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The Japan Commercial Arbitration Association

August 2000 JCA

Number 7

Judicial Reform and ADR Studies in Japan

Japan is currently undergoing unparalleled changes in the economic environment. Such changes inevitably compel Japanese companies to adjust themselves to economic globalization and to restructure their business models in order to survive in a global business environment. Japanese companies are thus being obliged to deal with this situation both quickly and boldly.

 It is said, however, that the current judicial system does not sufficiently support Japanese companies' efforts to improve their abilities to compete in the world market. Traditionally, the administration in Japan has been most active in handling disputes occurring in particular fields. However, in an economic society that is becoming increasingly complex, globalized, and deregulated, the administration can no longer take the central role in providing guidelines for many social activities, particularly in the area of dispute resolution. Japan needs to establish a better, more efficient system for dispute resolution, one that can make a definite contribution to the facilitation of business activities.

 In recent years, judicial reform has been the subject of lively debate in Japan, and ADR (Alternative Dispute Resolution) has attracted considerable attention. In this context, the possibility has arisen that ADR could reduce the burdens on the courts and provide various alternatives for dispute resolution in a variety of fields, such as traffic accidents, illegal construction, and patent right disputes. The ADR bodies that are provided for in the new Housing Quality Assurance Law to handle housing disputes (see JCA Newsletter #6) are examples of this recent movement in Japan.

 Various groups of lawyers, academics, government departments, and business people have recently published a number of reports that discuss the present situation and desired developments for ADR. Such reports include "Study on Necessity of ADR; A Proposal" by Group ADR, a group of lawyers who are active in promoting ADR in Japan; and "Report of Corporate Legal System Study Group for Research on Economic Activity and the Judicial System" by the Ministry of International Trade and Industry (MITI). Further, the Special Research Committee on the Judicial System of the Liberal Democratic Party recently published "Certain Guideline for Administration of justice for the 21st Century," and The 21st Century Public Policy Institute, established by the Japan Federation of Economic Organizations (Keidanren) in seeking to take an active role in public policy debate, in 1997 published "A Plan for Japan's Civil Justice System in the 21st Century." In general, these reports analyze the current functioning of ADR in Japan-which certainly has scope for improvement-and emphasize the expansion of ADR as a matter of great importance. This issue of the JCA Newsletter provides a summary of the MITI report that was published on May 9, 2000.

 In its section titled "Arrangement and Expansion of the ADR System," the MITI report focuses on the following five areas: 1) Necessity of improving ADR, 2) Current situation, 3) Improvement of ADR in the Judicial Context, 4) Improvement of Private ADR, 5) Improvement of Administrative ADR.

 First, the report points out the necessity of improving and expanding ADR because of its usefulness in a deregulated society for resolving disputes among citizens, not only through litigation but also through society's own rules and sense of justice. The report refers to the various advantages of ADR over civil litigation. Such advantages include each party's autonomous right to appoint a mediator(s) or an arbitrator(s), and the aspect of confidentiality. At the same time, the report states that to promote the wider use of ADR, efforts should be put to make it faster, more flexible, and less expensive than civil litigation.

 In reviewing the current situation of ADR in Japan, the report divides ADR into three groups; namely, ADR in the judicial context, private ADR, and administrative ADR. ADR in the judicial context, i.e., civil conciliation (minji chotei), though still not without its problems, is reported to be the most successful among the three areas of ADR, with approximately 250,000 cases in 1998. Private ADR is not commonly utilized, except for traffic accidents. Administrative ADR is employed at various levels, but its actual utilization differs from agency to agency. The report states that utilization of ADR in Japan is still at a low level and points out a number of problems. The report then proposes certain measures that should be taken in order to improve each aspect of ADR.

