Litigation 2019 Comparisons

Last Updated June 20, 2019

Contributed By TMI Associates

Law and Practice

Authors



TMI Associates TMI Associates is one of Japan’s leading litigation law firms, with 58 qualified lawyers in the litigation division, including 35 partners. TMI can form legal teams including lawyers who are also qualified as specialists in related fields, such as medical doctors, architects, accountants and patent attorneys with diverse technological backgrounds. To develop TMI’s litigation strategy, the firm incorporates advice from former judges (including three retired Supreme Court Justices) to assimilate the viewpoints from the bench to the clients’ advantage. It supports clients with overseas disputes, helped by having ten offices overseas (Shanghai, Beijing, Ho Chi Minh, Hanoi, Yangon, Singapore, Shanghai, Phnom Penh, Silicon Valley and London) and most of its attorneys having a good command of English and/or other foreign languages. TMI has handled hundreds of cases, which have included commercial litigation, IP litigation, tax disputes and administrative disputes.

Japan’s legal system is based on civil law. Under the Japanese Constitution, which provides for the separation of powers between the legislature, the executive and the judiciary, statutes passed by the Diet (the sole law-making organ in Japan) are the primary sources of Japanese law. However, court precedents are highly influential in the interpretation of statutes. While the doctrine of stare decisis as known in common law jurisdictions is not applicable per se in Japan, judgments of the Supreme Court have a de facto binding force.

Japanese civil litigation follows an adversarial model in which plaintiffs and defendants exchange written submissions during preparatory proceedings to establish the issues and evidence, and are entitled to cross-examine the witnesses proffered by the opposing party. However, judges are not passive umpires in proceedings, and they tend to actively disclose their impressions to frame critical issues and usually present supplemental questions to witnesses after the parties have completed their examinations. Relatively speaking, Japanese civil litigation relies more on written submissions than on oral arguments from counsel. A verbatim transcript of a hearing is not created and a court clerk will instead create a record which summarises the proceedings.

As Japan has a single, unitary legal system, all courts in Japan are national and there are no separate state or provincial courts. Japan’s court system has three instances. There are five types of courts in Japan: the Supreme Court, eight High Courts (with six branches), 50 District Courts, 50 Family Courts and 438 Summary Courts. The Supreme Court has 15 justices and is the highest court of the land. The Chief Justice is appointed by the Emperor following designation by the Cabinet. The backgrounds of the Supreme Court Justices vary. Typically, career judges comprise about one-third, with the remainder being made up of attorneys in private practice, public prosecutors, bureaucrats, and professors of law. As of September 2018, there are three female Supreme Court Justices. The Supreme Court is divided into three Petty Benches, each consisting of five Justices, and most appeals are adjudicated by one of these Benches. The Grand Bench, which is composed of all 15 Justices, including the Chief Justice, adjudicates appeals which involve material issues of constitutional interpretation.

High Courts and their branches sit in major cities across Japan. In 2005, the Intellectual Property High Court was established as a special branch of the Tokyo High Court. High Court cases are generally handled by a panel of three judges, but some exceptional cases involving intellectual property and antitrust issues may be heard by a panel of five judges. The court of first instance is decided based on the subject matter jurisdiction. District Courts adjudicate civil cases whose amount of controversy exceeds JPY1.4 million; those falling below such threshold are handled by Summary Courts. District Court cases are generally handled by one judge, but certain cases are assigned to a panel of three judges. The Japanese Constitution prohibits the establishment of extraordinary courts, hence there are no administrative courts present in Japan.

The Japanese Constitution requires that trials be conducted and judgments declared in public. For civil litigation, court proceedings are generally made open to the public, although some are closed, most notably preparatory proceedings where the parties and the court organise issues and evidence to prepare for the trial.

Court filings for civil litigation are publicly accessible in the sense that anyone may physically go to a court and request to inspect a case record. Except for some judgments posted on the Supreme Court’s website, court documents are not available electronically. Copying the case record is restricted to the parties to the case and interested third parties. If oral arguments of a case are closed, inspection of the court record will also be restricted in such manner. Furthermore, the court may, upon a party’s request, prohibit anyone other than the parties to the case from inspecting or copying parts of the case record that contain a party’s privacy or trade secrets.

Under Japan’s Code of Civil Procedure (the “CCP”), only lawyers admitted to practise law in Japan (bengoshi) may represent a client before a Japanese court, unless otherwise authorised by a statute. Other licensed professionals may represent a client in very limited cases (patent attorneys (benrishi) for certain patent infringement cases; judicial scriveners (shiho-shoshi) for small claims before a Summary Court). One generally becomes a bengoshi after passing a national bar exam and completing an apprenticeship at the Legal Training and Research Institute of the Supreme Court for one year.

Foreign lawyers, including registered foreign lawyers (gaikokuho-jimu-bengoshi), are not permitted to conduct cases in Japanese courts.

