Due Process as a Limit to Discretion inInternational Commercial Arbitration

Edited byFranco FerrariFriedrich Rosenfeld
Dietmar Czernich

Table of Contents§10.04§10.05§10.06[2] Set-Aside
Standard of Review and Threshold
Party Autonomy[A] Ex Ante Waivers of the Right to Assert a Breach[B] Ex Post Waivers of the Right to Assert a Breach[1] Recognition and Enforcement[2] Set-Aside
Conclusion

CHAPTER 11
Country Report: Italy
Francesca Ragno§11.01 Introduction to Italian Arbitration Law and Its Due Process
Guarantees§11.02 Due Process Violations as Grounds for Annulment of Arbitral Awards[A] Case Management Issues[B] Ne Eat Iudex Extra Petita Partium[C] Party Autonomy§11.03 Due Process Violations as a Ground to Refuse Recognition and
Enforcement of Foreign Arbitral Awards[A] Proper Notice and the Right to Present One’s Case[B] Irregularity in the Composition of the Arbitral Authority or the
Arbitration Procedure[C] Public Policy§11.04 Final Remarks
CHAPTER 12
Country Report: Japan
Koji Takahashi§12.01 Japanese Arbitration Law in Brief§12.02 Rules for Post-Award Review of Arbitral Procedure[A] Recognition and Enforcement of Arbitral Awards[B] Annulment of Arbitral Awards§12.03 Interpretation[A] Annulment[1] General Guidelines for Handling a Motion for Annulment[2] Inability to Present One’s Case[3] Decisions Beyond the Scope of Submission[4] Breach of Procedural Rules for Arbitration[5] Violation of ‘Public Order or Good Morals’[B] Recognition and Enforcement§12.04 Threshold and Standard of Review§12.05 Due Process Paranoia[A] Evaluation of the Case Law[B] Public Policy Scrutiny of Arbitral Procedure

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Table of Contents[C]

Concluding Remarks

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CHAPTER 13
Country Report: Middle East
Nayla Comair-Obeid & Zeina Obeid§13.01 Introduction§13.02 Due Process Requirements for Arbitration in Arab[A] Due Process as a Breach of Domestic and International Public
Policy[B] Annulment versus Enforcement of Awards[C] Standard of Review[D] Waivers[E] The Substantive Due Process Rights[F] Arbitration Proceedings Affected By Nullity[G] Breach of Due Process Resulting From the Conduct ofArbitrators§13.03 Conclusion
CHAPTER 14
Country Report: The Netherlands
Jacob B. van de Velden & Abdel Khalek Zirar§14.01 Introduction§14.02 Legal Framework[A] Due Process[B] Recognition and Enforcement and Setting Aside[1] Recognition and Enforcement and Setting Aside ofDomestic Awards[2] Standard of Review[3] Treaty-Based Recognition and Enforcement of ForeignAwards[4] Recognition and Enforcement of Foreign Awards Basedon the DCCP
[C] Waiver and Estoppel[D] Referral Back to the Tribunal (Remission)§14.03 Procedure in General[A] Administration of Deadlines[B] Allocation of Hearing Time
[C] Communication with the Parties[D] Offering Preliminary Views[E] Notes and Reports of Hearings[F] Applicable Laws or Standard[G] Costs of the Arbitral Proceedings§14.04 Submissions[A] Disregarding / Refusing (Additional) Written Submissions[B] Disregarding / Refusing (Additional) Oral Submissions

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CHAPTER 12

Country Report: Japan
Koji Takahashi§12.01

JAPANESE ARBITRATION LAW IN BRIEF

Japan has been a Contracting State of the 1958 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (hereinafter referred to as the ‘New York
Convention’) since 1961. Japan has also implemented the 1985 UNCITRAL Model Law
on International Commercial Arbitration (hereinafter referred to as the ‘Model Law’)with some deviations by enacting its arbitration law Chûsai Hô (hereinafter referred toas the ‘Arbitration Act’).1 The Arbitration Act has been in force since 2004.
When a motion for annulment or enforcement of an arbitral award is filed inJapan, the District Courts serve as the courts of first instance.2 An appeal may be madeas of right to the High Courts.3 A further appeal to the Supreme Court is subject topermission from the High Court from which the appeal is sought.4
In line with the civil law tradition, the primary source of Japanese law islegislation and the primary role of the courts is to shed light on the interpretation oflegislation. There is no principle of binding precedents equivalent to that of stare
decisis known in the common law jurisdictions. But the judgments of the higher courts
are treated with respect and those of the Supreme Court, in particular, are generally
followed in subsequent cases. Even the judgments of the District Courts can serve as
useful points of reference, especially in areas such as arbitration where there is a
scarcity of case law.

1. Law No. 138 of 2003. An unofficial English translation is available at: https://japan.kantei.go.jp/policy/sihou/arbitrationlaw.pdf.
2. Articles 5 and 44(1) of the Arbitration Act.
3. Articles 1 and 44(8) of the Arbitration Act and Art. 16(ii) of the Court Act (Saibansho Hô).
4. Article 10 of the Arbitration Act and Art. 337 of the Code of Civil Procedure (Minji Soshô Hô).

