Contributed By Kojima Law Offices
In Japan, a party seeking to enforce a judgment or arbitral award (referred to hereafter as the “enforcing party”) may try and locate the other party’s assets (this article will refer to the party that is required to act in a judgment or arbitral award as the “responding party”). The enforcing party generally has two principal court-supervised mechanisms available to locate the responding party’s assets:
Both mechanisms are limited to monetary claims. They also become available only after the enforcing party has obtained an enforceable title. In the context of a foreign judgment or arbitral award, this means either: (i) a Japanese court judgment permitting enforcement of the foreign judgment; or (ii) a Japanese court order permitting enforcement of the foreign arbitral award.
Debtor Asset Disclosure Procedure
When enforcing a foreign judgment or an arbitral award in Japan, the enforcing party may ask the court to convene a hearing at which the responding party must disclose their assets under oath. The assets subject to disclosure may include deposit accounts, receivables, real estate, and wage or salary claims.
To use this procedure, the enforcing party must show that the responding party does not own sufficient assets to satisfy the judgment or award in full. Courts do not require rigorous proof of this point.
If the responding party, without justifiable grounds, fails to appear at the hearing, refuses to answer questions, or makes statements that are plainly false, the court may impose criminal sanctions. The sanctions may include imprisonment for up to six months or a fine of up to JPY500,000. In practice, however, courts almost never impose imprisonment in connection with this procedure.
The practical value of the asset disclosure procedure often depends on the responding party’s willingness to cooperate. It may be of limited use where the responding party is determined to hide assets, particularly because the available sanctions are not particularly severe.
Court Orders Requiring Disclosure by Third Parties
The enforcing party may also seek a court order requiring a third party to disclose information about the responding party’s assets. The requirements differ depending on the type of asset involved.
The enforcing party may also consider using the inquiry procedure available through one of Japan’s bar associations under the Attorney Act. Under this procedure, a Japanese attorney may request that a local bar association make inquiries to third parties (such as banks or public registries) for information relevant to locating the responding party’s assets. In practice, enforcing parties commonly use this procedure, which can serve as a useful supplement to the court-based asset investigation tools.
Japanese civil judgments can be either interlocutory judgments or final judgments.
An interlocutory judgment decides an issue that arises during the proceedings prior to the court issuing its final judgment. For example, in cases that involve a dispute about both liability and the amount of damages, the court may first determine liability in an interlocutory judgment and then later address the amount of damages. An interlocutory judgment does not itself bring the proceedings to an end.
There are three categories of final judgments:
Unlike with a foreign judgment or an arbitral award, an enforcing party seeking to enforce a final and binding domestic judgment will not need to obtain a separate court decision to do so. Instead, the enforcing party must submit an authenticated copy of the judgment together with evidence that the responding party has been served with the judgment. An enforcing party may also enforce a judgment that is not yet final if the court declares in that judgment that the judgment is provisionally enforceable.
Enforcement of Monetary Claims
An enforcing party may enforce a judgment that orders the responding party to make a monetary payment by seizing the responding party’s assets. The principal methods of seizing the responding party’s assets are as follows.
Enforcement of Non-Monetary Obligations
The process of enforcing a non-monetary judgment depends on the nature of the obligation.
The time and cost required to enforce a domestic judgment will depend mainly on the type of asset involved.
Generally, the quickest and least expensive method is to attach certain items such as the responding party’s bank deposits, accounts receivable, salary or rent to be received from their rental property. The court filing fee is usually JPY4,000 plus relatively modest postal and document-related costs. Once the court has served the responding party with the order, the enforcing party will typically receive attached, non-salary/non-wage assets about one week later. (Note that, in Japan, it is the responsibility of the court to serve court documents; the parties themselves do not serve (or arrange to serve) these.) By contrast, it generally takes around four weeks for an enforcing party to receive attached salary or wages. The total time between the court attaching the asset and the enforcing party receiving that asset can vary depending on the court and when the court is able to serve the order.
By contrast, it is substantially more expensive and time-consuming to use the other party’s real property to satisfy a judgment. In addition to the JPY4,000 filing fee, the enforcing party must pay an advance to cover expenses such as the required inspection of the property, the appraisal, and the sale of the property. The amount of the advance will vary depending on the court and the circumstances of the case. However, an initial advance can range from about JPY700,000 to JPY2 million. The enforcing party must also pay a registration and licence tax, which – based on the statutory calculation – generally comes out to 0.4% of the amount of the enforceable claim.
It takes time to inspect, appraise, advertise, and sell the property through a court-administered auction. Enforcement can therefore take many months and, in some cases, more than a year.
