Shipping 2024 Comparisons

Domestic Laws

Japan has ratified most of the major maritime conventions, such as the Hague-Visby Rules, the latest version of the Limitation of Liability for Maritime Claims (LLMC) Convention 1976 with its 1996 Protocol, the 1992 Civil Liability for Oil Pollution Damage (CLC) Convention and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund), and relevant rules and regulations. In maritime and shipping practice in Japan, both general civil and commercial law and specific shipping laws/legislation apply, and they are generally based on these conventions. The main domestic laws related to shipping matters are:

• the Civil Code;
• the Commercial Code;
• the Act on International Carriage of Goods by Sea (JCOGSA) incorporating the Hague-Visby Rules;
• the Limitation of Liability Act incorporating the latest version of the Convention on Limitation of Liability for Maritime Claims (LLMC) 1976 with its 1996 Protocol; and
• the Act on Liability for Oil Pollution Damage incorporating the 1992 CLC Convention and Fund Convention, the International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunker) 2001 and the Nairobi International Convention on the Removal of Wrecks 2007; and
• the Mariners Act

Common Maritime and Shipping Claims

One of the common maritime and shipping claims filed in the Japanese jurisdiction is related to cargo claims between carriers and shippers under carriage contracts and/or bills of lading. The claims are essentially classified into contractual claims and the shippers’ claims are successful in the event that the carriers can be proven to be in breach of the carriage contract. The cargo claims for domestic sea carriage and international sea carriage are governed by the Commercial Code and the JCOGSA respectively.

Another key type of claim is a tort claim under the Civil Code, which can be broadly used in cases where the victims attempt to bring a claim for damages against the perpetrators. An example of this is where the owner of a vessel collided with another vessel and would be entitled to make tort claims for damages against the owner of the other vessel. It is worth noting that some general rules of the tort claim under the Civil Code are amended in line with the nature of maritime and shipping claims, such as the statute of limitations.

System of Port State Control

Japan has entered into a memorandum of understanding on port state control (PSC) in the Asia-Pacific region (the “TOKYO MOU”). The TOKYO MOU has been used to conduct concentrated inspection campaigns with the other PSC MOUs. Under the New Inspection Regime of the TOKYO MOU, vessels are categorised as either High-Risk Ships, Standard-Risk Ships or Low-Risk Ships, based on a consideration of the vessel type and age, flag, recognised organisation, and the number of deficiencies and detentions.

Vessels are detained by the PSC in the event that the condition of the vessel or its crew fails substantially to satisfy the requirements of the applicable conventions to ensure that the vessel can proceed to sea with no danger to the vessel or persons on board and no threat of harm to the marine environment. The Ministry of Land, Infrastructure, Transport and Tourism publishes a list of the vessels detained in Japan on its website.

Maritime Casualty Response

Where maritime casualties such as grounding or pollution occur in the Japanese jurisdiction, the Japan Coast Guard and Japan Transport Safety Board have powers to deal with the casualties separately. A coastguard officer may take necessary measures, such as control of a vessel’s movement, in the event of maritime casualties including seafarers. The Japan Transport Safety Board may conduct interviews with the parties involved in the maritime casualty, carry out an on-site survey and demand that the parties submit incident reports for the purpose of investigations into the maritime casualties.

Registration procedures for Japan-flagged vessels are mainly regulated by the Ship Act (Sempaku-ho). For vessels registered in Japan, there are two ways of registration, each of which has a different purpose and competent authority. The first, commercial registration (toki), is under the control of the Legal Affairs Bureau and records ownership, mortgages, lease rights, ship administrators, etc. The second, administrative registration (toroku), is under the control of the District Transport Bureau or Shipping Bureau, which are subordinated to the Ministry of Land, Infrastructure, Transport and Tourism and records the details of the hull, the owner, the port of registry, etc. The certificate of nationality is issued upon administrative registration.

