All questions

Procedure

i Types of action availableConventional civil actions

Claims do not need to be based on contracts. A broad range of tort claims, including personal injury, is available. However, all of the plaintiffs and defendants must be named and no John/Jane Doe filing is allowed. Claims for monetary damages, or temporary or permanent injunctions, or both, are possible.

Injunction action under special laws

Injunction actions are available against unfair solicitation or unfair provisions under the Consumer Contract Act (since 7 June 2007), unfair presentation under the Act against Unjustifiable Premiums and Misleading Presentations (since 1 April 2009), unfair solicitation, unfair provisions or unfair advertisement under the Act on Specified Commercial Transactions (since 1 December 2009) and false labelling under the Food Labelling Act (since 1 April 2015).

Damage recovery action under the Special Procedure Law

Damage must have occurred after 1 October 2016. Claims must be based on a contract between a consumer and a business operator in which the business operator owes monetary obligations to the consumer in the following five ways.

Claim for performance of contractual obligation

For example, a security deposit of a private membership club is not refunded upon termination of membership even if the membership charter requires the refund.

Claim related to unjust enrichment

For example, although students paid tuition to a language school, they cancelled the lesson agreement before taking all of the classes paid for, but the proportionate refund has not been made.

Damage claim based on non-performance of contractual obligations

For example, persons paid a fee to receive a referral to guarantors for property lease agreements but no guarantor has been referred.

Damage claim based on warranty obligation

For example, purchasers of a condominium in the same building, which does not meet fire resistance standards.

Damage claim based on tort provisions in the Civil Code provided that actions cannot be brought for personal injury

For example, a broker that purchased on a customer's account unlisted stock issued by a company whose business situation was not confirmed and which caused loss to customers.

Only monetary claims are covered by the action under the Special Procedure Law. Neither demand for product recall nor repair of defective products may be asserted.

ii Commencing proceedingsConventional civil actions

Any legal entities; both corporations and individuals may initiate the actions.

Injunction action under special laws

Only a QCO may bring the actions. An individual consumer has no standing to sue on behalf of a 'class'. As at August 2018, 19 QCOs had been certified by the Prime Minister.

Damage recovery action under the Special Procedure Law

This is a two-step proceeding.

The first step is to seek declaratory judgment of common liabilities. If the court determines that the business operator does not have liability to make monetary payments to consumers, then the procedure ends. If the court determines that it has such liability, then the procedure moves on to the second step, called a summary procedure to determine claims. A losing party may appeal the judgment to a High Court that has jurisdiction over the competent district court.

The second step is to determine the claims of individual consumers where the opt-in takes place.

The plaintiff must be an SQCO. As at April 2018, only three organisations, Consumers Organisation of Japan, Kansai Consumers Support Organisation, and Saitama Organisation To Get Rid of Consumer Damage have been certified by the Prime Minister among 19 QCOs. An SQCO is supervised by the government and subject to corrective action orders and revocation of certification. Compensation and fees to be charged by an SQCO to consumers are regulated. Therefore, there is no room for seeking significant contingency fees.

The defendant must be the business operator who has a contractual relationship with consumers, typically a retailer. An SQCO may not sue a manufacturer, unless the manufacturer has entered into the contract with the consumer. If the business operator ultimately loses in the action and paid damages to consumers, it may be able to recover the amount from the manufacturer. Therefore, the manufacturer may file an application to intervene in the action.

In addition to courts that have jurisdiction over the defendant's head office and other business offices, the location where the tort was allegedly conducted, and the location for the performance of the alleged legal obligation, (1) if the number of subject consumers is expected to be 500 or more, any district courts under the common jurisdiction of those courts; and (2) if the number of subject consumers is expected to be 1,000 or more, the Tokyo District Court and Osaka District Court also have jurisdictions.

If multiple cases in which the content of claims and defendants are identical have been filed, their procedures shall be consolidated.

After the first step action is filed, if there is pending conventional civil action filed by a subject consumer and the defendant for the related claim, the court where the conventional case is pending may stay the procedure.

An SQCO may apply for provisional attachment to the business operator's assets in order to secure the performance of claims.

iii Procedural rulesConventional civil actions

In contrast with the US legal system, Japanese civil procedure has the following characteristics (which are also applicable to injunction actions and the damage recovery procedure):

  1. no jury or lay judge participates in decision-making. Only bench trial by professional judge is available; and
  2. no discovery is available between the parties. The party seeking information needs to obtain court ruling upon filing a request for specific documents.
Injunction action under special laws

A typical start is when a consumer provides information to a QCO regarding his or her damage. If the QCO sees the merit on the case upon its internal review, it would contact the business operator in question and request suspension of its unfair activities. If the business operator does not accept the request, the QCO would file the injunction action against it. The judgment may be appealed to higher court by a losing party.

Damage recovery action under the Special Procedure Law

As explained in subsectionii, it is a two-step proceeding.

The first step is to seek declaratory judgment of common liabilities. The outcome of the first step is binding upon the plaintiff (SQCO), the defendant (business operator), other SQCOs and consumers who filed proof of claims at the second step.

The second step is to determine the claims of individual consumers where the opt-in takes place. In principle, the SQCO is required to apply for determination of the claims within one month of the day when the declaratory judgment becomes final.

Opt-in invitations are made in the following methods:

  1. the court shall post the official notice;
  2. the SQCO shall notify subject consumers individually in writing or by email and post official notice (internet notice is permitted) at its cost;
  3. the business operator shall announce the content of the court's official notice (internet announcement is permitted) and upon request by an SQCO, disclose documents containing information regarding subject consumers; and
  4. the Consumer Affairs Agency shall announce the summary of declaratory judgment.

In response to the invitation, the subject consumer shall authorise the SQCO to file proof of claim on his or her behalf and pay fees to the SQCO. The SQCO shall file the proof of claim per such authorisation. The filing of proof of claim shall toll the statute of limitation.

The business operator shall accept or deny the claim. If the SQCO does not dispute the answer from the business operator, its answer becomes the final determination of the claim. If the SQCO disputes the answer, the court will decide on the claim's existence and amount, which will be paid to consumers. A losing party may appeal the determination to the High Court in the jurisdiction.

Those consumers who do not opt in are not barred from bringing or resuming individual lawsuits.

iv Damages and costs

Court costs should be borne by the losing party while each party pays its own attorney's fee.

Conventional civil actions

For contract claims, ordinary damages are recoverable while special damages are recoverable if they are foreseen or foreseeable by the breaching party. For tort claims, the statute requires 'causation', which is interpreted by courts as 'foreseeability'.

Injunction action under special laws

Damages are not included in the remedies.

Damage recovery action under the Special Procedure Law

Only direct damages are recoverable. Lost earnings or pain and suffering are unrecoverable.

v SettlementConventional civil actions

Court sanction is not needed for a settlement. Only named parties to the settlement and their legal successors are bound by the settlement.

Injunction action under special laws

Court sanction is not needed for a settlement. Only named parties to the settlement and their legal successors are bound by the settlement.

Damage recovery action under the Special Procedure Law

The law authorises the SQCO to settle the case with the defendant during the first step to confirm the common liabilities. Court sanction is not required by law. The settlement triggers the commencement of the second step. The subject consumers who opt in during the second step are bound by the settlement.