251§12.02[B]§12.02

Koji Takahashi
RULES FOR POST-AWARD REVIEW OF ARBITRAL PROCEDURE

Japanese courts review the arbitral procedure when they decide on applications for therecognition and enforcement or the annulment of arbitral awards.

[A]

Recognition and Enforcement of Arbitral Awards

Where the recognition or enforcement of an arbitral award is sought before a Japanesecourt, the grounds for denying recognition or enforcement, including those related todue process, are contained in Article V of the New York Convention as well as in Article
45(2) of the Arbitration Act, which implements Article 36 of the Model Law. While the
New York Convention is applicable to foreign arbitral awards, arbitral awards renderedin Japan are subject to the Arbitration Act. Japan has made a declaration pursuant to
Article I(3) of the New York Convention that it will limit the application of theConvention to awards made in the territory of other contracting States.5 Accordingly,
the Arbitration Act is applicable, rather than the New York Convention, where the seatof the arbitration is situated in the States or regions such as North Korea or Taiwan
which are not parties to the New York Convention. In practice, however, the boundary
between the New York Convention and the Arbitration Act is insignificant since thegrounds for refusing recognition and enforcement under the two regimes are essentially the same.

[B]

Annulment of Arbitral Awards

Implementing Article 34 of the Model Law, Article 44 of the Arbitration Act setsout in paragraph (1) the grounds for annulment, including those related to due process.
The following circumstances constitute due process-related grounds:(1) The party seeking annulment was not given proper notice of the appointmentof arbitrators or of the arbitral proceedings (sub-paragraph (iii), implementing Article 34(2)(a)(ii) of the Model Law);(2) The party seeking annulment was unable to present its case (sub-paragraph(iv), implementing Article 34(2)(a)(ii) of the Model Law);(3) The award contains decisions on matters beyond the scope of submission toarbitration (sub-paragraph (v), implementing Article 34(2)(a)(iii) of theModel Law);(4) The composition of the arbitral tribunal or the arbitral procedure was not inaccordance with the agreement of the parties or Japanese law (sub-paragraph(vi), implementing Article 34(2)(a)(iv) of the Model Law);(5) The ‘content of the award is in conflict with the public order or good morals’of Japan (sub-paragraph (viii), implementing Article 34(2)(b)(ii) of the Model
Law).
5. See, https://uncitral.un.org/en/texts/arbitration/conventions/foreign_arbitral_awards/status2.

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Chapter 12: Country Report: Japan§12.03[A]Importantly, sub-paragraph (viii) is different in its wording from Article
34(2)(b)(ii) of the Model Law as the latter simply states that ‘the award is in conflictwith the public policy of this State’. The phrase ‘public order or good morals’ is merely
a standard expression denoting public policy which is used in various Japaneselegislation including the Constitution and the Civil Code. It is, however, noteworthy
that the word ‘content’ does not appear in the Model Law counterpart, a point which
will be revisited later in this chapter.6§12.03

INTERPRETATION

What follows will examine the case law to see how the due process-related grounds forannulment and those for denying recognition and enforcement have been interpretedby the Japanese courts.

[A]

Annulment

There have only been four reported cases on the annulment of arbitral awards since theentry into effect of the Arbitration Act in 2004. One of these cases is a decision of theSupreme Court7 which concerned an arbitrator’s duty to disclose circumstances giving
rise to doubts as to his independence and impartiality. But the independence andimpartiality of an arbitrator are excluded from the scope of survey for this book on thenotion that these matters do not concern a limit on the exercise of arbitral discretion
with respect to the conduct of the proceedings. This chapter will accordingly focus on
the decisions rendered in the other three cases:(1) The decision of the Tokyo District Court on 28 July 20098 (hereinafter referred
to as the ‘2009 Tokyo District Court decision’ or the ‘2009 decision’),(2) The decision of the Tokyo High Court on 13 March 20129 (hereinafter referred
to as the ‘2012 Tokyo High Court decision’ or the ‘2012 decision’),(3) The decision of the Tokyo High Court on 1 August 201810 (hereinafter referred
to as the ‘2018 Tokyo High Court decision’ or the ‘2018 decision’).
Among those three decisions, the 2018 Tokyo High Court decision is particularly
noteworthy because it spelt out general guidelines as to how the courts should hear anddetermine motions for annulment. The analysis below will, accordingly, start by

6. See, the text accompanying infra nn. 23 and 60.
(Minshû) vol. 71-10,
7. The decision of the Supreme Court on 12 December 2017 (reported in2106).
8. Reported in(Hanrei Times) vol. 1304, 292. The decision of the appellate court, theTokyo High Court, on 26 February 2010 is unreported.
(Hanrei Taikei) at ID 28211461. It was appealed from the
9. Reported in D1-Law.com
decision of the Tokyo District Court on 13 June 2011 (reported in(Hanrei Jihô) vol.
2128, 58).
(Kinyû Shôji Hanrei) vol. 1551, 13. An appeal from this decision
10. Reported in
was filed to the Supreme Court but it is not known how it was (or is being) handled.

