Resolving disputes by arbitration in Japan is a common practice, especially when it comes to disputes involving foreign investors. In fact, the popularity of arbitration is so high that Japanese arbitration institutions are reporting a two and even a three fold increase in the number of arbitration cases. In this short review we’ll try to analyze the main aspects of resolving disputes over investment agreements in Japan & provide you with some important clues.
Requirements & Regulators
Concluding an M&A deal in Japan requires drawing up a relevant agreement & issuing a public notification. Concluding an agreement without holding a tender is permitted only under limited circumstances. Choosing which agency a deal must be reported to (i.e. one charged with the regulation of FDI in Japan) is pivotal on the line of business a transaction relates to.
An investment is understood to be any assets /controlled/owned (either indirectly or directly) by an investor. Here’s a short list of assets qualifying for an investment:
- promissory notes, bonds, credits & other debt instruments;
- contractual rights;
- legal rights or rights granted as per treaties;
- any immovable/movable property or tangible/intangible assets;
- property-related rights.
An investor is defined as:
- individuals holding contracting parties’ citizenship;
- contracting parties' enterprises.
Contracting parties’ enterprises can be a trust, sole proprietorship, corporation, association, JV, partnership, organization, enterprise or representative office.
Since there’s no formal language for concluding investment agreements in the state of Japan, scrutinizing BITs on an individual basis may be required to determine protection types & terms to be met. Available basic remedies normally include:
- complete protection & safety;
- protecting against civil unrest;
- performance-related requirements;
- guarantees of capital transfer.
- compliance clauses;
- equal & fair treatment.
Japan: Settling Disputes
Most international agreements Japan is a signatory provide investors with a chance to select arbitration pursuant to UNCITRAL. However, investors’ right to seek arbitration beyond UNCITRAL is limited.
Managing investment & trade insurance is the sole responsibility of NEXI, a government-controlled agency. Insuring foreign investment in the state of Japan is mostly done with the participation of NEXI; no investment agreements signed between other countries & Japan are required for this.
The NYC to which Japan is a signatory provides foreign investors with a right to simply abide by the requirements set forth in it. According to them, they’re required to translate all the required documentation into Japanese if it’s only available in their native language.
Under Japan’s Arbitration Act, local courts must determine whether a court verdict can be enforced pursuant to Japanese law & if it’s governed by substantive or procedural legislation. Japanese courts are commonly believed to render positive judgements regarding enforcing foreign arbitral awards in the state of Japan.
Under the recently signed TPP agreement, new conditions for settling investment disputes by arbitration in the state of Japan have been introduced. Quite a few companies are currently making use of investment treaty arbitration in the state of Japan. It’s projected that more of them are going to be participating in cases related to arbitration under investment contracts in Japan.
Should you require more information or advice on the resolution of investment disputes through arbitration in Japan, please contact IQ Decision UK.