International Arbitration 2019

Last Updated August 23, 2018

Contributed By Mori Hamada & Matsumoto

Trends and Developments


Authors



Mori Hamada & Matsumoto 's dispute resolution team consist of 45 partners and 54 other lawyers, including former chief judges of the Tokyo High Court and prominent scholars, as well as ten partners and eight other lawyers who focus on international arbitration and other international dispute resolution. Most of its team members are based at the main office in Tokyo, but it also offers significant regional capabilities, with its offices in Singapore, Beijing, Shanghai, Bangkok and Yangon, and its local desk in Jakarta. As a full-service firm, its dispute resolution practitioners benefit from complementary experience in related areas, such as corporate, finance, bankruptcy, intellectual property, antitrust and tax.

Overview of Arbitrations and Enforcement of Arbitral Awards in Japan

All arbitration proceedings seated in Japan (including both international and domestic arbitration proceedings) are governed by the Arbitration Act of 2003, which came into force in 2004. The Arbitration Act was based on the UNCITRAL Model Law, with the intention of harmonising Japanese legislation with the international standard to the fullest extent possible, but has yet to incorporate the 2006 amendments to the UNCITRAL Model Law. Therefore, some features of the amended Model Law, such as the interim measures and preliminary orders set forth in Chapter IV A, are not available under the Arbitration Act.

The main commercial arbitration institution in Japan is the Japan Commercial Arbitration Association (“JCAA”), which has offices in Tokyo and Osaka. JCAA revised its arbitration rules in 2014 and 2015. Key revisions include interim measures of protection and provisions for emergency arbitrators and mediation combined with arbitration.

According to JCAA’s annual report, 17 arbitration cases were requested before JCAA from 1 April 2017 to 31 March 2018, and 25 cases were pending as of 31 March 2018. In the past six years, there has been no significant change in the number of new arbitration cases requested before JCAA, with 17 cases in 2017, 16 in 2016, 21 in 2015, 14 in 2014, 26 in 2013, and 15 in 2012 (each year starts on April 1st and ends on March 31st of the following year). More than half of the parties to the arbitrations in JCAA are Japanese entities or Japanese citizens, either as claimants or respondents.

With respect to the enforcement of arbitral awards, Japan is a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), so foreign arbitral awards will be enforced in Japan in accordance with the New York Convention. Japan has reserved the principle of reciprocity so that Japanese courts will only enforce arbitral awards made in the territory of another contracting state. The recognition and enforcement provisions of the Arbitration Act closely mirror the recognition and enforcement provisions of the New York Convention and the UNCITRAL Model Law.

Under Article 45 of the Arbitration Act, an arbitral award shall have the same effect as a final and binding judgment, regardless of whether the place of arbitration is in Japan. However, in order to enforce the arbitral award, an execution order from Japanese courts must first be obtained, pursuant to Article 46 of the Arbitration Act. According to statistics from the Tokyo District Court, 34 applications for execution orders were filed from 2004 to 2016.

Recent Supreme Court Judgment

On 12 December 2017, the Japanese Supreme Court reversed a high-court judgment which set aside an arbitral award issued under the JCAA rules, on the ground of conflict of interest of the presiding arbitrator.

In this case, the presiding arbitrator was a lawyer at the Singapore office of an international law firm. A new lawyer, who joined the San Francisco office of the same law firm about 18 months after the arbitration proceedings commenced, represented the sister company of the claimant in an unrelated litigation in California before he joined the firm, and continued his representation after he joined. The presiding arbitrator failed to disclose this fact; however, he made an advance declaration and a waiver of potential future conflicts of interest before the commencement of the proceedings. Under these circumstances, the respondent in the arbitration proceedings challenged the award before Japanese courts.

The Osaka District Court dismissed the challenge on the ground that the circumstances in question did not give rise to any justifiable doubts regarding the arbitrator’s impartiality or independence. The respondent appealed this decision before the Osaka High Court, which set aside the arbitral award. According to the Osaka High Court’s decision, arbitrators have an ongoing obligation during the course of proceedings to disclose – without delay – all facts that are likely to give rise to justifiable doubts as to their impartiality or independence under Article 18(4) of the Arbitration Act, and it was decided that an advance declaration and waiver of potential future conflicts of interest were too abstract and lacked the factual specificity required to enable the parties to determine whether or not they may challenge the appointment of an arbitrator.

The Supreme Court agreed with the High Court’s decision, and held that merely telling the parties in the abstract that circumstances under Article 18(4) of the Arbitration Act could potentially arise does not constitute proper disclosure, as it lacked the necessary specificity to enable the parties to challenge an arbitrator’s appointment. It also found that the disclosure obligation is not limited to facts of which the arbitrator was actually aware, but extended to circumstances of which the arbitrator would normally become aware if he or she made a reasonable inquiry.

