An Overview of Civil Litigation in Japan

    By Osamu Ishida, Naoki Takahashi, and Harold Godsoe

The potential for bias in the system is a reasonable concern for companies wading into disputes in a foreign jurisdiction. You may be concerned that foreign companies and/or foreigners may be disadvantaged in the Japanese judicial system. However, Japanese civil courts tend to reach results similar to those of courts in other highly developed nations and, basically, resolve disputes fairly and impartially regardless of the nationality of the parties. Moreover, in our experience, Japanese judges are competent adjudicators who take their jobs seriously.
However, there are a few differences between jurisdictions, which this overview will address while outlining the entire civil litigation process. Significantly, when compared to the United States, for example, the Japanese civil court system lacks punitive damages, severely limits a prevailing party’s ability to be awarded their attorney’s fees, offers parties very limited discovery powers, and does not employ a jury system for civil trials.

PRIOR TO FILING AN ACTION

Which court will have jurisdiction over the action?

In Japan, district courts have jurisdiction over disputes in excess of 1.4 million yen (or about USD 13,000 as of this writing), with other courts handling smaller claims.
A person or company can file suit in the court with jurisdiction over the defendant’s place of residence. This means that, for example, the Tokyo District Court can hear a case if the defendant is either a resident or a business registered in Tokyo. In addition, district courts can also accept jurisdiction over certain specific types of disputes. For example, a court located in a jurisdiction where a tort occurred (e.g., a car accident) may adjudicate a case involving that tort. As another example, a court may also accept jurisdiction over disputes involving real estate within its territory. Parties can also agree by contract that a specific Japanese court will take jurisdiction over any of their disputes, (unless the law sets forth exclusive jurisdiction over a case, such as in patent infringements cases seeking damages and/or an injunction).

What are the pre-trial actions?

The first step in bringing a lawsuit before a Japanese court is to carefully analyze and develop the underlying case. This is because pre-trial discovery is very limited in Japan. Some legal methods do exist to obtain information from an opposing party or a third party before filing a civil action, but these methods are usually not very effective. Therefore, someone accustomed to extensive U.S.-style discovery rules may be surprised by the limited amount of information obtainable from the opposing party before trial.
The next step is generally to send a demand letter to the opposing party. Especially in Japan (where receiving correspondence from a lawyer is comparatively rarer than in other countries, and therefore arguably more intimidating), a demand letter can in some cases persuade the other side to do what is asked of them or at least lead to an acceptable settlement, thereby avoiding or decreasing the cost, time, and stress that would come with litigation.
Unfortunately, in the majority of cases, the opposing party will refuse the demand and respond with their own legal and/or factual arguments. Even in these cases, the demand letter can help to assess the opposing party’s frame of mind and the strength of their case.

How long will pre-trial actions take and how much will they cost?

It’s typical to spend one to three months assembling the evidence and developing the case before sending a demand letter. The amount of time and effort will depend on the size of the potential lawsuit, the issues, and the resources the suing party wishes to devote to each issue. Drafting a demand letter in Japanese can cost in the area of JPY 300,000 to JPY 500,000 due to the need to develop the underlying case and include all of the relevant legal and factual points in the letter. (Translating the letter into English usually adds another JPY 30,000 or so per page.)
How long the parties engage in discussion and negotiations following delivery of the demand letter will also vary. If the demand letter results in serious negotiations, legal costs can add an additional JPY 500,000 to JPY 800,000 for this step. This additional amount does not apply if the parties skip negotiations and proceed directly from the demand letter to a trial.

COMMENCEMENT OF COURT PROCEEDINGS

How do the court proceedings start?

If the opposing party refuses to settle or negotiate after receiving the demand letter, the next step is to file a complaint with the appropriate court. The complaint needs to include who is suing and who is being sued, the factual basis for the claim and relevant evidence, the legal elements of the claim, and the relief sought (which includes money being claimed and/or any requests for the court to order the defendant to, for example, vacate a specific property).
After a person or company files a complaint, the court will serve the complaint on each defendant. Service is usually via a special postal service to confirm that the documents were delivered. Unlike in the United States, Japan does not permit the kind of personal service that a process server would perform.
The court usually sets the first hearing about a month after the filing of the initial complaint. The complaint is accompanied by a summons indicating the first hearing date. The court determines the first hearing date after consulting with the person or company who filed the complaint.

What happens after the defendant is served with the complaint?

A defendant who is served with a complaint is required to submit an answer. In their answer, the defendant must admit or deny the facts contained in the complaint and assert any defenses, as well as provide the factual and legal bases and documentary evidence in support of their answer.

Are there challenges for non-Japanese litigants?

Although Japanese civil courts are generally not biased in favor of Japanese litigants, non-Japanese litigants can and often do face language challenges. Unlike some Asian countries where the courts accept pleadings and evidence in English (like Hong Kong, Singapore, India, and the Philippines), Japanese courts at all levels require everything to be in Japanese. This can result in expensive translation costs if there is a significant amount of evidence in a language other than Japanese. All testimony must either be given in Japanese or translated into Japanese by an interpreter, again at additional cost.

HOW CASES TYPICALLY PROCEED

How long is a trial, and how much does it cost?

