Bringing a claim - initial considerations

Key issues to consider

What key issues should a party consider before bringing a claim?

A party should consider whether the merits of its claim can be proven based on evidence that it already has in its possession or can be obtained easily from a third party. Civil litigation in Japan does not provide for broad pretrial discovery; thus the means to obtain evidence from the opposing party are limited. It is standard practice for a potential plaintiff to send a demand letter using a content-certified letter (a type of letter that the post office certifies the content and the delivery thereof) stating the issue and the claim to the opposing party before commencing litigation to assess the opposing party’s likely response in the event that the case goes to court.

Establishing jurisdiction

How is jurisdiction established?

In cases concerning an individual, a court in Japan has general jurisdiction if the defendant is domiciled or has its residence in Japan. In cases concerning a corporation, the court has general jurisdiction if its principal office or business office is located in Japan, or if its representative is domiciled in Japan (in cases where such office does not exist or is unknown). Furthermore, the CCP provides for 12 categories where a court in Japan has specific jurisdiction depending on the nature of the claim. For instance, an action demanding performance of a contractual obligation or payment of damages for a breach thereof may be filed in Japan if the place for performance of the obligation is within Japan. Jurisdiction is also established by written agreement (including electronic or magnetic records) or by appearance.

Preclusion

Res judicata: is preclusion applicable, and if so how?

Res judicata applies with regard to the cause of action that a plaintiff requested the court to adjudicate. It precludes a claim based on the same cause of action from being litigated in other proceedings. Res judicata also applies to a court’s judgment regarding the validity of a claim asserted as a set-off defence; thus, such claim cannot be pursued in other proceedings.

Applicability of foreign laws

In what circumstances will the courts apply foreign laws to determine issues being litigated before them?

A Japanese court will typically apply foreign laws in a contract dispute where the parties have designated having a foreign law as the governing law. A court will also apply foreign laws if the Act on General Rules for Application of Laws, which is the source regarding conflicts of law in Japan, designates the application thereof. In such cases, parties often submit an expert opinion on the application of the foreign law to the issue before the court.

Initial steps

What initial steps should a claimant consider to ensure that any eventual judgment is satisfied? Can a defendant take steps to make themselves ‘judgment proof’?

A plaintiff should consider filing for a provisional remedy to ensure that an eventual judgment on the merits will be satisfied. Japan’s Civil Provisional Remedies Act provides two types of provisional remedies. First, a provisional seizure order may be issued to attach a defendant’s property to secure a plaintiff’s monetary claim. Second, a provisional disposition order may be issued to preserve the status quo of a disputed subject matter or establish an interim relationship between the parties.

Under Japanese law, contempt is not available as a procedure to enforce a court order. Thus, a defendant may practically become judgment-proof if it dissipates its assets before a plaintiff takes action to enforce a judgment.

Freezing assets

When is it appropriate for a claimant to consider obtaining an order freezing a defendant’s assets? What are the preconditions and other considerations?

A plaintiff should consider obtaining a provisional seizure order to attach a defendant’s property if there is a risk that the defendant will dissipate its assets. To obtain the order, a plaintiff must show a prima facie case for the claims to be preserved and the necessity of preserving them in an ex parte procedure. A plaintiff must also provide security as a condition for a court to issue an order. A court determines the amount of the required security taking into account, among other things, the monetary value of a claim and the subject property to be seized.

Pre-action conduct requirements

Are there requirements for pre-action conduct and what are the consequences of non-compliance?

The CCP does not require parties to take pre-action conduct. The CCP provides for an advance notice of filing, which allows a prospective plaintiff to ask a prospective defendant about certain matters and ask for a court’s assistance in collecting certain evidence. However, it is rarely used because there are no means to compel fulfilment of those requests.

Other interim relief

What other forms of interim relief can be sought?

See question 8.

Alternative dispute resolution

Does the court require or expect parties to engage in ADR at the pre-action stage or later in the case? What are the consequences of failing to engage in ADR at these stages?

Parties are not required to engage in ADR at the pre-action stage or later in a case, except in certain cases such as rent reviews. A court has discretion to order the parties to attempt conciliation, which is often the practice in cases involving construction.

Claims against natural persons versus corporations

Are there different considerations for claims against natural persons as opposed to corporations?

If a corporate defendant lacks a duly authorised representative to act on its behalf, the plaintiff needs to request the appointment of a special agent by making a prima facie showing of the risk that the plaintiff will incur damage if there is a delay.

Class actions

Are any of the considerations different for class actions, multi-party or group litigations?

In cases where an action is brought by or against multiple parties, a Japanese court has jurisdiction if rights or obligations that are the subject matter of litigation are common to such parties or are based on the same factual or statutory causes.

In 2016, the Act on Special Provisions of Civil Court Procedures for Collective Recovery of Property Damage of Consumers came into effect, enabling consumers to recover damages collectively concerning claims in connection with consumer contracts. However, this legislation differs considerably from the class action under US law because the ability to initiate important procedures thereunder is not given to individual consumers, but to a specific qualified consumer organisation certified and regulated by the Prime Minister.

Third-party funding

What restrictions are there on third parties funding the costs of the litigation or agreeing to pay adverse costs?

Third-party litigation funding is not common in Japan, especially for commercial litigation. The Basic Rules on the Duties of Practising Attorneys prohibit an attorney from sharing fees for his or her services with anyone other than practising attorneys or legal profession corporations, unless permitted by law or regulations or rules of the bar association to which the attorney belongs, or unless there is a justifiable cause.

Contingency fee arrangements

Can lawyers act on a contingency fee basis? What options are available? What issues should be considered before entering into an arrangement of this nature?

Contingency fees are permitted if they are appropriate and reasonable considering factors such as the economic benefit, the difficulty of the case, and the volume of time and labour required from an attorney. However, a typical fee arrangement for civil litigation will involve a combination of a retainer fee upon engagement and a contingency fee to paid upon successful representation.