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General climate and recent developments

State of legal development

In general terms, how developed are the product regulation and liability laws in your jurisdiction?

Japan is a highly industrialised country and, as a result, has developed sophisticated product regulations and liability laws. The Product Liability Act has helped to establish a level playing field for plaintiffs and victims of product liability accidents. However, the number of court cases has not increased dramatically since its enactment.

The Japanese legal system lacks the main ingredients of a robust plaintiff-driven practice compared with what is available in the United States (eg, jury trials, punitive damages and discovery). Japanese class action does not offer attractive options. Many manufacturers have been quick to settle complaints and claims with individual consumers rather than risk bad publicity and litigation. Product recall has increased, along with the ensuing publicity (especially in the automotive industry). Further, labelling and marking requirements have become stricter, in line with manufacturers’ emphasis on warnings and instructions across all industries.

Recent developments

Have there been any notable recent developments in relation to product liability law and product safety law in your jurisdiction, including any regulatory changes and case law?

Extensive reform of the Civil Code is underway. Its main purpose is to revamp the 1896 Civil Code and make it more comprehensive and user-friendly by turning general principles of law derived from court precedents into statute. The amendments adopted in 2017 will enter into force on April 1 2020.

Legal framework

Legislation

What primary and secondary legislation governs product safety and liability in your jurisdiction?

The main pieces of legislation include:

  • the Civil Code (89/1896) ; and
  • the Product Liability Act (85/1994).

An extensive reform of the Civil Code is underway. Its main purpose is to revamp the 1896 Civil Code and make it more comprehensive and user-friendly by turning general principles of law derived from court precedents into statute. Amendments adopted in 2017 will enter into force on April 1 2020, some of which will affect product liability, albeit not drastically.

Other relevant laws include:

  • the Consumer Contract Act (61/2000);
  • the Consumer Product Safety Act (31/1973), administered by the Ministry of Economy, Trade and Industry and the Consumer Affairs Agency;
  • the Consumer Safety Act (50/2009);
  • the Food Sanitation Act, administered by the Ministry of Health, Labour and Welfare and the Consumer Affairs Agency;
  • the Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices, Regenerative and Cellular Therapy Products, Gene Therapy Products and Cosmetics, administered by the Ministry of Health, Labour and Welfare;
  • the Electrical Appliances and Materials Safety Act, the Gas Business Act and the Act on the Security and Transaction of Liquefied Petroleum Gas, administered by the Ministry of Economy, Trade and Industry;  
  • the Household Goods Quality Labeling Act;
  • the Road Transport Vehicle Act, administered by the Ministry of Land, Infrastructure, Transport and Tourism; and
  • the Code of Civil Procedure (109/1996).

Regulatory and enforcement authorities

Which government authorities regulate and enforce product safety and liability laws in your jurisdiction, and what is the extent of their powers?

Various government authorities oversee the safety of different categories of product under specific laws and regulations. The Consumer Product Safety Act vests powers in the competent minister (for the majority of consumer products, this is the Ministry of Economy, Trade and Industry) to:

  • investigate complaints;
  • compel manufacturers and importers to disclose information relating to allegedly unsafe products; and
  • order product recalls or other remedial actions.

The Consumer Affairs Agency also plays a significant role.

Liability

Product defects

How is a ‘product defect’ defined in your jurisdiction?

A product can be deemed defective if it lacks the level of safety which it should normally possess, taking into account:

  • its nature and characteristics;
  • ordinarily foreseeable uses;
  • the state of the art (scientific or technical knowledge) at the time of delivery; and
  • other relevant circumstances relating to the product.

Causation and burden of proof

How is causation of loss or damage established in relation to product liability claims and where does the burden of proof lie? Can this burden be shifted in any way?

As a rule, the party bringing the liability claim (buyer or injured party) bears the burden of proof.

