction of the Draft of Amendment focusing on digitalization, with an additional descriptionof the expedited procedure to be completed within seven months ("Special Procedure"), a
newly-introduced litigation procedure.

26）Minji soshô hô (IT-ka kankei) tô no kaisei ni kansuru yôkô-an ("Yôkô-an ") [The Draft of theAmendment to the Code of Civil Procedure concerning the Digitalization with IT, etc. ("Draft ofAmendment")], https://www.moj.go.jp/shingi1/shingi04900001_00119.html (only available in Japanese).
27）See World Bank Group, Doing Business 2017: Equal Opportunity for All . 215 (Washington, DC: World
Bank, 2016) https://openknowledge.worldbank.org/handle/10986/25191. The Japanese judiciary system
has been highly evaluated in respects of "Resolving insolvency" (the second-highest score in the world)and "ADR" in the "Enforcing contracts" area (the score was 2.5 out of 3.0). However, it has ranked
relatively low in the fields of "Case management" (1.0 out of 6.0) and "Court automation" (1.0 out of 4.0)
both in the "Enforcing contracts" area. See https://databank.worldbank.org/source/doing-business (morespecific scores of Japan).

Japan Commercial Arbitration Journal VOL.3［2022］

113

Digitalization of the Civil Procedure—Three "e"s

The ultimate goal set by the Japanese government is the computerization of the entire civil

procedure—termed the three "e"s. The three "e"s refer to (i) "e-filing," which enables

electronic submission of all documents including a complaint ; (ii) "e-court," meaning enabling

the court to hold an oral argument, an issue-evidence management procedure, and an
examination, all in a virtual manner via the web-conference system; and (iii) "e-casemanagement," which is an electronic case-management system. Here, we introduce the firsttwo "e"s that are important for global companies and lawyers overseas: "e-filing" and"e-court.""E-filing" means that each party will be able to take actions that currently require

submission to the court in writing , i.e., on a paper basis, by means of an electronic-filingsystem, including filing a complaint and submission of evidence.28) The service will also becompleted by the party's access to the document uploaded by the court in the filing system.29)

It is noteworthy that a lawyer must use the system under the Draft of Amendment.30)
Therefore, every case a global company will be involved with will proceed under the "e-filing"system.

As for the "e-court," a party who desires oral examination virtually must obtain approval of

the court with satisfying each statutory requirement.31) The requirement of the place where awitness is examined virtually has yet to be determined. It will be specified by amending theRules of the Civil Procedure (Minji soshô kisoku , Sup. Ct. Rule No. 5 of 1996).32) An interpreter
may also participate in an examination session using a web-conference system (or via thevoice-call system when there is trouble with a web-conference system).33)
An Expedited Procedure to Be Completed Within Six Months

The Draft of Amendment newly introduces the Special Procedure, a statutory shortened civil

procedure as an alternative to a normal litigation process.34) This is a procedure where, from28）Yôkô-an [Draft of Amendment], supra note 26, Sec. 1-1 and 1-6, at 4-7, 13-14.
29）Id , Sec. 1-2, at 7-9.
30）Id , Sec. 1-1-3(1), at 6.
31）The court may let the parties examine a witness virtually in each of the following cases in which: (i) it
is difficult for a witness to appear at the court due to the reasons including a residence in a remote place,its age, or its physical or mental status; (ii) a witness is likely to feel pressure and whose peace of mind
would be seriously harmed while testifying at the place where a judge and a party are present; or (iii)both parties raise no objection. Id , Sec. 1-7-1, at 14.
32）Yôkô-an [Draft of Amendment], Sec. 1-7-1, n., at 14-15. Although the requirement has not beenclarified yet, it would be the place with an appropriate communications environment and without unfair
influence on the witness according to the discussion at the Ministry of Justice Legislative Council COCP
(Digitalization with IT) Subcommittee. See the minutes of the 4th, 15th, and 20th meetings of the council(all only available in Japanese). https://www.moj.go.jp/content/001335049.pdf (4th); https://www.moj.
go.jp/content/001357241.pdf (15th); https://www.moj.go.jp/content/001368344.pdf (20th).
33）Yôkô-an [Draft of Amendment], supra note 26, Sec. 1-7-2, at 15.
34）The Draft of Amendment describes this Special Procedure as "Tôjisha no môshide ni yoru kikan ga
hôtei sareteiru shinri no tetsuzuki no tokusoku " [Special Provisions on a Procedure with Statutory Fixed
Period Based Upon Parties' Request]. Id , Sec. 1-4, at 10-11.