253§12.03[A]Koji Takahashi

examining these guidelines. It will then look individually at the due process-related
grounds for annulment to see how they have been interpreted in those three decisions.

[1]

General Guidelines for Handling a Motion for Annulment

In line with the civil law tradition, the judgments and decisions of the Japanesecourts do not usually contain an extensive observation in general terms. The 2018
Tokyo High Court decision, however, did spell out general guidelines as to how amotion for annulment should be heard and determined. The following observations are
particularly noteworthy:(A) In view of the fact that the Arbitration Act was enacted to implement theModel Law, the courts interpreting the Act should avoid the temptation tofollow the usual analysis they would take when they interpret the elaborate
rules applicable to domestic litigation. The courts should rather adopt theinterpretations which are commonly adopted in other countries or which
would be accepted in the international community (hereinafter referred to as
the ‘observation (A)’).11(B) Arbitrators are expected to conduct hearings with a full appreciation of thefeatures distinguishing arbitration from litigation such as the finality of thedecision at first instance, expeditiousness, and a high level of flexibility andexpertise. To avoid the protraction of arbitral proceedings and the escalationof costs, the courts should take care not to impose on arbitrators the exacting
procedural burdens and obligations which would be required of domestic
litigation (hereinafter referred to as the ‘observation (B)’).12(C) The grounds for annulment should not be read expansively or by analogy
but should rather be interpreted within the four corners of the words used in
the text (hereinafter referred to as the ‘observation (C)’).13[2]Inability to Present One’s Case

Implementing Article 34(2)(a)(ii) of the Model Law, Article 44(1)(iv) of the Arbitration
Act allows the courts to set aside an arbitral award if the party filing the motion forannulment was unable to present its case in the arbitral proceedings. In the abovementioned 2018 decision, the Tokyo High Court ruled that this ground for annulment
covered the situations where the arbitral tribunal took deliberate steps to obstruct aparty from presenting its case.14 In the same decision, the High Court ruled, consistent
with its own observation (C), that it would not cover the situation where the party
seeking annulment had merely complained about the period fixed by the tribunal for

11. Id., para. 2(1).
12. Ibid.
13. Id., para. 2(4).
14. Ibid.

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Chapter 12: Country Report: Japan§12.03[A]presenting its case.15 Importantly, the court also stressed that arbitrators had no duty
to provide the parties with endless opportunities to present their case, emphasizing theneed to avoid the protraction of arbitral proceedings and the escalation of costs.16 The
High Court went on to hold, consistent with its own observation (A), that the groundfor annulment under Article 44(1)(iv) should be interpreted by reference to international standards. It observed that under the current international standards, therelevant test was whether the parties were treated equally and provided with asufficient opportunity to present their case.17
In the above-mentioned 2009 decision, the Tokyo District Court interpreted thisground for annulment restrictively, holding that it only covered the situations where
there was a serious breach of due process.18 On that reasoning, the court held that thisground for annulment would cover the situations where, for example, the party seeking
annulment was provided with virtually no opportunity to present its case and where
the award was based on evidence the party could not be aware of. Applying the same
reasoning, the court held that this ground for annulment would not cover the situations
where the party seeking annulment was merely unaware of the significance ofparticular issues involved in the case.

[3]

Decisions Beyond the Scope of Submission

Implementing Article 34(2)(a)(iii) of the Model Law, Article 44(1)(v) of the Arbitration
Act allows the courts to set aside an arbitral award if it contains decisions on mattersbeyond the scope of submission to arbitration. This ground, too, may be seen as
safeguarding due process.
In the above-mentioned 2018 decision, the Tokyo High Court ruled, consistent
with its own observations (A) and (B), that the scope of a party’s submission should
not be determined by the rigid legal theory for domestic litigation but rather by viewing
the dispute from a socio-economic perspective.19 In this case, the party who filed the
motion for annulment argued that the arbitral tribunal had gone beyond the scope ofsubmission as it had based its award on the restitution of unjust enrichment, whereas
in fact what had been sought was compensation for damages, a distinction which
would be important in domestic litigation. The court, however, rejected this argument,
holding that the dispute in this case, when viewed from a socio-economic perspective,
concerned the repayment of prepaid money and accordingly, the precise legal basis forthe return – whether compensation for damages or the restitution of unjust enrichment– was immaterial.20

15. Ibid.
16. Ibid.
17. Id., para. 2(5).
18. 2009 Tokyo District Court decision, supra n. 8, para. 1(4).
19. 2018 Tokyo High Court decision, supra n. 10, para. 3(2)a.
20. Ibid.