Under the Product Liability Act, the manufacturer’s liability is strict once it is found that the product sold was defective. Proof of the manufacturer’s fault, negligence or wilful misconduct is not required to seek monetary compensation. A plaintiff seeking monetary damages under the act must prove that the manufacturer’s product is defective and that the defect has caused the plaintiff’s injuries or damage. In practice, the plaintiff must at least prove that:

  • the defendant is a manufacturer;
  • there is a defect in the product that the defendant has manufactured, supplied, placed on the market or delivered;
  • the plaintiff’s life, body or property has been injured or damaged as a result of the product defect;
  • the occurrence resulted in damage and the amount claimed as damages; and
  • a causal link between the product defect and the injury or damage exists.

The Product Liability Act prescribes no specific test for proof of causation. Instead, the courts apply the standard test for causation used under the Civil Code. Under Article 709 of the Civil Code, the plaintiff must prove causation between the defendant’s negligence and the resulting damage. 

In a claim under Article 709, the plaintiff must prove that:

  • the injury was caused by a defect in the product; and
  • the manufacturer negligently or intentionally breached a duty owed to the plaintiff and this breach caused the plaintiff’s injuries or damage.

In practice, the plaintiff must prove:

  • the existence of the plaintiff’s right or legally protected interest;
  • the existence of a breach of the plaintiff’s right or interest;
  • the defendant’s intention or negligence in relation to the breach;
  • the occurrence of damage and amount claimed; and
  • the causal link between the breach and the damage.

For breach of contract claims, the plaintiff must prove that the manufacturer has breached the contract through the supply of a defective product in breach of an express or implied warranty and that such breach has caused some damage to the plaintiff.

Legal bases for claims

On what legal bases can a product liability claim be brought?

A plaintiff (generally a buyer) can bring a product liability claim against a seller that is its counterparty in a sale and purchase contract, either for breach of contract or breach of implied statutory warranties under the Civil Code, provided that there is a direct contractual relationship between the injured party and the seller of the defective product. Article 415 of the Civil Code deals with liability for incomplete performance of obligations, while Articles 566 and 570 govern warranties against latent defects. Article 526 of the Commercial Code, equivalent to Article 566 of the Civil Code, applies to latent and visible defects in transactions between business operators.

Traditionally, product liability claims were brought as tort claims under the Civil Code. Since 1995 claims can also be brought under the Product Liability Act, which allows a plaintiff to seek compensation for damages caused by a defective product. If a defective product causes any damage to the buyer’s life, body or property (excluding the product itself), the buyer can bring a product liability suit against the manufacturer (Article 3 of the Product Liability Act). The plaintiff is not required to prove that the manufacturer owed a duty to the plaintiff and negligently or intentionally injured the plaintiff. The plaintiff need only demonstrate that the product was defective and that the defect caused the injuries.

Alternatively, if a claim cannot be brought or is unsuccessful under the act, the injured party may bring a tort claim under the Civil Code. This type of claim, which is still relied on in civil cases to obtain monetary damages, is viewed as a last resort for persons injured by a defective product. Article 709 provides that a person who has intentionally or negligently infringed any right or legally protected interest of another will be liable for any resulting damage. In contrast with the act, the plaintiff must prove the defendants’ intent or negligence, and the burden of proof is subject to a high standard. Causes of action under Article 709 include fraud and misrepresentation.

Criminal liability

Can a defendant be held criminally liable for defective products?

Yes, under the Penal Code (45/1907) in the case of death or injury caused by a failure to exercise due care. Moreover, certain Consumer Product Safety Act violations can give rise to criminal penalties.

Liable parties

Which parties can be held liable for defective products?

  • Any natural or legal person classified as a manufacturer under the Product Liability Act can be held liable. The act defines a ‘manufacturer’ as:any person that manufactures, processes or imports the product as a business;
  • any person holding itself to be the manufacturer of a product by putting its name, trade name, trademark or other indication on the product, or any person that puts its name on the product in a manner that misleads others into believing that it is the manufacturer; and
  • any person that puts its name on a product and that, in light of the manner in which the product has been manufactured, processed, imported or sold, or any other relevant circumstances, may be recognised as a substantial manufacturer (de facto manufacturer).