Accordingly, if the enforcing party can identify the responding party’s bank accounts or other appropriate receivables, attaching that asset is generally the most efficient method of enforcing a monetary judgment. Using real property to satisfy a judgment may be appropriate for a substantial claim, but doing so involves higher upfront costs and usually takes much longer. The enforcing party may also use the responding party’s movable property to satisfy a judgment, but the often-modest value of movable property makes this a less attractive option.
As discussed in 1.1 Options to Identify Another Party’s Asset Position, the enforcing party may use the asset disclosure procedure or seek court orders requiring certain third parties to provide information about the responding party’s assets. The applicable requirements and limitations are also set out in 1.1 Options to Identify Another Party’s Asset Position.
A responding party generally cannot prevent enforcement of a final and binding judgment by citing defects in the original proceedings, even if those defects concern the merits of the case or procedural matters. A responding party must instead generally raise any challenges through an appeal or other procedure directed against the judgment itself, rather than during the enforcement proceedings.
The responding party may, however, challenge enforcement based on circumstances that arose after the conclusion of the oral proceedings on which the judgment was based. For example, if the responding party has paid part of the judgment after the conclusion of those oral proceedings, they may bring an action seeking to prevent enforcement of the full judgment amount. To illustrate this, if the judgment requires the responding party to pay JPY1 million and the responding party pays JPY250,000 of that amount after the conclusion of the oral proceedings, the responding party may take action to have the court reduce the judgment amount to JPY750,000.
If enforcement is based on a judgment that the court has declared the enforcing party may provisionally enforce, the responding party may appeal the judgment and seek a temporary stay of enforcement. Filing an appeal does not itself automatically stay enforcement; the responding party must instead obtain a separate court order.
As discussed above in 2.1 Types of Domestic Judgments, the enforcing party may generally only execute a judgment that orders performance. By contrast, the enforcing party cannot execute a declaratory judgment because declaratory judgments do not order either party to take (or refrain from taking) any action. Although not “unenforceable” per se, judgments that create, modify, or terminate a legal relationship (as described in 2.1 Types of Domestic Judgments) do not need to be executed because the legal relationship is changed by the judgment itself once that judgment becomes final and binding.
Japan has no central register containing all domestic judgments or outstanding judgments. It is true that Japanese courts publish selected decisions in an online case-law database. However, that database does not contain every judgment. Moreover, it is not possible to remove a judgment from the database even after the judgment is satisfied.
Japan does not currently participate in any treaty or convention that directly governs the recognition or enforcement of foreign court judgments. This includes the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. As a result, Japanese domestic law controls the recognition and enforcement process in Japan.
The key statutory provisions are Article 118 of the Code of Civil Procedure and Article 24 of the Civil Execution Act. Article 118 sets out the conditions that a foreign judgment must satisfy before a Japanese court will recognise that judgment. Article 24 of the Civil Execution Act sets forth the procedure for obtaining an execution judgment. An enforcing party must obtain this execution judgment before it can enforce the foreign judgment in Japan.
Although no treaty directly controls enforcement, the Hague Service Convention can, in practice, play an important role. Proper service of process is one of the issues Japanese courts consider when deciding whether to recognise a foreign judgment. Japan is a party to the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. This convention establishes a Central Authority mechanism for service abroad, which, for the purposes of this guide, means service on a defendant in Japan.
Japan also objected in December 2018 to service under Article 10(a) of the Hague Service Convention, which concerns service by postal channels. Accordingly, where a party from a contracting state outside Japan must serve documents on a party in Japan, the serving party should generally use Japan’s Central Authority (the Ministry of Foreign Affairs) rather than direct postal service, unless another applicable treaty or arrangement permits a different method.
Japan does not have different approaches to enforcement depending on the type of judgment.
Foreign judgments are not generally excluded from recognition and enforcement merely because they fall within a particular category. Instead, a Japanese court will assess each judgment against the requirements of Article 118 of Japan’s Code of Civil Procedure, including the requirement that the judgment be final and binding.
Japan recognises foreign judgments that satisfy the following requirements.
Once the enforcing party has obtained a Japanese court judgment authorising enforcement of the foreign judgment, the subsequent enforcement process is the same as with a domestic Japanese judgment. Please see 2.2 Enforcement of Domestic Judgments for a summary of the available enforcement procedures for domestic Japanese judgments.
The time and cost required to enforce a foreign judgment can vary depending on the circumstances of each case, including the jurisdiction that issued the judgment. Costs specific to the enforcement of a foreign judgment may include Japanese translations of the judgment and related documents.
The court filing fee to seek a Japanese judgment authorising enforcement of a foreign judgment depends on the judgment amount. For example, the filing fee is approximately JPY50,000 where the amount of the judgment is JPY10 million and approximately JPY320,000 where the amount is JPY100 million.
As far as required time is concerned, it generally takes Japanese courts six months to two years to issue an enforcement order. The time required will depend on factors such as the complexity of the issues, the need to analyse foreign law or procedure, and whether the responding party is contesting enforcement.