255§12.03[A][4]

Koji Takahashi
Breach of Procedural Rules for Arbitration

Implementing Article 34(2)(a)(iv) of the Model Law, Article 44(1)(vi) of the Arbitration
Act allows the courts to set aside an arbitral award if the arbitral procedure was inbreach of Japanese law.
In the above-mentioned 2018 decision, the Tokyo High Court held, consistent
with its own observation (B), that a deviation of the arbitral procedure from theprocedural rules for domestic litigation would not in and of itself constitute a groundfor annulment.21 The court confirmed that what mattered was the breach of the
Arbitration Act rather than the Code of Civil Procedure, a statute which is applicable todomestic litigation. To emphasize this point, the court noted a change in the Japanesearbitration law. Prior to the enactment of the Arbitration Act, the provision stipulatingthat the ‘arbitral procedure shall be subject to the statutory rules for civil litigation to
the extent not incompatible with its nature’ had been contained in the statute22 which
was the predecessor of the Arbitration Act. This provision was removed when the
Arbitration Act was enacted.

[5]

Violation of ‘Public Order or Good Morals’

Article 44(1)(viii) of the Arbitration Act allows the courts to set aside an arbitral award
if ‘the content of the award is in conflict with the public order or good morals’ of Japan.
As noted above, the word ‘content’ does not appear in the corresponding provision of
the Model Law.23 Despite this textual focus on the ‘content’ of the arbitral award, theJapanese case law takes the position that the arbitral procedure is also subject to public
policy scrutiny.
Thus, in the above-mentioned 2012 decision, the Tokyo High Court ruled that thewords ‘public order or good morals’ could not be interpreted as excluding theprocedural dimension of public policy.24 It further held that the specific components ofthe ‘public order or good morals’ could not be determined by international public
policy but should be determined in line with the language of Article 44(1)(viii) by
reference to the Japanese legal order.25
In the above-mentioned 2018 decision, the Tokyo High Court ruled that the
infringement of the due process requirement which the lower court had considered toconstitute a violation of the ‘public order or good morals’ was not, in fact, sufficiently
grave to be considered as such. The High Court, however, did not go as far as denyingthat arbitral procedure should be subject to public policy scrutiny.26

21. Id., para. 2(3).
22. Article 1 of the Act on Public Notification Procedure and Arbitral Procedure (Kôjisaikoku
Tetsuzuki oyobi Chùsai Tetsuzuki ni kansuru Hôritsu).
23. Article 34(2)(b)(ii) of the Model Law.
24. 2012 Tokyo High Court decision, supra n. 9, para. 2(1).
25. Id., para. 2(2).
26. 2018 Tokyo High Court decision, supra n. 9, para. 3(2)c.

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Chapter 12: Country Report: Japan
[B]§12.03[B]

Recognition and Enforcement

The cases concerning the recognition and enforcement of arbitral awards date backfurther than the enactment of the Arbitration Act as Japan has been a Contracting Stateof the New York Convention since 1961. Still, there is not a significant number ofreported cases and these decisions were primarily based on factual findings. They areaccordingly not particularly illuminating on how the Japanese courts will interpret the
grounds for recognition and enforcement.
Thus, in a recent decision rendered on 25 March 2011,27 the Osaka District Court
simply held that none of the grounds for resisting recognition or enforcement had been
proven, without shedding light on how they were to be interpreted. Earlier, in adecision rendered on 20 June 2001, the Tokyo District Court rejected the defendant’s
assertion under Article V(1)(b) of the New York Convention that it had been unable topresent its case.28 The court based its decision on the finding that the defendant had
abstained from participating in the proceedings notwithstanding that it had received
proper notices.
More interesting issues were addressed by the decision of the Yokohama District
Court on 25 August 1999.29 In this case, the defendant asserted under Article V(1)(b)of the New York Convention that it had not been given proper notice of the appointment of the arbitrator or of the arbitral proceedings as the notice it had received had
been written in Chinese language without any Japanese translation attached. The court
rejected the assertion, finding that the defendant had agreed, through the choice of theChinese institutional arbitration, to arbitration conducted in Chinese language.30 The
defendant also asserted under Article V(2)(b) of the New York Convention that therecognition and enforcement of the award was contrary to the public policy of Japan as
the plaintiff had adduced falsified evidence in the arbitral proceedings. The court
rejected this assertion, finding that the defendant’s allegation was not substantiated.31
It added that had the defendant’s allegation been true, it would still not have resulted
in the violation of the public policy of Japan. The court, however, did not clarify
whether adducing falsified evidence would ever constitute a violation of the public
policy of Japan.
The public policy ground was also addressed in a judgment of the Tokyo District
Court of 19 June 1995.32 The defendant asserted under Article V(2)(b) of the New York
Convention that the recognition and enforcement of the award was contrary to the
public policy of Japan because a fair decision could not have been expected from thearbitrators who were all members of the Chinese communist party while the plaintiff
was a state-owned company of China and because the arbitrators had dismissed all of
the defendant’s submissions and had based their arbitral award on findings of factwhich were unilaterally and erroneously made. The court rejected the defendant’s
27. Reported in(Hanrei Times) vol. 1355, 249.
28. Reported in the Westlaw Japan as the case 2001WLJPCA06200008.
(Hanrei Times) vol. 1053, 266.
29. Reported in
30. Id., para. 2.
31. Id., para. 3.
(Hanrei Times) vol. 919, 252.
32. Reported in257

