Japanese Arbitration Act Q&A
Shunichiro Nakano / Boting Ruan
[Adoption of the Model Law]
Q1, Does the Japanese Arbitration Act adopt the 1985 UNCITRAL Model Law on International Commercial Arbitration?
A1. Yes. The Arbitration Act is modeled on the Model Law, but differs from it in several respects. In particular, the Arbitration Act adopts some original rules for the special circumstances of Japan, such as provisions regarding consumer protection and labor issues.
[Arbitration Agreements]
Q2. What law governs an arbitration agreement?
A2. The Arbitration Act allows the parties autonomy in determining the law applicable to an arbitration agreement within the context of setting aside or executing arbitral awards. In the absence of an agreement, the law of the place of arbitration will apply. In Japanese practice, an arbitration clause is often incorporated in a contract, according to which the claimants will refer their disputes to arbitration in the defendant’s domicile.
Q3. Can all disputes be resolved through arbitration under the Arbitration Act?
A3. No. An arbitration agreement is valid only when its subject matter is a civil dispute that may be resolved by settlement between the parties. If the subject matter of the dispute is not capable of settlement by arbitration under the laws of Japan, the arbitral award may be set aside and its enforcement may be refused. For example, in Japanese theory and practice, the arbitrability of family law disputes, including divorce and child custody, is generally denied.
Q4. Should an arbitration agreement be in writing?
A4. Yes. The Arbitration Act requires that arbitration agreements be in writing, which includes arbitration agreements made by means of electromagnetic records. An arbitration agreement contained in a standard contract form may be deemed valid.
Q5. Is an arbitration agreement enforceable if it is entered into between a company and its employees or consumers?
A5. The Supplementary Provisions of the Arbitration Act provide, as a measure "for the time being until otherwise enacted", that a consumer is entitled to terminate an arbitration agreement. Also, arbitration agreements concerning individual labor-related disputes are null and void. However, these rules may not be relied on to deny the effect of an arbitration agreement which was concluded before the Arbitration Act came into effect.
Q6. Does the invalidity of a contract containing an arbitration clause directly affect the validity of the arbitration agreement?
A6. No. The separability of arbitration agreements is recognized under the Arbitration Act and by the Japanese courts.
[Arbitrators]
Q7. Is a foreign national eligible to be an arbitrator in Japan?
A7. Yes. The Arbitration Act does not prescribe qualifications for arbitrators. There is no obstacle preventing a foreign national from being an arbitrator under the Arbitration Act.
Q8. How many arbitrators constitute an arbitral tribunal?
A8. The number of arbitrators is determined by the parties’ agreement. In the absence of an agreement, if there are two parties in an arbitration, there will be three arbitrators.
Q9. Can an arbitrator rule on the arbitrator’s own jurisdiction to decide the dispute?
A9. Yes. An arbitrator may rule on arguments made in respect of the existence or validity of an arbitration agreement or his/her own jurisdiction. When an arbitral tribunal has upheld its own jurisdiction through an interlocutory award, a party who is dissatisfied with the decision may request that a court decide the matter within 30 days of his/her receipt of the notice of the decision, or await the final award and challenge the award within 3 months after his/her receipt of the final award. If the arbitral tribunal decides that it lacks jurisdiction, the decision will result in the termination of the proceedings.
Q10. Can all the members of an arbitral tribunal be appointed by one party alone?
A10. According to the Japanese precedents under the old law, an agreement which authorizes one party to grant a third party the power to appoint all arbitrators is valid unless one of the parties is vested with grossly unfair power over the selection of arbitrators. An arbitration agreement giving the authority to appoint arbitrators to only one party will be invalid, as it is patently disadvantageous to the other party.
[Arbitral Procedures]
Q11. Can the parties agree on the applicability of a foreign law to arbitral procedures, while designating Japan as the place of arbitration?
A11. The Arbitration Act is “applicable when the place of arbitration is in the territory of Japan”. Therefore, even if a foreign law is designated as applicable, it is not possible to evade the application of the mandatory rules of the Japanese Arbitration Act.