Unless they fall within any of the aforesaid categories, the act provides for no cause of action against distributors or sellers of a product. Claims against these persons must be brought under the Civil Code on other grounds (eg, breach of implied statutory warranty or breach of contract or tort).

Limitation of liability

Can liability be excluded or mitigated in any way?

The parties to a contract can be released entirely or partially from their liability under the Product Liability Act or tortious liability under the Civil Code by entering into an agreement on indemnification excluding or capping such liability. A seller’s liability would not be excluded in the event of fraud or concealment of known facts (Article 572 of the code). An agreement excluding liability for death or injuries as a result of intentional acts or gross negligence would be deemed invalid as repugnant to public order.

In addition, liability exclusions and limitations are strictly limited by the Consumer Contract Act with respect to contracts entered into between a consumer and a merchant (business operator). It protects consumers in their dealings with business operators. The following clauses are void if they are included in a contract made between a consumer and a business operator (Article 8 of the act):

  • clauses which totally exempt a business operator from liability to compensate a consumer for damages arising from the business operator’s fault;
  • clauses which partially exempt a business operator from liability for damages arising from the business operator’s fault (limited to default arising due to an intentional act or gross negligence on the part of the business operator, its representatives or employees);
  • clauses which totally exempt a business operator from liability for damages to a consumer arising from a tort under the Civil Code committed during the business operator’s performance of a consumer contract;
  • clauses which partially exempt a business operator from liability for damages to a consumer arising from a Civil Code tort (limited to cases in which the tort arises due to an intentional act by, or the gross negligence of, the business operator, its representatives or employees) committed during the business operator’s performance of a consumer contract; and
  • if a consumer contract is for value and there is a latent defect in the subject of the contract (including a contract for services), clauses totally excluding a business operator from any liability to compensate a consumer for damages caused by such defect, except in the event that:
  • the contract provides that the business operator is liable to deliver substitute products without the defect or repair the goods when there is a latent defect; or
  • it is concluded between a consumer and a business operator simultaneously with, or after another contract is concluded between the consumer and another business operator entrusted by the business operator, or between the operator and another operator for the benefit of the consumer, and that other contract provides that the other operator is responsible to provide compensation for all or part of the damage caused by a defect, deliver substitute products without defects or repair the defective products where there is a latent defect.

The Consumer Contract Act limits the extent to which the seller may disclaim warranties or restrict the remedies available to a buyer injured by a product sold by the seller, but it offers no specific cause of action for damage caused by defective products.

Litigation

Procedure

What is the procedure for filing a product liability claim before the courts in your jurisdiction?

A plaintiff submits a written statement of claim to a court to commence civil proceedings. The court reviews the description made therein and serves on the defendant a copy thereof and a writ of summons specifying the date of the first hearing. Service is performed under the court’s authority. Service via courier or direct delivery by a plaintiff is not valid (Article 98 of the Code of Civil Procedure). Usually, a post office clerk instructed by a court delivers documents to a representative or employee of the defendant company. Service outside of Japan is commissioned by the court and conducted by the competent foreign government agency, Japanese ambassador or consul (Article 108).

Interlocutory motions

Can the court issue interlocutory orders or judgments in product liability cases? If so, what rules and procedures apply?

Significant powers to conduct proceedings are vested in the courts and judges may decide to close proceedings and enter a judgment at any time. Unless the matter is straightforward, various procedures are available under the Code of Civil Procedure designed to facilitate pre-trial arrangements (eg, preliminary proceedings, preparatory proceedings for oral argument and preparatory proceedings by document, such as briefs).

Pre-trial disclosure

What pre-trial disclosure/discovery mechanisms are available in product liability cases, if any?

Under Japanese law, there are no disclosure obligations or extensive discovery processes. Documents submitted as evidence are typically collected by the parties through their own efforts. In a product liability case, if a manufacturer is not cooperating, critical evidence may be concealed from the plaintiff, which is both relevant and admissible, including

  • notice to the manufacturer of the existence of a defect in its products;
  • causation;
  • the existence of a defect; and
  • the feasibility of safer alternate designs.

