ICC Bulletin 2024 (2)｜国际争议解决法律改革 —— 《日本仲裁法》修正案和《新加坡公约实施法》生效实施

Introduction

Although arbitration is globally recognised as the standard dispute resolution procedure for international commercial disputes, it has not been as frequently used in Japan as in some other jurisdictions. This situation may have been regarded as one of the legal risks for foreign companies investing in Japan, as well as a factor that has made Japanese companies reluctant to expand their business in overseas for fear of having to resolve international disputes, should they arise, through arbitration.

The Japanese government, therefore, has developed measures such as professional training, familiarisation with the international arbitration and amendment of the Arbitration Act to promote Japan as a leading dispute resolution seat in Asia. In response to this movement, the Arbitration Act was considered for amendment from September 2020 and was enacted in April 2023.

Additionally, in October 2023, the Japanese government ratified the United Nations Convention on International Settlement Agreements resulting from Mediation (‘Singapore Convention’), becoming the 11th country to ratify the Singapore Convention, which provides an international framework to give enforceability to settlement agreements resulting from international mediation (similar to the New York Convention in arbitration).

Both the amended Arbitration Act and the Singapore Convention Implementation Act came into effect on 1 April 2024. These legal reforms and their impact on the practice of international dispute resolution in Japan were discussed as the key topics at the 2nd ICC Tokyo Arbitration Day in April 2024.

The Japanese Arbitration Act (Act No. 138 of 2003), initially enacted in 2003 on the basis of the UNCITRAL Model Law on International Commercial Arbitration, has been amended to align it with the UNCITRAL Model Law 20065 (Act No. 15 of 2023).

The Arbitration Act mainly applies to cases where the place of arbitration is in Japan (Art. 3(1)), while the provisions on the recognition and enforcement of arbitral awards also apply to cases where the place of arbitration is outside Japan (Art. 3(3)).

Enforcement approval order for interim measures

Upon the petition of the party, Japanese courts can now issue an enforcement approval order for interim reliefs issued by arbitral tribunals to preserve rights and evidence until an arbitration award is made, unless otherwise agreed by the parties (Art. 47). The court may dismiss the petition without prejudice only if it finds that any of the grounds stated in Art. 47(7) exist.

Under the amended Arbitration Act, interim reliefs issued by arbitral tribunals are classified into two distinct types:

• Prohibition measures. Prohibition of disposal or change of property, prohibition of taking harmful actions to the proceedings, prohibition of disposal of evidences, etc. (Art. 24(1)(i), (ii), (iv), and (v)). If a final and binding enforcement approval order regarding an order for these interim measures is violated or likely to be violated, a separate order for the payment of a penalty can be issued by the courts, which is effective as a title of obligation for compulsory execution of the payment(Arts. 47(1)(ii) and 49).

• Prevention and restoration measures. Measures necessary to prevent substantial loss or imminent danger to the property or rights that are the subject matter of the dispute, and to restore their status quo (Art. 24(1)(iii)). Here, these interim reliefs with a final and binding enforcement approval order can be effective as a title of obligation for compulsory execution (Arts. 47(1)(i) and 48).

  
  

Limitation of the translation requirement

In judicial proceedings in Japan for obtaining enforcement approval orders for arbitral awards and interim measures, if the court finds it appropriate, after hearing the opinions of the respondent, it may decide not to require the submission of the whole or part of the Japanese translation of the award or interim reliefs (Arts.46(2) and 47(2)). This amendment is aimed at reducing the cost and workload of translation for the parties and expediting the procedure. It may also help the court see how the arbitral tribunal felt about the case more clearly through reading the original expressions used by the arbitral tribunal, without its key messages being lost in translation.

Extended jurisdiction of the Tokyo and Osaka District Courts

If the place of arbitration is in Japan, parties can go before the Tokyo District Court or the Osaka District Court, in addition to the courts with jurisdiction under Article 5(1), to have their arbitration-related matter decided (Art. 5(2)). This amendment is expected to facilitate more reliable and expeditious determination of arbitration-related matters, including enforcement of arbitral awards, set aside of arbitral awards, and enforcement approval order of orders for interim measures, as judges in these large courts are more likely to be familiar with arbitration.

The arbitration agreement written requirement relaxed

The requirement in Articles 13(2) and 13(4) that an arbitration agreement must be in writing or in electronic record has now been relaxed. Specifically, even where the relevant contract is not in writing, if it refers to a document or an electronic or magnetic record (e.g.email) containing a clause which constitutes an arbitration agreement forming part of the contract, the arbitration agreement is now deemed to have been made in writing (Art. 13(6)).

