Arbitration-Related Amendment to Act on Special Measures Concerning the Handling of Legal Services by Foreign Lawyers

　 Lately Japan has taken a number of positive steps to boost its international arbitration profile. These steps include updates in 2019 to the rules of the Japan Commercial Arbitration Association (JCAA), the establishment in 2018 of the Japan International Dispute Resolution Center (JIDRC) in Osaka, and the opening of a JIDRC office in Tokyo in March 2020 (see https://zelojapan.com/lawsquare/26655). Most recently, on August 29, 2020, several amendments took effect in Japan’s Act on Special Measures Concerning the Handling of Legal Services by Foreign Lawyers (Foreign Lawyers Act).¹ Among these amendments is a revision that expands the right of “Registered Foreign Lawyers” in Japan to represent parties in “international” arbitration (a Registered Foreign Lawyer is authorized to handle legal services concerning the laws of the jurisdiction in which he or she obtained qualification as a lawyer or the laws of a specific jurisdiction designated by Japan’s Ministry of Justice). This revision is a welcome if overdue improvement. But does it go far enough to contribute to the “activation of international arbitration in Japan,” which was the stated aim of the government-sponsored committee whose recommendations were adopted in the revision?² 

　The ability of parties in arbitration to select lawyers of their own choosing is extremely important. As Gary Born, a leading arbitration practitioner and commentator, has noted, parties’ right to choose legal representation in arbitral proceedings “is of fundamental importance. The quality and vigor of a party’s representation can have substantial consequences for the party’s case, for the outcome of the arbitral process, and for the parties’ perceptions of the fairness of the process.”³

　Under the Foreign Lawyers Act, Registered Foreign Lawyers may not represent clients in Japanese court or give legal advice on laws other than those of their jurisdiction of qualification. But the Foreign Lawyers Act allows Registered Foreign Lawyers to act in an “International Arbitration Case,” which, before the recent amendment, was defined as “a civil arbitration case which is conducted in Japan and in which all or some of the parties are persons who have an address or a principal office or head office in a Foreign Jurisdiction [i.e.: outside Japan].”⁴ This previous definition meant that Registered Foreign Lawyers were allowed to act in arbitrations seated in Japan only if at least one party was not a Japanese company.⁵ Registered Foreign Lawyers were not permitted to act in a Japan-seated arbitration if all parties were Japanese, even if those parties were Japan-based affiliates of non-Japanese corporations, and even if the governing law of the contract at issue was not Japanese.

　Now, with the amendment to the Foreign Lawyers Act, the definition of “International Arbitration Case” has been expanded to mean arbitration cases where at least one of the parties is over 50% owned by a non-Japanese corporation, the governing law of the contract at issue is not Japanese law, or the seat of arbitration is not Japan. The third revision is unlikely to have much effect on the rights of Registered Foreign Lawyers; it is rare that arbitral proceedings occur outside the seat (although this may be evolving somewhat with more remotely held hearings due to the COVID-19 pandemic). Nor is the second revision likely to be of great consequence; it is unusual, although not unheard of, for Japanese parties to select a governing law for their contract other than Japanese law. Given the number of multinationals that have affiliates in Japan, the first revision may have more impact on the ability of Registered Foreign Lawyers to act in Japan-seated arbitrations.

　The question remains: will the amendment, in the words of the committee tasked with reviewing the Foreign Lawyers Act, “provide motivation for more people to use Japan’s international arbitration proceedings and to activate Japan’s international arbitration”?⁶ Perhaps, in conjunction with the other steps that have been taken recently in Japan to promote arbitration. The committee itself, however, acknowledged the competitive challenge Japan faces in this respect from the two most established and popular Asia-based arbitral centers:

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¹ See http://www.moj.go.jp/content/001331477.pdf.
² Report of the Review Committee for Representation in International Arbitration, etc. by Registered Foreign Lawyers or Foreign Lawyers (Report), September 25, 2018, p. 2.
³ G. Born, International Arbitration: Law and Practice (2012), p. 261.
⁴ Act on Special Measures concerning the Handling of Legal Services by Foreign Lawyers (Act No. 66 of May 23, 1986), Art. 2(xi).
⁵ As explained in an earlier article (https://zelojapan.com/en/4816), arbitral “seat” means the legal place of arbitration, which in turn refers to the country: (i) where the arbitral award is deemed to have been issued under the Convention on the Recognition and Enforceability of Foreign Arbitral Awards; (ii) whose national arbitral legislation applies to the arbitration; and (iii) whose courts have supervisory authority over the arbitration.
⁶ Report, p. 2.
⁷ Id.
⁸ See Born, p. 263; “International arbitration – the use of Hong Kong arbitration for international commercial disputes,” August 13, 2019, http://csj.hkics.org.hk/site/2019/08/13/international-arbitration-the-use-of-hong-kong-arbitration-for-international-commercial-disputes/.
⁹ Report, p. 1.
¹⁰ Report, pp. 2-3.

The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only. Readers of this article should contact an attorney to obtain advice with respect to any particular legal matter.