On 20 May 2020, Japan passed a bill broadening the Act on Special Measures concerning the Handling of Legal Services by Foreign Lawyers (the “2020 Gaiben Law”). Its purpose is twofold: to reduce the post-qualification requirements necessary to practice in Japan as a foreign lawyer; and perhaps more significantly, to make it possible for foreign lawyers to handle a broader range of international arbitrations. The 2020 Gaiben law will take effect from 29 August 2020.
In order to practice as a foreign lawyer in Japan, an individual must have three years’ post-qualification experience, and prior to the 2020 Gaiben Law, the requirement was for two of those three years’ experience to have been gained overseas. This made it difficult for junior lawyers who have a particular focus on Japan related work, to practise effectively in Japan. In many cases, it became necessary for the lawyer to leave Japan purely so as to obtain the requisite overseas experience, which in turn had the effect of restricting law firms’ hiring policies (as well as limiting clients’ choice of legal representation). In practice, this was invariably difficult to accommodate with hurdles for both the law firm and individual lawyer involved.
The 2020 Gaiben law makes a modest change to this requirement in that while the three-year post-qualification experience requirement remains in place, only one year’s experience must now be obtained overseas. It therefore makes it a little easier for foreign lawyers to establish a practice in Japan and to provide Japanese clients with much needed foreign law advice relating to the continuing growth in overseas investment projects.
The second change introduced by the 2020 Gaiben Law is perhaps even more welcome in that it broadens the category of arbitration disputes that a foreign lawyer registered in Japan is permitted to conduct.
Registered foreign lawyers are restricted to practising what are termed “international arbitration” cases such that if a case is deemed to be domestic, it can only be conducted by Japanese counsel.
This presented an issue in cases where for example, two Japanese subsidiaries of overseas registered companies enter into a contract in English; with negotiations being directed from outside Japan; and where the parties agree to JCAA arbitration in English. Under the old legislation, the fact that such a matter might clearly be international in nature was negated by the fact that it involves Japanese companies (albeit majority foreign owned subsidiaries). Consequently, the foreign parent companies would be unable to use their own choice of international counsel to conduct the arbitration, which in turn resulted in such arbitrations being moved offshore, to jurisdictions such as Singapore in particular. This did not help the development of the arbitration market in Japan.
The 2020 Gaiben law changes the position specifically in this regard and now permits registered foreign lawyers to act in what were previously considered “domestic” arbitrations (i.e. between Japanese companies) – provided there is an international connection. This includes disputes where:
- one or both of the “domestic” companies is more than 50% owned by a foreign company;
- there is a foreign governing law; or
- the seat of arbitration is outside Japan.
Moreover, by clarifying an area of uncertainty under the old legislation, registered foreign lawyers are also now able to represent clients in an international commercial mediation in Japan under the 2020 Gaiben law. This is a widely welcomed development given efforts in recent years to establish new mediation and dispute resolution centres in Japan (i.e. the Japan International Mediation Center in Kyoto and the Japan International Dispute Resolution Center in Osaka) and the regional developments with enforcement under the Singapore Mediation Convention.
These reforms will widen the choice of legal counsel for international users of arbitration and mediation and should be seen in a positive light by Japanese corporates.