Q12. If an arbitration institution is designated by the parties in the arbitration agreement, will the procedural rules of that institution be applicable on that basis?
A12. Yes. Subject to the mandatory provisions of the Arbitration Act, the rules of an arbitration procedure may be determined by the parties’ agreement. Designation of an arbitration institution by the parties is generally construed as an agreement on the applicable procedural rules of that institution (See Rule 3 of the Japan Commercial Arbitration Association (JCAA) Commercial Arbitration Rules http://www.jcaa.or.jp/e/arbitration-e/kisoku-e/pdf/e_shouji.pdf).
Q13. Can an arbitral award be made even if one party does not appear at the oral hearing?
A13. Yes. If a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may make the arbitral award based on the evidence in hand.
Q14. How are notices in arbitral proceedings served?
A14. Written notices in arbitral proceedings are deemed to have been given at the time when it is delivered to the addressee personally, or, at the time when it is delivered to the addressee's domicile. Where necessary, court assistance can be provided in serving written notices in arbitral proceedings, regardless of where the place of arbitration is located.
Q15. Can arbitration hearings be conducted at a place different from the place of arbitration stipulated in the arbitration agreement or determined by the arbitrator?
A15. Yes. Unless otherwise agreed by the parties, the arbitral tribunal may hold meetings of the tribunal members, hearings or inspections, such as of goods, at any place it considers appropriate, irrespective of the place of arbitration.
Q16. Will extinctive prescription be interrupted by a claim in an arbitration proceeding?
A16. Yes. A claim made in arbitral proceedings will interrupt extinctive prescription, provided that this will not apply where the arbitral proceedings have been terminated for a reason other than the issuance of an arbitral award.
Q17. What languages are used in arbitration proceedings in Japan?
A17. The language to be used in arbitration proceedings may be determined by the parties’ agreement. In the absence of an agreement, the arbitrator will determine the matter.
Q18. Can the arbitrator or a party request Japanese court assistance in taking evidence in the arbitration proceedings?
A18. Yes. The arbitral tribunal or a party may apply for the assistance of a Japanese court in taking evidence by any means that the arbitral tribunal considers necessary, if the place of arbitration is in Japan. During the court’s examination of evidence, the arbitrators may peruse documents, inspect objects and, with the approval of the presiding judge, put questions to witnesses or experts.
Q19. Can an expert be appointed to assist in the arbitration proceedings?
A19. Yes. Unless otherwise agreed by the parties, the arbitrator may appoint one or more experts to appraise specific issues and to report their findings, in writing or orally.
Q20. Can a Japanese court grant interim measures of protection even though there is an arbitration agreement in place?
A20. Yes. A party may request that a court, before or during arbitral proceedings, consider granting an interim protective measure for the subject matter of any civil dispute which is governed by the arbitration agreement. However, the jurisdiction of the Japanese courts may be denied if the provisional relief sought is not related to the property situated in Japan and the place of arbitration is not in Japan.
Q21. Is a foreign lawyer allowed to represent a party in arbitration proceedings in Japan?
A21. Yes. While the Arbitration Act contains no express provisions on representation and legal assistance in arbitral proceedings, the Act on Special Measures for the Handling of Legal Business by Foreign Lawyers (Foreign Lawyers Act) [Gaiben Ho] allows foreign lawyers practicing outside Japan to represent a party in an international arbitration.
[Arbitral Awards]
Q22. Are non-national laws or lex mercatoria applicable when deciding the substance of disputes?
A22. Usually, the arbitrator will decide the substance of a dispute in accordance with the rules of law designated by the parties. “Rules of law” is a broad concept which includes non-national laws or lex mercatoria. In the absence of the parties’ agreement, the law of the state with which the dispute has the closest connection will be applied, and in that case, the application of non-national laws is not permitted.
Q23. Can an arbitrator decide the substance of a dispute ex aequo et bono?
A23. Yes. The Arbitration Act gives effect to an agreement of the parties to have the arbitral tribunal decide ex aequo et bono, though these agreements are not common in Japanese practice.
Q23. Are there any requirements regarding the format or content of an arbitral award?
