PRE-ACTION CONSIDERATIONS

1 Case Analysis

1.1 Cause of action

The first thing to do is to determine whether a potential claimant has a cause of action. A cause of action is the legal basis of a claim. For example, the elements of a cause of action for breach of contract are (a) the formation of a contract between the claimant and the defendant; (b) failure to perform by the defendant; (c) damages and loss to the claimant; and (d) the causation between (b) and (c).

1.2 Burden of proof

The elements of a cause of action must be proved. In civil cases, the required standard of proof is ‘high probability[1]’, which is less stringent than ‘beyond reasonable doubt’ in criminal cases. It is essential that a potential claimant let a lawyer analyse all the evidence to assess whether the potential claimant will be able to discharge the burden of proof. If there is documentary evidence written in a foreign language, the party must prepare Japanese translations of it.

1.3 Limitation

It is also essential to appreciate that the period for issuing proceeding has not elapsed. If this period elapses without proceedings being issued, the case becomes ’statute-barred’. For example, the limitation period for contractual claims expires either: (a) 5 years from the date on which the claimant knows that s/he can exercise the right; or (b) 10 years from the date on which s/he can exercise the right[2].

1.4 Viablility

1.4.1 Identification of defendant

Identification of a defendant will rarely be a matter where a dispute arises between well-established businesses. A defendant may be a limited company, a partnership, or a sole trader. Identification of a defendant often matters where a defendant is doing business through a dummy company or non-existent entity. Particularly, in a fraud case, identifying the defendant will be the first hurdle to commence proceedings.

1.4.2 Defendant’s whereabouts

The defendant’s whereabouts must be found for the statement of claim to be served by the court. If the defendant is a company, its principal office address is publicly accessible on the company register. If the defendant is an individual, lawyers are allowed to investigate his or her domicile on the resident register. Nevertheless, if their whereabouts are not known from public sources, additional investigation will be required. In that case, the claimant should be sceptical of the defendant’s financial strength as well.

1.4.3 Defendant’s assets

The financial strength of the defendant does not matter from the legal point of view. However, it is not worth obtaining a judgment against a defendant who does not have the means to pay. From a cost-benefit point of view, it should be satisfied that prima facie, the defendant has the means to pay the amount in issue or that it has assets that can be taken from it to enforce payment.

1.4.4 Costs

Costs consist of (a) attorney’s fees and (b) disbursements. Disbursements consist of litigation costs paid to the court (i.e. court fees, postage…) and other expenses (e.g. attorney’s travel expenses).

1.4.4.1 Attorney’s fees

Japanese lawyers traditionally work on a quasi-contingency fee basis, consisting of a retainer fee (set at a certain percentage of the claim amount) and a success fee (set at a certain percentage of the award obtained). Pure contingency fee arrangements (‘no win, no fee’) are permitted. Lawyers in large law firms generally work on an hourly rate basis.

Each party must pay its own attorney’s fees, and the unsuccessful party usually is not liable to pay the successful party’s attorneys’ fees. However, in a contractual claim, if the contract states that the unsuccessful party must pay the successful party’s attorneys’ fees, the claimant can claim its attorney’s fees under the contract. In a tort claim, the claimant can claim its attorney’s fees, though limited to 10% of the claim amount, as part of its damages.

1.4.4.2 Litigation costs

The litigation costs are defined under the relevant law[3], including court filing fee, postage expenses, witnesses’ travel expense, and interpreter’s fees (if necessary). The court filing fee depends on the claim amount (see the court filing fee schedule). For example, if a claimant files a claim for ¥30 million in a district court, s/he will be required to pay ¥110,000 for the court fee. S/he will also be required to deposit the court’s postage expenses, which generally amounts to ¥6,000 to 7,000.

The unsuccessful party is liable to pay litigation costs. The judgment allocates the ratio of the litigation costs between the parties. Then, the successful party can file another petition to have the court determine the amount of the litigation costs. If the dispute is resolved by a settlement, the litigation costs usually are not counted.

2 Choice of Forum

If a party wishes to take proceedings against an opponent who is based in Japan, one of the first things that must be considered is the question of jurisdiction. The basic rule is that the defendant must be sued in its local courts. For a company, it means its principal office address. For an individual, it means the place where s/he is domiciled.

Nevertheless, if the parties have agreed that the courts of Japan are to have jurisdiction to settle disputes, proceedings can be taken in Japanese courts.