Privileges of Japanese Ships

The privilege to fly a Japanese flag is granted only to Japanese vessels, and in turn there is an obligation always to show that flag. Only Japanese-flagged vessels are able to call at closed ports or conduct coastal transportation of cargos and passengers.

For a vessel to be eligible to fly a Japanese flag, its owner must be:

• a Japanese authority;
• a Japanese citizen;
• a company incorporated under the laws of Japan, with all its representatives and at least two thirds of its executive officers being Japanese nationals; or
• an entity other than a company as described in the preceding point, in which all the representatives are Japanese nationals.

As long as either of these last two requirements is met, the owner may own Japanese-flagged vessels, even if its shares are held by a foreign individual or company.

The details of the hull, the mortgage and the identity of the owner upon delivery may be recorded on the commercial registry for vessels under construction.

Provisional Certificate of Nationality

If the certificate of nationality of a vessel ceases to be valid while the vessel is anchored in a foreign port, or if a vessel is delivered to a place outside the jurisdictional district of the maritime authority that has jurisdiction over the registered port (including cases outside Japan), a provisional certificate of nationality may be issued. Any such certificate will expire in one year or less if the certificate is issued in a foreign country, and six months or less if it is issued in Japan. In any case, however, it will expire upon arrival of the vessel at the registered port.

Dual Registration

Dual registration is not allowed for Japanese vessels (including in cases of both charter-out and charter-in). However, in Japan, a special system called “maru-ship” is permitted, and when a Japanese vessel is bareboat-chartered to a foreign company, and the bareboat-charterer leases back the vessel to the original Japanese owner in the form of a time charter, foreign seafarers are allowed to be on board.

Competent Authority for Registration of Mortgages

Mortgages on Japanese vessels are recorded in a commercial registry and maintained by the branch office of the Legal Affairs Bureau, which has power over the location of the registered port (in the case of the vessels under construction, and the location of the manufacturer).

Documentary Requirements for Registration of Mortgages

The registration of a mortgage shall be applied to be recorded in the commercial registry with the original or certified copy of the ship mortgage agreement. In Japan, there is no designated form of the agreement. The registration of a mortgage on a ship under construction shall also be recorded in the registration after the delivery of the vessel without any additional application. The maturity date is not required to be stated, but the amount or the maximum amount of the principal must be specified. The secured claim must be owed by the registered mortgagee itself, and an agent or trustee for the benefit of lenders may not be registered as the mortgagee. Mortgages on several vessels securing the same single claim are also permitted. A registration and licence tax of four thousandths of the amount of the secured claim will be imposed in order to register the mortgage.

Certificate of Administratively Registered Matters and Registered Book

The certificate of administratively registered matters of a vessel can be obtained by anyone. Regardless of the location of the registered port, any District Transport Bureau or Shipping Bureau is available for inquiries. The certificate describes the status of ownership, but not the status of the mortgage.

Certificate of Commercially Registered Matters

The certificate of commercially registered matters can also be obtained by anyone. Not only the status of ownership but also the status of mortgages is described thereon. Such a request for issuance may be made only to the competent branch office of the Legal Affairs Bureau. However, only interested parties are allowed to inspect collateral documents such as mortgage agreements.

Japan has ratified major maritime conventions covering pollution, such as the 1992 CLC Convention and the Fund Convention, MARPOL 73/78 with its Annexes, the International Convention for the Safety of Life at Sea (SOLAS), the Bunker Pollution Convention 2001 and other relevant rules and regulations, as well as conventions covering wreck-removal, such as the Nairobi Convention. These conventions are incorporated into or codified by Japanese local laws and regulations.

