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The Japan Commercial Arbitration Association

February 1997 JCA Newsletter Number 2




Foreign Lawyers Gain Right to Represent a Party in Japan – Special Measures Law Amended

On June 4, 1996, a bill on the Partial Amendment of the Special Measures Law concerning the Handling of Legal Business by Foreign Lawyers was passed in the House of Representatives. It was promulgated as Law No. 65 of 1996 on June 12 and came into force on September 1,1996.
By this amendment, the longstanding issue of whether foreign lawyers may be allowed to represent a party in international arbitration proceedings in Japan under Japan's Lawyers Law has mostly been settled.
The following paper on the amendment was contributed by Mr. Charles Russell Stevens, a partner at Freshfields' Tokyo Office.


Foreign Lawyer Advocacy in
International Arbitrations in Japan

Charles Russell Stevens, Freshfields - Tokyo

Effective on 1 September 1996 Japan has amended its laws clearly to permit foreign lawyers to represent parties in international arbitrations conducted in Japan. This new law was the culmination of two decades of effort by the international business community in Japan and foreign international lawyers to persuade Japan to amend its laws to make it clear that parties to international arbitrations conducted in Japan are not restricted in their choice of counsel to bengoshi (lawyers admitted to practice domestic law in Japan).

Amendments to the Foreign Lawyers Law

The new law1 is an amendment to the "Special Measures Law concerning the Handling of Legal Business by Foreign Lawyers" (the Foreign Lawyers Law)2, enacted in 1986. The main purpose of the Foreign Lawyers Law is to permit and regulate the practice of foreign lawyers licensed to practice foreign laws in Japan (gaikokuho jimu bengoshi, in Japanese). Under the Foreign Lawyers Law a foreign lawyer must be approved for practice in Japan in an application process that, among other things, requires five years or more of experience in a foreign jurisdiction which offers a reciprocal opportunity to Japanese bengoshi.3 The Foreign Lawyers Law restricts the practice of the foreign lawyer licensed in Japan to the practice of foreign law and excludes the practice of domestic Japanese law.4
The new law which became effective on 1 September 1996 adds new provisions to the Foreign Lawyers Law, including the following new definition of "international arbitration case":
"... a civil case in which the place of arbitration is Japan and in which all or any of the parties have or has an address, main office, or head office in a foreign country."5
The new law then provides that it is possible for two specific categories of foreign lawyer to represent parties in such an "international arbitration case" in Japan:

  • A foreign lawyer registered in Japan. When engaging in such representation such a registered foreign lawyer is specifically exempted from the Law's otherwise stringent restrictions on his or her practice.6

  • A foreign lawyer practicing outside of Japan who has been retained for the international arbitration case while in the foreign country in which he or she practices. When engaging in such representation such foreign lawyer is exempted from specific legal prohibitions on the unauthorized practice of law in Japan.7
    Thus, the new law (by its liberal definition of an "international arbitration case" and its removal of legal restrictions on two specific categories of foreign lawyers) allows the designated foreign lawyers to represent parties in "international arbitration cases" even if the contracts or matters in dispute are governed by Japanese law or even if the procedures before the arbitral tribunal sitting in Japan are influenced by Japanese civil litigation procedures.8

    Paucity of International Arbitrations Before the New Law

    Prior to the new law foreign lawyers registered in Japan or foreign lawyers flying in to represent parties in arbitrations conducted in Japan were subject to disciplinary proceedings or criminal proceedings since such representation was argued by some domestic Japanese bengoshi to be the unauthorized practice of domestic law in Japan. Apprehension of such proceedings was so great that foreign lawyers advising their clients on contract drafting regularly counselled their clients to refuse to designate Japan as a place of arbitration.
    Accordingly in recent years arbitrations conducted in Japan before Japan's leading arbitration body, The Japan Commercial Arbitration Association (JCAA), have numbered less than ten new arbitrations per year, despite Japan's immense commercial power. In contrast in recent years international arbitrations in China before The China International Economic and Trade Arbitration Commission (CIETAC), China's international arbitration body, have numbered more than 500 new cases per year.
    The new law should rapidly change this situation.

