Legal issues of general application

Government permission

What government approvals are required for typical project finance transactions? What fees and other charges apply?

There are no general government approvals or any related fees or charges that would be required across all typical project finance transactions. However, depending on the type of project being contemplated, certain licences may be required to carry out the project in question (eg, the METI’s authorisation under the Renewable Energy Act, permits under the Electricity Business Act or Construction Industry Act). In addition, with respect to certain types of investments, loans, operations and remittances by foreign parties, reporting to the Finance Minister or the relevant competent authorities, or both, may be required under the Foreign Exchange and Foreign Trade Control Act.

Registration of financing

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

Financing or project documents do not need to be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable. However, the payment of stamp duty may be required depending on the nature of financing or project documents unless they are executed outside Japan.

Arbitration awards

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

Under the Arbitration Act (Act No. 138 of 2003), arbitral awards, including arbitral awards where the seat of arbitration is not in Japan, are deemed to be final and binding by the courts. To enforce an arbitral award, an individual must prepare a copy of the award along with a Japanese translation and present these to the courts. There are no types of commercial disputes common to project finance transactions that cannot, by agreement, be made subject to arbitration.

Japan is a member of both the ICSID Convention and the New York Convention.

Law governing agreements

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

Project agreements and financing agreements are typically governed by the laws of Japan. Project agreements may also be subject to certain prefectural or municipal ordinances.

Japanese law does not have exclusive jurisdiction over any matter other than security over assets located in Japan or receivables governed by Japanese law, and parties are otherwise free to agree on the governing law of any agreement. That being said, any enforcement in Japan will be required to conform to Japanese civil procedures and any decisions of a foreign court that violate Japanese doctrines of public policy or good morals will not be enforceable in Japan. In addition, matters of insolvency, consumer protection and employment will be subject to mandatory provisions of Japanese law.

Submission to foreign jurisdiction

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?

Japanese companies and government entities may validly submit to the courts of a foreign jurisdiction. While sovereign immunity in relation to certain matters may not be waived under the Japanese Constitution, a waiver of immunity by a Japanese government entity in relation to commercial transactions should generally be effective under Japanese law.

Pursuant to the Act on the Civil Jurisdiction of Japan with Respect to a Foreign State, etc (Law No. 24 of 2009), which came into force on 1 April 2010, a foreign government shall be subject to the jurisdiction of the Japanese courts provided that such foreign government has expressly submitted thereto. Even without the express submission to jurisdiction on the part of a foreign government, it is possible to commence civil proceedings against foreign governments in the context of certain commercial transactions (eg, a sale and purchase under civil or commercial law, commercial loans), labour contracts, physical injuries or property damage.

Where a foreign government expressly consents or where it has provided collateral as part of a project finance transaction, a temporary injunction or civil enforcement procedure may be carried out against the assets of such a foreign government. Even if no explicit consent has been given, the commercial assets of a foreign government that are located in Japan may be subject to civil enforcement procedures.

There are limited court precedents in relation to waiver of immunity clauses, but the Supreme Court has previously held that waiver of immunity clauses were effective in relation to acts of foreign governments other than any sovereign acts or functions of government.