However, it is possible to petition a court to issue an order to submit documents after an action has commenced by providing valid reasons to compel the counterparty or third party keeping certain documents listed in Article 220 of the Code of Civil Procedure in its possession to submit them. The party filing a motion must, if possible, indicate:

  • the document;
  • the identity of the person holding the document;
  • the document’s significance; and
  • what must be proven in respect of the document and why it is necessary. 

The obligation has been recognised in a number of situations, although there are exceptions.

Before filing an action, if the plaintiff has given advance notice of the filing to the defendant, the plaintiff or recipient of the notice may, within four months of the date of the notice, make inquiries to the other party on matters necessary to substantiate its allegations or collect evidence (Article 132-2 of the Code of Civil Procedure). In addition, the court may order the submission of documents and the commissioning of examinations when a motion is filed by a party and it is difficult for that party to collect documentary evidence that would be necessary to prove its case (Article 132-4).

Evidence standards

What evidence is accepted to support claims in product liability cases? What formalities apply to evidence submission?

There are no strict rules to exclude evidence. In principle, there are no restrictions to admissibility in evidence. Any person or item, including hearsay evidence and expert opinions, can be called or submitted as evidence. Judges can determine whether evidence is admissible at their own discretion. In a product liability case, the defective product is key to proving the plaintiff’s case. Sometimes a defective product is destroyed through its malfunction, but the plaintiff often relies on the use of circumstantial rather than direct evidence to prove the defect.

Expert evidence

Under what circumstances will the court appoint an expert to assist it in examining the merits of the case? What rules and procedures apply?

The court may order the appointment of expert witnesses. Under the expert commissioner system (Article 92-2 of the Code of Civil Procedure), expert commissioners can be appointed to support judges and provide support in:

  • arranging the contested issues;
  • taking charge of and assisting in reconciliation;
  • conducting research and providing opinions on issues requiring specialised knowledge; and
  • participating in the examination of evidence in their own specialised field.

Can the parties rely on expert witness testimony to support their claims? If so, what rules and procedures apply?

In principle, there are no restrictions to admissibility in evidence. Any person or item, including hearsay evidence and expert opinions, can be called or submitted as evidence, and judges can determine whether evidence is admissible at their own discretion. Evidence that violates confession agreements between the parties or agreements restricting methods of evidence gathering are inadmissible. The examination of witnesses is performed in an open court after the parties have filed petitions with the court and after the court has designated the witnesses to be admitted and summoned them to be examined on the examination date (Articles 180 and 181 of the Code of Civil Procedure). Written witness statements are often exchanged instead of direct oral examination at the hearing.

Class actions

Are class actions or any other collective proceedings available for product liability claims in your jurisdiction? If so, what is the procedure for their formation and what benefits do they afford claimants? Are class actions formed on an opt-in or an opt-out basis?

There are no US-style class actions in Japan. The Act on Special Provisions of Civil Procedure for Collective Recovery of Property Damage Suffered by Consumers (96/2013) introduced a system which provides for a two-tier opt-in procedure. During the first stage, a qualified consumer organisation files a lawsuit requesting the court to confirm the liability of a business operator for a common obligation arising under a consumer contract on behalf of potential consumer claimants. If the action is confirmed, the quantum of damages will be determined based on individual claims filed by consumers having elected to opt in. However, claims cover only those situations arising from consumer contracts and to certain categories of property damage, including claims for performance based on:

  • contractual obligations;
  • unjust enrichment;
  • breach of contract;
  • warranty against defects; and
  • damages arising out of unlawful acts.

Damage to property other than the subject matter of the consumer contract, lost profits, personal injury and pain and suffering are expressly excluded by the act. 

There is also a so-called ‘appointed party’ mechanism under Article 30 of the Code of Civil Procedure, which allows certain plaintiffs (or defendants) appointed by other claimants (or defendants) to act on their behalf in pursuing (or defending) civil actions when enough claimants or defendants share a common interest (ie, the main allegations or defences). The appointed party can pursue the case on their behalf and the result will be binding on them, including a settlement.

Appeals

What rules and procedures govern appeals of court decisions?