114

Japan Commercial Arbitration Journal VOL.3［2022］

Civil Litigation in Japan: Too Long from Start to Finish? A Primer on Recent Timelines and Law Reforms

the date of the first session (oral argument), parties have to complete their submission ofallegations and evidence within five months and the court has to complete the last session(oral argument) within six months, and the court has to render a final judgment within one
month after its completion of the last session. Figure 5 shows an overview of the timeline:
Figure 5: Overview of the Timeline of the Special Procedure
Courtʼs Decision ofCommencement of

2nd to Xth Sessions(incl. Examination)

Special Procedure

2 weeks

Deadline ofAllegation and
Evidence

Final Judgment

5 months

1 month
2 weeks

6 months

1st Session

Last Session

Deadline of
Objection to Final
Judgment

The Special Procedure is entirely agreement-based. It may only be commenced by the

court's decision subject to both parties' request, and each party may request to transfer the

instant case to an ordinary procedure at any time during the Special Procedure.35) It is also
designed as an alternative to ordinary litigation. A final judgment rendered in the procedure
has the same effect as an ordinary final judgment (i.e., no right to appeal) unless either party
objects within two weeks after a final judgment is rendered.36)

The introduction of the Special Procedure is controversial, and whether it will be enacted

remains unseen. From the viewpoint of business litigation, however, there should be aparticular need for the Special Procedure considering the trend toward expedited proceedings
in other areas, including international arbitration.

Ⅴ．Conclusion
In this article, we have attempted to describe litigation in Japan and its timeline, mainly forthe benefit of corporations and lawyers outside Japan. Our goal is for readers to understandthe outline of Japanese civil procedure, the active role of Japanese judges, and the timeline ofactual litigation. Although the amendment of the Code of Civil Procedure has yet to beenacted, we are of the belief that it will improve the accessibility of the judiciary system inJapan and have a positive influence on litigation timelines.37）35）Id , Sec. 1-4-1, 2, and 11, at 10-11.
36）Id , Sec. 1-4-15 and 16, at 11.

Japan Commercial Arbitration Journal VOL.3［2022］

11537）The authors of this article relied on information available as of March 2022. Supra note 16. Following
submission of this article to the publisher, the amendment to the COCP passed the Diet on May 18, 2022
and was promulgated on May 25, 2022. The enacted amendment is essentially identical to the Draft ofAmendment described here, and the explanation in this section is applicable to the enacted amendment.
The majority of the amendment will come into effect within four years from the promulgation date of May
25, 2022, but the section on the "e-court" (which allows the court to hold oral argument sessions andissue-evidence management procedures via a web-conference system) will be effective within one or two
years from the date of promulgation.

116

Japan Commercial Arbitration Journal VOL.3［2022］

A Message from JCAA
President

Kazuhiko Bando
It is our pleasure to publish the third volume of the Japan Commercial
Arbitration Journal this September. We would like to extend our thanks
to all contributors to this journal.
This journal features articles on the JCAA’ s arbitration rules, Online
Dispute Resolution, ADR and litigation with special focus on Japan. It
aims to introduce the latest trends in arbitration, mediation andlitigation in Japan. It would be our great delight if you find this journal
helpful.
In 2022, Chinese translation of the Commercial Arbitration Rules andInteractive Arbitration Rules came out. It is available at JCAA’ s website.
Chinese parties are the most frequent non-Japanese users of the JCAA
Arbitration. The long-awaited official translation would invite more
Chinese corporates to choose the JCAA Arbitration.
We will continue to do our utmost to take our services to the nextlevel, and your continued support will be vital to our success.

118

Japan Commercial Arbitration Journal VOL.3［2022］

Japan Commercial Arbitration Journal VOL.3［2022］ ISSN 2435-9726

The Japan Commercial Arbitration Association (JCAA)
www.jcaa.or.jp