JAPAN: An Introduction to Dispute Resolution: Domestic

The expansion and further activation of private ADR (arbitration and private mediation) has been positioned as one of the most important issues to address in Japan. Since the Arbitration Act of Japan (the “Arbitration Act”), which generally adopts the UNCITRAL Model Law, was enacted in 2003 and came into force in 2004, the Japanese government has promoted and developed reliable judicial systems for arbitration. Further, serious discussions occurred to the effect that relevant laws should be amended in line with the adoption of the United Nations Convention on International Settlement Agreements Resulting from Mediation (the “Singapore Convention”).

In April 2023, the following laws were enacted and promulgated, which are to take effect on 1 April 2024:

• an act partially amending the Arbitration Act; and

• a new act for implementation of the Singapore Convention (the “Convention Implementation Act”).

This article provides an overview of the amendments to the Arbitration Act (the “Amended Arbitration Act”) and the Convention Implementation Act.

Summary of the Amended Arbitration Act 

Under the Arbitration Act, which adopts the UNCITRAL Model Law in general, foreign (and domestic) arbitral awards are enforceable in Japan once the obligee obtains an execution order from the court. However, because the UNCITRAL Model Law was amended in 2006 (shortly after the Arbitration Act was enacted in Japan in 2003), the Arbitration Act did not reflect the latest revisions of the 2006 UNCITRAL Model Law, including the enforceability of interim measures. Therefore, following discussions, the Amended Arbitration Act was enacted to revise the rules to harmonise with the 2006 UNCITRAL Model Law.

Amendments related to interim measures 

The Amended Arbitration Act clarifies the types and definitions of interim measures (ie, temporary measures pending arbitral awards to preserve rights and evidence). It also clarifies the conditions for granting interim measures.

In line with Article 17 of the 2006 UNCITRAL Model Law, the Amended Arbitration Act explicitly defines the five categories of interim measures that an arbitral tribunal may order. With regard to the conditions for the arbitral tribunal to issue an order to take interim measures (“order for interim measures”), in line with Article 17 A of the 2006 UNCITRAL Model Law, the Amended Arbitration Act requires a petitioner seeking an interim measure to make a prima facie showing of the rights or relationship of rights that must be preserved and the facts constituting the grounds for the petition. In addition, provisions regarding procedures for granting interim measures such as the arbitral tribunal’s order to provide appropriate security are also set forth in line with the 2006 UNCITRAL Model Law.

Further, the Amended Arbitration Act allows interim measures to be enforced following the court’s enforcement approval order, which is also in line with the 2006 UNCITRAL Model Law. The court is to examine whether there are certain grounds for refusing enforcement of an order for interim measures and must grant an enforcement approval order if there are no such grounds.

Amendment related to domestic jurisdiction and transfer of arbitration and mediation cases

The Amended Arbitration Act establishes concurrent jurisdiction for arbitration-related court cases in the Tokyo District Court and the Osaka District Court for the purpose of facilitating smooth and sophisticated management of these kinds of court proceedings.

Arbitration-related court cases include court procedures for the recognition and enforcement of an arbitral award. It is expected that the arbitration-focused divisions of the two district courts will accumulate experience and know-how regarding the effective management of arbitration-related cases. Even before the Amended Arbitration Act comes into effect, the Tokyo District Court changed its internal rules for the allocation of cases to its divisions from April 2023, and all arbitration-related court cases filed with the Tokyo District Court are assigned to the Eighth Civil Division (the Corporate Division), which is now located at the so-called Business Court (a special branch of the Tokyo District Court). This change is supposed to promote a reliable judicial system for international arbitration in Japan.

Amendment related to the need for translation 

The Amended Arbitration Act allows the court to decide not to require the submission of the translation of an arbitral award written in a foreign language if the court considers it appropriate after hearing the respondent’s opinion. The same applies to exhibits written in a foreign language. This revision will benefit the parties by significantly reducing translation costs for an arbitral award and exhibits, which often add considerable time and expense to the enforcement of an arbitral award in Japan.

Summary of the Convention Implementation Act 

On 1 October 2023, Japan deposited the instrument of accession to the Singapore Convention. The Singapore Convention will enter into force for Japan on 1 April 2024 (six months after the above-mentioned date) and the Convention Implementation Act will come into force on the same day. Enforceability of international settlement agreements the Convention Implementation Act introduces the enforceability of an “international settlement agreement”, which is defined as an agreement resulting from mediation that has been concluded between the parties and that falls under any of the following categories at the time of the conclusion of the agreement:

• some or all of the parties have an address, a main office or a place of business outside Japan (including cases in which a party’s parent company has an address, a main office or a place of business outside Japan);

• some or all of the parties have their addresses, offices or places of business in different states (if a party has two or more offices or place of businesses, the office or place of business that has the closest relationship to the dispute resolved by the agreement, with regard to the circumstances known to, or contemplated by, the parties at the time of the conclusion of the agreement; hereinafter the same applies in the following category); or

• the state in which some or all of the parties have their addresses, offices or places of business is different from the state in which either (i) the place where a substantial part of the obligations under the agreement is performed belongs or (ii) the place with the closest connection to the subject matter of the agreement belongs.

The second and third categories correspond to Article 1, Paragraph 1, subparagraphs (a) and (b) and Article 2, paragraph 1 of the Singapore Convention.

On the other hand, the first category is somewhat unique to Japan. If one of the parties to a settlement agreement (or its parent company) is a non-Japanese corporation, the settlement agreement would not qualify as an “international settlement agreement” unless it meets the requirements of the second or third item, even though the agreement has an international aspect. In such a case, it was considered difficult for the parties to obtain settlement agreements that are immediately enforceable in Japan. Therefore, the first category was adopted based on practical needs to grant enforceability to such settlement agreements.

The Convention Implementation Act excludes consumer disputes (including both B2C disputes and C2C disputes), labour disputes, and family disputes from the scope of enforceable international settlement agreements. This is in line with the Singapore Convention, which applies only to commercial disputes.

Parties’ agreement to apply the Singapore Convention 

For the Convention Implementation Act to apply, the parties to the settlement agreement must agree that the agreement is subject to civil enforcement based on the Singapore Convention. This provision is based on the declaration of reservation to the Singapore Convention allowed under Article 8, paragraph 1, subparagraph (b), which Japan made as of the conclusion of this convention.

The Act does not impose restrictions on the timing or method of the parties’ agreement to the application of the Singapore Convention, which is in line with Article 8, paragraph 1, subparagraph (b) of the convention.

Grounds for refusal of enforcement 

Under the Convention Implementation Act, the party seeking enforcement of an international settlement agreement must file a petition with the court, and the court must grant enforcement unless there are grounds for refusal. The grounds for refusal are generally in line with Article 5 of the Singapore Convention. However, Japan has made some modifications to the grounds for refusal considering other provisions in the Convention Implementation Act and other existing legislation in Japan.

Translation and concurrent jurisdiction 

In a petition for enforcement of an international settlement agreement, as in the Amended Arbitration Act, the Convention Implementation Act allows the court to decide not to require the submission of the translation of the international settlement agreement written in a foreign language if the court considers it appropriate after hearing the respondent’s opinion. In such petition, the Tokyo District Court and Osaka District Court have concurrent jurisdiction when the location of the general venue of the respondent, or the location of the subject matter of the claim or the seizable property of the respondent, is in Japan.