3 Alternatives to Litigation

International contracts often contain an arbitration or mediation clause requiring the parties to refer their disputes to arbitration or mediation rather than litigation. In the absence of such a clause, the parties in dispute may agree to arbitration or mediation once the dispute has arisen.

Arbitration at the Japan Commercial Arbitration Association (JCAA) is worth considering, particularly if the amount in dispute is less than ¥50 million. The expedited arbitration procedure under the JCAA rules allows the parties to obtain a final award within 3 months from the appointment of the arbitrator, which is much speedier than litigation.

4 Choice of Court

4.1 Court structure

Japan has a three-tiered judicial system. In most cases, a district court will be the court of first instance. A judgment given by a district court can be appealed to the High Court and then the Supreme Court. Civil claims of ¥1.4 million or less are generally tried at a summary court in the first instance.

Disputes involving intellectual property rights (i.e. patents, utility model rights…) are subject to the exclusive jurisdiction of the IP Division of either the Tokyo District Court or the Osaka District Court.

4.2 Court personnel

Judges are generally appointed from among legal apprentices who have no experience practising law. Summary court judges are generally appointed from among experienced judicial clerks. As the quality of summary court judges varies, lawyers often add nominal claims to a small claim to make it exceed ¥1.4 million, whereby the case will be tried at a district court.

4.3 Fast track

Expedited proceedings are available to a claim of ¥600,000 or less[4]. The judge generally gives a judgment immediately after the first oral hearing. The parties are usually required to appear to give oral evidence at the hearing. The defendant may object to the expedited proceedings, whereby the case will be sent to ordinary proceedings.

EARLY ACTION

5 Pre-Action Correspondence

There are no pre-action protocols to be followed by Japanese lawyers. However, it is common practice to send a demand letter by a special type of mail service (naiyo shomei) to negotiate a settlement before issuing proceedings. Such a letter has the effect of interruption of the limitation periods if followed by an issue of proceedings within 6 months from the receipt of the letter[5].

6 Out-of-Court Settlement

If a settlement is reached prior to the issue of proceedings, its terms are typically recorded in a formal settlement agreement. An out-of-court settlement is not enforceable unless prepared in the form of a notarial deed (kosei shosho).

7 Preparation for Court Proceedings

7.1 Company certificate

If a party is a company, it must prove the authority of the representative to act on behalf of the company. Parties generally submit a certified copy of the company certificate to prove s/he is the director of the company.

7.2 Power of attorney

If a lawyer is acting for a party under a power of attorney, the lawyer must prove its authority by submitting the original copy of the power of attorney.

8 Interim remedies

An interim remedy can be obtained before proceedings are issued. Among other remedies, a party for monetary claims may apply for an order of ‘provisional attachment’ to freeze the opponent’s assets to secure the collection of their claims. In practice, a provisional attachment puts pressure on the potential defendant to seek a settlement even before the main proceedings are issued.

PROCEEDINGS

9 Statement of Claim

9.1 Contents of the statement of claim

The claimant must state all facts necessary for establishing a complete cause of action. The statement of claim needs to set the legal basis on which the claim is based. Therefore, there is a need to cite the Act and the provision number. Evidence can be attached to a statement of claim. Generally, it is advisable to attach all the material evidence to it.

10 Issuing Proceedings

A party who wishes to start proceedings must hand in or send a statement of claim to the appropriate court office. If the court finds any failure to comply with the formalities in the statement of claim, it normally urges the claimant to amend it before striking it out. If the court is satisfied with its compliance with the formalities, it then serves the statement of claim on the defendant. Proceedings are commenced when the statement of claim is duly served to the defendant. For limitation purposes, however, the relevant date is the date when the court receives the statement of claim.

11 Service of the Statement of Claim

The court serves the statement of claim together with a notice of summons to the first hearing date by a special type of mail service (tokubetsu sotatsu). The first hearing date is set around 4 to 6 weeks from the service of the statement of claim. The claimant cannot personally serve the statement of claim on the defendant.

12 Defence

A defence must be submitted by the deadline set by the court, which usually is one week before the first hearing date. The defence must answer each allegation in the statement of claim by way of admission, non-admission or denial, whereby the judge and the parties can identify the issues in dispute.

12.1 Security for costs

If a claimant has no office or address in Japan and the defendant applies, the court will order the claimant to provide security to cover the expected litigation costs[6]. In practice, this application is rarely used because the litigation costs for the defendant are nominal.