A23. Arbitral awards are made in writing and signed by the arbitrators. The signatures of the majority of the arbitral tribunal will suffice if the reasons for any missing signature are stated. Unless otherwise agreed by the parties, the reasons for an arbitral award must be stated in the award. A statement of the date and place of arbitration is also required. No registration or deposit of an arbitral award is required under the Arbitration Act.
Q24. Is an arbitrator allowed to act as a mediator?
A24. An arbitrator may try to settle a dispute only if there is a written consent of both parties.
Q25. Can an arbitral award be corrected after it is made?
A25. Yes. An arbitral tribunal may, at the request of a party or by its own authority, correct errors in computation, clerical or typographical errors or errors of similar nature in an arbitral award. Requests for correction must be made within 30 days of the receipt of the notice of the arbitral award.
Q26. Can an additional award be made in respect of claims omitted from a final award?
A26. Yes. A party may request that the arbitrator make an arbitral award as to claims presented in the proceedings but omitted from the final award. The arbitral tribunal is required to make a ruling within 60 days of the receipt of the request.
Q27. What effect does an arbitral award have in Japan?
A27. The court may set aside the arbitral award at the request of a party under certain circumstances. Otherwise, an arbitral award has the same effect as a final and conclusive judgment irrespective of the country in which it was made. The Arbitration Act has introduced provisions which essentially correspond to Articles IV - VI of the New York Convention of 1958. In effect, these provisions result in the withdrawal of the reciprocity reservation. To date, the enforcement of foreign arbitral awards has never been denied in Japanese courts.
Q28. What procedures are required for the execution of an arbitral award?
A28. Usually, civil execution of an arbitral award is effected by virtue of “an arbitral award accompanied by an enforcement decision which has become final and conclusive”. A party seeking enforcement of an award may apply to a court for an enforcement decision by submitting a copy of the arbitral award, a document certifying the authenticity of the copy, and a Japanese translation of the award. For the recognition and enforcement of a foreign arbitral award, it is not required that the foreign award be accompanied by an exequatur rendered by the court of the place of arbitration. Enforcement decisions are subject to appeals. Appeals must be filed within two weeks from the day on which the notice of the decision is given.
[Fees and Remuneration]
Q29. Who bears the costs of arbitral proceedings?
A29. Unless otherwise agreed by the parties, each party bears the costs that party has disbursed with respect to the arbitral proceedings. The arbitrator may determine the allocation of the costs between the parties in accordance with any agreement of the parties.
Q30. Is a deposit required for the costs of arbitral proceedings?
A30. An arbitrator may require the parties to deposit an amount determined by the arbitrator for costs of the proceedings within an appropriate period of time. If the parties fail to comply with the order, the arbitrator may suspend or terminate the arbitral proceedings.
Q31. How are arbitrators compensated?
A31. Unless otherwise agreed by the parties, the arbitral tribunal will determine the fees. The Japan Commercial Arbitration Association (JCAA) recently amended its Regulations on Remuneration for Arbitrators, which relate to its institutional arbitration services and apply to requests for arbitration submitted to the JCAA on or after 1 January 2008. According to the new regulations, JCAA will determine an hourly rate within the range of ¥30,000 to ¥80,000 for each arbitrator (http://www.jcaa.or.jp/e/new-e/rules_renewal4.html). The Tokyo Maritime Arbitration Commission (TOMAC) of the Japan Shipping Exchange, Inc. provides Rules of Arbitration, which stipulate that the amount of remuneration for arbitrators will be determined by consultations between the TOMAC chairman and vice-chairmen, considering the degree of difficulty of the case and other circumstances (http://www.jseinc.org/en/tomac/arbitration/ordinary_rules.html).
Q32. Do the costs of legal assistance constitute a cost of arbitral proceedings?
A32. Although there is no express provisions as to whether or not the costs of legal assistance constitute a cost of arbitral proceedings, it is assumed that these costs may also be included in the costs of arbitration if the parties so agree. In institutional arbitration (See JCAA Rule 72 or TOMAC Rule 44(2)), the legal representation fees and expenses incurred by the party’s legal representative are usually expressly stipulated as a cost of the arbitral proceedings.