Amendment to the Code of Civil Procedure: International Jurisdiction Now Specified

Davis LLP Japan Group Bulletin


1. Outline of Amendment

On May 2, 2011, the law concerning an amendment to the Code of Civil Procedure (the “Code”) to clarify international jurisdiction was published (the “Amendment”). The date of implementation is the date which will be specified by a Cabinet Order and will be within a year from the publication date1.

The Code had no clearly stated provisions governing international jurisdiction. However, the Amendment ensures predictability and clarity of international jurisdiction by specifying the same in the Code. This is expected to lead to smoother international trade.

The major Amendments are as follows.

1.1 An action against a person (Code of Civil Procedure2 Article 3-2 (1))

According to the Amendment, if the defendant is domiciled in Japan, the Japanese courts have jurisdiction. If the defendant has no domicile in Japan or the domicile of the defendant is unknown, the Japanese courts have jurisdiction if the defendant is resident in Japan.

1.2 An action against a company or any other legal entity (Article 3-2 (3))

According to the Amendment, the Japanese courts have jurisdiction if a company or any other entity has a principal office or a business office in Japan. If a company or other entity has no office or business office in Japan, or its office or business office is unknown, the Japanese courts have jurisdiction if its representative or any other principal person in charge of its business has domicile in Japan.

1.3 An action relating to a contractual obligation, etc (Article 3-3 (i))

According to the Amendment, the Japanese courts have jurisdiction over (1) an action to claim for fulfillment of a contractual obligation (e.g. an action to claim for a payment of an account receivable) or (2) an action to claim for damages or other claim based on default under a contractual obligation, if the place of performance of the contractual obligation (e.g. the place of payment of an account receivable) stipulated in the contract is in Japan; or if, pursuant to the law of the place selected in the contract (e.g. where the governing law is stipulated in a contract, that governing law), the place of performance of the contractual obligation is in Japan.

1.4 An action relating to property rights (Article 3-3 (iii))

According to the Amendment, the Japanese courts have jurisdiction over an action in respect of a property right (1) if the subject matter of the claim (e.g. the land in an action for transfer of the land) is located in Japan, or (2) if, in case of an action for payment of money or any seizable property of the defendant (e.g. the real property of the defendant (debtor) in an action for repayment of the debt) is in Japan, unless the value of the property is significantly low.

1.5 An action against a person who has a business office or other office (Article 3-3 (iv))

According to the Amendment, the Japanese courts have jurisdiction over an action against a person who has a business office or other office (the “Business Office, etc.”), which relates to a business conducted at the Business Office, etc., if the location of the Business Office, etc., is located in Japan. For example, if the Osaka branch of a company which has its main office in a foreign country had a transaction with a Japanese company, and a business dispute between the two companies arose, the Japanese company could file an action in a court in Japan.

1.6 An action against a person who does business in Japan (Article 3-3 (v))

According to the Amendment, the Japanese courts have jurisdiction over an action against a person who does business in Japan if the action relates to his or her business. For example, if a foreign entity which has no business office in Japan has a direct transaction related to its business with a Japanese company through setting up website for Japanese people, a court in Japan has jurisdiction over the action concerning the transaction.

1.7 Tort actions (Article 3-3 (viii))

According to the Amendment, as a general rule, the Japanese courts have jurisdiction if the place where the tort was committed (including both the place where the tortious action occurred and the place where the result of the tort occurred) is located in Japan.

1.8 An action relating to real property (Article 3-3 (xi))

According to the Amendment, the Japanese courts have jurisdiction over an action relating to real property if the real property is located in Japan.

1.9 An action relating to a right of inheritance, etc (Article 3-3 (xii), (xiii), 5 (xv))

According to the Amendment, the Japanese courts have jurisdiction over an action relating to a right of inheritance or a statutorily reserved share or an action relating to a testamentary gift, or any other act that shall become effective upon death, if the domicile, etc., of the deceased at the time of commencement of inheritance is located in Japan.

The court in Japan has also jurisdiction in the same way over an action relating to a claim against the deceased or other obligation imposed on inherited property.

