New trends in international ADR in Japan

November 2018 | SPOTLIGHT | LITIGATION & DISPUTE RESOLUTION

Financier Worldwide Magazine

November 2018 Issue

The Japan Association of Arbitrators (JAA) is taking the lead in developing and establishing new centres and institutions for alternative dispute resolution (ADR), cooperating with the Japanese government and other organisations, including economic industry.

On this basis, the Japan International Dispute Resolution Center (JIDRC) in Osaka, was established earlier this year, with a new centre in Tokyo planned for 2019, before the year of the Tokyo Olympics. Also, an institution to administer mainly mediation, the Japan International Mediation Center in Kyoto (JIMC-Kyoto), opened in September 2018.

These initiatives have been strongly supported by the Ministry of Justice (MOJ), multiple industry associations and many legal professionals. The main goal of establishing these centres and institutions is to make Japan an attractive venue for dispute resolution and strengthen Japan as an economic centre for global corporations doing business across Asia. The facilities offer state-of-the art equipment and experienced and multilingual staff.

JIDRC is located in a commercial district of Osaka and serves as a facility for ADR in the form of both arbitration and mediation. Aiming to be similar to Maxwell Chambers in Singapore, JIDRC is expected to be used as a venue for ADR administered by institutions such as the International Chamber of Commerce (ICC), the Singapore International Arbitration Centre (SIAC), the Hong Kong International Arbitration Centre (HKIAC), the Korea Commercial Arbitration Board (KCAB) and the Japan Commercial Association of Arbitration (JCAA). As noted, this type of facility is also planned for Tokyo, to coincide with the Tokyo Olympics and any sports-related disputes, including doping issues.

In contrast, JIMC-Kyoto is to be based at Doshisha University, one of the leading private universities in Japan. JIMC-Kyoto will administer mediation proceedings under its own rules, utilising its own mediators list. Disputing parties are also free to apply other mediation rules on an ad hoc basis and appoint mediators from a list of candidates provided by JIMC-Kyoto.

Historical background and future prospects

Historically, very few international ADR cases have been handled in Japan. In contrast, the number of ADR proceedings administered outside of Japan by ADR institutions such as the ICC, SIAC, HKIAC and AAA, has been high and is increasing. This has been attributed, in part, to a lack of sophisticated facilities for holding international ADR proceedings in Japan. Many dispute resolution practitioners and their clients believe that the establishment of new dispute resolution centres and mediation institutions will have a positive impact on international ADR practice in Japan. These facilities are expected to appeal to the amicable legal culture of Japanese corporations and users and provide support for potential cross-border multijurisdictional disputes – for example intellectual property (IP)-related disputes, such as standard essential patent (SEP) disputes.

It is widely recognised that Japanese corporations prefer amicable settlements to protracted and rancorous disputes. While this tendency has been changing in some cross-border aspects, in recent years – as Japanese corporations globalise and expand their international presence through overseas affiliates or by acquiring international business practices and resources, including non-Japanese legal practices and human resources – amicable solutions have been preferred not only by most Japanese corporations but also by global corporations doing Japan-related business. This tendency has also been the case in Japanese court proceedings, where judges take on the role of mediators. As such, there should be significant opportunities for using mediation, possibly combined with arbitration, to offer a more holistic and flexible approach that may help raise Japan’s profile as an ideal location for international dispute resolution.

In addition, there is a growing need to address disputes and stalled negotiations involving IP, such as patents, trademarks, copyrights, licence contracts and other related issues. SEP-related disputes in particular appear to be increasing globally as multiple jurisdictional disputes, involving suitable issues for ADR due to the inability of sovereign powers in certain jurisdictions to resolve them. Thus, in cases where claims include not only Japanese corporations but also foreign entities in multiple jurisdictions, even US and European courts may opt for cases to be mediated in Kyoto, Japan.

Resource issues and improvement

The small number of international ADR cases seen in Japan is commonly attributed to the shortage of international arbitrators and mediators who can efficiently handle cross-border, multinational commercial or investment disputes in English. While many practitioners in Europe and Asian countries such as Hong Kong and Singapore have been trained by, for example, the Chartered Institute of Arbitrators (CIArb), the Singapore Institute of Arbitrators (SIArb) and other ADR institutions, access to trained and experienced international ADR professionals has been quite limited in Japan.

Therefore, the establishment of the two new dispute resolution centres in Osaka and Tokyo, as well as the new institution in Kyoto, provides a strong incentive to enhance the training programmes provided through institutions such as the JAA and the CIArb.

These efforts have been matched with great interest and enthusiasm in legal and commercial circles. Japan’s cultural environment appears to complement the spirit of ADR based upon an amicable settlement seeking culture, and we hope that the new facilities in Osaka and Tokyo, as well as the new mediation institution in Kyoto, can continue to attract both Japanese and global companies seeking fair and efficient solutions for their international business.

Yoshihiro Takatori is a partner and Haruka Matsumoto is a managing associate at Orrick. Mr Takatori can be contacted on +81 3 3224 2911 or by email: ytakatori@orrick.com. Ms Matsumoto can be contacted on +81 3 3224 2952 or by email: hmatsumoto@orrick.com.

Yoshihiro Takatori and Haruka Matsumoto

Orrick