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Home > Country profiles > Japan > Articles > Article detail

A case for Tokyo

Wednesday, 4th January 2018

"It’s been another good year for international arbitration in Asia, with the leading Asian venues Singapore and Hong Kong not resting on their laurels and keeping up to date with the latest international developments, and South Korea’s Seoul and Malaysia’s Kuala Lumpur continuing their rapid growth.


But one Asian powerhouse has not made noticeable progress compared to its size and stature, and not just the past year but several years: Japan.


Despite being the world’s third-largest economy and home to leading companies that uses international arbitration, Japan and its capital city Tokyo have been barely in the discussions about the rise of international arbitration in Asia.


There are several reasons behind the anaemic state of arbitration in Tokyo. For starters, arbitration – or any dispute resolution for that matter – is not popular in Japan as historically Japanese companies are dispute-averse.


“The Japanese actually settle out of court – they don’t like the courts,” says Haig Oghigian, senior counsel at Squire Patton Boggs in Tokyo, focusing on international dispute resolution. “But if they had to choose, they would choose the Tokyo District Court over going to international arbitration hearing. So the cultural problem is not just arbitration versus court, it’s just any kind of dispute – they want to try and settle any kind of dispute.”


With a culture so reluctant to litigate, the country and its lawyers were never really up to speed with arbitration. “There are very few Japanese lawyers who are knowledgeable or experienced in international commercial arbitration,” notes Oghigian. “And of course, most clients are even less knowledgeable. So when a client asks about a potential dispute to use court or arbitration, typically arbitration is not recommended because there’s a general unfamiliarity with it.”




Japan needed someone to take the lead to boost arbitration, but it didn’t come from the government, which has noticeably been less active compared to other Asian venues.


“Obviously with Singapore and Hong Kong, it’s very well known that they have had massive government support for arbitration; likewise there’s the judiciary in both countries that are very well-versed in arbitration matters and really push to get ahead of the developments in this area,” says Benjamin Jolley, a senior associate at Herbert Smith Freehills in Tokyo.


“And although we understand the Japanese government is keen to promote arbitration in Japan, historically arbitration in Japan hasn’t had the same level of support that it has had in Singapore and Hong Kong.”


“I think likewise, the Japan Commercial Arbitration Association (JCAA) may find it difficult to provide the same level of support in promoting arbitration in Japan as other institutions do internationally,” he adds.


Jolley shares the examples of institutions like the International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC) as having a bigger marketing budget and are more visible internationally. “We see those institutions regularly in Tokyo marketing to Japanese users,” he notes. “As far as I understand, I don’t think the JCAA is going out and marketing that much to users of arbitration in countries outside of Japan.”


It also didn’t help that there was a misconception about the perceived bias towards the Japanese party. “It’s less so now, but there used to be a misconception that doing arbitration in Japan would not necessarily be an even playing field,” says Oghigian. “There was a series of articles written in the U.S. about how the JCAA are pro-Japanese. That is now pretty much proved to be incorrect.”


But there have been a couple of court cases that haven’t been pro-arbitration by Japanese courts, he adds. The arbitration community is anticipating the ruling of the first arbitration case taken by the Supreme Court of Japan later this month or early January, which will set to have an impact.


“If it goes against the modern trends of arbitration, I think that’s going to put a wet blanket on any kind of international arbitration here,” he notes. “There are people that will be justifiably sceptical about whether or not Japan is the right place to do arbitration.”


There are also smaller but significant factors that don’t help its cause. Language barriers, for one, with English being the language of international business and the common language for international parties, the court decisions around arbitrations in Japan are published only in Japanese – a language really only used in the island country."

Read in full:  

Language: English
Contact: John Kang

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