 With respect to ADR in the judicial context, the report first identifies such problems as the fact that the only existing form of ADR in the judicial context, i.e., court-annexed conciliation (chotei), is not generally linked to litigation. The report then makes a number of proposals: 1) improvement of litigation-annexed conciliation, 2) establishment of litigation-annexed arbitration, 3) introduction of early neutral evaluation, 4) development of partial outsourcing of trials to specialist ADR organizations.

 As for private ADR, the report identifies various weaknesses, notably the lack of information about private ADR available to the public. As for improvements, the report makes the following proposals: 1) providing a centralized support service for the public and ADR organizations, 2) support for key ADR organizations, 3) establishment of specialist ADR services, 4) promotion of ADR for cyberspace transactions, and 5) support of ADR through adequate legislation.

 Finally, in the section, "Improvement of Administrative ADR," the report makes an observation that administrative ADR is presently not well integrated, which makes it difficult to find the right body to consult with, and proposes the establishment of an integrated information service for customers. Other proposals to improve administrative ADR offered in the report include the further promotion of specialist ADR services, with quasi-judicial authority, and the establishment of administrative ADR in the judicial context.

 The MITI report thus not only discusses ADR but also proposes a number of more general judicial reforms. The above analyses and proposals in the field of ADR are made within the context of MITI's broad review of the litigation system as a whole. For example, the report also reviews and makes a number of proposals concerning lawyers, with the aim of improving legal services. It is hoped that the report's proposals concerning ADR, together with proposals for the reform of the judicial system in general, will serve to improve and revitalize both Japan's economic activities and its judicial system.

Review by a Study Group on Japanese Arbitration Law

 It has been pointed out that Japanese arbitration law needs to be updated. The law was promulgated in 1890, based on the German Code of Civil Procedure, and since then has not been amended or supplemented in its substance. The Japanese arbitration law was initially Book 8 of the Code of Civil Procedure. In 1996, when the Code was substantially amended and was made into a new Code, Book 8 remained as it was and, together with Book 7, renamed as the "Law Concerning Means for a Public Peremptory Notice and Arbitration Procedure." (Koji-Saikoku-Tetsuzuki oyobi Chusai-Tetsuzuki ni Kansuru Houritsu)

 Even if the arbitration law is not updated for some time, actual arbitration cases in Japan have been well-administered by Japanese arbitral organizations including JCAA by means of their carefully-drafted arbitration rules. However, a well-prepared arbitration law should remove any misunderstanding (if any) about arbitration in Japan and, together with the fact that Japan is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, should strengthen confidence in arbitrating a case in Japan.

 Taking into due consideration the necessity of updating the Japanese arbitration law, the Arbitration Law Study Group (Chusai-Kenkyukai) published its "Draft Text of Law of Arbitration" in 1989. The Arbitration Law Study Group, formed in 1979, is a group that consists mainly of leading Japanese scholars who are specialized in the field of arbitration, civil procedure and other related areas. The group studied arbitration legislation in various countries as well as the UNCITRAL Model Law on Arbitration of 1985, and prepared the Draft Text of the Law of Arbitration. The Draft, which was intended to replace the existing arbitration law, took the form of separate legislation consisting of 50 articles. The existing Japanese arbitration law has only 20 articles in a combined set of legislation; therefore, the Draft substantially supplemented the existing law.

 After publishing the Draft Text of the Law of Arbitration, the Arbitration Law Study Group continued their study on Japanese arbitration law. In recent years, JCAA has supported the activities of the Study Group as its secretariat. Because of the recent development of arbitration law as well as economic activities in general, the Draft may have certain provision(s) that would need further review or revision. For example, the UNCITRAL Model Law might have to be taken more into consideration, as it has been adopted by many countries in recent years. Also, a new legislation might be able to take advantage of the recent developments in computer technology in the arbitration process.

 Such continuing review activities include a general review of the entire Draft Text, a questionnaire survey sent out to JCAA members on arbitration law and arbitration in general, and a detailed study of selected important issues on arbitration such as multiparty arbitration, arbitration and mediation/conciliation, etc.