In 2020, the Nairobi Convention and the Bunker Pollution Convention 2001 were ratified, resulting in amendments to the Act on Liability for Oil Pollution Damage and other related domestic laws, which came into force on 1 October 2020. The amendments to the Act on Liability for Oil Pollution Damage mainly purport to bring this legislation into line with the conventions. The gist of the amendments lies in:

• expanding the scope of the vessels which are required to obtain compulsory insurance;
• admitting a direct claim against an insurer for compensation for loss and damage arising from bunker oil or wrecks;
• limiting the defence arguments which may be made by the insurer, other than the defences which that owner may have been entitled to invoke against the claimant; and
• recognition and enforcement of judgments made by the state parties under the Bunker Pollution Convention 2001.

Japan has ratified the 1910 Collision Convention and the Convention on the International Regulation for Preventing Collisions at Sea 1972, which have each been promulgated and enforced as domestic laws. Whilst there had been a major difference between the 1910 Collision Convention and the applicable domestic law (ie, the Commercial Code) with respect to the relevant limitations period, this anomaly has now been resolved by the reform of the Commercial Code enacted on 1 April 2019.

Japan has also ratified the 1910 Salvage Convention, but not the 1989 Salvage Convention. The Lloyd’s Standard Form of Salvage Agreement (LOF) and the Japan Shipping Exchange (JSE) Form of Salvage Agreement are the two forms most widely accepted by salvage operations in Japan. In the absence of any such specific agreement between the parties, the Commercial Code 2019 applies, and provides that:

• the basic principle is “no cure, no pay”;
• the labour and costs incurred as a result of any necessary measures to prevent or reduce environmental pollution are taken into account in determining the amount of salvage reward (as special compensation); and
• the limitation period for making a claim for the salvage reward is two years from the time of salvage, etc.

Japan has ratified the LLMC Convention 1976 and the LLMC Protocol 1996, both of which have been implemented into the Limitation of Liability Act. The increase in the limits of liability brought about by the amendment of the Protocol of 1996 have been applied under the Act, which was amended in line with the amendment of the Protocol of 1996 and came into effect on 8 June 2015.

Under the Limitation of Liability Act, an applicant for limitation of liability must be classified as a “ship-owner, etc” or a “servant, etc”. “Ship-owner, etc” is widely construed as including ship-owners, voyage charterers, time charterers and slot charterers. “Servant, etc” is defined as “the servant of a ship-owner or salvor, or any other such person whose actions the ship-owner or salvor is responsible for”. The applicant must file an application to the local District Court to initiate limitation proceedings and, once the court has found its application appropriate, the court will order the establishment of a limitation fund by cash equivalent to the liability limit or by guarantee made by a bank, insurance company or protection and indemnity insurance (P&I) club.

Article 7 of the Limitation of Liability Act provides the information on how to calculate the limitation figure. A complex calculation is required to find the amount of the limitation funds, but the basic concept for the calculation is: (i) the limitation figure is calculated based on the gross tonnage of the vessel; and (ii) two types of limitation figures are set out, one for claims arising out of only property damage and the other for all other claims (including claims arising out of death and personal injury). No further funds (eg, a deposit) are required to be provided.

Japan has ratified the Maritime Labour Convention 2006 and it has been implemented into the Mariners Act since 2013. The purpose of the Mariners Act, in which the Convention has been directly or indirectly reflected, is to not only protect seafarers’ rights with regard to working conditions but also to ensure safety of navigation of vessels. The main parts of the Act provide:

• basic conditions for seafarers’ work (such as seafarers’ employment agreements, hours of work or rest and complaint handling procedures) as international standards, and
• flag state inspections for vessels flying the Japanese flag and port state control for vessels flying a foreign flag so as to check if vessels comply with the Convention.

Contracts for international carriage of goods by sea under bills of lading are governed by the Act on International Carriage of Goods by Sea (JCOGSA), which incorporates the essence of the Hague-Visby Rules, though with some variations. For example, unlike the Hague-Visby Rules, the JCOGSA extends the period of the carrier’s obligation for reasonable care of cargo from receipt by the carrier up to delivery to the receiver.

