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The Japan Commercial Arbitration Association

November 2000 JCA

Number 8

Group ADR Releases Report on ADR in Japan

As reported in Issue Number 7, a series of ADR reports were published in Japan over the past months. Among them: "Study on the Necessity of ADR: A Proposal." The current newsletter summarizes the report published in April this year by Group ADR, which is composed of four Japanese lawyers: Takahisa Hirota, Former Chairman of the Operations Committee of the Dai-ichi Tokyo Bar Association Arbitration Center; Shuichi Kashiwagi, Director of The Japan Commercial Arbitration Association; Naoki Idei, Co-chairman of the Operations Committee of the Dai-ni Tokyo Bar Association Arbitration Center; and Shinjiro Motoyama, Co-chairman of the Operations Committee of the Dai-ni Tokyo Bar Association Arbitration Center. Topics in the report include: 1) Significance of ADR, 2) Necessity of ADR, 3) History and Current Situation of Court-annexed ADR in the USA, 4) General View of Dispute Resolution Systems in Japan, 5) Points at Issue and Thinking Process to the Proposal, and 6) the Proposal.

 "Significance of ADR" defines the meaning of ADR and names ADR organizations in Japan. It states that ADR means mediation and arbitration as alternative dispute resolutions to civil trials. It points out three types: Administrative ADR, conducted by organizations such as the Central Labor Relations Commission and Construction Disputes Committee; Private Sector ADR, conducted by organizations such as The Japan Commercial Arbitration Association, Tokyo Maritime Arbitration Commission of The Japan Shipping Exchange, Inc., and Bar Association Arbitration Centers; and Court-annexed ADR, which is mediation conducted in district, summary, and family courts. The report emphasizes that ADR could not offer advantages such as simple procedures, low cost, fairness, and quickness without designing effective systems and operating them efficiently.

 "Necessity of ADR" notes that new dispute resolution mechanisms must be developed to deal with cases arising from social change in Japan. According to the report, Japanese society is becoming increasingly complex, globalized, and deregulated. Disputes themselves are also becoming complex and diversified. Some are processed for trial adjudication by courts. The increase in court case- loads in recent years burdens the judicial system in Japan. As a result, increased disposition time is also a burden on litigants.

 In civil litigation, concerned parties allege mutual interest. Courts, applying relevant laws, adjudicate in favor of one or the other. However, when a suit is filed with a court, not all the parties concerned expect a "Win or Lose" judgment. The report notes the public uses courts for dispute resolution rather than judgment.

 The report states that, although they have been trained to exercise jurisdiction over cases in compliance with litigation procedures, judges have not been trained to promote negotiation between litigants and help them to reach amicable settlements. Therefore, whether mediation succeeds or not currently depends on individual competence.

 In recent years, the tendency is toward dispute resolution by an independent and impartial person who is a specialist in the relevant field rather than court ruling. To offer new dispute resolution mechanisms, in addition to statutes and case laws, Cases of amicable settlements and arbitral awards, Technology, Doctrines, Customs, Economical rationality, Jus naturale, Game Theory, and so on should be considered.

 "History and Current Situation of Court-annexed ADR in the USA" mentions the Civil Justice Reform Act of 1990, requiring federal courts to consider utilizing ADR. In 1998, Congress obliged them to this by enacting Alternative Dispute Resolution Act.

 "General View of Dispute Resolution Systems in Japan" surveys caseloads filed with the three types of ADR mentioned above. According to the Annual Report on Judicial Statistics, 360,000 cases were dealt with by Court-annexed ADR in 1998. Administrative ADR and Private Sector ADR handled at best 1,000 cases, excluding some 5,000 cases disposed of by the Japan Center for Settlement of Traffic Accident Disputes.

 "Points at Issue and the Thinking Process to the Proposal" indicates the following problems facing the current judicial system in Japan:
1) Dispute resolution systems are insufficient as a whole.
2) Too many cases are filed with courts despite not insubstantial portion of them being ill suited to civil litigation.
3) There are many problems with settlements reached through civil litigation (mediation process presided by adjudicating judge).
4) Court-annexed mediation lacks systematization and does not work well in terms of litigants' mutual consent.
5) Administrative and Private Sector ADR are not as well developed as Court-annexed ADR.