 The Arbitration Law Study Group is planning to publish a revised new Draft Text of the Law of Arbitration in the future so that it can contribute to new Japanese arbitration laws. JCAA will continue to support these activities.

 WTO appoints Professor Yasuhei Taniguchi as a member of its Appellate Body

The World Trade Organization has officially announced that it has appointed as a member of its Appellate Body Mr. Yasuhei Taniguchi, Senior Advisor to JCAA, Professor Emeritus of Kyoto University, Professor of Tokyo Keizai University, and Attorney at Law.

 The appointment was made at a special meeting of the WTO's Dispute Settlement Body held in Geneva on May 25 this year. Mr. Taniguchi is to serve on the Appellate Body until the end of 2003 with other six members from Germany, the Philippines, Uruguay, the U.S., India and Egypt. He is the second Japanese to assume the post following Prof. Mitsuo Matsushita of Seikei University, whose term of office expired in March this year.

 JCAA, which has long been benefited from Mr. Taniguchi's knowledge and experience, welcomes this appointment and hopes that it will still leave him the time to contribute to JCAA's international activities.

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
(name of city), Japan in accordance
with the Commercial Arbitration Rules of The Japan Commercial
Arbitrarion Association. The award rendered by the arbitrator(s)
shall be final and binding upon the parties hereto."

ICCA Conference 2000 in New Delhi

 The 15th International Arbitration Conference of the International Council for Commercial Arbitration (ICCA) was held in New Delhi, India from March 2 to 4, 2000 hosted by The Indian Council of Arbitration and supported by the Indian government.

 About 400 people including representatives of arbitration institutions and arbitration experts from various countries of the world attended the biyearly conference. From JCAA, Mr. Norihiko Maeda, JCAA President, and Mr. Masaharu Onuki, General Manager of JCAA Osaka Office, participated in the conference.

 Following the pre-inaugural reception held on the night before, the conference opened in the evening of March 2 at the Vigyan Bhawan, India's premier conference center. Mr. K. R. Narayanan, President of India, delivered the opening address.

 The business sessions of the conference were held on March 3 and 4 at the Hotel Taj Palace. Under the main theme of "International Arbitration and National Courts: The Never Ending Story," multiple rapporteurs made reports on the sub theme of each session and panelists gave comments on each report. Then discussions were held between the audience, rapporteurs and panelists. Mr. Fali S. Nariman, President of ICCA, acted as a coordinator through all sessions. Issues discussed at the four sessions were as follows:

What causes courts to disregard agreements to arbitrate and how can such agreements be improved to avoid that fate?
- Problems in arbitration laws
- Problems in drafting

The Proceedings: How to avoid Judicial Interruptions:
- Ensuring adequate mechanisms for organising the arbitral process, including notably appointing and removing arbitrators and extending time limits.
- Ensuring that all allegations of procedural irregularities do not derail the arbitral process.
- Anti-suit injunctions by arbitrators vs. anti-arbitration injunctions by judges.

Interim Relief: How can it be obtained without Harming the Arbitral Process?
- Tactical requests for interim relief intended to sabotage the arbitration
- Meritorious requests for relief: what can the arbitral tribunal achieve? How does the judge fit in?

Looking to Enforcement: Awards that pass Judicial Scrutiny
- The legislative criteria
- The art of meeting legislative criteria

At the close of the conference, it was announced that the next ICCA conference will be held in London in May, 2002.

JCAA Holds International Commercial Arbitration Forum

As part of its long-term efforts to promote the understanding and accessibility of arbitration in Japan, JCAA is planning to hold an international commercial arbitration forum this autumn.

 In an attempt to provide people with more opportunities, this year JCAA will hold the forum in two locations, based on the same program: in Osaka and Tokyo, on November 22 and 24, respectively. The forum is supported by the Ministry of International Trade and Industry, the Ministry of Justice, and other organizations, including the Japan Chamber of Commerce and Industry, and the Japan Federation of Bar Associations.