The JCOGSA has force of law for the carriage of goods by sea when either or both of the port of loading or the port of discharge is located outside Japan (ie, international carriage), regardless of whether a bill of lading is issued. In contrast, contracts for domestic carriage of goods by sea are subject to the Commercial Code.

Under Japanese law, the lawful holder of a bill of lading is entitled to sue the carrier for loss or damage to the cargo, based on the contract of carriage on that bill of lading. Even if a bill of lading is not issued, the consignee has the title to make claims against the carrier after the cargo reaches the port of discharge, since the consignee is supposed to take over the shipper’s title at that time.

Ship-Owner’s Liability for Cargo Damages

Under the Act on International Carriage of Goods by Sea (JCOGSA), two main duties are imposed on the carrier: (i) the duty to receive, load, stow, carry, custody, discharge and deliver cargo properly and carefully; and (ii) the duty to ensure the vessel is seaworthy in three respects, namely, the physical condition of the vessel, the efficiency of the crew and equipment, and the vessel’s cargo-worthiness. In the event of damage to the cargo during a voyage, the carrier is liable for damages unless the carrier can successfully prove that exercise of due diligence on the aspects has been fulfilled by the carrier.

Calculation and Limitation of Liability for Cargo Damages

The JCOGSA sets out the rules for calculation of cargo damages, which state that the amount shall be either the current market price or, if there is no available market, the normal value at the place and time at which the goods should have been discharged. The prevailing view is that determination of the value should be consistent with the cost, insurance and freight value. The JCOGSA also includes a package limitation that is identical to that set out in Article IV (5) of the Hague-Visby Rules.

The shipper is obliged to notify the carrier of the nature of the cargo, together with other information necessary to carry it safely, if the cargo has a flammable, explosive or otherwise dangerous nature. In the case of a breach of the shipper’s duty to provide notice of the cargo (including a misdeclaration), the carrier is entitled to claim damages against the shipper.

On 12 December 2015, the Supreme Court affirmed a judgment by the Tokyo High Court in the NYK Argus case, in which it ruled that the shipper and the cargo manufacturers were liable for damage to the vessel and the cargo caused by a fire in the container of the cargo in question, on the basis of tort and product liability respectively.

The time limits and prescription periods set out in substantive laws vary, depending on the nature of the claim. Claims for carrier’s liability for breach of contract for carriage of cargo (including a claim for damaged or lost cargo) are subject to one-year time limits from the date of delivery of the cargo, or the date when the cargo should have been delivered in the case of total loss of the cargo.

The shipper can agree with the carrier on an extension of time to sue the carrier in order to avoid unnecessary court proceedings, and this agreement on extension of time is commonly used in the practice of cargo claims.

Japan has not ratified the 1952 Arrest Convention, nor the 1999 Arrest Convention; thus, vessel arrest is carried out under the domestic laws of Japan. Under Japanese law, creditors may arrest vessels upon the following rights or orders:

• a lien;
• a mortgage; or
• a provisional attachment order.

An arrest by a lien or a mortgage is usually considered as the first option by creditors since it is the easiest way to arrest vessels.

Under Japanese law, which is basically a civil law system, maritime liens are not formally recognised in the same way as under common law, such as the laws of England and Wales.

Further, there is no distinction between maritime claims and non-maritime claims. However, the following claims are covered by statutory liens which enable the claimants to arrest the vessel more easily than other measures. Thus, these claims have a similar nature to maritime claims which are covered by maritime liens (for this reason, this type of lien will be referred to as a “maritime lien” in this chapter for ease of understanding):

• claims for death or personal injury directly in connection to navigation of vessels;
• claims for salvage and general average;
• claims for pilotage, towage or voyage-related taxes such as port charges;
• claims for necessity for continuation of a voyage; and
• mariners’ claims arising from their employment contracts.