    Advantages of Japan as a Place of Arbitration

    Besides the liberality of the new law, Japan presents a number of additional advantages for international arbitrations:

  • The leading arbitration association in Japan, the JCAA, has staff and facilities of a very high calibre and offers attractive venue services for any arbitration in Japanese, English or other languages in Tokyo, Osaka, Kobe, and Nagoya, under the JCAA's own modern Commercial Arbitration Rules or under UNCITRAL Arbitration Rules.

  • Other facilities and stenographic and translator services are easily available in Tokyo and other major Japanese cities for arbitrations conducted by other associations or under other rules.

  • Tokyo itself has become an international legal center, and many international firms well known in international arbitration have Tokyo offices with resident foreign lawyers registered in Japan and younger lawyers who assist them.9

  • Many Japanese bengoshi are active in international practice, including arbitration practice. 925 bengoshi have sufficient interest in international practice to list themselves in the 1995 Martindale-Hubbell Law Directory. Of these 375 have foreign law degrees (mostly LLM's or MCL's from U.S. law schools) and 117 have foreign bar qualifications, including 111 who are qualified in New York.

    Japan as a Preferred Place for Asian Arbitration

    The new law may even boost Japan into a position as a preferred place of arbitration in Asia. Other rival arbitration places have aspects that make them less attractive to international businesses and practitioners. In particular two likely Asian arbitration venues, Singapore and Hong Kong, now present problems for international arbitrations:

  • Foreign lawyers are not permitted to represent parties in international arbitrations in Singapore when the dispute is governed by Singapore law, an unfortunate restriction out of keeping with the international character of Singapore.

  • Hong Kong's reversion to China in 1997 has cast into doubt the enforceability in China of arbitral awards rendered in Hong Kong after reversion since after reversion a Hong Kong award may be interpreted as a domestic award in China and, therefore, unenforceable in China through the New York Convention.

    Conclusion

    Japan accounts for about two-thirds of the gross domestic product of all of Asia. It is the predominant foreign investor and foreign trader in many Asian jurisdictions. The sheer scale of its economic involvement in Asia, therefore, coupled with the liberality of the new law, should result in Japan becoming a preferred place of arbitration for international contracts.



    1. Law No. 65 of 1996, 12 June 1996.

    2.Law No. 66 of 1986, as amended by Law No. 91 of 1989, Law No. 89 of 1993, Law No. 65 of 1994, and Law No. 91 of 1995.

    3.Foreign Lawyers Law art. 10. Two of the five years can be spent in the employ of a bengoshi or a gaikokuho jimu bengoshi in Japan. Foreign Lawyers Law art. 10 (2).

    4.See in particular Foreign Lawyers Law arts. 3, 4, 5, and 6.

    5.Foreign Lawyers Law new art. 2 (11).

    6.Foreign Lawyers Law new art. 5-2.

    7.Foreign Lawyers Law new art. 58-2. A person "employed in Japan who offers his services on the basis of his knowledge of foreign laws" is excluded from benefiting from this provision.

    8.Of course, if Japanese law is at issue in the arbitration, it may have to be offered into proof by testimony of expert witnesses (such as testimony by domestic Japanese bengoshi or law professors).

    9.At present, there are approximately 75 foreign lawyers registered under the Foreign Lawyers Law. Generally, these registered foreign lawyers staff the offices of major international law firms with offices in Tokyo. They often supervise younger foreign lawyers who cannot meet the five years' experience test, resulting in a total foreign lawyer population in Tokyo of perhaps 130 to 150 lawyers, registered and unregistered, in the Tokyo offices of major foreign law firms.