As discussed in 3.4 Process of Enforcing Foreign Judgments, once the Japanese enforcement judgment becomes final and binding, the subsequent execution process is the same as that for a domestic Japanese judgment.
A responding party may oppose enforcement of the foreign judgment by arguing that the enforcing party has failed to satisfy one or more of the requirements under Article 118 of the Code of Civil Procedure. Those requirements are summarised in 3.3 Categories of Foreign Judgments Not Enforced. The Japanese court will not relitigate the merits of the foreign court’s decision. However, it may analyse the judgment itself and, if necessary, also look at the foreign proceedings that produced the judgment to determine whether enforcing the judgment would be contrary to Japanese public policy.
After the enforcing party manages to obtain a final and binding Japanese judgment authorising enforcement, the responding party cannot again raise the Article 118 requirements in the execution proceedings. However, the responding party may still challenge the execution based on the type of subsequent event discussed above in 2.5 Challenging Enforcement of Domestic Judgments.
Japan generally takes an enforcement-friendly approach to arbitral awards. It is a party to the New York Convention, and the Japanese Arbitration Act provides the principal framework for recognising and enforcing awards.
The Arbitration Act applies the same basic rules to awards made in Japan and awards made outside Japan. An arbitral award generally has the same legal effect as a final and binding Japanese court judgment. The enforcing party normally does not need to bring a separate recognition proceeding. However, the enforcing party must obtain an enforceability order from a Japanese court to use the responding party’s assets to satisfy the arbitral award.
In considering the enforcing party’s request for an enforceability order, the Japanese court will not review whether the arbitral tribunal reached the correct decision on the facts or the law. Instead, it will refuse to recognise or enforce an arbitral award only on limited statutory grounds, which are broadly consistent with the New York Convention. See 4.4 Process of Enforcing Arbitral Awards and 4.6 Challenging Enforcement of Arbitral Awards for more detail on the enforcement procedure and the available grounds for a challenge.
Assuming the arbitral award is enforceable, Japan’s approach to enforcement does not vary depending on the type of award.
Apart from the factors discussed in 4.6 Challenging Enforcement of Arbitral Awards that a responding party may rely on to challenge an arbitral award, there are no broad categories of arbitral awards that Japanese courts will automatically decline to enforce.
An enforcing party seeking to enforce an arbitral award in Japan will generally take the following steps.
The enforcing party must generally identify the assets against which it wishes to enforce. If the enforcing party does not know where the responding party’s assets are located, it may use Japan’s asset-disclosure procedures or seek court orders requiring banks, governmental agencies, municipalities, and certain other third parties to provide information about the responding party’s assets. These procedures become available after the enforcing party has obtained a court order making the arbitral award enforceable.
The time and cost required for the enforcing party to enforce an arbitral award may vary depending on the circumstances of each case, including the complexity of the case and whether the other party contests enforcement.
Costs
The enforcing party must pay three separate costs to enforce an arbitral award in Japan – the court filing fee, attorneys’ fees, and, possibly, the cost of translation.
Time Required
Court statistics suggest that, in about a third of cases, the enforcing party managed to enforce the award within three months. For cases that took longer, around 15% took up to six months, with 25% requiring an entire year. Only a quarter of the cases took longer than a year, including a small number (3.13%) that continued for longer than five years. Because these figures are historical, the time required in any particular case will depend largely on whether the responding party opposes enforcement.
Once the enforceability order becomes effective, the enforcing party may enforce the award in the same manner as a domestic Japanese judgment.
The grounds for refusing recognition or enforcement of an arbitral award are set out in Article 45(2) of Japan’s Arbitration Act. They are largely the same as those under the UNCITRAL Model Law and the New York Convention. A Japanese court must recognise an arbitral award and issue an enforceability order unless one of the following grounds exists.
For all but the last two of these grounds, the party opposing recognition or enforcement bears the burden of proof. By contrast, the court may itself rely on the final two grounds to deny enforceability.
The Japanese court will not conduct a general review of whether the tribunal correctly decided the facts or the law. Instead, the court’s review will be limited to the statutory grounds discussed above. Regardless, in order to correctly apply those grounds, the court may consider the terms of the award and how the arbitration was conducted.
For an award made in Japan, a party may – no later than three months after it received notice of the award – also ask a Japanese court to set aside the award under Article 44 of Japan’s Arbitration Act. The grounds under Article 44 include: (i) the incapacity of a party or the invalidity of the arbitration agreement: (ii) inadequate notice or the inability of a party to present their case; (iii) an award that goes beyond the scope of the arbitration agreement or beyond the scope of the arbitration itself; (iv) an improperly constituted tribunal or improper arbitral process; (v) non-arbitrability of the dispute under Japanese law; and (vi) the award violating Japanese public policy.
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