Although third party litigation funding is not specifically prohibited, it is not common in Japan for commercial litigation, nor has there been any substantial discussion regarding this topic. The Japanese government recently announced plans to explore ways to utilise and regulate third party funding as part of its policy to vitalise international arbitration. The Attorney Act prohibits anyone who is not an attorney or a legal professional corporation from acting as an intermediary between a client and an attorney to provide legal representation for the purpose of obtaining compensation. The Basic Rules on the Duties of Practising Attorneys, which are ethical rules issued by the Japan Federation of Bar Associations, prohibit an attorney from sharing fees for his/her services with anyone other than practising attorneys or legal profession corporations, unless permitted by laws or regulations or the rules of the Bar Association to which the attorney belongs, or unless there is a justifiable cause.

In theory, third party funding should be available for any types of lawsuits as there is nothing specifically prohibiting this.

In theory, third party funding should be available to both the plaintiff and defendant as there is nothing specifically prohibiting this.

In theory, there is no minimum or maximum amount for a third party funder to fund as there is nothing that specifically sets such amount.

In theory, there is no restriction on the costs to be provided by a third party funder as there is nothing specifically prohibiting this.

Contingency fees are permitted if they are appropriate and reasonable considering factors such as the economic benefit, the difficulty of the case, and the volume of time and labour required from an attorney. It should be noted, however, that pure contingent fee arrangements are not common in Japan. Typically, a fee arrangement for civil litigation will involve a combination of a retainer fee upon engagement and a contingency fee to be paid upon successful representation.

In theory, there should be no time limit for a party to obtain third party funding as there is nothing that specifically sets such limit.

Parties are not generally required to take any specific actions, such as engaging in alternative dispute resolution, before initiating a civil lawsuit proceeding. Typically, a potential plaintiff will serve a demand letter on the opposing party by using contents-certified mail (a type of letter wherein the post office certifies the content of the letter and its delivery) stating the issues and the claims, before commencing litigation. Such letter is sent as a way to initiate potential settlement discussions, as well as to gauge the opposing party’s likely arguments in the event that the case goes to court. Certain proceedings such as an action related to family law or rent review require the plaintiff to file for conciliation before initiating proceedings in a court.

The statute of limitations for contract claims is currently ten years from when the claim becomes exercisable. Such period drops to five years if the claim arises out of commercial activities. There are also specific types of contract claims which subscribe to a statute of limitations of between one and three years. For tort claims, the relevant time is three years from the time when the victim comes to know of the damage and the identity of the perpetrator. Tort claims are also time-barred after 20 years from the time of the tort.

The amended Civil Code, which will come into full force in April 2020, has simplified the statutes of limitations that apply to civil suits. Under the amended Civil Code, contract claims have a statute of limitations of five years running from the time when the rights holder comes to know that the right is exercisable, and will be extinguished ten years from the time when the right could have been exercised. For tort claims, the current statute of limitations will remain in place. However, the amended Civil Code extends the statute of limitations for any claims arising from harm to a person’s life or body, whether based on contract or tort. The statute of limitations for such claims will be five years from the time when the victim comes to know of the damage and the identity of the perpetrator, and also will be time-barred after 20 years.

In cases concerning an individual, the courts in Japan have general jurisdiction if the defendant is domiciled or has residence in Japan. In cases where the defendant is a corporation, the court has general jurisdiction if the corporation’s principal office or business office is in Japan, or if its representative is domiciled in Japan (in the case where such office either does not exist or is unknown). Furthermore, the CCP provides for 12 categories where the courts in Japan have specific jurisdiction depending on the nature of the claim. By way of example, an action demanding performance of a contractual obligation may be filed in Japan if the place for performance of the obligation is within Japan. The courts in Japan will also have jurisdiction over an action relating to a tort if the tort took place in Japan (excluding cases where it was ordinarily unforeseeable for the outcome of the tort that took place in a foreign country to have occurred in Japan). Jurisdiction can also be established by written agreement (including electronic or magnetic records) or by appearance. The courts, however, may dismiss an action without prejudice, under special circumstances, by considering factors such as the nature of the case, the defendant’s burden to make an appearance and the location of the evidence, even if they would otherwise have jurisdiction based on the provisions of the CCP.

To initiate a lawsuit in Japan, a plaintiff must file a complaint with a court along with material documentary evidence, a power of attorney, a certificate of commercial registration if a party is a corporate entity, revenue stamps to pay the filing fee, and postage stamps. A complaint must state the parties and their statutory agents (such as a representative director of a corporation), along with the object and statement of the claim. A plaintiff may amend the claim and the statement of the claim before the conclusion of oral arguments if there is no change to the basis of the claim, as long as such amendment does not substantially delay the court proceedings.