    JCAA International Commercial Arbitration
    Forum Held in Tokyo and Osaka

    The JCAA holds regular forums, seminars and lectures on international commercial arbitration where representatives of international arbitration institutions and prominent experts in the field are invited to give lectures, mainly to senior staff from the legal and international business departments of Japanese corporations.
    On January 30, 1996, the International Commercial Arbitration Forum was held at the International Conference Hall of the Tokyo Chamber of Commerce and Industry in Tokyo. The forum was supported by the Ministry of International Trade and Industry, the Japan Chamber of Commerce and Industry, the Tokyo Chamber of Commerce and Industry, the Japan Federation of Bar Associations and NHK (Japan Broadcasting Corporation).
    The main theme was "Recent Situations and Existing Problems in International Arbitration." The JCAA invited three panelists: Mr. Michael F. Hoellering, General Counsel of the American Arbitration Association, Mr. Ulf Franke, Secretary General, Arbitration Institute of the Stockholm Chamber of Commerce, and Prof. Toshio Sawada, Vice President of the ICC International Court of Arbitration. The moderator was Prof. Kazuo Iwasaki of Nagoya University.
    Most of the estimated 170 participants who attended the forum were business people, while others were lawyers and professors. The opening addresses were given by JCAA President Y. Munakata, and Mr. E. Sakata, Deputy Director-General, International Trade Administration Bureau, Ministry of International Trade and Industry. Prof. Iwasaki then introduced the speakers and the forum's schedule.
    Mr. Hoellering's address focused on such current issues as suitability for arbitration, confidentiality, consolidation, legal representation and punitive damages. He also cited relevant U.S. court cases.
    Mr. Franke, who is also Secretary General of the International Council of Commercial Arbitration (ICCA), followed with an address entitled "Salient Issues in International Arbitration with Particular Reference to International Arbitration in Sweden."
    The address was devoted to three key issues in international arbitration: arbitration agreements, the constitution of arbitral tribunals and the finality of arbitral awards. Mr. Franke described the recent progress of international commercial arbitration from the international and Swedish viewpoints. He also referred to the arbitration being conducted under the auspices of the Stockholm Chamber of Commerce.
    In the final address, entitled "Some Current Issues in International Arbitration," Prof. Sawada delved into the consolidation of multi-party arbitration cases, the arbitrator's liability, as well as the scrutiny and correction of awards, etc.
    Following the speeches, a discussion was held on several questions from participants about the practice of international arbitration, especially the ICC arbitration. Prof. Iwasaki made the closing remarks.
    Another forum on international commercial arbitration was held by the JCAA in Osaka on November 14, 1996. The forum featured four guest speakers -- three representatives from arbitral institutions in Singapore, Taiwan and Thailand, as well as a prominent expert on international arbitration from Kyoto.
    The speakers were Mr. Giam Chin Toon, who is a member of the Panel of Accredited Arbitrator of the Singapore International Arbitration Centre and a former President of the Law Society of Singapore; Mr. Liu Jiin-Hwa, Deputy Secretary General of the Commercial Arbitration Association of the Republic of China; Mr. Voravuthi Dvadasin, Executive Director of the Arbitration Office, Ministry of Justice in Thailand, and Prof. Yasuhei Taniguchi, law professor of Kyoto University and a JCAA board member.
    They delivered addresses on arbitration in their respective institutions and countries under the theme of "The Recent Situations and Existing Problems in International Commercial Arbitration."
    Prof. Toshio Sawada served as the moderator. The forum brought together some 250 participants from the fields of business, law and academia, among others.