A kouso appeal can be filed with the appellate court against a final judgment rendered in trial by a first-instance court. In principle, it is possible to appeal judgments twice. The first appeal is for the ex post facto review of judgments entered by the first-instance courts. Whether claims made there are right is not directly reviewed. The parties may introduce new evidence or arguments. The appellate court (generally the High Court in a product liability case) may conduct its own fact finding within the scope of the complaint based on lower court materials or those submitted to the appellate court. A joukoku appeal against the final judgment rendered by a lower court (against kouso judgments rendered by a district court or the High Court) lies with the Supreme Court (or the High Court) as a second appeal. It is permitted only for a limited number of reasons, excluding questions of fact.

Statute of limitations

What is the statute of limitations for filing product liability claims?

Under the Product Liability Act, the right to seek damages based on product liability is extinguished by prescription if:

  • the victim or his or her legal representatives do not exercise such a right within three years from the date on which he or she became aware of the damage and identify the party liable for the damages (the responsible manufacturer); or
  • 10 years have elapsed since the delivery of the product by the manufacturer.

In the event that damage or injuries are caused by substances which become harmful to human health after accumulating in the body, or where the symptoms linked to damage or injury do not appear immediately, claims become time barred after 10 years of the occurrence of the damage.

Claims brought under Article 709 of the Civil Code follow a similar prescription pattern of three and 20 years, respectively. Under Article 724, the right to demand compensation for damages in tort is extinguished if it is not exercised by the victim or his or her legal representative within three years  from the time when he or she became aware of the damage and identified the perpetrator. The same applies if 20 years have elapsed after the tort has been committed.

Under Article 166 of the Civil Code, the extinctive prescription for contract claims starts running when the right can be exercised.  Generally, contract claims must be brought within 10 years, but this can vary with the identity of the parties and the nature of the contract.

The rights to claim damages based on liability for fault and liability for defects expire under the applicable statute of limitations if they are not exercised within 10 years (Article 167). If the seller is a merchant, the right to demand compensation for breach of contract expires if it is not exercised within five years.

Unless otherwise provided in the Commercial Code, claims arising from a commercial transaction will expire if they are not brought within five years. However, in the event that a prescription period shorter than five years is provided in other laws and regulations, these provisions will prevail (Article 522).

With respect to latent defects, unless the sale and purchase contract provides otherwise, the buyer must make a claim within one year from the time it becomes aware of the defect (Articles 570 and 566 of the Civil Code). This does not apply where the buyer had knowledge of the defect or had no knowledge of the defect due to gross negligence. In a transaction between business operators, the buyer may not bring a claim against the seller for a defect that is not immediately obvious unless it gives notice of the defect to the seller within six months of receipt of the goods. The buyer may not pursue remedies against the seller for other defects unless the buyer notifies the seller of the defect immediately after receiving the goods (Article 526-2 of the Commercial Code).

Notwithstanding the above rules, a court may still decide to set aside the statute of limitations in cases of fraud or concealment of evidence.

Timeframe

What is the typical duration of proceedings in product liability cases?

One objective of the 1996 Code of Civil Procedure was to speed up trials. Under the Law Concerning the Speeding Up of Trials enacted in 2003, proceedings must be closed within two years of their commencement. First-instance proceedings can last eight months on average, but complex cases can take longer. Generally, the courts schedule the initial hearing within one to one-and-a-half months after the plaintiff has submitted a statement of claims and require the defendant to submit an answer about a week before the hearing.

Costs, fees and funding

Can the successful party to the litigation recover court and attorneys’ fees and any other related expenses from the losing party? If so, what rules and procedures apply?

Court costs are generally borne by the losing party if they consist of:

  • court filing fees;
  • costs associated with service of process;
  • documentary fees;
  • costs incurred for the examination of evidence;
  • accommodation and travel expenses; and
  • daily allowances paid to witnesses and interpreters and the remuneration of experts under the Law on Costs of Civil Procedure (40/1971).