 The report also clarifies Group ADR's thinking in developing ADR:
1) Is ADR against rule of law?
-No. ADR differs from litigation in logic and structure. ADR organizations should handle cases fitting ADR while courts should handle cases fitting litigation. With such differentiation of functions rule of law is expected to be promoted.
2) Is judicial reform of settlements through litigation and court-annexed mediation more desirable than ADR?
-No. Courts are currently overloaded and not always able to resolve disputes to parties' mutual consent.
3) Will currently operating ADR develop without drastic measures?
-It would be difficult. Some policy construction is needed.
4) If an organization like the American Arbitration Association were established, would it work?
-Difficult. Merely establishing an ADR organization does not work without certain measures at least for the start-up period.
5) Could current ADR organizations handle court referrals of cases suitable for ADR?
-Difficult. Administrative and Private Sector ADR organizations do not have sufficient capacity and resource.
6) What about adding special ADR organizations sector by sector?
-No. Existing special ADR organizations are far from sufficiently utilized.
7) What about establishing a new ADR organization and having courts refer cases fitting ADR to such a new organization?
-This is a practical and creative proposal.

 "Proposal" presents three proposals in view of disputes in Japanese society and the need for new dispute resolution mechanisms: 1) Promotion of case referrals to ADR organizations, 2) Establishment of preparatory committees for new ADR mechanisms, and 3) Establishment of training programs for mediators and arbitrators.

 The report suggests dividing cases into civil litigation and mediation, with the latter referred to newly established ADR organizations. In principle, courts would not handle mediation, although amicable settlements through litigation should not be forbidden.

 The report suggests litigation should cover cases requiring 1) "Win or Lose" trial adjudications, 2) cases involving new interpretations of laws, 3) judgments requiring enforcement, 4) cases that may create leading cases on major legal issues, and 5) cases in which either or both of the parties concerned insist on being processed in court.

 Cases referred to ADR need to be considered prudently. The following are examples: a) Cases not involving 1) ~ 5) above, b) District court non-litigation cases, c) Family court divorce litigation, and d) Summary court cases not requiring enforcement of judgments. By referring cases to ADR organizations, court burden would be reduced. Satisfaction among individuals and businesses would increase in dispute resolution with the increased capacity such mechanisms would bring through the establishment of new ADR organizations and reduced court burden.

 The report suggests preparatory committees for new ADR mechanisms should be formed in areas where district courts, family courts, and summary courts are located. The committees should be in charge of securing facilities and personnel for the new organizations. The plan for the new organizations should be implemented within three years.

 The report states it is natural that judges should be highly involved as members of committees because case referrals to ADR organizations would be a court function. However, specialists, ordinary citizens and attorneys should also participate in ADR processes because ADR is based on the private-autonomy principle.

 The report suggests training programs for mediators and arbitrators be established and implemented nationwide. Whether new ADR mechanisms work or not depends on the quality of personnel in the new organizations. However, few judges and attorneys have received training as mediators and arbitrators. A program should be organized as soon as reasonably possible and well-trained personnel should be ready when the new organizations come into service.

 There are several other matters Group ADR believes require public consideration. First, funding for the new organizations needs to be covered by public support in addition to fees imposed on parties concerned. It is also worth considering a membership system, donation, and an insurance system. Second, should the new ADR be run by the private or public sector? Third, the connection between the courts and new organizations should be considered in terms of constitutional rights, fees, and execution of arbitral awards. Fourth, some measures are needed to promote cooperative relationships between the new organizations and existing ADR organizations like The Japan Commercial Arbitration Association. Fifth, laws concerned with ADR need to be amended or enacted. Sixth, a system should be built to promote cooperation with educational institutions, collection of information concerning ADR, nurturing of ADR specialists, etc. Finally, ensuring fairness and neutrality in the new organizations must be considered comprehensively.