Under Japan’s CCP, the authority to effectuate service of process lies with the court, not the parties. Once a court confirms that a complaint meets the required formalities, a court clerk serves it at the defendant’s domicile, residence, business office or other office of the defendant, usually by post. Upon a motion, a court clerk may make service by publication if such places of service for the defendant are unknown and service by other means, such as registered mail, is ineffective.

To serve a foreign party, a court needs to commission the government in that foreign state or the Japanese ambassador, minister or consul stationed in that state to complete the service through formal diplomatic channels and in accordance with applicable treaties, such as the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters and the Convention on Civil Procedure. With respect to foreign jurisdictions lacking diplomatic relationships with Japan, documents are served by publication, which becomes effective six weeks after the notice has been posted at the respective court.

If a defendant does not appear at the first oral proceeding without having submitted an answer or any other brief beforehand disputing the claim or offering a defence, the court may deem that the defendant has admitted the plaintiff’s factual allegations, conclude the proceedings and render judgment in the plaintiff’s favour.

The Act on Special Provisions of Civil Court Procedures for Collective Recovery of Property Damage of Consumers enables consumers to recover damages collectively for certain claims concerning consumer contracts. The system under such Act is designed so that consumers who want to opt-in may recover damages in a simplified and prompt manner. First, a Specific Qualified Consumer Organisation (SQCO), certified and regulated by the government, files an action for declaratory judgment on common obligations. The point of this stage is to seek to determine whether a business operator has an obligation to pay money for property damage caused to numerous consumers in connection with consumer contracts, based on factual and legal causes common to such consumers. Once the common obligation is judicially established, the procedure then advances to the second stage which is known as a “simple determination proceeding”. Here, the SQCO will give individual notice to known consumers as well as public notice concerning the court proceedings to redress damages based on the common obligation. Consumers will also be notified of the method for delegating to the SQCO the powers necessary to ascertain the amount of damages specific to individual consumers. It should be noted that this system does not allow for consumers to collectively recover the following damages as they must be determined individually for a specific consumer: secondary losses, loss of profit, damages from harm done to a person’s life or body, and emotional suffering.

Claims concerning consumer contracts that can be brought as the basis for establishing the existence of a business operator’s common obligation are limited to the following five claims: (i) claim for performance of a contractual obligation; (ii) claim pertaining to unjust enrichment, (iii) claim for damage based on non-performance of a contractual obligation; (iv) claim for damage based on a warranty against defects; and (v) claim for damage based on a tort arising from the provisions of the Civil Code.

Attorneys are not explicitly required to provide clients with a cost estimate of the potential litigation at the outset. However, when an attorney undertakes a case, the Basic Rules on the Duties of Practising Attorneys require attorneys to explain their fees and the cost of the case based on information obtained from the client, and prepare a written agreement incorporating provisions regarding the same.

Except for the two types of provisional remedies (i.e. provisional seizure orders (karisashiosae) and provisional disposition orders (karishobun)) available under Japan’s Civil Provisional Remedies Act (see 6.1 Circumstances of Injunctive Relief), the CCP does not provide for an interim application or motion before trial or substantive hearing of a claim.

A party may request a court to issue an interlocutory judgment on some of the issues in dispute before the final judgment is rendered, although the court has discretion on whether or not to issue the same. A court may issue an interlocutory judgment regarding a distinct statement of claim or an affirmative defence. A court may also issue an interlocutory judgment regarding the statement of claim when there is a dispute regarding the statement of claim and the monetary amount associated therewith. The CCP does not provide for a specific timing or procedure for rendering interlocutory judgments. The legal standard for issuance of an interlocutory judgment is the same as that for a final judgment; namely, whether a court has reached the level of conviction whereby an ordinary person could not interject doubts regarding the veracity of the allegation at issue.

There is no procedure under the CCP that allows the other party’s case to be struck out before trial or a substantive hearing of the claim. In particular, there is no procedure that is similar to a motion to dismiss for failure to state a cause of action.

Japan’s CCP does not provide for any dispositive motions before trial, such as a motion for summary judgment.

Interested parties not named as a plaintiff or defendant are permitted to join a pending lawsuit in one of three ways: intervention as an independent party, intervention as a co-party, and intervention as an assisting intervener.

A third party may file a motion to intervene as an independent party if he/she would be prejudiced depending on the outcome of a lawsuit, or if he/she claims he/she is entitled to the subject matter of a lawsuit in whole or in part.

A third party may file a motion to intervene as a co-plaintiff or co-defendant if the subject matter of a lawsuit should be determined in a single form both for one of the original parties and for a third party. In such case, the third party may intervene in the suit as a co-party.

A third party may also file a motion to intervene as an assisting intervener to provide support and assistance for either party in a pending lawsuit if he/she has a legitimate legal interest in the outcome of such litigation.

