Prem Warehouse LLC, et. al v Sanyo Electric Co. Ltd. et. al., Osaka High Court Decision, 11 March 2019, 2017 (RA) no. 1552
In Prem Warehouse LLC, et. al v Sanyo Electric Co. Ltd. et. al., Osaka High Court Decision, 11 March 2019, 2017 (Ra) No. 1552, the Osaka High Court dismissed a long running challenge to set aside an arbitral award arising from an arbitrator’s failure to disclose potential conflicts of interest. The case has made its way through the courts, and highlights the importance of the a good conflict check system.
Initially, the Osaka High Court found that an arbitrator’s disclosure obligation was paramount to the integrity of the arbitration and by failing to disclose the conflict of interest, the arbitrator breached the disclosure obligation. This was a reversal of the Osaka District Court finding that held the fact of a potential conflict did not give rise to a justifiable doubt as to the arbitrator’s independence and impartiality and that such potential conflict did not appear to have affected the outcome of the case. The case then made it up to the Supreme Court, which then remanded the case back to the Osaka High Court on the issue of whether the arbitrator had actual knowledge of the potential conflict.
In the most recent decision, the Osaka High Court ultimately found there was an adequate conflict check system in place, and the arbitral award survived the challenge. The court found that the potential conflict could be attributed to a number of factors which arose after arbitration commenced, thereby clearing the arbitrator of any fault as far as a failure to disclose the conflict was concerned.
There has been an increase in the number of challenges against arbitrators. The case is a reminder of the importance of disclosure of potential conflicts, and the potential consequences, including the impact on the validity of the arbitral award.
Other key developments
Amendments to the Foreign Lawyers Act take effect
Japan has amended the Act on Special Measures concerning the Handling of Legal Services by Foreign Lawyers (Foreign Lawyers Act) to expand the scope of services that foreign lawyers can conduct in international arbitration proceedings in Japan.
The Amendments came into effect on 29 August 2020.
Some of the key changes are set out below:
- Qualification requirements – Prior to the amendments, three years of post qualification work experience was required by a foreign lawyer before they could provide legal advice in Japan, and two of those years were required to be acquired outside of Japan. The amendments now require only one of those years to be acquired outside Japan, and allow for two years of experience in Japan.
- Expanding scope of services of foreign lawyers – In addition, foreign lawyers could previously only represent a party in arbitral proceedings seated in Japan where a party to the proceedings is registered in a foreign jurisdiction, effectively meaning that foreign lawyers could not represent parties in domestic arbitration.
- Arbitration – Foreign lawyers can now act in arbitrations between domestic companies where there is an international connection, including where:
- Japanese law is not the governing law;
- where one company is more than 50% owned by a foreign company; or
- the seat of arbitration outside Japan.
- Mediation – Foreign lawyers can also now represent clients in mediations in Japan, in circumstances where:
- any of the parties are registered in a foreign state;
- where one party is more than 50% owned by a foreign company; or
- where Japanese law is not the substantive law governing the dispute.
New facilities for the JIDRC
The Tokyo hearing facility of the Japan International Dispute Resolution Centre (JIDRC) officially launched in October 2020.
The new JIDRC venue was built to accommodate hearings in international arbitration and alternative dispute resolution. It offers a series of rooms, including large hearing rooms and several break out rooms. The hearing rooms can be converted to host seminars.
The facilities and technology employed at the JIDRC venue will facilitate proceedings involving multiple languages, offering up simultaneous interpretation booths in the hearing rooms. The JIDRC venue reflects the growing use of tech in arbitrations by offering
AI based transcription services for English language proceedings at no extra cost to the parties.
In light of the increased take up of virtual hearings in 2020, the tech focused venue is an attractive option for parties engaging in arbitrations involving one or more party in another jurisdiction.