    Lord Mustill Lectures in Japan

    Lord Mustill, Kt, PC visited Japan at the end of July, 1996. During his stay, Lord Mustill held a fruitful meeting with several top Japanese scholars: Akira Mikazuki, Professor Emeritus of Tokyo University and Ex-Minister of Justice, Toshio Sawada, Professor of Sophia University, Chuo University Professor Takeshi Kojima, Masato Dogauchi, Professor of Tokyo University, as well as Seikei University Professor Yukiko Hasebe.
    The meeting, arranged by Tsukuba University Professor Yutaka Tajima, was held at the JCAA on July 31, 1996. The gathering focused on two controversial issues: Lord Woolf's report "Access to Justice," published on July 26, 1996, and the Arbitration Act 1996, which received royal assent on June 17, 1996 and came into force on January 31, 1997.
    Lord Mustill began the meeting with a lecture on the two issues. He then answered several questions from Japanese scholars on ADR in England and its 1996 Arbitration Act. A lively exchange of views ensued.
    On August 5, 1996, Lord Mustill also held a seminar in Osaka on the theme "The Recent State of Arbitration Law: Future Trends and Problems."
    The seminar was co-sponsored by The British Council and the JCAA with the support of the Osaka Bar Association. Kyoto University Professor Yasuhei Taniguchi delivered the opening address, which was followed by a two-hour lecture by Lord Mustill.
    Lord Mustill warned that "The opinion is widely held by those who practice arbitration as well as those who use it, that arbitration has lost contact with its roots, that in many instances it is no longer the quickest and most effective means of resolving commercial disputes; and that participants in such disputes should seriously consider, as an alternative to arbitration, either litigation in court or the various methods loosely grouped under the title "Alternative Dispute Resolution" (usually abbreviated to "ADR")."
    He further stated that these perceptions have fueled two current trends: the movement away from arbitration to other forms of dispute resolution, and the search for improvements in arbitration procedures and laws.
    Regarding the latter trend, Lord Mustill touched on the reform of English arbitration law. The new act did not incorporate the UNCITRAL Model Law. As to whether it should be adopted for arbitration law, he said "the advantages to nations with evolved arbitration law and a long tradition of arbitration practice are not so obvious. For such a nation to adopt the Model Law would mean that all those concerned with arbitration, whether users, arbitrators, lawyers or judges, would have to discard all the accumulated expertise and learning, so as to begin again with a new text."
    Lord Mustill then outlined the principal characteristics of the new Act as follows; "First, it is written in everyday language. No doubt close inspection in the courts will disclose some minor ambiguities. Nevertheless, I believe that it can readily be understood not only by English lawyers, but also by the lay persons who will be the users of arbitration, both in England and abroad.
    Secondly, the Act sets out to cover almost the entire field of the relationships created by an arbitration. In this respect, it goes far beyond the aims of the Model Law. Finally, the Act is founded on certain general statements of principle which are intended to reflect the fundamentals of intentional commercial arbitration as commonly understood worldwide today."
    The seminar was attended by about 80 people, including people from corporate legal departments, scholars and lawyers. Those who attended found the lecture worthwhile, especially with regard to the latest developments concerning dispute resolution in England.