A Study Team from KCAB Visits JCAA

 On October 20, 2000, a study team from the Korean Commercial Arbitration Board visited JCAA mainly to collect information and exchange opinions on the legal and procedural aspects of arbitration. The team comprised three staff members: Mr. Kim Ji Ho, Mr. Kim Tae Hoon, and Mr. Geun Sik Cho.

 After being briefed on JCAA's operation systems, activities, and arbitral procedures, it was explained to the team that even though the use of arbitration is still limited in Japan, the number of cases filed with JCAA has been gradually increasing for the past several years. It was further explained that this increase was partly due to the amended "Foreign Lawyers Law" that came into force on September 1, 1996 to allow foreign lawyers' representation in international arbitrations conducted in Japan. (See here for more information:http://www.jcaa.or.jp/e/arbitration-e/kaiketsu-e/venue.html)

 JCAA and KCAB concluded an arbitration agreement in 1973 and have enjoyed a mutually beneficial relationship ever since. The visit contributed to further strengthening relations between the two institutions.

 The 4th National Arbitration Center Conference Held by The Dai-ichi Tokyo Bar Association

The Dai-ichi Tokyo Bar Association hosted the 4th National Arbitration Center Conference (Zenkoku Chusai Senta Renraku Kyougikai) on September 29, 2000 in Tokyo under the sponsorship of the Japan Federation of Bar Associations. The National Arbitration Center Conference is held once a year for, among others, existing and potential arbitration centers of local bar associations to get together, exchange information, and to consider a variety of methods to develop and improve appropriate dispute resolution procedures for society.

 Mr. Norihiko Maeda, President of JCAA, participated in the conference as a guest panelist together with Mr. Kouzou Fujita, former Chief Justice of Hiroshima High Court, Mr. Takahisa Hirota, former Chairman of the Arbitration Center of the Dai-ichi Tokyo Bar Association, Mr. Ryuji Hori, Managing Director of Nissho Iwai Corporation, and Ms. Hatsuko Yoshioka, Secretary General of the Housewives Association. The theme of the panel discussion at the conference this year was "Arbitration to Improve the Judiciary in the 21st Century - What is Expected from the Arbitration Centers? -."

 In Japan, some local bar associations have their own dispute resolution proceedings that utilize mediation/conciliation and arbitration. A total of 11 arbitration/dispute resolution centers have been established nationwide since 1990 when the first arbitration center was founded by the Dai-ni Tokyo Bar Association. All of those centers are being operated by local bar associations. Although their names vary slightly (for instance, Arbitration Center, Mediation (Assen) and Arbitration Center, or Civil Dispute Resolution Center), their primary functions are the same; that is, to accept claims and conduct mediation and/or arbitration. The claims that they accept include both commercial and family disputes.

 Mr. Maeda presented at the panel a brief history of JCAA, which is largely different from those of the Arbitration Centers:

 In 1947, private companies of still occupied Japan were allowed to come back to the world market. It was the beginning of the days of "Export or Die." Export is the only way to obtain 'foreign exchange' which enabled Japan to buy food, raw material, machine and new technology for the survival of the Japanese and the reconstruction of the Japanese economy. But, the world market had little confidence in Japanese products or in Japanese companies. Even a few commercial claims could ruin the reputation of Japanese export. Both business and government were very much afraid of this to happen. Prevention and prompt resolution of commercial disputes were very important.

 Against this background, top seven business organizations in Japan including the Japan Chamber of Commerce and Industry and Keidanren jointly sponsored the establishment of the International Commercial Arbitration Committee, the former body of JCAA. With three years of preparation, JCAA was incorporated in 1953 and played a key role in preventing claims from developing into disputes. Most foreign business firms which brought claims to JCAA were satisfied by ASSEN which was usually translated as mediation. But most Japanese exporters were so eager to build and keep their reputation that they usually took care of the not entirely unreasonable claims before the mediation actually commenced.