13 No Extensive Disclosure

There is no general obligation on a party to show the other party the contents of documents. In particular, a party is not obliged to produce evidence adverse to itself either to the court or the other party. Also, there are no extensive document requests in Japan. However, a party can request the court to order the other party or a third party to produce certain documents, specifying information such as a summary of the document and the fact to be proved[7]. The court typically asks the requested party to produce the document voluntarily before issuing an order.

14 The First Oral Hearing Date

The court determines the date of the first oral hearing, consulting the claimant’s availability alone. The date is normally set around 4 to 6 weeks from the service of the statement of claim. The defendant is not obliged to attend the first hearing as long as a defence is filed by that date.

14.1 Rights of audience

Japanese law allows a party to represent itself in any civil lawsuit. Attorney-at-Law (bengoshi) who are admitted to practice law in Japan can appear and conduct proceedings in court on behalf of their client. There is no distinction between barristers and solicitors. Foreign lawyers who register to practice law in Japan cannot appear and conduct proceedings in court but can do so in international arbitrations.

14.2 Absence

The defendant is not obliged to appear on a date for the first hearing as long as a defence is filed by that date. However, if a defence is not filed and the defendant does not appear, the alleged facts in the statement of claim are deemed to have been admitted by the defendant. The court will then give the winning judgment for the claimant.

14.3 Publicity

Oral hearings are held in a courtroom, which is open to the public. Preparatory proceedings, where substantial discussions are often conducted, are held in a meeting room or via web/phone conference, which is closed to the public.

14.4 Access to case files

Case files and court records are publicly accessible for inspection[8]. Additionally, those who show a prima facie interest in the case can make copies of them[9]. If the case files contain confidential personal information or a trade secret, the parties may request the court to issue an order prohibiting any third party from accessing them.

15 Subsequent Hearings

After the first oral hearing, the court typically holds preparatory proceedings to identify the issues and evidence. Parties are allowed to exchange briefs and evidence to prepare for hearings. These hearings are held once every 4 to 6 weeks at court or via web/phone conference. There is no limit on the number of hearings and exchanges of briefs. While the court can dismiss allegations and/or evidence that have not been presented in a timely manner and have caused a delay in proceedings[10], it generally allows parties to submit briefs and evidence until the parties have exhausted arguments.

16 Court Mediated Settlement

Before a case proceeds to the stage of a witness examination, the judge generally attempts to mediate a settlement between the parties. In practice, judges are highly motivated to conclude a settlement to reduce their workload, and most disputes are settled before a judgment is given. A court settlement is enforceable, unlike an out-of-court settlement.

17 Examination of Witnesses

Parties submit witness statements before the court decides who should be called to give oral evidence. In practice, the witness statement works as the evidence-in-chief, and the witness is often asked to confirm that it is true to shorten direct examination. The witness will then be cross-examined by the other party and the judge. After third party witnesses are examined, the parties will usually be examined. If oral evidence is given in a foreign language, Japanese interpretation must be arranged. Opinion evidence is not admissible except for expert witness.

18 Judgment

Once the examination of witnesses is completed, the hearings will be closed. Then, the judge must render their judgment within 2 months from the closing date[11]. The parties are not obliged to appear on the date of the delivery of a judgment. In practice, most lawyers only ask the court clerk the main text of the judgment on the phone immediately after the judgment is given. A certified copy of the judgment will be served within 2 weeks from the date of the delivery of the judgment.

19 Appeals

A party in a district court at first instance can appeal to the High Court. An appeal must be made within 2 weeks from the receipt of a certified copy of the judgment[12].

Notes:

[1] It is formulated that ‘[i]t is necessary and sufficient that the judge has been persuaded of the truthfulness to the degree that an average person would not have doubt’ (Supreme Court, 24 October 1975)

[2] CC, Article 166(1)

[3] Act on Cost of Civil Procedure (Act No. 40 of 1971)

[4] CC, Article 368

[5] CC, Article 153

[6] CCP, Article 75

[7] CCP, Article 221

[8] CCP, Article 91(1)

[9] CCP, Article 91(3)

[10] CCP, Article 157(1)

[11] CCP, Article 251

[12] CCP, Article 285

Statutes

Civil Code (Act No. 89 of 1896) (‘CC‘)

Code of Civil Procedure (Act No. 109 of 1996) (‘CCP‘)

Act on Cost of Civil Procedure (Act No. 40 of 1971)
 
 
You can find English translations of these statutes here: Japanese Law Translation

 
 
 
Published on 24 April 2021