Court costs do not include legal fees which are borne by each party respectively in the absence of an attorneys’ fees clause. Apart from these costs, the rule is that litigation costs are borne by the party incurring them. In the context of tort claims, the court may award a small part of the prevailing party’s attorneys’ fees as part of the damages when there is a reasonable nexus between tort and fees. The allocation of court costs is ordered as part of the court’s decision.

What rules and restrictions (if any) govern contingency fee arrangements?

Attorneys’ fees may be freely agreed on between attorneys and clients, while lawyers can charge part of their fees on a contingency basis. Many firms continue to determine their fees based on a combination of retainer fees and success fees listed in the now repealed legal fee table of the Japanese Federation of Bar Associations.

Is third-party litigation funding permitted in your jurisdiction? If so, do any rules or restrictions apply?

Third-party funding is not yet common in Japanese litigation practice. Its lawfulness is still a moot point, although not prohibited per se. The assignment of claims or causes of action is generally permitted but the entrustment of a claim for litigation purposes is prohibited under the Trust Law (108/2006). Third-party funding could still be regarded as a criminal act under the Lawyers’ Law, which prohibits any person who is not an attorney from engaging in legal business (including lawsuits, arbitration and conciliation) and from acting as an intermediary in such matters (ie, referring cases to attorneys to obtain compensation for their business activities).

Is legal aid (ie, public funding) available to claimants in product liability cases? If so, what rules, restrictions and procedures apply?

The Japan Legal Support Centre provides civil legal aid services including free legal consultations and loans for attorneys' fees for people who require the assistance of legal experts but who, for economic reasons, are unable to pay for attorneys’ fees and court costs. Criminal matters are excluded from the scheme. 

The government operates special compensation schemes for pharmaceuticals and products deemed to have specific risks. One scheme compensates victims of inoculations. An industry-funded scheme provides compensation covering the medical and funeral expenses of individuals and their families in the event of illness, disability or death caused by side effects. 

Another scheme is the safe goods mark (known as the ‘SG mark’) administered by the Consumer Product Safety Association under the Consumer Product Safety Act. The association prescribes stringent safety standards covering products that could be dangerous and cause injuries or death and only products complying with its safety requirements can bear the mark. The consumer compensation scheme operates for the benefit of persons injured by these products.

Settlement

What rules and procedures govern the settlement of product liability cases?

Settlements can be made before or outside the courts. There are no specific requirements on content or procedures. Settlements before the courts have the same claim preclusive effect as judgments.

How common are settlements in product liability cases?

Settlements in product liability cases are very common.

Alternative dispute resolution

Are any alternative dispute resolution (ADR) methods required or advised before or in lieu of proceeding with litigation?

Japanese people typically prefer amicable settlements through negotiation over court litigation. Even then, a negotiated settlement (wakai) can be made at any time before or during court proceedings. Alternative dispute resolution (ADR) is available on a voluntary basis in the form of civil mediation under the Law Concerning the Promotion of the Use of Alternative Dispute Resolution Procedures (151/2004). If the parties can reach an agreement before the court proceedings, this agreement is put on record by the court and becomes enforceable in the same manner as a final judgment. Civil mediation procedures are simple and cost-effective and proceedings are confidential.  

Civil litigants can also agree to refer their dispute to civil conciliation (chotei) under the Civil Conciliation Law (222/1951), conducted by a conciliation committee composed of one judge and two or more civil conciliation commissioners appointed from among knowledgeable and experienced citizens. The committee assists the parties in finding an amicable settlement. Any agreement is put on record by the court with the same effect as a judgment. Failing an agreement, the plaintiff must file a suit before the ordinary courts to pursue their claims. Arbitration (chusai) is available.

A number of product-specific trade associations have established permanent dispute resolution organisations, including:

  • the Federation of Pharmaceutical Manufacturers Associations of Japan;
  • the Japan Chemical Industry Association;
  • the Association for Electric Home Appliances;
  • the Japan Automobile Manufacturers Association Inc;
  • the Centre for Housing Renovation and Dispute Settlement Support;
  • the Consumer Product Safety Association;
  • the Japan General Merchandise Promotion Centre;
  • the Japan Cosmetic Industry Association; and
  • the Japan Construction Material and Housing Equipment Industries Federation.

