Doing Business in Japan
Professor Kozo Yabe
A. Japanese Civil Code
Japanese law is not in the traditional common law like the UK and the US. Japanese law is grounded in a civil law system. Their civil law is highly reliant on the Civil Code and rules created by the Diet.
“Precedent” was once not seen as actual precedential “law,” but rather as mere examples of how to apply the civil code.
The Japanese Code was initially closely related to the French Code. However, when the Germans won the war against the French, they began taking more ideas from the German Code.
A Japanese law occurred during the middle of the 1800s – the Tokugawa era. In the 1860s, they established a new regime in Japan. At this time, Japan was a very underdeveloped country. So, under this regime, they attempted to modernize and import ideas from many European countries.
Civil Code, Civil Procedure Code and the Commercial Code and the constitutional law of other Western countries were all imported.
B. History of the Japanese Constitutional Law
o The laws in Japan are defined by the Japanese Constitution, which sets up the judiciary, other branches of government and the basic rights of individuals.
o The first Constitution maintained the monarchy. Plus, the judiciary was subject to the Emperor of Justice. This was the imperial constitutional law era. At this time, the Prime Minister was simply above other ministers, but he was not above the Emperor. This was a German, not a British style. In addition, the judiciary was subject to the national assembly at that time. Luckily, individuals could enjoy private property rights.
o As Japan began to trade with other countries, they quickly became more modern and industrial. For example, Japan and the UK entered a business alliance against Russia together.
o After WWII, Japan created a new (and current) constitutional law. This granted full property rights, rights for laborers, equal protection of gender, social welfare, due process and judicial review. The judiciary was now independent. The US was highly influential in the creation of the current Japanese Constitution.
o It would be common for a country to kick out the old law first and then create and pass a new constitution. However, Japan did not simply amend their old constitution. Instead, they simply wiped the slate clean and passed a brand new Japanese Constitution. To many, this new Japanese Constitution is not legitimate. Others simply consider it a “legal revolution.” Most importantly, business personnel loved the changes in the law because it made fair trade more plausible.
C. Career Judge System in Japan
o After graduation and the national bar passage, if the person wanted to become a judge, they become an associate judge. They become trained as an associate judge without any private practice experience. If they enjoy it, they can remain an associate judge until retirement.
o Actually, upon graduation, a student has three choices, you can be (1) a private lawyer, (2) a public lawyer, e.g., prosecutor, or (3) an associate judge. (Review page 73 for more information.) The three groups do not always get along, particularly in the criminal law side. However, on the business side, people are more cordial and communicate well together.
D. The Judicial System in Japan
o First of all, there are no juries in Japan! The only near exception is that there are lay person judges who hear some criminal cases.
o There is also no discovery procedure in Japan. They focus more on the arguments.
o Samsung v. Apple – Samsung sued Apple for not paying royalties after using licensed Samsung technology. The judge denied Samsung’s injunction and damages. This case is now on appeal. Professor Yabe believes that this is unfair. He believes that because these associate judges don’t have any private practice experience, they sometimes don’t make informed decisions. However, prohibiting recent graduates from being judges and having career judges has not been discussed by the Diet yet.
o There is one court system, not a state and federal system.
o Judges are reassigned every few years to prohibit corruption in certain localities.
E. Anti-Monopoly Law
o Before WWII, Japan didn’t not control the market because it was considered useless to try to regulate competition. Competition still existed then though.
o After WWII, because the market seemed so unfair, anti-monopoly law was enacted. It had three basic principles:
o No congromarit.
o No cartel.
o No unfair competitive deals – deals between multiple companies and between company and customers should be fair. This is more expansive than US antitrust law.
o Initially, the anti-monopoly was disfavored at first. However, after 2000, it has become a very important and even appreciated area of law.
November 5, 2013
I. Anti-Monopoly Law Continued from Yesterday
o Private monopolization
o E-Access had an agreement with JASKAC concerning fixed royalty rates. But the agreement concerning these rates, in the minds of the Japanese FTC, was unfair. The parties appealed and the determination was reversed. E-Access still wasn’t happy though. So, E-Access appealed to the IP High Court, not the Tokyo High Court. The IP High Court agreed with the first decision that this was unfair conduct.
o Cartel – fixed prices to reduce competition
o Unfair business practices and conduct – deals between multiple companies and between company and customers should be fair. This is more expansive than US antitrust law.
o These are foreign attorneys at law. They are very important, but their role is limited. Even if they are admitted to the Japan Bar, they can litigate in
ues a letter in response. This makes it very difficult for lawyers to get enough evidence. You need cooperation from the other side in order to get everything you need for fact finding. This makes the truth hard to find. In that respect, Japan is behind global trends.
o Recent amendments to the Japanese Code of Civil Procedure required that all case be completed within two years. Also since then, preliminary hearings have been used more often. This form of hearings is not open for the public; they are like meetings with the judge in his chambers. It enables the parties to figure out which issues to be discussed, which also expedites how quickly cases resolve.
o The Japanese Supreme Court must hear certain cases, but other less important cases, e.g., most business cases, are discretionary as to whether the Supreme Court will hear them. This reduces the number of cases this court must hear every year.
o Court clerks manage operations of cases. They can even ask the parties to amend some of their pleadings and documents.
o Less litigation has occurred in recent years. There are several reasons as to why this may be. For example, perhaps many rights are not properly afforded. Maybe the judiciary doesn’t function correctly. Perhaps the Japanese court should allow some English in their court system.
I. Discussion Continued from Yesterday
o Foreign legal counsel (Gaikokumo Jimu Bengoshi) – licensed in another country. This type of lawyer can handle some cases because of reciprocity, but in a very limited sense. Such lawyers can only practice their own law from their home country. They cannot practice Japanese law, unless they are accompanied by a qualified, Japanese lawyer. Otherwise, your practice will be illegal.
o Qualifications: 3 years home practice experience in your home country or 1 year in your home country and two years in a Japan office of a U.S. law firm, e.g. working at the Jones Day in Tokyo.
o Attorney at law (Bengoshi) – There are only about 30,000 attorneys in Japan for 127 million people. They are considered litigation experts. They are taking care of more general civil and criminal law cases. It is much harder to find the business law lawyers. The number of those who can also speak English and handle business law is only about 4-5% of the 30,000 lawyers.