§12.04

Koji Takahashi

assertion, finding first that the appointment of the arbitrators was orderly in view of thefact that the defendant had failed to participate in the constitution of the tribunal andsecond that the arbitral award did take into account the defendant’s submissions.
Finally, in an older case of the judgment of the Osaka District Court of 22 April
1983,33 the defendant asserted under Article V(1)(b) of the New York Convention thatit had been unable to present its case because it had not been properly represented in
the arbitral proceedings. The court held that this assertion was not supported on thefacts of the case.
All five of the decisions and judgments outlined above have disposed of the casethrough the finding of facts without articulating the interpretation of the grounds forthe refusal of recognition and enforcement. It is, however, noteworthy that two of thesejudgments, namely the judgment of the Yokohama District Court of 25 August 1999 andthe judgment of the Tokyo District Court of 19 June 1995, proceeded on the assumptionthat the arbitral procedure was subject to public policy scrutiny under Article V(2)(b)of the New York Convention.

§12.04

THRESHOLD AND STANDARD OF REVIEW

There is support for the proposition that Japanese courts are entitled to apply athreshold in the administration of the grounds for annulment. Such a threshold entails
that not every minor due process violation automatically results in the annulment of
the arbitral award. This proposition rests on the language of Article 44(6) of the
Arbitration Act, which implements the opening words of Article 34(2) of the Model
Law. It provides that upon a motion for annulment, the court ‘may’ set aside the award
if it finds that there are any grounds for annulment set forth in Article 44(1). The word
‘may’ (dekiru in Japanese) could be interpreted as implying that the courts havediscretion to dismiss a motion for annulment even if a ground for annulment is shown
to exist. Arguably, a similar threshold may be applied in the administration of thegrounds for refusal of recognition and enforcement under the New York Convention. In
a case dealing with the duty to disclose circumstances giving rise to doubts about theimpartiality and independence of arbitrators, both the Osaka District Court at first
instance and the Osaka High Court which heard the appeal34 proceeded on theassumption that they did have discretion to dismiss a motion for annulment, though
the Osaka High Court ultimately did not resort to the discretion because the procedural
flaw involved in the case was found to be grave.35 It has indeed been suggested bycommentators that the discretionary dismissal is impermissible where the deficiency isdeterminative of the outcome of the award or grave in its own right.36
33. Reported in(Kaminshû) vol. 34 (1–4), 169.
34. The decision of the Osaka District Court on 17 March 2015 (reported in(Minshû) vol. 71-10,(Minshû) vol.
2146) and the decision of the Osaka High Court on 28 June 2016 (reported in
71-10, 2166).
35. The case was further appealed to the Supreme Court but the latter did not rule on the point in its
decision on 12 December 2017 (supra n. 7).
(Theory and
36. See, e.g., Kouichi Miki & Kazuhiko Yamamoto (eds)
Practice under the new Arbitration Act) (Yûhikaku, 2006) 352 (Remarks by Naoki Idei).

258

Chapter 12: Country Report: Japan§12.05[A]As far as the standard of review is concerned, the Japanese courts have someleeway in assessing under Article 44(1)(vi) whether the arbitral procedure was inaccordance with Japanese law. Such leeway exists where the provision of the Arbitration Act alleged to be infringed gives the courts a margin of appreciation. The courts
have such a margin in assessing, for example, whether the arbitral tribunal has
provided the parties with an ‘adequate’ (jûbun na in Japanese) opportunity to present
their case (Article 25(2), implementing Article 18 of the Model Law37), whether thetribunal was right to refuse to allow a party to amend its claim or defence having regard
to the delay in making the amendment (Article 31(3), implementing Article 23(2) of theModel Law), or whether the tribunal was correct in concluding that the party had
shown no sufficient cause for failing to appear at a hearing or to produce documentary
evidence (Article 33(3), implementing Article 25(c) of the Model Law). The courts may
rely on such broadly phrased provisions to show deference to the arbitral tribunal’s
determinations. Thus, in applying Article 25, the 2018 Tokyo High Court decision
accepted the arbitral tribunal’s determinations on the conduct of proceedings, describing it as belonging to the domain of the tribunal’s prerogative.38§12.05

DUE PROCESS PARANOIAThe expression ‘due process paranoia’ is a recent buzz phrase in arbitration circles. It
refers to arbitrators who have an exaggerated anxiety or suspicion that they may be
criticized by national courts for failing to comply with due process requirements. Outof fear that their arbitral award may be challenged in courts, these arbitrators may
become reluctant to act decisively in the conduct of arbitral proceedings.39 Such aparanoia is problematic because it may result in the protraction of proceedings and theescalation of costs.
In Japan, ‘due process paranoia’ has so far scarcely been on the lips of arbitral
practitioners or discussed in literature.40 There is, however, no reason to believe that
arbitrators seated in Japan are any less susceptible to such a paranoia than those seatedin other countries. Accordingly, the remainder of this chapter will focus on thisphenomenon, beginning with the evaluation of the Japanese case law to see whether
it has the effect of causing or curbing due process paranoia.