The National Consumer Affairs Center of Japan manages an ADR system and deals with product liability matters.

How commonly is ADR used in relation to product liability cases in your jurisdiction?

ADR used in relation to product liability is not particularly common. The main avenues are court litigation and amicable settlement through negotiations. 

Defences

Available defences

What defences are available to defendants in product liability cases?

A number of defences can be asserted under the Product Liability Act and the Civil Code to avoid liability or shift all or part of it to another party. A common defence under Articles 418 and 722 of the Civil Code is comparative negligence. It can also be claimed in relation to product defect claims brought under the act where the manner in which the plaintiff has handled, used or stored products can be deemed as unforeseeable misuse. Under Article 722, the courts have adopted a proportionality rule under which a portion of damages may be borne by the plaintiff if the defendant can prove its comparative negligence claim.

Statute of limitations may also provide a valid defence if the claim is time barred.

Article 4 of the act provides for two more defences. A manufacturer will not be liable if it could not have discovered the product defect given the state of scientific or technical knowledge at the time of delivery.   

The manufacturer must prove that the state of scientific or technical knowledge at the time of delivery was such that the existence of a defect could not have been known. Basing a defence on the then current state of the art is difficult, as Japanese courts have generally interpreted knowledge as meeting the highest scientific or technical standards then in existence. 

A manufacturer of products to be used as a component of, or raw material for, another product is not liable when the defect has occurred primarily because it has complied with design specifications and instructions given by the final product manufacturer, and it is not negligent with respect to the occurrence of the defect. The component manufacturer (eg, a subcontractor) must prove that it could not have foreseen or prevented the defect in the product integrated into final products.

For breach of contract claims, customary defences are available. The seller may argue that a claim is time barred. Other defences are available, including:

  • lack of simultaneous performance of the buyer’s payment obligations in a contract where the parties’ duties are concurrent;
  • buyer’s knowledge of the defect (or negligence in failing to spot it); and
  • a special agreement between the parties disclaiming warranties and liability.

In addition, the seller may seek to rely on:

  • comparative negligence, which can be invoked in a situation where the plaintiff can be shown to have assumed a certain level of risk and therefore that the plaintiff’s own negligence contributed to the injury;
  • an agreement between the parties limiting compensation and liability; and
  • the absence of fault attributable to the seller.

Preliminary actions

What preliminary procedural mechanisms are available to defendants, if any?

With respect to the preservation of evidence, if circumstances exist that could make it difficult to examine evidence, including where the other party may spoil such evidence, a party may request the court to issue an order to preserve the evidence (Article 234 and following of the Code of Civil Procedure).

Interim relief is available under the Civil Provisional Remedies Law (91/1989). Where a dispute involves a monetary claim, obligees and potential plaintiffs may apply for a provisional attachment order (kari sashiosae) to ensure that any future monetary judgment will be enforced. The effect of the attachment is to freeze the obligor’s or potential defendant’s assets to keep the defendant from disposing of its movables or immovables and secure the future collection of its claims. Where a dispute involves certain categories of non-monetary claims, potential plaintiffs may apply for a provisional disposition order (kari shobun) to preserve their rights with respect to the subject matter in dispute (Article 23). Unlike a provisional attachment which concerns only monetary claims, provisional disposition may take different forms due to the variety of subject matters in dispute. Provisional orders establishing a provisional legal relationship between the parties are available to avoid substantial detriment or imminent danger caused by disputed legal relationships. To be granted an order, the claimant must demonstrate:

  • its substantive right to be protected; and
  • that the exercise of its right will most likely be impossible or extremely difficult without such provisional attachment or disposition. 

For provisional dispositions establishing a provisional legal relationship between certain parties, the claimant must establish the existence of a legal relationship that the other party is disputing, as well as the need for interim relief to avoid substantial detriment or imminent danger.

Remedies

Damages

What types of damages may be awarded in product liability cases? What rules and standards govern their calculation? Are damages capped?

