Reform of Commercial Code (Transport Law) in Japan

Masahiro Amemiya*

Abstract:
In Japan the Commercial Code (Transport law and Maritime commercelaw) has been revised. This article intends to introduce the reform of the transport law.
This article introduces the background of the reform of the Commercial Code firstly andthe noteworthy issues regarding amended provisions of the transport law, i.e. shippers’
obligation to inform of nature of dangerous cargo, consignees’ rights, carriers’ liability
for high value goods and the multimodal transport, which apply to the international
carriage by sea.
Keywords: The reform of Japanese Commercial Code (Transport law and Maritimecommerce law), shippers’ obligation to inform of nature of dangerous cargo, consignees’
rights, carriers’ liability for high value goods, multimodal transport.
Ⅰ. Introduction

The legislative Bill of the reform of Japanese Commercial Code (Transport law andMaritime commerce law) was submitted to the Diet by the Cabinet and passed in May
2018. The amended Commercial Code is expected to come into force next Spring (Aprilor May, 2019). The transport law (BookⅡ, Chapter 8) and maritime commerce law(Book Ⅲ ) are original and substantial component of the Commercial Code. The
contents of the transport law are as follows:BookⅡ, Chapter 8*

LLB (Waseda University), LLM (Waseda University), Attorney-at-law, Partner of Amemiya Law

Office, Visiting professor of Law, Waseda University and Dalian Maritime University, Chief fellowof the Institute of Maritime Law (Waseda University Comprehensive Research Organization),
Councilor of Japanese Maritime Law Association, Arbitrator of maritime arbitration commission at
Japan Shipping Exchange, Inc. He participated in the deliberation on the reform of the CommercialCode (Maritime law and Transportation law) as a secretary of the Legislative Council of the Ministryof Justice.
1Section 1
Section 2

General rule for transport law (Article 569)
Carriage of goods (Article 570-589)
freight, carriers’ liability, consignee’s right, deposition and auction of goods,
prescription time for claim pertaining to carrier’ liability, etc.
Section 3 Carriage of passengers (Article 590-592)
The contents of the maritime commerce law are as flows_Chapter 1 Vessels and Owners (Article 684-704)
Chapter 2
Captains (Article 705-721)
Chapter 3
Carriage by sea (Article737-787)
seaworthiness, voyage charterparty, bills of lading etc.
Chapter 4
Casualties (Article788-799)
general average, collision
Chapter 5
Salvage (Article 800-814)
Chapter 6
Marine insurance (Article815-841)
Chapter 7
Maritime Claimants (Article 842-851)
maritime Lien, mortgage
Ⅱ. Background of Reform

The Commercial Code was enacted in 1899 under the great influence of German law.
The transport law and the maritime commerce law has not been subject to any majoramendment in 119 years. This means that the Commercial Code had become outdated
in some respects. For example, there is no provisions on a contract for domestic carriage
by air. Also, the wordings written in old-fashioned style makes it difficult to beunderstood.
In Japan the basic legislation is currently being modernized, i.e. the BookⅠand a part ofBookⅡhave been already modernized at the same time the Companies Act was enacted.
Under the circumstances the transport law and the maritime commerce law were amended
in order to be harmonized with the current international maritime legal standard andreflect the change of practices in the transport business1.
1

The transport industries seem to cope with the development of the transport transactions
under the outdated Code by way of using contracts concluded by parties. Most ofprovisions of the Code is non-mandatory. The parties are able to update contractual terms
2

In the first place, a study group was organized by the Japan Institute of Business Law.
The fellows of the group investigated foreign laws such as German law, French law, USlaw and English law, and drafted up the report. After that “Study Group of Transport
Legal System” was established by the above Institute. The Study Group examined thereform of the transport law and the maritime commerce law, and published the report onsuch examination.
In the second place, in February 2014, the Legislative Council of the Ministry of justiceset up the Working Group for the reform of the Commercial Code (transport law andmaritime commerce law) composing of scholars, lawyers, businessmen of the transportindustries including representatives of vessel’s owners, carriers, freight forwarders, cargointerests, seafarers, marine insurance and bank, and officials in charge of the Ministry ofJustice. Two years’ deliberation of the Working Group resulted in a gist of the reform.
It was approved in the general meeting of the Council and submitted to the Minister ofJustice in February 2016. The legislative Bill of the reform of the Commercial Codewas drafted up with reflection on the above gist.
Ⅲ. Noteworthy Issues of Amended Provisions of Transport law