In addition to the foregoing, the following claims are also covered by a lien:

• claims subject to a limitation held in accordance with the Limitation of Liability Act; and
• claims for the damage caused by oil pollution resulting from a spill or discharge of oil from a tanker.

As mentioned in the above, a maritime lien for indemnities for injuries of crew is recognised to the extent that such injury is directly in connection to navigation of vessels. On the other hand, the liabilities resulting from contracts for chartering a vessel do not provide grounds for a maritime claim.

In order to arrest a vessel upon a maritime lien under Japanese law, the prevailing view is that owners, demise charterers or time charterers of the vessel are required to be liable in personam (Articles 707 and 703(2) of the Commercial Code).

Arrest for Unpaid Bunkers

Bunkers are one of the necessities for vessels to continue a voyage. Therefore, a bunker supplier’s claim for the payment of unpaid bunkers against ship-owners or demise charterers is covered by a maritime lien by which the bunker supplier is able to arrest the vessel.

However, since it is considered that the maritime claim is required to be against owners or demise owners of the vessels, time charterers are not considered to have the authority to bind the vessel by ordering bunkers.

Possibility of the Arrest by Physical Supplier

If the bunker supplier is an actual supplier and not a contractual supplier, it is unlikely to be granted the right to arrest the vessel, since the claimant does not have a contractual claim against the ship-owners, demise charterers or time charterers of the vessel.

Issue of Conflict of Laws

It should be noted that Japanese courts may also require that (i) the governing law of the bunker supply contract, and/or (ii) the law of the country where the bunker is supplied or the flag state of the vessel, recognise and grant any such arrest, which is up to the interpretation of each court over the issue of conflict of laws.

In order to file an application for the arrest of a vessel, an original power of attorney and corporate certificates are required as a formality. Documents which prove the claimant’s claims/liens and their supporting affidavit may also be required. All the documents must be attached with Japanese translations, but, generally, notarisation and apostille are not required.

Arresting Bunkers

Under Japanese law, it is extremely difficult or almost impossible to arrest a remaining bunker on board. This is due to the interpretation of the requirements of the Civil Execution Act and the difficulties lying in the practical process of arrest of a bunker which is in the tank of the vessel.

Arresting Freight

The right to arrest the freight on board the vessel may not be granted under Japanese law; however, claims for losses or damages of the freight may be covered by the lien which arises from the scheme of limitation of liability for marine claims.

It is not possible to arrest a sister-vessel with a maritime lien. Conversely, such an order may be granted by a provisional attachment. However, the thresholds are high in terms of the requirement that the registered owner of the sister-ship must be liable in personam, and, after arresting the vessel, the claimant must commence normal litigation procedures to obtain title of debt against the aforementioned registered owner.

In general, there is no other practical measure to arrest the ship, other than previously mentioned, but this still may depend on the factual background.

In the Case of Arrest by Maritime Lien or Mortgage

If a vessel is arrested by enforcement of a maritime lien or mortgage, then cash, bank guarantees, insurance bonds or a P&I club’s Letter of Indemnity (LOI) are accepted as security to release the vessel.

In the Case of Arrest by Provisional Attachment Order

If a vessel is arrested by a provisional attachment order, the courts will normally accept only cash as a security to release the vessel.

Procedure for the Judicial Sale

Arrest of a vessel as an enforcement of lien or mortgage is a part of the judicial auction procedure. If the arrested vessel is not released with sufficient security, the court will proceed to the sale of the vessel, by:

• deciding on the end of the period in which a person who has a claim may apply for distribution of proceeds;
• evaluating the vessel;
• holding a judicial auction;
• deciding on the sale of the vessel; and
• distributing the proceeds to claimants.

If a vessel is arrested under a provisional attachment order, a judicial sale procedure will not be held until the arresting party obtains title of the debt in the normal litigation procedures in the court.

During the procedures, the vessel is maintained by the ship-management agent, who is appointed by the court. It normally takes six to 12 months from the commencement of the judicial sale until its completion (ie, the completion of distribution to each creditor).

