Japan has a modern arbitration law, an international arbitral institution with progressive rules and procedures, a supportive court system, and first class hearing facilities in Tokyo and Osaka established exclusively to cater for both international commercial arbitration and mediation at competitive prices. These factors, together with recent government supported efforts to educate as well as encourage greater use of arbitration in the public and private sectors, a safe environment and splendid food and tourism resources, are the foundation for Japan’s endeavours to become a leading international dispute resolution jurisdiction in Asia Pacific. Below is a short primer intended to give an overview of the Japanese arbitration regime.
1. What is the main legislation and who are the major arbitration institutions?
Both international (i.e. cross border related) disputes and domestic disputes are governed by the Arbitration Act (the “AA”), which is based on the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”).
The three main international arbitral institutions that administer arbitration cases seated in Japan are the Japan Commercial Arbitration Association (“JCAA”), the Tokyo Maritime Arbitration Commission (“TOMAC”) of the Japan Shipping Exchange, Inc. (“JSE”) and the International Court of Arbitration of the International Chamber of Commerce (“ICC”).
Other important institutions based in Japan include the Japan Intellectual Property Arbitration Center (“JIPAC”), the International Arbitration Center in Tokyo (“IACT”), the Japan Sports Arbitration Agency (“JSAA”) and various ADR Centers associated with the different Bar Associations in Tokyo, Osaka, Fukuoka etc. The Japan Association of Arbitrators (“JAA”) is active in training arbitrators and counsel. The Japan International Dispute Resolution Center (“JIDRC”), was established in 2018 as a driving-force entity for implementing specific Japanese government promoted projects. It operates facilities in Tokyo and Osaka that are accessible as venues for both institutional and ad hoc international arbitration and mediation hearings.
2. Is the court system supportive of arbitration?
Japanese courts provide strong support for arbitration in accordance with the AA. Notably, there are express provisions in the AA that a court will not interfere in an arbitration except in certain limited circumstances expressly provided for therein. In particular, save in limited instances, if petitioned by a Defendant, Japanese courts are required to dismiss proceedings on a without prejudice basis where proceedings have been commenced despite the existence of an arbitration agreement (Article 14(1) AA and Article 5 Model Law).
3. Is it confidential? What about any related court proceedings?
Article 42(2) of the JCAA’s Commercial Arbitration Rules imposes a duty of confidentiality on all persons involved in arbitration proceedings. This applies to all records thereof, including documents prepared for and used in the arbitration, documents disclosed in the arbitration, transcripts, witness evidence and the resulting award. Where confidentiality obligations have been agreed by the parties (for example, when using the JCAA’s Rules), Japanese courts are empowered to enforce those obligations pursuant to Article 44(1) of the Civil Code.
As for arbitration related court proceedings, upon the application of any party to any such proceedings, the proceedings may be conducted in court hearings that are closed to the public. In practice, most arbitration related court proceedings are heard in this way. However, if oral argument is heard in relation to a setting-aside application challenging an arbitral award, or there is a hearing in connection with the issue of an execution order for an arbitral award, the proceedings must be open to the public.
4. Are there any requirements for the arbitration agreement?
Pursuant to the AA, an arbitration agreement must be in writing (Articles 13(2) to (5) AA). “In writing” includes letters or telegrams exchanged between the parties agreeing to arbitration, arbitration clauses in other documents incorporated by reference into a contract, and an electromagnetic record recording the contents of an arbitration agreement. (Please note that Japan has not adopted either Option I or Option II under Article 7 of the Model Law as amended in 2006, which clarifies the defined form of an arbitration agreement.)
5. Can the Tribunal rule on its own jurisdiction and do parties have flexibility on procedural rules?
Yes (Article 23(2) AA). However, the Tribunal’s ruling as a preliminary question that it has jurisdiction or at any stage that it does not have jurisdiction is subject to appeal before Japanese courts by any party within 30 days of receiving notice of that ruling (Article 23(5) AA). The court’s decision on jurisdiction may also be appealed (Article 7 AA).
Subject to the mandatory requirements of the AA and the Model Law, parties are free to agree on the procedural rules to be followed in an arbitration (Article 26(1) AA). If there is no agreement, then the tribunal can conduct the arbitration in such manner as it considers appropriate.
6. Is there provision for consolidation of arbitrations and joinder of parties?
Yes, the rules of the major institutions allow for consolidation of arbitrations (Article 57 JCAA Rules and Article 10 ICC Rules). Factors that the institution will consider include: whether the parties have all agreed; whether the claims arise under the same arbitration agreement; or if the agreements are different; whether the arbitrations are between the same parties; the disputes arise from the same legal relationship; or the same or a similar question of fact or law arises from the claims; or whether the arbitration agreements are compatible or there are other reasons conducive to making an order to consolidate.