A. Shipper’s obligation
Japan is a contracting party to the International Convention for the Safety of Life at Sea
and IMDG Code is implemented as the Regulations for the Carriage and Storage ofDangerous Goods by Ships. In accordance with article 17 of the above regulation, ashipper of dangerous goods is obliged to submit the Declaration of Dangerous Goods tothe shipowner or the master of the vessel which is scheduled to load them.
Japan has ratified the Protocol of 1979 to the international Convention for Unification ofCertain Rules of Law relating to Bills of Lading 1924 (Hague Visby Rules) and a contractfor international carriage by sea is governed by Carriage of Goods by Sea Act
corresponding to the Hague Visby Rules (Japan COGSA)2. Japan COGSA allows forand conditions unless mandatory provisions prevail or those are offending against pubicorder and decency.
2The Japan COGSA does not exactly correspond to the Rules. For instance, whether billsof lading are issued or not, the Japan COGSA applies to the contract of carriage of goods bysea including voyage charter parties.
3the possibility of taking reasonable measures such as the destruction of dangerous cargo(Article 11). However, in either Japan COGSA or the Commercial Code, there is noprovision as to the shippers’ obligation to notice dangerous nature of the goods. Inpractice, such obligation has been sought under the so-called fair and equitable principle.
In the revised Commercial Code, the provision regarding the shipper’s obligation toinform the carrier of the necessary information of the goods which have dangerous
characteristics such as being inflammable or explosive in nature, the dangerousness, theproduct name of cargo, nature and required handling instruction, has been added.
If the shipper fails to do so, the shipper shall be liable for damage caused by the failure.
The nature of shipper’s liability was one of the subjects of great debate in this deliberation.
There was a strong opposition to the strict liability in view of unreasonableness that if
consumers who may not have enough information on nature of the cargo assume the strictliability as shippers. Finally, there is no provision concening the strict liability and thisliability is construed as negligence liability.
The shippers bearing the burden of proof that there was neither fault nor neglect
contribute to the absence of the notification. It is thought to be of great difficulty for theshipper to prove that he is not negligent3.
Regardless of the above, this provision is non-mandatory and thus contracting parties may
agree to the different provision under contract.
The obligation is imposed on the shipper of dangerous goods regardless of whether thecarrier is aware of such dangerousness of the goods. However, the carrier who is awareof it shall be under the obligation to scrutinize the handling instruction of the goods andto prevent an accident from occurring4 . In such case, the shipper’s liability may be
reduced by such as fault offsetting.
B. Consignee’s right
It is stipulated in Article 583 of the Commercial Code that when the goods arrived at theplace of destination, the consignee will obtain the rights of the shipper under the contractof carriage. Also, it is stipulated in Article 582 of the Commercial Code that the shipper
34

NYK ARGUS case, the Tokyo Appeal Court (February 28, 2013)
Margo Case, the Japanese Supreme Court (25 March 1993)4

has control rights which shall ceases when the goods arrive at the place of destination andthe consignee claims for the delivery. These articles apply when bills of lading are notissued. If they are issued, due holders are entitled to exercise their rights under the billsof lading.
In the case of M.V. “MOL COMFORT”, the Vessel sunk with more than 4000 containers
laden on board in the Indian Sea. Some goods were carried under the contract evidenced
by sea waybill instead of bill of lading and some consignees faced difficulties to pursue
the carriers under the contract because the consignees could not obtain the same rights ofthe shippers under the Commercial Code. If the conditions of the sale contract are FOB,
CFR or CIF, the risk of goods transfer to the consignee at the time of loading of the goods,
some of shippers would not be interested in recovery from the carrier or willing to assist
in transferring the rights of the shipper to the consignee.
The above provision was amended as follows, considering the mentioned practice in theinternational carriage by sea though it is realized that the consignee is unlikely to prevailover the shipper during carriage in case of land transport.
Article 581 of the amended Commercial CodeAfter the goods arrive at the place of destination or the goods are totally lost, theconsignee shall have the same right as of the shipper raised by the contract of carriage.
The shipper shall not be able to exercise their rights when the goods arrive at the placeof destination or goods are totally lost and the consignee claims for the delivery or fordamages.
In future, disputes would arise such as the meaning of “totally lost” etc. and they are left
to interpretation in practice.
C. Exemption for High Value Goods
It is provided in Article 578 of the Commercial Code that the carrier shall not be liable tocompensate for damage with regard to cash, securities or other high value goods unlessthe shipper declared the nature and value of it upon entrusting such goods for transport.
This provision is essential for carriers, especially inland carriers, because carriers could
not decide whether to undertake the carriage with an ad valorem freight or buy a liability
insurance taking account of risks of being claimed for damage to such high value goods

5unless the shipper declared its nature and value. If the provision would be abolished,
the shipper could have been indemnified for damage to the cargo though the shipper had
not declared the nature and value of the goods or paid the ad valorem freight. Thissituation should be unfair for carriers.
This provision has been basically maintained. However, the express provision ofexemption has been newly added in the revised Commercial Code that such discharge ofthe carrier’s liability shall not apply in case the carrier is aware at the time of conclusionof a contract that the goods is of high value and in case the loss, damage or delay occurred
intentionally or by gross negligence of the carrier.
D. Multimodal Transport
Currently, in Japan the multimodal transport has come into wide use. However, there is
no stipulation regarding the multimodal transport in the Commercial Code and in practicethe multimodal transport would be subject to contracts between parties. Considering thespread of such type of transport and existing uncertainty in law, rules on the multimodaltransport have been added.
In the amended Commercial Code (Article 578), concerning the carrier’s liability for lossof, damage to, or delay in delivery of cargoes in case of the multimodal transport, which
consists at least two kinds of mode among land transport, sea transport and air transport,
in case the stage where loss or damage occurred is determined, any Japanese law orconvention ratified by Japan would apply to that stage if the contracting parties had madea separate and direct contract concerning the stage.
For instance, if damage to cargoes occurred during land carriage in foreign country,
Japanese transport law would apply. The above provision is non-mandatory and thus
contracting parties may agree to the different provision under contract.
It is not provided that which laws applies when it cannot be proved where the damage
occurred. The carriers are required to verify that the damage occurred during sea
carriage if they want to enjoy the exemption of the carriers’ liability such as “error innavigation” under Japan COGSA.
Also, the provisions on ocean bill of lading mutatis mutandis apply to transport
documents for the multimodal transport covering sea and land carriage.

6Ⅳ. Conclusion

The scope of the reform is limited to the provisions of the Commercial Code. The JapanCOGSA was not amended substantially this time. The transport law originally regulates
the domestic transport, however, most of provisions would apply to a contract forinternational carriage by sea. The influence of the reform to the international carriage
is thought to be not so small.

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