A typical case consists of many separate court hearings and may take one to three years to complete.
Cases vary a lot, and it is impossible to precisely estimate the total cost to litigate a particular case, especially at the beginning of a dispute. However, rough estimates are usually possible before the beginning of any particular case.
The ultimate duration and final cost of the dispute will depend on the parties’ respective positions and how vigorously they defend their claims. The parties may, for example, at any time stipulate any agreed-upon facts as true, which simplifies the case by reducing the issues that the court needs to decide and the evidence that the parties need to submit.

What happens during the court hearings?

At the court hearings, the parties present their allegations to the court and then supplement their cases with supporting evidence. Most of the judge’s understanding of the case comes from the parties’ written submissions. Oral arguments in the courtroom usually don’t play a big part in the proceedings. For this reason, hearings in Japanese courts tend to be rather short, with some lasting only five minutes.
If the defendant fails to make an appearance at the first hearing and has not filed an answer, the defendant will be deemed to have admitted all of the facts that were alleged in their complaint, and the court will issue a default judgment based only on those facts.
The court typically schedules subsequent hearings every 30 to 60 days, depending on the circumstances.
Witnesses provide testimony after the parties and the court identify the relevant legal and factual issues. Just as in most common law jurisdictions, witnesses undergo both direct and cross examination. Unlike in common law courts, it is not unusual for Japanese judges to pose their own questions, as necessary.
Judges in Japan’s civil law system play a more active role in certain aspects of the case than would be normal in common law jurisdictions. For example, a Japanese judge will sometimes suggest what additional evidence the parties will need to prove their claims. By contrast, a common law judge would usually leave such decisions entirely to the parties and their attorneys. As a result, litigants accustomed to common law procedures may be surprised by the deference their lawyers pay to the judge’s suggestions.

END OF THE PROCEEDINGS

How does the court render its verdict?

After considering all the evidence, the court schedules a date on which it will issue its written judgment. Just as in most other jurisdictions, the court will include both a decision and the underlying rationale.

Can I recover my legal costs?

The cost to litigate a dispute largely consists of court costs and attorneys’ fees.
The losing party will generally bear the court costs, which consist of the filing fee, postage for serving the pleadings, travel expenses for witnesses, and other costs. However, depending on the circumstances, the court may require the successful party to pay all or a portion of the “court costs” if the court finds that the successful party engaged in needless or wasteful litigation. The “court costs” is mostly the filing fee, which, for illustrative purposes, can be as low as JPY 50,000 for a JPY 10 million claim, and as high as JPY 3,000,000 for a JPY 1 billion claim. (An appeal would involve additional filing fees.)
Unfortunately, parties should note that they will most likely bear their own attorneys’ fees, regardless of the outcome of a case. The court will basically not award attorney’s fees, which are usually much higher than the court costs. (As an exception, the court may award the successful party about 10% of a certain granted amount in tort claims.)

How do I appeal?

An unsuccessful party may appeal to the High Court within two weeks of the judgment date. Appeals to the High Court typically take from several months to two years (an appeal tends to take more time if the underlying District Court trial was lengthy). In many common law jurisdictions, the court immediately above the trial court is strictly an appellate court, meaning the parties cannot introduce any new evidence or make any new arguments. However, the High Court in Japan is not only an appellate court but also has certain aspects of a trial court (where parties can introduce new evidence and arguments). If someone wins at the High Court, the High Court may vacate the District Court’s decision in whole or in part.
Lastly, a person or company can appeal the High Court’s ruling to Japan’s Supreme Court within 50 days after the High Court issues its judgment. As its name suggests, Japan’s Supreme Court is the final appellate court. Unlike the High Court (and similar to common law appellate courts), the Supreme Court never examines new evidence, but rules almost exclusively on issues of law as determined by the lower courts’ judgments. Someone who wishes to appeal an unfavorable High Court decision should be aware that the Supreme Court will probably decline to hear their case unless their appeal meets certain very limited grounds under the relevant civil procedure rules, or the case involves a novel area of law, a weighty constitutional issue, or is significant in some other way. Further, if the Supreme Court does agree to hear an appeal, they will on average take at least a year to issue their decision.

How do I enforce a judgment?

A court judgment entitles the successful party to promptly obtain the relief they sought in the litigation. However, obtaining a hard-won judgment in your favor means little unless you can enforce it.
Most of the time, a losing party with the money to pay will generally pay. This is especially true of larger, reputable companies. It is less true of individuals.
If a losing party adamantly refuses to pay, challenges may arise that can make enforcement difficult in Japan. The successful party will need to identify the debtor’s assets and take additional court action to enforce their award. However, the Japanese court system offers successful parties little assistance in this regard, which is different from some other jurisdictions. In some U.S. courts, for example, the successful party can subpoena the other party for information about their assets, and failure to comply with the subpoena can result in contempt of court sanctions.
If the successful party is unable to identify the losing party’s assets on their own, a standard practice is to retain a company that specializes in this process. This can be another large expense and does not guarantee success. Assuming the successful party is able to obtain the required information, the next step is to file a motion for enforcement to a court with jurisdiction over the losing party’s assets (which can be an entirely different court, depending on the asset).

If you have questions about this topic, please contact any of the authors directly or our firm’s Litigation Practice Group through the contact information available on our firm’s website.

KOJIMA LAW OFFICES  | Tokyo | www.kojimalaw.jp