Priority Ranking of the Claims

The basic priority ranking of claims is as follows:

• claims for costs of the procedure for the judicial sale;
• claims secured by maritime liens;
• claims secured by mortgages; and
• unsecured (ordinary) claims.

Priority Ranking of the Claims Covered by a Maritime Lien

Within the category of maritime liens, the ranking of covered claims is as follows:

• claims for death or personal injury;
• claims for salvage and general average;
• claims for pilotage, towage or voyage-related taxes such as port charges;
• claims for necessity for continuation of a voyage;
• mariners’ claims arising from their employment contracts; and
• claims subject to a limitation held in accordance with the Limitation of Liability Act/claims for the damage caused by oil pollution resulting from the spill or discharge of oil from a tanker.

Under Japanese law, there are similar insolvency schemes to those under Chapter 7 and Chapter 11 of the United States Bankruptcy Code; namely, the schemes under the Bankruptcy Act, Civil Rehabilitation Act and Corporate Reorganisation Act of Japan.

If the owner of the vessel goes bankrupt and an insolvency procedure commences, the bankruptcy court/trustee may order or obtain an arrest order to recover its control over the vessel; however, this is not unconditional and depends on the terms of the relevant charterparty and other legal circumstances.

In relation to an arrest by maritime lien, the threshold for the argument of wrongful arrest may be lower than that for arrest by provisional attachment order. The main requirement for such an argument is negligence or wilful misconduct of the arresting party in the course of the filing and arresting the vessel. The reason for this is that, since the arrest of the vessel by maritime lien is easier than for another normal attachment order procedure, the arresting party is required to be more cautious and should carry out sufficient analysis, both factual and legal, to avoid damage being incurred by innocent or irrelevant parties such as the owner who is not liable in personam.

Convention and Domestic Law

Japan has not ratified the Athens Convention on Passengers’ Liability. The rights of the passenger to claim for damages against ocean carriers are governed by the passenger transportation agreement and the Commercial Code.

Carrier’s Liability for Passengers

With regard to liability for death or personal injury of passengers, there is no legislative limitation in favour of the carrier. Further, any agreement which limits or releases a carrier’s liability for death or personal injury of passengers is deemed to be null and void, except for the damage mainly due to delay, Act of God, or liability for passengers who may suffer damage from normal vibration or other similar causes, which is normal for ocean transportation.

Nature of Liability of the Carrier and Burden of Proof

The nature of a carrier’s liability for passengers is not strict liability; however, the burden of proof on the exercising of due care by the carrier or its employees lies with the carrier (Article 590 of the Commercial Code).

Time Bar for Passenger Claims

The time bar for passenger claims for personal injury or death in relation to transportation as a tort claim is five years from the time when the passengers first become aware of the damage and the wrongdoers, or 20 years from the time when the damage occurs, and, for a contractual claim, the time bar is five years from the time when the passengers first become aware of the damage and the wrongdoers, or ten years from the time when the damage occurs.

Maritime Lien for Indemnities for Injuries of Passengers

A maritime lien for indemnities for injuries of passengers is recognised to the extent that such injury is directly in connection with the navigation of the vessels in question.

If a bill of lading indicates a specific foreign law as a governing law, Japanese courts will respect and accept that foreign law. In the absence of a governing-law clause in a bill of lading, it would be extremely difficult to predict the decision on what laws should be applicable to and govern the bill of lading. In practice, almost all bill of lading forms issued by Japan-related carriers have a governing-law clause.

Japanese courts also are inclined, broadly, to admit and enforce an exclusive jurisdiction (and arbitration) clause on the reverse side of a bill of lading. This means that the courts will dismiss a claim brought to an undesignated jurisdiction under a contract of carriage covered by a bill of lading.