    Final Report Released by JCAA Study Group

    The Study Group to Investigate Means for Enhancements of the International Commercial Arbitration System in Japan, which was established within the JCAA in 1992, held its last meeting on June 17, 1996.
    The following month, the group wrapped up its four years of work by releasing a final report entitled "Towards the New Development of Commercial Arbitration in Japan."
    The report (B5. 150pp. Japanese edition) consists of eight chapters. Chapter One describes the objectives of the Study Group. Chapter Two contains five "Propositions" put forward by the Study Group on ways to develop the international commercial arbitration system in Japan.
    Chapter Three details the Study Group's four-year effort. Chapter Four examines the purposes and features of arbitration, then analyzes its advantages and disadvantages vis-a-vis litigation. Chapter Five focuses on the growing importance of international commercial arbitration in the expanding global economy.
    Chapter Six discusses the continuing development of arbitration. It includes an overview of recent trends in arbitration law in 23 countries as well as an introduction to 22 international arbitral institutions. Chapter Seven takes an in-depth look at the current status of and problems of arbitration in Japan. It also deals with six arbitral organs in Japan other than the JCAA.
    Chapter Eight is a detailed portrait of JCAA which includes its history, functions, activities and budgets.
    Since its inception, the 16-member Study Group, formerly headed by Akira Mikazuki, Professor Emeritus of Tokyo University, and later by Kyoto University Professor Yasuhei Taniguchi, conducted strenuous research and discussion on ways to make international commercial arbitration more efficient in Japan.
    At the same time, the Study Group frequently provided invaluable advice to the JCAA on ways to promote its role as a fair and reliable dispute resolution organization. The recommendations have played a crucial role in shaping the JCAA's activities.
    Among the report's most important contributions are the "Propositions" in Chapter Two, which includes the Study Group's above-mentioned recommendations.
    In Proposition I, the Study Group calls on the JCAA, judicial circles and government bodies to make further efforts to promote the understanding of arbitration, especially of international commercial arbitration. It also calls on business circles to recognize arbitration as an efficient way to settle disputes and to take the initiative in utilizing arbitration.
    Through these efforts, the Study Group expects an end to the vicious cycle of "unfamiliarity" and "unpopularity," which is considered a prime reason why arbitration remains limited in Japan.
    In Proposition II, the Study Group argues that Japan's arbitration law, which has changed little in over 100 years, is outdated and cannot cope with contemporary needs. It calls for immediate reforms based on the UNCITRAL Model Law or the Draft Text of Law of Arbitration proposed in 1989 by the Arbitration Law Study Group. It welcomes, however, the recent amendment to the "Special Measures Law concerning the Handling of Legal Business by Foreign Lawyers (the Foreign Lawyers Law)" which enables foreign lawyers to represent parties to international arbitration conducted in Japan.
    In Proposition III, the group stresses the importance of nurturing skillful arbitrators, arguing that increasing the use of arbitration depends on the quality and competence of arbitrators.
    In Proposition IV, it calls on the JCAA to provide more attractive arbitration services to meet the needs of business circles. Priority was given to preparing expedited rules and various others; flexibly combining arbitration with conciliation; and internationalizing the arbitration panel as well as its staff.
    Proposition V urges both business circles and government bodies to provide financial support to the JCAA, noting that the organization cannot offer attractive services without a solid financial foundation.
    The report may appropriately be considered the latest "White Paper on Arbitration" that will serve as a useful reference to anyone interested in arbitration.


    Recommended Arbitration Clause

    In drawing up contracts, parties are recommended to
    include the following arbitration clause:

    "All disputes, controversies or differences which may arise between the parties hereto, out of or in relation to or in connection with this Agreement shall be finally settled by arbitration in (for instance, Tokyo, Osaka, Kobe, Nagoya), Japan in accordance with the Commercial Arbitration Rules of The Japan Commercial Arbitration Association. The award rendered by the arbitrator(s) shall be final and binding upon the parties hereto."

    If you need our Commercial Arbitration Rules,
    please contact our arbitration department.




    New Arbitration Law under Consideration in Japan

    A review of Japan's existing arbitration law is finally under way.
    According to a press release on September 6, 1996, the Civil Procedure Law Department of the Legislative Council organized by the Ministry of Justice has decided to give top priority to reviewing the century-old arbitration law.
    Toward that end, the Ministry of Justice is scheduled to set up a study group early in 1997 to conduct (1) a comparative study of foreign arbitration laws, and (2) hearings on the practical needs for the revision, etc.





    Japanese-Yugoslav Arbitral Cooperation Agreement Signed

    On August 26, 1996, the JCAA entered into a cooperation agreement with the Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Economy. Under the agreement, both institutions shall each recommend, respectively, to Japanese and Yugoslavian enterprises engaged in economic transactions between the two countries the insertion of the following arbitration clause in contracts between such enterprises;

    "All disputes that may arise between the parties out of, or in relation to this contract shall be finally settled by arbitration. The place of arbitration shall be, unless otherwise agreed upon by the parties, the country in which the respondent resides.
    In case the respondent is an enterprise of Japan, the arbitration shall be conducted by the Japan Commercial Arbitration Association in accordance with the Commercial Arbitration Rules thereof.
    In case the respondent is an enterprise of Yugoslavia, the arbitration shall be conducted by the Foreign Trade Court of Arbitration attached to the Yugoslav Chamber of Economy in accordance with its Rules."