Issues not amended

The following issues remain potential subjects of discussion and amendments in the future:

• Enforceability of emergency arbitrators’ decisions. As described above, the interim reliefs that are subject to an enforcement approval order by the Japanese courts are limited to those issued by the arbitral tribunal, and do not include decisions made by the emergency arbitrator as set forth in Article 29 of the ICC Rules. The reason for this is believed to be because emergency arbitrators are not deemed to fall within the meaning of ‘arbitral tribunals’ under the Arbitration Act and the decisions of emergency arbitrators are usually not binding on arbitral tribunals under most institutional rules.

• Confidentiality of the arbitral proceedings. Although, in practice, arbitral proceedings are commonly conducted in private, the amended Arbitration Act is silent on the confidentiality of arbitral proceedings. Therefore, as before, the confidentiality of arbitral proceedings is left to the parties’ agreement.

• Governing law of the limitation of period. Statute of limitation is one of the topics frequently raised in arbitration, and sometimes the parties disagree on what law governs the issue of limitation period (especially where the period differs depending on what national law applies). The amended Arbitration Act only provides that commencement of arbitration tolls or renews a limitation period for the underlying claim (Art. 29(2)), and does not clarify which law determines the applicable limitation period in the first place.

2.Ratification of the Singapore Convention on Mediation

and new Singapore Convention Implementation Act

Mediation has been recognised as a popular procedure for resolving international commercial disputes, especially in terms of time- and cost- efficiency. In recent years, there have also been an increasing number of cases in which arbitration and mediation have been combined for more efficient dispute resolution procedure. The survey conducted by Queen Mary University and White & Case in 2021 shows that a noticeable increase over recent years in the overall popularity of arbitration used in conjunction with ADR, including mediation.

Although Japan did not initially sign the Convention, in response to the international trend of increasing use of international mediation, Japan ratified the Convention in October 2023 and enacted the ‘Singapore Convention Implementation Act’ (‘Implementation Act’). This new act came into effect on 1 April 2024.

It is notable that Japan adopted the opt-in approach; it shall apply the Singapore Convention only to the extent that the parties to the settlement agreement have agreed to the application of the Singapore Convention(Art. 8(1)(b), Singapore Convention). Accordingly, aside from the settlement agreement itself, an agreement on the application of the Singapore Convention will be required for the enforcement of a settlement agreement reached through mediation in Japan. This avoids party imbalance resulting from a unilateral enforceability of the international mediation agreement only in Japan while such an agreement is not enforceable in the non-signatory jurisdictions of the other party.

The effect and the scope of the application of the Singapore Convention Implementation Act

The Implementation Act also establishes an enforcement regime that allows Japanese courts to issue an enforcement approval order for international settlement agreements resulting from international mediation related to commercial disputes (Art. 5).

The ‘International settlement agreements’ subject to such enforcement fall within one of the following items(Art. 2(3)):

• Some or all of the parties have an address, a main office or a place of business outside Japan.

• Some or all parties have their addresses, offices or places of business in different State.

• The State in which some or all of the parties have their addresses, offices or places of business is different from the State in which either the place where a substantial part of the obligations under the agreement is performed or the place with the closest connection to the subject matter of the agreement belongs.

The provisions of the Implementation Act apply when parties to the international settlement agreement have agreed that it could be enforced through civil enforcement (Art. 3). They do not apply to international settlement agreements on consumer disputes, individual labor-related disputes, and personal status and other disputes regarding family affairs (Art. 4).

The impact on the mediation practice in Japan

Historically, mediation has been widely accepted in Japan as a popular procedure of resolving domestic disputes for more than 100 years. However, lacking the mechanism for the enforceability, international mediation was not perceived as similarly popular procedure as domestic mediation. This situation is now changing as a result of the increased needs to resolve international disputes in mediation in recent years. As part of these developments, a new institution dedicated to international mediation was established in November 2018.

As a result of the enforceability granted to international commercial mediation through the framework of the Singapore Convention, more international disputes involving Japanese companies are expected to be resolved through international mediation.

In addition, given the number of signatory states (and ratifications) to the Singapore Convention, it is expected that the Singapore Convention will have significant impact on disputes with parties from such countries, and Japan is now ready to make material advancement in the practice of international mediation.

Conclusion