Where a bill of lading has clear clauses or wording for incorporation of the terms set out in a specific charterparty, the incorporation of those terms (including the jurisdiction and dispute resolution clauses) into the bill of lading would be adopted by Japanese courts. However, it is still unclear what the courts require in detail for such incorporation, since there are only a few judgments by the courts on this issue.

Japan is a contracting state to the 1958 New York Convention. Arbitral awards rendered in signatory countries of the Convention are enforceable in Japan, as long as the requirements of the Convention have been fulfilled. Conversely, the enforceability of arbitral awards in non-party states is subject to the conditions set out in the Arbitration Act.

The Arbitration Act has very similar provisions to those provided in the 1958 New York Convention. For instance, in cases where the party to an arbitral award attempts to resist its enforcement, the main available grounds are set forth under the Arbitration Act, and are that:

• the arbitration agreement is not valid due to the limited capacity of a party, etc;
• the arbitration proceedings have serious defects, such as a lack of proper notice or opportunity for defence;
• the arbitral award is not valid on the premise that it contains a decision on matters going beyond the scope of the arbitration agreement, or the arbitral award is not final and binding, or the arbitral award has been set aside or its effect has been suspended by a judicial body of that country, etc; or
• the content of the arbitral award is contrary to public policy in Japan.

In Japan, it is considered that Japanese courts will issue an arrest order for a vessel if the courts find that the claim in question is secured by a maritime lien, regardless of whether the claim is subject to a foreign arbitration/jurisdiction clause under the relevant contract/bill of lading.

Where the creditors attempt to arrest a vessel by a provisional attachment order, the courts will not allow the creditors to arrest the vessel, unless there is a possibility that a claim which is subject to a foreign arbitration/jurisdiction clause, and which will eventually be awarded or judged by foreign arbitration or courts, is legally enforced in Japan.

The Tokyo Maritime Arbitration Commission (TOMAC), which is located in the Japan Shipping Exchange (JSE), is the only arbitral tribunal in Japan for resolving shipping disputes. It has a long history and a prestigious reputation, in particular with regard to disputes relating to the NIPPONSALE contract. The TOMAC is recognised as being the most popular choice for dealing with shipping issues.

The TOMAC has drawn up three types of arbitration rules: Ordinary Rules, Simplified Rules (claims up to JPY20 million), and Small Claims Arbitration Procedure (SCAP) Rules (claims up to JPY5 million). These rules all have a basic concept that, the smaller the claim amount is, the lower the costs that will be borne by the arbitration and the quicker the arbitration proceedings are resolved. The average length of arbitration proceedings is about 13 months under the Ordinary Rules, three to five months under the Simplified Rules and five to ten weeks under the SCAP Rules.

An arbitral award has the same effect as a final and binding judgment and an appeal to the court to set aside the arbitral award is allowed only on narrow grounds (such as violation of the arbitration procedure or public policy). One of the advantages of arbitration by the TOMAC in comparison with court proceedings is that the successful party is entitled to recover, to a reasonable extent, its legal costs from the losing party upon application for recovery of those costs.

In the case that a claimant commences legal proceedings in a court or arbitral tribunal in Japan, despite the relevant contract having a foreign jurisdiction or arbitration clause, a defendant can simply seek to dismiss the claim in the court proceedings and to dismiss the petition for an arbitral award, based on the defence of lack of jurisdiction or lack of valid arbitration agreement, respectively. Moreover, the defendant may be able to rely on a provisional court order prohibiting the commencement of legal proceedings in Japan on the ground that the claimant ignores the foreign jurisdiction or arbitration clause, resulting in a breach of the contract.

In Japan, owners or operators of Japanese-flagged ships, or owners or operators who run a business in Japan with other countries’ flagged ships, may enjoy the tonnage tax scheme. Moreover, ship-owners may enjoy accelerated depreciation, as is seen in many countries worldwide.