Monetary compensation is available as a remedy under the Product Liability Act and the Civil Code for claims brought under Article 3 and Article 709, respectively. Damages awarded are divided into monetary damages and non-monetary damages. Under the act, the manufacturer is liable for damage and injury to the life, limbs or property of the victim, but not liable for damage to the product itself. Compensation for mental pain and suffering can be recoverable, as well as medical expenses and lost wages. Similar remedies are available under the Civil Code. Monetary damages encompass actual loss and anticipated profits. The scope of damages permitted for breaches of civil obligations is set out under Article 416 and covers losses that would normally arise from non-performance, plus losses arising from special circumstances that parties had foreseen or should have foreseen.

A buyer can ask a court to rescind the sale and purchase contract and demand compensation if there is a defect in the product (Articles 570 and 566-1 of the Civil Code). If the contract cannot be rescinded, the buyer may claim damages. The plaintiff need not prove the manufacturer’s or seller’s negligence or intent. In addition, although only monetary compensation is available as a remedy under the code, the buyer can ask the seller to:

  • repair the defective goods;
  • provide a substitute for the goods;
  • reduce the price of the defective goods as an alternative to rescission; or
  • make a compensation claim.

Orders to void contracts, as well as prospective orders to prevent unlawful solicitations for new business, can be applied for under the Consumer Contract Act.

Are punitive damages allowed?

Punitive damages are not available.

Other remedies

Are any other remedies available?

There are no other remedies under the Civil Code or Product Liability Act.

Product recalls

General requirements

Are there any statutory criteria under which a product must be recalled or other corrective action be taken?

Several pieces of legislation govern product safety including the Consumer Product Safety Act. Separate rules apply to road transport vehicles, pharmaceutical products and other products which are not treated as consumer products regulated by the act. ‘Consumer products’ are defined as products to be supplied mainly for use by general consumers for routine everyday activities.

The Product Liability Act does not require a manufacturer to recall or repair a product found to be defective in a product liability lawsuit. However, the Consumer Product Safety Act vests powers in the competent minister (often the METI (Ministry of Economy, Trade and Industry) Minister) to:

  • investigate complaints relating to particular products;
  • compel manufacturers and importers to disclose information on unsafe products; and
  • order recalls or other remedial actions if the ministry finds it necessary.

Under the Consumer Product Safety Act, a person engaging in the manufacture or import of consumer products is legally obliged to investigate the cause of product accidents, and if it finds it necessary to prevent the occurrence and decrease the risk of a danger, it must endeavour to recall the products or otherwise take preventive action. In the event of a serious accident, or where serious danger has occurred to the lives or bodies of consumers or the danger is imminent, the minister may order the person engaging in the manufacture or import of products to recall them or otherwise take measures to prevent risks.    

Under the Consumer Product Safety Act, a manufacturer or importer must report the occurrence of a serious product accident to the competent minister. The minister may publicly announce the serious incident. Those that are not serious may be reported to the National Institute of Technology and Evaluation.

Notification

What rules and procedures govern notification of the product recall to government authorities and the public?

See above.

Repairs, replacements and refunds

What rules and procedures govern repairs, replacements and refunds for defective products?

The various laws and regulations do not generally provide for any mandatory repair, replacement and repair procedures. However, the Consumer Product Safety Act provides that where the lives or bodies of general consumers could be at risk, the minister may order a product recall and other measures needed to prevent risks. Manufacturers typically implement measures that will prevent further hazards or product deterioration and the authorities generally provide guidance or instructions.

Non-compliance

What penalties apply for non-compliance with the legal provisions governing product recalls?

Manufacturers or importers of consumer products may be ordered by the relevant authority under a hazard prevention order to recall products where:

  • serious accidents have happened;
  • the lives of consumers have been jeopardised;
  • the occurrence of danger is imminent; or
  • the authority wants to prevent the reoccurrence of any danger (Article 39(1) of the  Consumer Product Safety Act).

Violation may be punished by up to one years’ imprisonment, a fine up to Y1 million or both (Article 58).