A. LEGISLATION AND RULES
International arbitration in Japan continues to be governed by the Arbitration Act of 2003 (“Arbitration Law”), which took effect in 2004 and to which no legislative amendment has been made since. Japan is, however, expected to amend its Arbitration Law imminently. After several steps in both the public and private sectors to build the country as an international dispute resolution hub during the last few years, an overhaul of the underlying legislation is seen as the likely next step in Japan’s arbitration reforms. The Legislative Council of the Ministry of Justice announced its interim draft proposals of amendments to Japan’s Arbitration Law in March 2021, where it invited public comments, then introduced a summary draft proposal of amendments to the Arbitration Law in October 2021 on its website, following which discussions have been ongoing. The proposals include:
- An enforcement scheme for interim and/or provisional measures issued by arbitral tribunals, which is in line with the amended UNCITRAL Model Law 2006
- Broader jurisdiction of the Tokyo District Court and the Osaka District Court over cases related to procedures under the Arbitration Law
- Court discretion not to request Japanese translations of arbitral awards and written evidence
In connection with other methods of alternative dispute resolution, draft legislation was introduced for discussion in Japan in 2022 as regards the establishment of a system aimed at granting enforcement power to settlement agreements reached through mediation. While Japan is yet to sign or accede to the United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”), if implemented, the legislation would enable Japan to accede to the convention.
A.2 Institutions, rules and infrastructure
The major international arbitration institution in Japan is the Japan Commercial Arbitration Association (JCAA). On 1 July 2021, the JCAA introduced its revised Commercial Arbitration Rules (“New JCAA Rules”) and new Appointing Authority Rules (“Appointing Authority Rules”). While the JCAA Rules were revised as recently as 1 January 2019, the New JCAA Rules introduce two key changes to the existing rules and the newly introduced Appointing Authority Rules, which will likely provide a distinct aspect to dispute resolution in Japan.
The New JCAA Rules introduce two major changes to the existing JCAA Rules: (i) expedited procedures will apply to arbitrations in which the amount in dispute does not exceed JPY 300,000,000 (around USD 2,750,000), except in certain circumstances; and (ii) a new category of administrative fees will apply to “small claims” in which the amount claimed does not exceed JPY 5,000,000 (around USD 45,000).
As regards the new maximum claim value for expedited procedures to apply, the new JPY 300,000,000 ceiling represents a considerable increase from the previous upper limit of JPY 50,000,000 (approximately USD 400,000) introduced under the previous revisions to the JCAA Rules and appears targeted at keeping pace with other major arbitral institutions in the region. In one press release on the introduction of the New JCAA Rules, the JCAA noted that, in 47.4% of JCAA-administered arbitrations between 2011 and 2020, the amount in dispute did not exceed JPY 300,000,000. As such, this recent revision should better serve the JCAA’s “typical user” in ensuring arbitrations are as swift and efficient as possible.
With respect to administrative fees, the New JCAA Rules insert a new category of fees for “small claims.” Here, for claims with a value not exceeding JPY 5,000,000, the administrative fee will be 10% of the economic value of the claim. This new “bracket” of administrative fees appears again to seek to expand the use of JCAA arbitration for smaller claims and perhaps for fairly typical JCAA users. Indeed, the JCAA noted in a press release that, between 2011 and 2020, 21.43% of JCAA administered arbitrations had an amount in dispute of less than JPY 50,000,000.
By way of the JCAA’s Appointing Authority Rules, the JCAA may assist with the appointment of arbitrators in ad hoc arbitrations where the JCAA is selected as appointing authority by the parties. Moreover, the JCAA may assist with the appointment of arbitrators in arbitrations conducted under the rules of other arbitral institutions under the Appointing Authority Rules where they are designated to do so. The Appointing Authority Rules provide an additional string to the JCAA’s bow as regards the services it is able to offer arbitration users and follows the example of other major arbitral institutions — including the ICC — in establishing specific rules for such circumstances.
In a 2021 case, a regional court in Japan provided clarity on the position in Japan pertaining to jurisdiction where the governing law of an arbitration agreement is unclear.
The case was filed by a wholly owned subsidiary of the claimant (“Claimant“), who purchased a cargo ship from the Defendant. The ship was chartered to B under a distinct charter agreement (“Charter Agreement”). Subsequently, a decision was sought by the Claimant where the ship charter fees were no longer paid by B due to poor performance.