A defendant may petition the court to order a plaintiff to provide security for court costs if the plaintiff is not domiciled in Japan or does not have a business office in Japan. A defendant filing the petition may refuse to appear until the plaintiff provides security. If a plaintiff fails to provide security by the ordered deadline, the court may dismiss the action without prejudice unless the plaintiff provides security before the judgment is rendered. It should be noted that security for court costs does not cover attorney fees.

As mentioned in 4.1 Interim Applications/Motions, the CCP does not provide for interim applications or motions before trial.

As mentioned in 4.1 Interim Applications/Motions, the CCP does not provide for interim applications or motions before trial. Specifically, the CCP does not provide for any proceedings to be conducted on an expedited basis.

Unlike the situation seen in the United States and other countries, Japan does not have a discovery system whereby a party can obtain documents, locate evidence and identify witnesses in a thorough manner. Regarding how a party obtains and submits evidence to the court under the CCP, please refer to 5.4 Alternatives to Discovery Mechanisms.

There is no discovery procedure in Japan; however, there are several means to obtain the evidence possessed by a third party. Please refer to 5.4 Alternatives to Discovery Mechanisms.

There is no discovery procedure in Japan. For more information on how a party obtains and submits evidence to the court under the CCP, please refer to 5.4 Alternatives to Discovery Mechanisms.

Under the CCP, each party is basically required to obtain evidence by itself to establish or disprove the merits of the plaintiff’s claim and must submit such evidence to the court together with the party’s statement of claim or counterargument. If the defendant disputes the allegations made in the complaint, the case is then typically referred to a preparatory proceeding to sort out the relevant issues through the exchange of briefs and documentary evidence. Through the preparatory proceeding, the court will identify the important facts as well as the issues that need to be proven by testimonial evidence. At the end of the preparatory proceedings, the court decides, based on the parties’ motions, the factual witnesses and expert witnesses to be called upon trial, and the witnesses are then examined in a courtroom open to the public. 

Although there is no broad pre-trial discovery system in Japan, there are the following three means which parties often use under the CCP to obtain documentary evidence from either the opposing party or a third party, as the case may be:

  • Inquiry to the Opposing Party: a party may make enquiries by means of providing a document to the opposing party seeking its written response with regard to the matters necessary for preparing allegations or proof (although there is no meaningful sanction against a non-response to such document);
  • Commission to Send Document: a party may request the court to commission the holder of the document to send the document and if the court finds the request is well grounded, the court will carry out the commission;
  • Petition for Order to Submit Document: a party may file with the court a petition for an order against an opponent or a third party to submit a document by clarifying the following items as well as the necessity to file a petition for the order;
    1. an indication of the document;
    2. the purport of the document;
    3. the holder of the document;
    4. the facts to be proven by the document; and
    5. the grounds for the obligation to submit the document.

If the court finds the petition is well grounded, the court shall make an order toward the document holder.

Attorney-client privilege and attorney work-product privilege are not available in Japan regardless of whether an attorney is an external counsel or in-house counsel. Japanese attorneys may refuse to disclose any facts learned while performing their duties and may refuse to produce any document containing such facts on the ground of the attorney’s duty of confidentiality, which practically functions in lieu of a privilege under the CCP.

If a petition for order to submit document is filed, the holder of the document must generally produce the document unless such document falls into any of the following categories:

  • a document stating matters by which (i) the holder of the document could face criminal prosecution, (ii) the holder of the document could be found and sentenced as guilty, or (iii) the holder of the document could be defamed;
  • a document concerning a secret in relation to a public officer’s duties, which, if submitted, is likely to harm the public interest or substantially hinder the performance of his/her public duties;
  • a document stating a fact that a professional, such as a doctor, attorney, notary, etc., has learnt in the course of his/her duties and which should be kept confidential and is not released from the duty of confidentiality;
  • a document prepared exclusively for use by the holder thereof (excluding a document held by the state or a local public entity, which is used by a public officer for an organisational purpose); or
  • a document concerning a suit pertaining to a criminal case or a record of a juvenile case, or a document seized in any such case.

Japan’s Civil Provisional Remedies Act provides for two types of provisional injunctive remedies. First, a provisional seizure order (karisashiosae) may be issued to attach the respondent’s property to secure an applicant’s monetary claim. Second, a provisional disposition order (karishobun) may be issued to preserve the status quo of disputed subject matter or to establish an interim relationship between the parties.

To obtain an order of provisional seizure or provisional disposition, an applicant must show a prima facie case for the claims to be preserved and the practical need for preserving them in an ex parte procedure. To obtain a provisional disposition order to establish an interim relationship, an applicant must show a prima facie case for the claims to be preserved and the need to avoid any substantial detriment or imminent danger that would otherwise occur to the applicant regarding the relationship of the rights in dispute, and the court is required to hold oral arguments or a hearing at which the respondent may be present. In any sort of provisional remedy cases, an applicant must also provide security as a condition for the court to issue an order. The court determines the amount of the required security at its own discretion by taking into consideration the amount of the claim, the value of the assets to be provisionally seized and other matters.