    It is also agreed that both institutions shall cooperate in promoting international commercial arbitration between the two countries and shall exchange all necessary information and opinions conducive to the carrying out of this agreement.





    Japanese-Romanian Commercial Arbitration Agreement Renewed

    On the following day, August 27, 1996, the JCAA renewed its 1957 Agreement with the Chamber of Commerce of the Romanian People's Republic by signing a new Japanese-Romanian Commercial Arbitration Agreement with the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania.
    This renewal was made due to changes in the chamber's name, organization and functions on the Romanian side. Following the change, the arbitration clause recommended in the agreement has been revised as mentioned below:
    "All disputes, controversies or differences which may arise between the parties out of, or in connection with this contract shall be finally settled by arbitration at

  • the Japan Commercial Arbitration Association according to the Commercial Arbitration Rules of the said Association, in case when the defendant is a Japanese party or at

  • the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania, Bucharest, according to the Rules of International Arbitration of the said Court, in case when the defendant is a Romanian party."
    It is also agreed that the two institutions shall cooperate in promoting international commercial arbitration, among others, through the increased use of the facilities of their organizations and shall exchange all necessary information, materials or publications conducive to the realization of this agreement.
    Under the memorandum attached to this agreement, it is confirmed, inter alia, that if the parties request arbitration under the arbitration clause recommended in the former 1957 Agreement, both institutions shall accept such a request.





    JCAA Seminar Held in Tokyo

    JCAA held an international arbitration seminar on October 7, 1996 in Tokyo. The speakers were Mr. Richard H. Kreindler, a partner with Jones, Day, Reavis & Pogue in Frankfurt, and Mr. Masatami Otsuka, a partner with the firm's Tokyo office.
    Under the first theme of "Practical Issues and Problems in the Drafting of International Arbitration Clauses," Mr. Kreindler delivered a lecture focusing on the (1) Advantages and Disadvantages of Arbitration, (2) Essential and Optional Elements of Arbitration Clauses, (3) Variations on "Standard" or "Model" Arbitration Clauses, and (4) Enforcement of Arbitral Awards: A Comparative Approach.
    Under the second theme of "International Tax Arbitration," Mr. Otsuka referred to a recent trend in arbitration. "Arbitration is," he said, "growing in various fields as a reasonable means of settling disputes. Now arbitration is used not only in disputes between private parties, but also in private to government or government to government disputes."
    Mr. Otsuka concluded by stressing the importance of examining each institution's arbitration rules in drafting international arbitration clauses.
    About 60 people, mostly those from the international business and legal divisions of Japanese companies, attended the seminar.





    Manuals for Arbitral Proceedings Published by JCAA

    In March 1996, the JCAA published "Selected Questions and Answers on Arbitral Proceedings under the JCAA Commercial Arbitration Rules." The book provides explanatory guidelines for JCAA's arbitral proceedings from the initial application to request arbitral proceedings through the termination thereof for those who are to make use of JCAA's arbitration.
    The book's question-and-answer format includes various sample documents and notifications that must be submitted by parties to actual proceedings as well as some forms of notification from the JCAA to the parties. To purchase the publication, please contact the Arbitration Department (fax no. +81-3-3287-3064). The price is ¥3,000 plus mailing charge.





    "You Can Rely on Us" Video by JCAA

    This video provides valuable insights into the JCAA's many activities. If you would like a copy, please contact the Arbitration Department (fax no. +81-3-3287-3064). A copy will be sent free of charge at your request.





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    For further information, kindly address enquiries to any of the above offices.
    If you have any comments or questions on this newsletter, please contact our arbitration department.


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