Under a separate contract through which the Claimant claimed (“Taking Over Agreement”), the Claimant alleged principally that there was an agreement between the Claimant and the Defendant that, in the event that B was no longer able to continue the Charter Agreement, the Defendant would take over the Charter Agreement (i.e., conclude a charter agreement with the Claimant under the same conditions as the Charter Agreement in question).
The Claimant alleged that the Defendant received an assignment of a claim for damages based on certain concepts of Japanese tort law by which the Defendant had misled the Claimant into believing that it was taking over the ship, even though it had no intention of doing so, and for having caused the Claimant to purchase the ship. Consequently, the Claimant claimed remuneration from the Defendant and interest on such damages.
In the Charter Agreement, the dispute resolution clause provided that all disputes shall be referred to arbitration in Singapore and the general rules of the London Maritime Arbitrators Association (“Arbitration Agreement”). Distinctly, the governing law of the Charter Agreement was English law. The Defendant asserted that all of the Claimant’s claims arose under the Charter Agreement and, as a result, the Claimant’s claims in Japan’s courts should be dismissed in favour of arbitration in Singapore in line with the Arbitration Agreement.
In response, the Claimant stated that the law governing the Taking Over Agreement in this case should be interpreted as Japanese law and the claims were not subject to the Arbitration Agreement in the Charter Agreement as: (i) the disputes subject to the Claimant’s claim did not require expertise in maritime matters or reference to English law precedents on international maritime disputes; and (ii) there was no specific benefit to resolving the dispute by arbitration in Singapore.
Additionally the Claimant argued that the Charter Agreement was an agreement between the Claimant and B, with the Defendant merely having signed the same to make clear that it had entered into the Taking Over Agreement with the Claimant. As such, the parties subject to the Arbitration Agreement in the Charter Agreement were limited to the Claimant and B, i.e., the Defendant should be unable to avail itself of the Arbitration Agreement as it was not party to the agreement.
In the court’s discussion, as regards the establishment and validity of arbitration agreements in international arbitration, the court held that it was reasonable to conclude that the governing law of the Arbitration Agreement should be determined in accordance with the intention of the parties in the first instance. Although there was no explicit agreement on the governing law of the Arbitration Agreement itself: (i) the Charter Agreement was governed by English law; and (ii) the Arbitration Agreement stated that all disputes relating to the Charter Agreement were to be referred to arbitration in Singapore and the general rules of the London Maritime Arbitrators Association. In light of this, it was held that it was reasonable to assume that there was an implied agreement between the parties to the Arbitration Agreement to the effect that the Arbitration Agreement was governed by English law.
Given that the governing law of the Arbitration Agreement in this case was English law, the scope of the Arbitration Agreement would also be subject to determination in accordance with English law. In this connection and under court precedents in the English courts at the time, the Japanese courts considered that the interpretation of an arbitration clause should be based on the presumption that, if wording is unclear as to whether certain issues are excluded from the scope of an arbitration agreement, the parties, as reasonable business persons, would have intended that any dispute arising out of a contract they had entered into would be decided by way of arbitration.
Taking into account the regional court’s finding on the scope of the Arbitration Agreement, the court found that the dispute relating to each of the Claimant’s claims fell within the scope of the Arbitration Agreement and therefore dismissed both claims as unlawful.
In summary and whilst a decision of a regional court in Japan, this decision reaffirmed the position that, in Japan: (i) in principle, the governing law of the main contract is recognised as the governing law of the arbitration agreement when the governing law of the main contract is expressly stated; and (ii) when the law of the place of arbitration differs from the jurisdiction to which the governing law of the main contract belongs (here, Singapore was the physical place of arbitration whereas the governing law was English law), there is an implied agreement as to the governing law of the arbitration agreement.
 Arts 709 and 715, Civil Code.
 Arts. 3(2) and 14(1), Arbitration Law.
 In accordance with Article 7 of the Act on General Rules for the Application of Law (Hou no Tekiyo ni kansuru Tsusoku ho) and certain case law in Japan.
 In accordance with the Arbitration law
 Under the concept of “Mokuji no Goui,” an agreement may be validated as an agreement without explicit manifestation of intent.