There are no special proceedings under which an injunctive relief case can be processed more expeditiously than normal proceedings. If an applicant’s claim is simple and can easily be proven by sufficient documentary evidence, an order of provisional seizure or provisional disposition to preserve the status quo may be obtained within a few days after filing the petition; however, in the case of a provisional disposition order to establish an interim relationship, the proceeding tends to last far longer because the court is required to hold oral arguments or a hearing at which the respondent may be present.

In practice, an applicant can obtain an order of provisional seizure or provisional disposition for disputed subject matter in an ex parte procedure. In order to obtain a provisional disposition order to establish an interim relationship between the parties, oral arguments or a hearing at which the respondent may be present are basically required unless the circumstances are such that the objective of the petition for such provisional disposition cannot be achieved if such proceedings are held.

If the respondent can later discharge the injunctive relief, the applicant can be held liable for damages suffered by the respondent. Thus, the applicant must also provide security as a condition for the court to issue an order. The court determines the amount of the required security at its own discretion by taking into consideration the amount of the claim, the value of the assets to be provisionally seized and other matters.

Obtaining a provisional injunctive remedy order against assets outside Japan is theoretically possible as the Japanese courts will have jurisdiction to adjudicate a petition seeking an order for a provisional injunctive remedy if an action on the merits may also be filed with a court in Japan; however, given the difficulties involved in enforcing court orders outside of such court’s jurisdiction, it is not practical to attempt to enforce a provisional remedy order from a Japanese court against assets located outside Japan.

A provisional injunctive remedy order can be obtained only against a respondent or an asset owned thereby. In the case where there is an asset under the name of a third party, which in fact belongs to the respondent, the applicant can obtain a provisional remedy order against such asset if the applicant succeeds in proving its real owner is the respondent. If a provisional seizure order is issued in relation to a respondent’s claim for payment of money, the debtor of the respondent’s claim is prohibited from paying such debt.

If a respondent fails to comply with an order for provisional seizure or provisional disposition to preserve the status quo of any disputed subject matter, the effect of such action by the respondent shall be void after the applicant obtains Title of Obligation (saimumeigi), such as through an upholding judgment, and enforces the Title of Obligation. If a respondent fails to comply with an order of provisional disposition to establish an interim relationship between the parties regarding any disputed subject matter, the applicant can enforce the order in cases such as a provisional disposition order to deliver a movable property, or can obtain an order requiring the respondent to pay a certain amount of money to the applicant until the respondent obeys its obligations under the provisional disposition order (such as not to build a building on certain land).

Under Japanese law, contempt of court is not available as a procedure to enforce a court order.

The first date of oral argument, where the complaint and the answer will be formally presented to the court, generally takes place within 30 days from the date on which the complaint was filed. The defendant is usually required to submit an answer one week before the first oral argument. If the defendant disputes the allegations in the complaint, the case is then referred to a preparatory proceeding to resolve the issues through an exchange of briefs and documentary evidence. At the end of the preparatory proceedings, the court will review the parties’ motions and decide upon the factual witnesses and expert witnesses to be called upon in the trial, the order of their questioning and the time each party is to be given for questioning. Witnesses are examined in a courtroom open to the public. The parties then typically file final briefs before the case is closed. The court usually renders its judgment within two months of the conclusion of oral arguments, but may take longer depending on the complexity of the case.

The CCP does not provide for a shorter hearing in relation to interim motions or applications.

The court and the parties generally discuss case management issues during preparatory proceedings; however, some judges favour designating a separate date for a scheduling conference to confirm the relationship between the issues and evidence, and to discuss other matters concerning the process of the lawsuit. For a very complex case involving a number of issues, a court may formulate a plan for trial, specifying certain cut-off dates to sort out the issues and evidence, examine witnesses and schedule the conclusion of oral arguments and the rendering of a judgment.

There are no jury trials for civil cases in Japan.

Unlike the situation in common law countries, there are generally no strict rules of evidence considering the admissibility of evidence that cover a broad area of civil suits in Japan. The examination and evaluation of evidence is entirely left up to the judge’s discretion. In addition, the court has the discretion to reject evidence if there was a delay in its submission. The level of such delay is decided on a case-by-case basis, but this threshold is quite high in practice.

Expert testimony is permitted. When expert testimony is made, it becomes part of the evidence in the case. Parties either request the court to appoint an expert to provide an expert opinion or submit an expert opinion obtained from an expert privately retained by that party. In other words, the court cannot seek and appoint an expert opinion without such request from the parties. However, the court may, upon consulting with the parties, appoint a technical adviser to provide explanations based on his/her expertise in order to clarify certain technical matters related to the case. It should be noted that, in contrast with expert witnesses, the explanations of technical advisers cannot become part of the evidence for the case unless either party submits the same as evidence and it is duly accepted by the court.