[A]

Evaluation of the Case Law

Due process paranoia is caused by the lack of certainty as to how the grounds forannulment and for the refusal of recognition and enforcement are to be interpreted. If

37. The expression used in the Model Law is ‘full opportunity’. It is, however, not sensible to takeit literally to mean an endless opportunity.
38. 2018 Tokyo High Court decision, supra n. 10, para. 3(2)a.
39. Queen Mary University of London, White & Case, ‘2015 International Arbitration Survey:
Improvements and Innovations in International Arbitration’ 10.
40. However, see Koji Takahashi, ‘日本法から見た「適正手続パラノイア」(‘Due Process Paranoia’ from the Viewpoint of Japanese Law)’ JCA Journal vol. 746 13–18 (August 2019).

259

§12.05[A]Koji Takahashi

there is a dearth of case law shedding light on interpretation, risk-averse arbitrators
would be motivated to stay within the safe zone. The dearth of case law will then be
perpetuated, resulting in a vicious circle.
In Japan, as outlined above, there are only a small number of decisions in which
the courts have interpreted the grounds for annulment or those for the refusal ofrecognition and enforcement. Against this backdrop, any remarks of the courts, even if
made obiter dicta or as general observations, can be helpful to curb due processparanoia. As noted above, such remarks are to be found in the 2009 Tokyo District
Court decision41 and the 2018 Tokyo High Court decision.42
The 2018 Tokyo High Court decision, in particular, contains a number of remarks
which would have the direct effect of curbing due process paranoia. Those include theabove-mentioned general observation (B) which acknowledged the differences between arbitration and court proceedings43 as well as the statement that arbitrators haveno duty to provide the parties with endless opportunities to present their cases.44
Significantly, the latter statement was made with an emphasis on the need to avoid theprolongation of proceedings and the escalation of costs.
Due process paranoia will also be curbed by the restrictive interpretation of thegrounds for annulment and those for the refusal of recognition and enforcement. The
above-mentioned general observation (C) made in the 2018 Tokyo High Court decision
which acknowledged the need to avoid expansive interpretation of the grounds forannulment45 would accordingly be helpful. In terms of individual grounds for annulment, the court in the same decision avoided an expansive interpretation with respect
to the ground for annulment based on inability to present one’s case (sub-paragraph(iv) of Article 44(1)).46 The 2009 Tokyo District Court decision adopted a restrictive
interpretation with respect to the same ground.47 With respect to the ground forannulment based on the violation of ‘public order or good morals’ (sub-paragraph (viii)
of Article 44(1)), however, due process paranoia may be caused by the abovementioned 2012 decision in which the Tokyo High Court interpreted it expansively as
covering the procedural dimension of public policy48 and by the 2018 decision in which
the Tokyo High Court ruled on the same assumption.49 In the context of recognitionand enforcement, too, the Yokohama District Court and the Tokyo District Court
proceeded on the assumption that the procedural dimension of public policy wascovered by the ‘public policy’ within the meaning of Article V(2)(b) of the New York
Convention.50
Due process paranoia will be curbed by permitting arbitrators to conduct
proceedings in accordance with the international standard of arbitration. In this41. Supra n. 8.
42. Supra n. 10.
43. Supra n. 12.
44. Supra n. 16.
45. Supra n. 13.
46. Supra nn. 14 and 15.
47. Supra n. 18.
48. Supra n. 24.
49. Supra n. 26.
50. Supra nn. 31 and 32.

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Chapter 12: Country Report: Japan§12.05[B]respect, the above-mentioned general observations (A)51 and (B)52 in the 2018 Tokyo
High Court decision would be helpful. The court in the same case also deferred to thearbitral tribunal’s determinations on the conduct of the proceedings, describing it as
belonging to the domain of the arbitrators’ prerogative.53 Such a deferential stance, too,should have the effect of curbing due process paranoia. In terms of individual grounds
for annulment, the court in the same decision helpfully confirmed, with respect to theground for annulment based on the arbitral procedure being contrary to Japanese law(sub-paragraph (vi) of Article 44(1)), that what mattered was the breach of the
Arbitration Act rather than the Code of Civil Procedure.54 It is equally helpful that the
court in the same decision ruled, with respect to the ground for annulment based on theaward going beyond the scope of submission to arbitration (sub-paragraph (v) of
Article 44(1)), that the ‘scope of submission’ should be determined by looking at the
dispute from a socio-economic perspective rather than by the rigid legal theory fordomestic litigation.55 On the other hand, on the understanding that the arbitralprocedure was subject to public policy scrutiny (sub-paragraph (viii) of Article 44(1)),
the 2012 Tokyo High Court decision confirmed that the components of ‘public order orgood morals’ were to be determined by reference to the domestic legal order.56 Thisconfirmation may exacerbate due process paranoia on the part of arbitrators who are
not familiar with the Japanese legal system.
In summary, one can identify two countervailing factors with respect to due
process paranoia in the current case law of Japan. On the one hand, there are not manycases in which the courts have illuminated the interpretation of the grounds forannulment and those for the refusal of recognition and enforcement. This factor may
cause due process paranoia, which may be exacerbated by the assumption of the caselaw that the arbitral procedure is subject to public policy scrutiny. There are, on theother hand, a number of remarks and rulings which will have the effect of curbing due
process paranoia.