 Under the themes of "The Recent Interesting Issues in International Commercial Arbitration" and "The Arbitrator's Rights and Duties," Mr. Yasuhei Taniguchi, Professor of Tokyo Keizai University and Professor Emeritus of Kyoto University, will coordinate the forum. Five panelists, each with a distinguished career in international commercial arbitration will participate and a lively discussion on the stated themes is anticipated. The panelists are: Mr. Stephen R. Bond, Partner at White & Case, Paris and former Secretary General of the ICC International Court of Arbitration; Mr. Julian D. M. Lew, Partner at Herbert Smith, London and Head of the School of International Arbitration, University of London; Mr. Toshio Sawada, Professor Emeritus of Sophia University (Tokyo) and Vice Chairman of the ICC International Court of Arbitration; Mr. Tadashi Ishikawa, Attorney at Law, Senior Partner at O-ebashi Law Office; and Mr. Toshihiko Omoto, Civil Engineer and Fellow of the Chartered Institute of Arbitrators. Prior to the discussion, Mr. Bond, Mr. Lew, and Mr. Sawada will express their ideas about the discussion themes.

 Registration for the forum will commence in early October. JCAA is hoping that the forum will be a good opportunity to promote arbitration and that a significant number of participants will be in attendance.

Workshop on International Commercial Arbitration in Asia and the Oceania Region - To Be Held at Meijo University on Sep. 8 and 9, 2000

As introduced previously in the No. 6 issue of this Newsletter in March, 2000, the Institute for Socioeconomic Dispute Studies of the Meijo University Graduate School of Law started a project last year to improve the international commercial arbitration systems in Asia and the Oceania Region. In the second Fiscal Year, as a first step, the institute will hold a workshop whereupon Japanese experts and professionals will convene at Meijo University this September 8 and 9, 2000 to discuss important topics given preference over the others by way of reports followed by a discussion among the participants, focusing on a comparative study of the arbitration laws and arbitration rules of arbitral institutions located in Asia and the Oceania region, working towards preparing draft amendments of the provisions of the laws and rules on the specific topics.

 On the first day of the workshop, the following topics will be discussed based upon the reports: "The definition of the place of arbitration" reported on by Mr. Tatsuya Nakamura of the JCAA, "What Provisions Should be Made on Statutory Arbitration such as Those for Disputes Related to Construction and Pollution" reported on by Prof. Yoshihiko Umemoto of Senshu University, and "The Relationship between Dismissal of Request for Arbitration, Withdrawal thereof, etc. and Extinctive Prescription or Statute of Limitations" reported on by Prof. Masato Dogauchi of the University of Tokyo.

 On the second day, "The Combination of Arbitration and Conciliation" reported on by Associate Prof. Yoshihisa Hayakawa of Rikkyo University, "A Hybrid Dispute Resolution Process and The Combination of Arbitration and Conciliation" reported on by Associate Prof. Yasunobu Sato of Nagoya University, "Arbitration and Provisional Remedies" reported on by Kaoru Matsuura of Meijo University, "Immunity of Arbitrators and Arbitral Institutions" reported on by Mr. Toshio Matsumoto of The Japan Shipping Exchange and "The Common System (in which common arbitral procedure rules are provided without distinguishing international cases from domestic cases) or the Separate System (in which arbitral procedure rules are provided for international cases and domestic arbitration cases), Distinction between Commercial Arbitration and Civil Arbitration and the Definition of International Arbitration on the Assumption that a Separate System is Adopted" reported on by Prof. Nobuyuki Tanaka of Aichi University will be discussed.

 Following this workshop, the second Symposium will be held on November 25 and 26, 2000. In addition, another workshop will be held in February 2001 for the same purpose, but on other topics than those dealt with in the September workshop. Details will be given in future issues of this Newsletter.

The JCA Newsletter is published by:

The Japan Commercial
Aribitration Association


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