Hearings are basically open to the public. Transcripts of witness examinations form part of the court documents and are open to the public (see 1.3 Court Filings and Proceedings).

The level of intervention by a judge during the hearing depends on the stage of the proceedings. Civil litigation cases in Japan progress by way of regular hearings that take place every one or two months. Earlier stages of the case are devoted to sorting out the issues and evidence through the exchange of written submissions by the parties. At this stage, judges are actively involved as the CCP authorises the court to control the proceedings by asking questions to clarify matters related to the lawsuit and by encouraging the parties to submit proof regarding factual or legal matters. In the later stages where witnesses are called to testify, judges tend to allow counsel to complete their direct and cross-examinations, and only thereafter does the judge intervene in the process by asking supplemental questions to a witness. However, some judges do not hesitate to interject and provide their own questions during direct or cross-examinations in order to clarify the record.

Judgments are not given at the hearing unless the case is extremely simple and clear-cut based on the evidence. The judge will normally set another date (generally within two months after the conclusion of oral arguments) to pronounce the judgment.

Statistics provided by the courts show that, in 2016, civil litigation at the District Courts level took 8.6 months on average to be completed; however, 7,789 cases had been pending for over two years, and 349 cases for over five years. There are no special or fast-track proceedings under which a case can be processed more efficiently than normal proceedings.

Court approval is not in itself required to settle a lawsuit in court, except to the extent that the settlement terms will be drafted by the court. If a settlement is recorded in the court’s record, then it will have the same effect (i.e. res judicata) and legal enforceability as a final judgment.

The parties are also free to settle a lawsuit outside of court without any court intervention or approval. While the parties may withdraw the lawsuit once they reach an out-of-court settlement agreement, if a party does not comply with the out-of-court settlement terms, then the other party will need to file another lawsuit to enforce such terms because out-of-court settlements lack res judicata or legal enforceability.

Settlement discussions in court take place outside of the courtroom and are closed to the public. The terms of a settlement in court can remain confidential if a court grants a party’s request for a secrecy protection order based on privacy or trade secrets.

Out-of-court settlements with confidentiality provisions bind the parties to keep the details of the settlement confidential.

Settlement agreements that are made in court and taken on the record are enforceable in the same way as a final judgment. Enforcing out-of-court settlements, on the contrary, would require the filing of a new lawsuit to obtain a judgment based on the terms of the agreement (see 8.1 Court Approval).

A settlement agreement will be void due to mistake if the factual basis of the settlement is materially incorrect due to being contrary to the recognition of one of the parties thereto. A party may be able to assert that the settlement is void during the process of executing the settlement or may commence a new lawsuit to ask the court to confirm the invalidity of the settlement.

In most cases, a successful plaintiff can obtain a judgment ordering the defendant to pay a certain amount of money or deliver certain property, whichever is sought by the plaintiff. Injunctions are available in some cases, such as those involving patent infringement. Declaratory judgments are also available in some cases if it is an appropriate remedy to resolve the legal dispute pending between the parties. A successful defendant can obtain a judgment to deny or dismiss the plaintiff’s claims.

The principle of res judicata applies with regard to a cause of action that a plaintiff has requested the court to adjudicate. It precludes a claim based on the same cause of action from being litigated in other proceedings. Res judicata also applies to a court’s judgment regarding the validity of a claim asserted as a set-off defence, thus such claim cannot be pursued in other proceedings.

Damages are compensated against losses that are proximately caused by the breach of an obligation or a tort. Under Japanese law, recoverable damages are compensatory in nature, and punitive damages are not available as the Supreme Court of Japan has ruled that they would contravene Japan’s public policy. While there are no explicit rules limiting the maximum amount of damages, a court may rule that excessive liquidated damages are void under Japan’s public policy.

The plaintiff must prove both the occurrence and the monetary amount of the damage by providing appropriate evidence. If damage is found to have occurred, but if it is extremely difficult to prove the amount of damage that occurred due to its nature, the CCP allows the court to ascertain the amount of damage that is reasonable, based on the entire import of oral arguments and the results of the examination of evidence. Statutes sometimes provide for a presumed amount for damages, such as for damages suffered due to unfair competition.

In Japan’s civil litigation system, a plaintiff usually includes a claim for interest which accrues from the date when a defendant has become delinquent in performing its obligation, which is the specified due date for contract claims, and the time of the tortious act for tort claims. The successful party is entitled to collect a statutory interest rate (or any other rate agreed by the parties) from such date until the date when the defendant pays in full. The statutory interest rate is 6% in the case of obligations arising out of commercial transactions and 5% in other cases. Under Japanese law, there is no conceptual distinction between pre-judgment interest and post-judgment interest.