[B]

Public Policy Scrutiny of Arbitral Procedure

In the light of the above analysis, this chapter concludes with a reflection on whether
or not there is a solid reason to maintain the current position of Japanese case law thatthe arbitral procedure is subject to public policy scrutiny.
The majority of commentators57 believes that the procedural dimension of public
policy is covered by the words ‘public policy’ under Article 34(2)(b)(ii) of the Model
51. Supra n. 11.
52. Supra n. 12.
53. Supra n. 38.
54. Supra n. 21.
55. Supra n. 19.
56. Supra n. 25.
(Arbitration Law) 520–522 (Nihon Hyôron
57. See, e.g., Takeshi Kojima & Takashi Inomata,Sha, 2014); Nobumichi Teramura ‘手続的公序違反による国際仲裁判断の取消し (The Annulment of an International Arbitral Award for Violation of Procedural Public Policy)’ (2014) 66-3
(ADR
Doshisha Law Review 308–312; and Kazuhiko Yamamoto & Aya Yamada, ADR
and Arbitration Law) 368 (2nd ed., Nihon Hyôron Sha, 2015).

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Law and argues that the same interpretation should be given to the correspondingwords ‘public order or good morals’ under Article 44(1)(viii) of the Arbitration Act. For
the interpretation of the Model Law, they rely on the UNCITRAL Report, which says:
It was understood that the term ‘public policy’, which was used in the 1958 New
York Convention and many other treaties, covered fundamental principles of law
and justice in substantive as well as procedural respects. Thus, instances such as
corruption, bribery or fraud and similar serious cases would constitute a groundfor setting aside. It was noted, in that connection, that the wording ‘the award isin conflict with the public policy of this State’ was not to be interpreted as
excluding instances or events relating to the manner in which an award was
arrived at.58

Among the first to form what was to become the majority opinion in Japan was
the commentary on the Arbitration Act written at the time of its enactment by a groupof authors who had served the secretariat of a governmental body in charge of drafting
the Act. The English version of the commentary states (in verbatim):
In addition to content of an arbitral award, the case where arbitral proceedings arein conflict with the public policy and good morals is included in the Model Law. As
examples of this, perjury by a witness, and acceptance of a bribe by an arbitrator(receipt from one of the parties for its own convenience) can be contemplated.
The present item uses the wording ‘content of an arbitral award’, in thefoundation to this; there is no intent to change the Model Law. Accordingly, even
where it is a case that does not correspond to the grounds for setting aside in items(iii), (iv), or (vi), where a situation exists with respect to the arbitral proceedings
which is conflict with the public policy and good morals, there is probably room
for the interpretation that it corresponds to the grounds for setting aside in thispresent item.59

If, as stated here, no deviation from the Model Law was intended, it is hard to see
why the word ‘content’ was added to the Arbitration Act. Whatever the legislative
intent, it is not fruitful to dwell on it since what is more important is to take the mostconvincing interpretation in the present-day environment.
The author of the present chapter wishes to take the side of the minority ofcommentators60 who favour a literal reading of the word ‘content’ and argue that thearbitral procedure is not covered. If, notwithstanding the language, the Japanese courts
invoke the violation of ‘procedural’ public policy as a ground for setting aside arbitralawards, it would risk taking unsuspecting parties by unpleasant surprise.
The minority of commentators also argue that excluding the arbitral procedurefrom public policy scrutiny would not entail sacrificing due process. This is because if
an arbitral tribunal takes any procedural step repugnant to the ‘public order or good
58. Report of the United Nations Commission on International Trade Law on the work of its
eighteenth session (Vienna, 3–21 June 1985) (A/40/17) para. 297.
59. Masaaki Kondo, et al., Arbitration law of Japan (Shojihomu, 2004) 245.
supra n. 36,
60. See, e.g., Kouichi Miki & Kazuhiko Yamamoto (eds)341–342 (Remarks by Kouichi Miki); Keiichi Karatsu, ‘日本における国際商事仲裁判断が手続的公序に反するとして取り消された事件について (On the Case in which an International
Commercial Arbitral Award in Japan was Set Aside for Violation of Procedural Public Policy)’(2012) 990 NBL 96-97.