Whilst Japanese law does not expressly stipulate either “force majeure” or “frustration” in the Civil Code or any other Code, the force majeure clauses agreed by contractual parities in both shipping and commercial contracts are generally recognised as valid and enforceable. Further, force majeure is logically interpreted as “an event or circumstance caused by an external cause beyond the parties’ control” and, in the case of the occurrence of a force majeure event, the parties are likely to be released from their liabilities under the contracts by relying on the no-fault defence.

It is difficult to state clearly in what circumstances the COVID-19 pandemic constitutes a force majeure/exemption of liability, since no judgments in Japanese courts have dealt explicitly with the requirements/factors to categorise the specific events as force majeure. However, one of the key factors for the issue must be whether the spread of COVID-19 and lockdown can be considered to be unforeseeable and uncontrolled for the parties involved.

IMO 2020 rules relating to a limitation on the sulphur content of fuel oil has been effective in Japanese territorial waters through domestic law (the Act on Prevention of Marine Pollution and Maritime Disaster, Article 19-21), according to which the sulphur in the fuel oil used on board the vessel shall be less than 0.5%, and, in the specific designated area, the corresponding rate shall be less than 0.1%. For any violation of these rules, the vessel can be detained by the port state control and a fine of less than JPY10 million can be levied, for both the company and the individual person whose act or omission has caused the violation.

Japanese jurisdiction has not incorporated any of the international trade sanctions directly, but it has implemented its own domestic sanctions in the Foreign Exchange and Foreign Trade Act. Under this act, any exporting to, or any capital transaction for, any country, region or individual which is subject to the asset freeze is required to be permitted. Penalties for breaching such sanctions include imprisonment, a ban on exports and fines of up to three times the amount of the violation.

Any legal proceeding applying a significant quantity of fines is not open to the public, although some cases have been seen where a ban on export has been imposed, due to the export of goods to North Korea.

In response to the Russia-Ukraine war, the competent authorities announced prohibitions/restrictions on the following activities:

• exporting particular goods to any entity or person designated by Ministry of Economy, Trade and Industry (eg, the Ministry of the Defence of the Russian Federation and aircraft manufacturers in the Russian Federation);
• exporting particular dual-use goods, goods used for industrial infrastructure and luxury goods to the Russian Federation;
• importing particular goods (eg, alcoholic beverage, timber and electronic machines) from the Russian Federation;
• exporting to and importing from the area so-called Donetsk People’s Republic and Luhansk People’s Republic in eastern Ukraine; and
• making certain non-permitted payments, loans or investments related to business conducted in the Russian Federation or by Russian related legal entities.

As an exception, the competent authorities currently also have authority to approve or permit the above prohibited or restricted transactions.

The direct impact of the war in Ukraine has been manifested in the strengthening of sanctions under the Japanese Foreign Exchange and Foreign Trade Act (see 8.3 Trade Sanctions). Setting aside sanctions, there are some disputes over the situation where vessels have been trapped in areas that are at war or where navigation is perilous, or where particular obligations of the parties under the agreed charters or other contracts have become difficult to perform. However, under Japanese law, the threshold for frustration is high and rarely admitted. As a legal requirement, at least non-foreseeability of such a particular event, which could be a ground for frustration, is required. As of the publication of this guide (February 2024), it has been sufficiently long since the war in Ukraine broke out for the conflict to be unlikely to be considered as a ground for frustration of a contract.

The Government of Japan has been emphasising and promoting clean energy, which does affect the maritime industry, in terms of the promotion of the construction of offshore wind-power generation and the construction of zero emission greenhouse-gas vessels.

In particular, many places are discussed and investigated as potential places for the construction of those wind-power generating stations and, if a project or business actually commences, support from the maritime industry will come to be essential. For example, a special oceanographic vessel, self-elevating vessel, crew-transfer vessel, construction support and operation vessel, and/or service operation vessels are all required to construct and maintain the whole offshore wind-generation station, which will, without doubt, promote and develop the marine industry much further.