After a plaintiff obtains a judgment for a monetary claim, the plaintiff files a petition for an execution order with the court of execution against the defendant’s assets, such as real estate, claims and movable property. If the court of execution finds that the petition meets the necessary elements, it issues a commencement order and declares that the defendant’s assets shall be seized for the plaintiff. The court then sells the seized real estate or movable property in an auction and distributes the money to the plaintiff and other competent creditors. If the defendant’s claim is seized, the plaintiff may collect it directly from the debtor of such claim or receive a distribution from the deposit the debtor paid.

Judgment for delivery of property can be enforced by a method in which a court execution officer releases the property from the defendant's possession and causes the plaintiff to acquire possession of such property.

In cases where the nature of the obligation does not permit the enforcement of specific performance, if it is an obligation to perform an act, the plaintiff may request the court to cause a third party to perform such act at the defendant’s expense. The court of execution may order the defendant to pay a certain amount of money that is found to be reasonable for securing performance of the obligation, based on the period of the delay or immediately if the defendant fails to perform the obligation within a certain period that is found to be reasonable.

Courts in Japan may render an execution judgment to enforce a final and binding foreign judgment without investigating the appropriateness of the foreign judgment itself, if a party shows that the foreign judgment meets all of the following requirements:

  • the jurisdiction of the foreign court is recognised under laws or regulations or conventions or treaties;
  • the defeated defendant has received service (excluding service by publication or any other service similar thereto) of a summons or order necessary for the commencement of the suit, or has made appearance without receiving such service;
  • the content of the judgment and the court proceedings are not contrary to public policy in Japan; and
  • a mutual guarantee exists.

There are two stages of appeal in Japan for judgments by the District Court. The non-prevailing party may first file an appeal to the High Court, and the non-prevailing party of the High Court’s judgment may file a final appeal to the Supreme Court.

The appellant at the High Court may plead both factual and legal issues as grounds of appeal.

On the contrary, the Supreme Court only examines questions of law and the grounds for final appeal are limited to violations of the Constitution or certain grave procedural errors. However, when there are no grounds for a final appeal, a party may still petition the Supreme Court to accept a case as a final court of appeal to provide a discretionary review on material matters concerning the interpretation of laws and regulations.

Both an appeal of a judgment from the District Court and from the High Court must be filed within two weeks of the receipt of the judgment. The reasons for the appeal needs to be filed within 50 days of either: (i) the filing of the appeal from a District Court’s judgment; or (ii) the receipt of an appeal filing notice from a High Court judgment.

The High Court will re-hear both the legal aspects and the facts of the case but it will rarely provide another opportunity to examine a witness since all of the records during the trial at the first instance will be passed on to the High Court. It is generally discouraged to assert new facts in the appeal proceedings unless they were found or came into existence after the last hearing in the District Court proceedings, or if the party introducing the new facts only in the appeal proceedings can show sufficient reasons to excuse the delay. It is comparatively easy to raise legal issues in the appeal proceeding than to raise factual issues; however, the reasoning for not raising such legal argument during the first instance may need to be explained. 

The Supreme Court will review the decision of a High Court only from a legal perspective.

The court may grant limited parts of an appeal and deny the remaining parts.

Appellate courts have the power to sustain or discard the original judgment. High Courts usually do not remand the case to the court below, but the Supreme Court often does so if it determines that issues of fact need to be further adjudicated.

Under Japanese law, each party bears their respective attorneys’ fees, except in some tort cases where a party is awarded a certain percentage (generally 10%) of the awarded damages on the merits as recoverable attorney fees. With respect to other court costs, such as court fees and other expenses, the general rule is that the non-prevailing party must bear the burden. However, a court may, at its discretion, apportion part or all of the burden to the other party in cases where the judgment was merely a partial defeat to the non-prevailing party, or where either party caused a delay in the litigation or performed unnecessary actions to pursue or defend a claim.

The non-prevailing party is required to reimburse the prevailing party for the costs of the litigation, such as filing fees, postage, and travel expenses for witnesses coming to testify at trial.

No appeal to the court of second instance may be filed independently against a judicial decision on the burden of court costs.

As stated above, a court may shift part or all of the burden to the other party if the judgment was merely a partial defeat to the non-prevailing party, or if either party caused a delay in the litigation or performed unnecessary actions to pursue or defend a claim.

Interest is not awarded on costs.

In Japan, courts and legal practitioners generally view alternative dispute resolution (ADR) proceedings in a positive manner as they are often more efficient and less costly than litigation.

The most popular ADR method in Japan is civil conciliation in the court.

In addition, ADR is now being viewed more favourably in certain types of disputes, specifically those that entail specific technical knowledge such as the development of enterprise information systems and trading of financial instruments. Instead of judges who may not be familiar with the technical knowledge necessary to better understand the dispute, experts who have vast professional knowledge and experience in the specific field will serve as mediators. With their technical qualifications, they are more capable of effectively assisting the parties in reaching a negotiated settlement.