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Chapter 12: Country Report: Japan§12.05[B]morals’ of Japan, this would usually trigger other grounds for annulment. If, forexample, an arbitral tribunal has infringed the principle of equal treatment between theparties which is guaranteed under Article 25 of the Arbitration Act, it would fall foul of
sub-paragraph (vi) of Article 44(1), a ground for annulment which may be invokedwhere the procedure was not in accordance with the Arbitration Act. Should there be
any procedural step which is repugnant to the ‘public order or good morals’ of Japanand yet is not contrary to any specific provisions of the Arbitration Act, the case could
be covered by sub-paragraph (iv) of Article 44(1), a ground for annulment which may
be invoked where the party filing the motion was unable to present its case. Thus, inthe cases of the 2012 Tokyo High Court decision and the 2018 Tokyo High Court
decision, it was alleged that the tribunal had in its award omitted to deal with animportant argument presented to it and a question was raised whether that omission
constituted a violation of the procedural dimension of public policy. Such an omission
may not qualify as an infringement of any specific provision of the Arbitration Act.61
But if the omission means that the tribunal has ignored an important argument
presented to it by treating the argument as if it were never presented, the situation
would arguably be covered by sub-paragraph (iv) of Article 44(1).
Admittedly, the ground for annulment based on the violation of ‘public order orgood morals’ under sub-paragraph (viii) of Article 44(1) differs from the other due
process-related grounds for annulment under sub-paragraphs (iii) through to (vi) of
Article 44(1) in that the former needs to be ascertained by the courts sua sponte (of its
own accord), whereas the latter can only be invoked if the party filing the motion
furnishes proof (Article 44(6), which implements the chapeau of Article 34(2)(a) of theModel Law). Arguably, however, it is the private interests of the parties which the due
process requirements purport to protect. For the sake of the sua sponte review of public
policy, it should be considered sufficient to submit the content of arbitral awards topublic policy scrutiny. In any event, it will be difficult in practice to ascertain sua
sponte the violation of procedural public policy.
In support of the view that the arbitral procedure should be shielded from public
policy scrutiny, the author of the present chapter wishes to put forward an additional
argument which ought to be given weight in the present-day climate of arbitration.
Arbitration was once commended for its expediency and cost-effectiveness. With thetendency of ‘judicialization’, however, arbitration today is plagued by increasing
delays and costs. Now, there is a heightened awareness of due process paranoia as afactor contributing to the protraction of proceedings and the escalation of costs. In
these circumstances, it is important to stress that shielding the arbitral procedure frompublic policy scrutiny would be effective to curb such a paranoia. Since ‘public policy’is an opaque concept, the public policy scrutiny of arbitral procedure could breed sucha paranoia. The expression ‘public order or good morals of Japan’ is particularly prone
to raise suspicions in the mind of foreign arbitrators that it may be something insularly

61. Where, on the other hand, a claim is omitted from an award, the Arbitration Act allows a party
to request the tribunal to make an additional award (Art. 43, implementing Art. 33(3) of theModel Law).

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unique to Japan.62 Legal certainty and transparency will be enhanced by excluding thearbitral procedure from public policy scrutiny.
For the foregoing reasons, it is submitted that the Japanese courts should departfrom the current case law and hold that the arbitral procedure is not subject to public
policy scrutiny. By taking this initiative, the Japanese courts could further strengthen
their stance for curbing due process paranoia and would also be able to help enhance
the attractiveness of Japan as a seat of arbitration.

[C]

Concluding Remarks

It must be acknowledged that due process paranoia is not the only factor that hascontributed to the increasing duration and costs of arbitral proceedings. There areindeed multiple factors, including excessively long submissions made by counsels andthe status of arbitrators: unlike judges, they have contractually agreed to provide a
dispute resolution service. In order to obtain customer satisfaction, arbitrators naturally become more inclined than would judges to provide the parties with opportunities
to thoroughly present their case, conscious also of the finality of their decision.
Accordingly, curbing due process paranoia is not a panacea for the protraction ofproceedings. It should also be mentioned that there are steps that may be taken torelieve the symptoms of due process paranoia. Thus, where additional costs haveresulted, it may be possible to distribute them fairly among the parties.
That having been said, every effort should be made to curb due process paranoia
as it is an important factor which risks undermining the appeal of arbitration.
Generally, an effective prescription for paranoia is to remove the cause of unfounded
anxiety. For due process paranoia, an effective prescription would be to shield thearbitral procedure from public policy scrutiny. That prescription, moreover, comes
without negative side effects because due process can be sufficiently safeguarded byother grounds for annulment.
While this chapter has focused on Japanese law, it will also be useful to examine
the law of other jurisdictions to see whether the term ‘public policy’ under the Model
Law is interpreted as covering the procedural dimension of public policy. For thosejurisdictions which, adhering to the UNCITRAL Report,63 adopt such interpretation, theheightened awareness of due process paranoia and the problems caused by it should
serve as an impetus to reconsider whether it is appropriate to maintain the sameinterpretation.

62. Yasuhei Taniguchi, ‘仲裁判断取消事由としての手続的公序違反 (Violation of Procedural Public Policy as a Ground for the Annulment of Arbitral Awards)’ in Kouichi Miki et al. (ed.),(International Arbitration and Corporate Strategy) (Yûhikaku, 2014) at
305 argues for the removal of the words ‘good morals’. As the Japanese legal system has received
much influence from German law, the standard legislative expression ‘public order or good
morals’ can be traced to the German phrase ‘öffentliche Ordnung und gute Sitten.’ But only thewords ‘öffentlichen Ordnung (ordre public)’ are used in the German arbitration law on theannulment of arbitral awards (Zivilprozessordnung § 1059).
63. Supra n. 58.

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