 JCAA started with some 400 claims in 1953. As the volume of Japanese exports increased, the number of claims increased. On the other hand, as the quality of Japanese products and Japanese companies improved, the number of claims decreased. With these two opposite vectors, the claims grew to hit nearly 900 cases in 1965 and then started decreasing to reach only a few dozens in recent years.

 The number of arbitration cases has been constantly small and stayed in single digit until 1996. JCAA has started to receive two digit numbers of applications since 1997, but they are still small.

 Mr. Maeda also told that JCAA was considering promotional activities for domestic arbitration next year, for it would form one of the underlying bases for the promotion of international arbitration.

 After the presentations by the panelists, discussions were held on how to improve the activities of the local dispute resolution centers. The panelists agreed on the importance of securing good arbitrators and mediators. A panelist said that promotion of business disputes resolution would become more important than before.

 Prior to the panel discussion, there were reports at the conference on recent activities at each local center. According to the reports, the total caseload for all these arbitration centers was 747 claims in 1999, compared with 528 claims in 1998. More than half of these claims were handled by the three centers in Tokyo (Dai-ni; 158 claims), Okayama (153 claims) and Nagoya (118 claims).

 The conference also discussed how to ensure implementation of settlements and arbitration awards. It was pointed out by many local centers that even if a settlement was reached between the parties as the result of the centers' efforts to resolve their disputes, some of them were not implemented as expected. In order to avoid this situation, local centers are trying to utilize various methods and techniques that are permitted under the current laws. Despite such efforts, however, the problem of non-implementation is yet to be resolved.

 The activities of these Arbitration Centers are an important factor in the promotion of ADR in Japan. JCAA will work together with them toward that goal.

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

 On September 8 and 9, 2000, the Institute for Socioeconomic Dispute Studies of the Meijo University Graduate School of Law headed by Professor Kaoru Matsuura held a workshop for its large-scale five year project. Issue No. 6 of this Newsletter introduced the project outline and its first international symposium. Issue No. 7 carried a preview of this workshop.

 JCAA has been supporting this project. Mr. Norihiko Maeda, President, Mr. Masaharu Onuki, General Manager of JCAA Osaka office, and Mr. Tatsuya Nakamura, Deputy General Manager of the Arbitration Department joined some 20 participants who convened at Meijo University in Nagoya City. All participants other than those three were scholars of universities who are famous and established and/or spearheading the study in arbitration.

 Mr. Nakamura made a report on the topic of "The definition of the place of Arbitration." Introducing the ambiguous definition of the place of arbitration provided in Section 3 of the English Arbitration Act 1996, he concluded that it is not necessary to define the place of arbitration as long as it is a factor in combining the arbitration with the law applicable thereto. His presentation ignited a very lively discussion.

 Other topics and reporters of the two-day workshop are shown below in the order of their presentation. Enthusiastic and fruitful discussions followed most of them. But most of the topics are difficult and the participants exchanged different views on each topic. As a result, more issues were raised for further discussion than those for which agreement was reached.

 The second international symposium for this project will be held on 25-26 November also in Nagoya. Nine overseas experts will be invited to make presentations.

 "What Provisions Should be Made on Statutory Arbitration such as Those for Disputes Related to Construction and Pollution" by Prof. Yoshihiko Umemoto of Senshu University
"The Relationship between Arbitration and Extinctive Prescription or the Statute of Limitations" by Prof. Masato Dogauchi of the University of Tokyo
"The Problem of The Combination of Arbitration and Conciliation" by Associate Prof. Yoshihisa Hayakawa of Rikkyo University
"A Hybrid Dispute Resolution Process and The Combination of Arbitration and Conciliation" by Associate Prof. Yasunobu Sato of Nagoya University
"Provisional Remedies by Arbitral Tribunal" by Kaoru Matsuura of Meijo University
"The Common System or Separate System, Distinction between Commercial Arbitration and Civil Arbitration and the Definition of International Arbitration on the Assumption that a Separate System is Adopted" by Prof. Nobuyuki Tanaka of Aichi University

The JCA Newsletter is published by:

The Japan Commercial
Aribitration Association


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