ADR is compulsory for certain types of legal issues. To cite a few examples, any actions regarding an increase or decrease of rent or involving personal status and family affairs require the filing of a petition for conciliation before a party may bring the case to the court. If a claim or action is filed directly with the court without first filing a petition for conciliation, the court will refer the case to conciliation.

For other general matters, ADR is not compulsory and the parties have the discretion on whether or not to resort to ADR. During the court procedure, a court may suggest settlement or mediation to the parties, but this is not compulsory and the parties are free to accept or reject the court’s suggestion.

However, there is one major exception to the above-mentioned general rule. Under the Financial Instruments and Exchange Act, when mediators request financial institutions to comply with ADR proceedings in a certain ADR body, the financial institutions are prohibited from refusing to comply with such requests without a justifiable reason. Further, if a mediator proposes a settlement agreement in the proceeding, the financial institutions must respect such proposal.

There are numerous certified ADR institutions in Japan that offer and promote ADR which are operated by both public and private bodies. The creation of ADR institutions is governed by the provisions of the ADR Act which was enacted in 2004 to facilitate the utilisation of ADR across the country. Under this Act, all ADR institutions must be certified by the Minister of Justice by showing proof of their compliance with the requirements and standards under the ADR Act.

Traditionally, the court already has well-organised mediation systems and continuously deals with large numbers of mediation cases.

Arbitrations conducted in Japan are governed by the Arbitration Law, together with any institutional rules that the parties may have agreed to in their arbitration agreement. The Arbitration Law is based on the UNCITRAL Model Law on International Commercial Arbitration.

Arbitration awards have the same effect as final and binding judgments rendered by courts (irrespective of whether or not the place of arbitration is in Japan); however, the party which wants to enforce the arbitral award needs to file an application with a Japanese court to obtain an execution order which will allow its civil execution under the Civil Execution Act in Japan.

Any matter may be referred to arbitration in Japan as long as it involves a legal claim arising from a civil dispute and both parties have agreed to refer it to arbitration. However, some arbitration institutions may have limitations on the subject matter that may be arbitrated at such institution.

The parties may file a petition with a court in Japan to set aside an arbitral award if such award was not valid in accordance with the Arbitration Act.

When a petition for setting aside an arbitral award is submitted by either party, the court will mainly investigate whether the procedural requirements in relation to the arbitral award were met. These include whether: (i) the party was granted an opportunity to participate in the arbitration procedure; (ii) the award contained a decision on matters beyond the scope of the arbitration agreement or of a petition in the arbitration procedure; and (iii) the composition of the arbitral tribunal or the arbitration procedure was in violation of the laws and regulations of the country in which the arbitration was held. The court refrains from determining whether the arbitration award was appropriate from a substantive legal perspective, except in instances where the content of the arbitral award is contrary to public policy in Japan.

Any party that intends to enforce a domestic or foreign arbitral award must file an application with a court to obtain an execution order that will allow for civil execution in Japan. The court may issue an execution order except in cases where it has determined that the award was not valid in accordance with the Arbitration Act.

In determining whether an award is valid in accordance with the Arbitration Act, the court shall ascertain whether the procedural requirements in relation to the award were complied with. These include ensuring that: (i) the party was granted opportunities to participate in the arbitration procedure; (ii) the award does not contain a decision on matters beyond the scope of the arbitration agreement or of a petition in the arbitration procedure; and (iii) the composition of the arbitral tribunal or the arbitration procedure was in accordance with the laws and regulations of the country in which the arbitration was held. The court refrains from determining the appropriateness of the arbitration award from a substantive legal perspective unless the content of the arbitral award is contrary to public policy in Japan.

TMI Associates

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6-10-1 Roppongi,
Minato-ku,
Tokyo 106-6123,
Japan

+81 (0)3 6438 5511

+81 (0)3 6438 5522

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TMI Associates TMI Associates is one of Japan’s leading litigation law firms, with 58 qualified lawyers in the litigation division, including 35 partners. TMI can form legal teams including lawyers who are also qualified as specialists in related fields, such as medical doctors, architects, accountants and patent attorneys with diverse technological backgrounds. To develop TMI’s litigation strategy, the firm incorporates advice from former judges (including three retired Supreme Court Justices) to assimilate the viewpoints from the bench to the clients’ advantage. It supports clients with overseas disputes, helped by having ten offices overseas (Shanghai, Beijing, Ho Chi Minh, Hanoi, Yangon, Singapore, Shanghai, Phnom Penh, Silicon Valley and London) and most of its attorneys having a good command of English and/or other foreign languages. TMI has handled hundreds of cases, which have included commercial litigation, IP litigation, tax disputes and administrative disputes.

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