The major institutions also allow for joinder of additional parties either before or after the appointment of a tribunal. Under the JCAA’s Commercial Arbitration Rules, an additional party may be joined if all parties, including the additional party, have consented to the joinder; or all claims are made under the same arbitration agreement – provided, however, that the third party’s consent in writing to such joinder is necessary when the third party is requested to join as respondent after the constitution of the arbitral tribunal (Article 56 JCAA Rules). Under the ICC’s Rules, prior to the appointment of a tribunal, an additional party may be joined even if one of the existing parties does not consent – however, prima facie jurisdiction over the additional party is a paramount requirement (Articles 7 and 6(4)(i) ICC Rules). No additional party can be joined after the confirmation or appointment of any arbitrator unless all of the parties, including the additional party, agree to the joinder (Articles 7(1) and 7(5) ICC Rules).
7. What interim measures and remedies are available?
In most cases, depending on the circumstances, parties should either approach the arbitral institution for the appointment of an emergency arbitrator (EA) or Japanese courts or the Tribunal for an order of interim measures.
Even if there is an arbitration agreement, parties may still file a petition with the Japanese courts for an interim measure of protection (Article 15 AA). This provision applies with respect to arbitrations seated in or outside of Japan, or where the seat has yet to be determined (Article 3(2) AA). A provisional order for interim measures is an order for provisional seizure (i.e. attachment) and/or disposition (i.e. an injunction) of a respondent’s assets in favour of a claimant with respect to arbitration proceedings. An order of provisional seizure may be issued when there is a likelihood that it will be impossible or extremely difficult to carry out compulsory execution for an award ordering the payment of money. It may be made against real property, movables and claims.
The Tribunal is empowered to make a wide range of orders in respect of interim and provisional measures and may require the applicant to provide security in connection with such measures (Article 24 AA). Both measures are considered equivalent to interim measures as they are prescribed by Article 17 of the Model Law. However, unlike orders made by Japanese courts, interim and provisional measures made by the Tribunal are not enforceable in Japan and therefore rely upon the willingness of a respondent to comply with the process for effectiveness (i.e. for fear of how non-compliance might undermine their standing in the main proceedings). In practice, parties that are actively participating in arbitration proceedings generally tend to comply voluntarily with orders made by a Tribunal but otherwise, it may be necessary to seek the assistance of the court in obtaining such relief. Please note that Japan has not adopted Articles 17 A to J of the Model Law as amended in 2006, which clarify the scope and availability of interim relief granted by the Tribunal.
In urgent cases, prior to the appointment of a Tribunal, both the JCAA Rules and ICC Rules provide for an EA procedure so that parties may seek emergency interim relief (Articles 75-77 JCAA Rules, Article 29 ICC Rules). Both institutions provide for the quick appointment of an EA and a short time frame within which the EA should make its order. However, as with Tribunal ordered interim relief, measures ordered by an EA are not enforceable and rely instead on the willingness of respondents to comply voluntarily. All requests for interim relief, including to an EA must be made on notice to the other party.
8. What if a party wants to appeal or set aside the award?
There is no right to appeal an arbitral award in Japan. However, a party may within 3 months of receipt of an award, apply to set aside the award on certain limited grounds (Article 44(1) AA and Article 34(2) Model Law), including that: (i) a party to the arbitration agreement was under an incapacity or the agreement was not valid; (ii) a party was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was otherwise unable to present their case; (iii) the award deals with a dispute not contemplated by or falling within the terms of the submission to arbitration, or contains decisions on matters going beyond the submission to arbitration; or (iv) the composition of the tribunal or the arbitral procedure was not in accordance with the terms of the arbitration agreement.
In addition, the award may be set aside if the Court finds that: (i) the subject-matter is not capable of settlement by arbitration under Japanese law; or (ii) an award runs contrary to Japanese public policy.
9. Where can I enforce an award?
An arbitral award made in Japan is enforceable overseas under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). This means that arbitral awards from 168 contracting states are enforceable in Japan and vice versa.
An award, whether made in or outside Japan, is enforceable in the same manner as a judgment of Japanese courts, but only pursuant to an execution order from the Japanese courts (Article 46 AA and Article 35 the Model Law). The grounds on which a party may resist enforcement of a foreign arbitral award are similar to those which a party may rely on to set aside an award (i.e. the ‘standard’ New York Convention grounds) (Article 45 AA and Article 36 the Model law).
10. Is there third party funding?
Third party funding of arbitration seated in Japan, related court proceedings and mediation in Japan is not prohibited. As Japan is not a common law country, the torts of Maintenance and Champerty do not exist. However, depending on the particular funding scheme and for example, the extent of involvement on the part of a funder in the management and/or conduct of a claim (if any), some third party funding arrangements may violate Japanese law and regulations governing legal practitioners.
So far as we are aware, no funders have provided third party funding for matters seated in Japan yet.