The Supreme Court, however, found that it was unclear whether the arbitrator had, in fact, been aware of the conflict before the award was rendered, whether the arbitrator’s law firm was aware of the conflict, or what sort of conflict-checking system was in place at the arbitrator’s law firm; on that basis, it did not consider the facts as presented to be sufficient to allow the High Court to find conclusively that the circumstances conflicted with the Arbitration Act. Therefore, it set aside the High Court’s decision and referred the case back to the High Court for further determination. The matter is still pending before the High Court.

The Japanese Government and Other Organisations

The Japanese government has recently become much more active in promoting international arbitration. Every year, it sets its “Basic Policy on Economic and Fiscal Management and Reforms”, which describes key subjects for the government. The 2017 basic policy issued on 9 June 2017 included international arbitration as a key subject, and stated that the government would develop a foundation to stimulate international arbitration.

On 21 September 2017, the government established the “Liaison Conference of Relevant Ministries and Agencies for Stimulating International Arbitration”, with the aim of promoting efficiency and co-operation among the relevant ministries and agencies of the Japanese government in order to develop the foundation for encouraging international arbitration in Japan. This liaison conference produced an interim report on 25 April 2018, which covered the following five items:

  • the meaning and aim of launching international arbitration in Japan, and the current status in Japan;
  • actions to develop a foundation for international arbitration in Japan;
  • actions for stimulating international arbitration where a Japanese company is a party;
  • actions for stimulating international arbitration in Japan between non-Japanese companies; and
  • co-operation between the Japanese government and the private sector.

With regard to the second item above, the Japan International Dispute Resolution Center (JIDRC) was established through the joint efforts of the Japanese government and the private sector. JIDRC started operating a hearing facility in Osaka on 1 May 2018, called “the Japan International Dispute Resolution Center (Osaka) (JIDRC-Osaka)”. This is the first-ever recorded facility that specialises in hearing international arbitration or other types of ADR in Japan. The centre aims to open a Tokyo hearing facility of a similar high quality.

Another product of the co-operation between the Japanese government and the private sector is the Japan International Mediation Center in Kyoto (JIMC-Kyoto), which aims to start operating in 2018 with a list of top mediators from all over the world. The facility will be located in the campus of Kyoto’s Doshisya University, which is eager to lend its support.

Intellectual Property Arbitration

Intellectual property has been a key concern for the Japanese government, which organised the Intellectual Property Strategy Headquarters headed by the Prime Minister. The headquarters sets an annual “Intellectual Property Strategic Programme”, which is aimed at the creation, protection and exploitation of intellectual property. The 2017 programme was released on 16 May 2017 and included international arbitration, referring specifically to the development of a foundation for the promotion of international arbitration in Japan, including providing support for the training of arbitration practitioners.

In 2018, these efforts will culminate in a new arbitration institution that will focus on intellectual property disputes, particularly disputes regarding standard essential patents, which are likely to increase rapidly in the 5G era. The new institution is called the International Arbitration Center in Tokyo or “IACT”, and will aim for the efficient resolution of complex disputes such as those relating to standard essential patents, which usually cover a number of jurisdictions. This institution will provide one-stop resolutions for such multi-jurisdictional disputes, with a list of arbitrators from major jurisdictions, many of whom are famous former judges in the various fields of intellectual property, including a former chief judge of the US DC Circuit. To encourage the efficient resolution of cases, this institution is further considering having a general timeline of 12 months from the constitution of the tribunal to the final award. At the same time, the institution is considering measures to ensure the high quality of decisions, such as the scrutiny of arbitration awards by a panel of five members each coming from the US, Europe, China, Japan and Korea.

Mori Hamada & Matsumoto

Marunouchi Park Building
2-6-1, Marunouchi, Chiyoda-ku
Tokyo 100-8222
Japan

+81 3 5223 7759

+81 3 5223 7659

mugi.sekido@mhmjapan.com http://www.mhmjapan.com
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Authors



Mori Hamada & Matsumoto 's dispute resolution team consist of 45 partners and 54 other lawyers, including former chief judges of the Tokyo High Court and prominent scholars, as well as ten partners and eight other lawyers who focus on international arbitration and other international dispute resolution. Most of its team members are based at the main office in Tokyo, but it also offers significant regional capabilities, with its offices in Singapore, Beijing, Shanghai, Bangkok and Yangon, and its local desk in Jakarta. As a full-service firm, its dispute resolution practitioners benefit from complementary experience in related areas, such as corporate, finance, bankruptcy, intellectual property, antitrust and tax.

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