Case updates

Shintoyo Enterprises Ltd v Aston Martin Japan GK, Tokyo district court, judgment dated 19 june 2020 2018 (WA) no. 10883 In the case of Shintoyo Enterprises, the Tokyo District Court dismissed a case in favour of an arbitration agreement.

This case involved a dealership contract providing for LCIA (London Court of International Arbitration) arbitration seated in London and the laws of England & Wales was provided as the governing law for the contract. The plaintiff commenced an action on the basis of tort for wrongful abandonment of negotiations against the Japanese subsidiaries and the representatives of its counterparty to the original dealership contract.

The defendants contended that the applicable law governing the arbitration agreement should be the laws of England & Wales and according to which an agent of a signatory to an arbitration agreement (i.e. the defendants who are the subsidiaries and representatives of the signatory of the dealership contract) can invoke the arbitration agreement to refer the claims made against the agents to arbitration.

Demonstrating a pro-arbitration approach, the Tokyo District Court found that there is an implied agreement that the laws of England and Wales is the governing law of the arbitration agreement in the dealership contract and it was held that the defendants were entitled to invoke the arbitration agreement in the dealership contract. The plaintiff’s case was therefore dismissed.

Other key developments

Proposed amendments to the Arbitration Act

On 5 March 2021, the Japan Ministry of Justice published a provisional draft Amendments to the Arbitration Act and invited public comments to the proposed changes. The Japan Arbitration Act was enacted in 2003 and the main purpose of the proposed draft amendments is to bring the Arbitration Act in line with the latest UNCITRAL Model Law which was amended in 2006.

The key changes proposed include:

  • revising the rules on interim measures and clarifying the types of interim measures that an arbitral tribunal may order in line with Article 17(2) of the UNCITRAL Model Law 2006 and recognition and enforcement of interim measures by Japanese courts.
  • clarifying the requirement for an arbitration agreement to be in writing to include an orally recorded arbitration agreement.
  • clarifying the venue for hearing arbitration-related matters. The Ministry of Justice considered that currently the venue for determining an arbitration-related matter may be difficult to determine for instance in situation where a setting-aside application was filed for a Japan-seated arbitration where no specific city was designated and the defendant does not have a "general venu" in Japan. The proposed amendments suggest to designate a specific district court to hear cases if court venue is unclear and also proposed that the Tokyo or Osaka District Courts can exercise jurisdiction over an arbitration-related matter in addition to the courts that would have jurisdiction under the Arbitration Act in order to strengthen the expertise of the Tokyo and Osaka District Courts in handling arbitration matters whilst providing the flexibility and option for the most suitable venue to hear the arbitration-related cases.
  • relaxing translation requirement by allowing the Japanese court hearing an arbitration-related matter to decide, after hearing the views of the parties, not to request translations into Japanese of all or part of the documents submitted to the court to save time and costs of translations.
  • providing specific procedures for enforcement of mediated settlement agreements similar to those for arbitration awards consistent with the Singapore Convention.

The Ministry of Justice also discussed the suggestion to address virtual hearings in the Japan Arbitration Act but, no amendments were proposed due to a lack of consensus on how the Act should be updated.

Amendments of the JCAA expedited arbitration procedures and enactment of the JCAA Appointing Authority Rules On 10 June 2021, the Japan Commercial Arbitration Association (JCAA) announced the amendments to the expedited arbitration procedures under its Commercial Arbitration Rules and the Interactive Arbitration Rules and enactment of the Appointing Authority Rules which became effective on 1 July 2021.

In the press release, JCAA noted that the average duration from constitution of the arbitral tribunal to the rendering of award for JCAA-administered arbitration cases in the last decade is around 12.8 months but it only took an average of 3.5 months for arbitrations where the expedited arbitration procedures apply. However, only 22 out of 139 cases were conducted in expedited arbitration procedure. The upper limit of amount in dispute for its expedited arbitration procedures has been raised from JPY50 million to JPY300 million to encourage a greater use of the expedited procedures.

The Appointing Authority Rules have also been enacted for appointment of arbitrators in ad hoc arbitrations or for arbitrations administered by other institutions but JCAA was appointed as the appointing authority. Previously, there were no specific rules for the JCAA to act as appointing authorities and the purpose of these new rules is to encourage parties to entrust the appointment of arbitrators to the JCAA.

The administrative fees of the JCAA were also amended to encourage the use of arbitration with small claims.