1.10 An action relating to a consumer contract (Article 3-4 (1), (3))

According to the Amendment, the Japanese courts have jurisdiction over an action by a Consumer3 against a Business Operator4 if the Consumer, at the time of conclusion of the consumer contract or of filling of the action, has domicile in Japan. For example, if a Consumer who has domicile in Canada concludes the consumer contract with a Business Operator who has its business office in Canada, and the Consumer moves to Japan and establishes domicile in Japan after the conclusion, the Consumer may file for an action to the courts of Japan because the Consumer has Japanese domicile at the time of the filing5.

In addition, according to the Amendment, the Japanese courts also have jurisdiction over an action by the Business Operator against the Consumer, notwithstanding the provision of the Article3-3, except when the Business Operator files the action against the Consumer in the court of the Consumer’s country of domicile, only there is a binding agreement on jurisdiction about the consumer contract, or the Consumer has responded to the action.

1.11 An action relating to labor and employment (Article 3-4 (2), (3))

According to the Amendment, the Japanese courts have jurisdiction over an action by a business operator against a worker related to civil disputes between an individual worker and the business operators with respect to the presence or absence of a labor contract or any other labor relationship6(hereinafter referred to as “Individual Labor-Related Disputes”) if the place where the labor services should be provided (in cases where such place cannot be identified, the place of business at which the worker was employed) is located in Japan.

In addition, according to the Amendment, the Japanese courts also have jurisdiction over an action by the business operator against the worker, notwithstanding the provision of the Article3-3, except when the business operator files the action against the worker in the court of the worker’s country of domicile, only if there is a binding agreement on jurisdiction concerning Individual Labor-Related Disputes, or the worker has responded to the action.

1.12 Agreement on Jurisdiction (Article 3-7)

According to the Amendment, the parties may determine a court in which country each of the parties may file an action through an agreement in writing or by means of an electromagnetic record.

According to the Amendment, the parties can not invoke such an agreement if it provides that the parties may file for an action only in a foreign court if the foreign court does not have jurisdiction for legal or factual reasons (e.g. the cases where the foreign court does not have jurisdiction under the laws of the agreed foreign country, or cases where the judicial system of the foreign country is practically inactive because of warfare, a natural disaster or other reasons.).

Also, according to the Amendment, an agreement on jurisdiction over disputes related to a consumer contract or a labor relationship shall not be effective except as provided below;

a) Consumer Contracts

i) Where a Business Operator and a Consumer enter into an agreement on international jurisdiction which allows either party to file an action in the court of the country where the Consumer is domiciled at the time of conclusion of the consumer contract.

ii) (A) Where the Consumer, according to the agreement on international jurisdiction, files an action in a court of the agreed country, or (B) where the Consumer invokes the agreement on international jurisdiction at the time the Business Operator files an action.

b) Labor Relationship

i) Where an agreement is made when the labor contract is terminated and the agreement allows either party to file an action in the court of the country where the last place for the labor service was located.

ii) (A) Where the worker, according to the agreement on international jurisdiction, files an action in a court of the agreed country, or (B) where the worker invokes the agreement on international jurisdiction at the time the business operator files an action.

2. Points to Remember

Japanese courts have jurisdiction or if the foreign company concludes a consumer contract with a Consumer who is domiciled in Japan, or if the foreign company concludes a labor contract with a worker who provides his or her services in Japan (Article 3-4). In this case, even if the foreign company and the Consumer or the worker agrees a foreign court as the court having jurisdiction, such agreement on jurisdiction shall not be effective as a general rule and the Japanese courts will entertain jurisdiction unless the cases meet the requirements in the items of Article 3-7 (5) or Article 3-7 (6).
Therefore, it should be noted that the Amendment results in increasing the possibility that foreign companies will have to comply with Japanese judicial proceedings in such cases.

For example, if a company (regardless of the fact the company is a domestic company in Japan) wishes a Japanese court to entertain jurisdiction over disputes related to a labor contract with a worker who provides his or her services in Japan, it is recommendable that the company agree on (international) jurisdiction with the worker at the time when the labor contract was terminated (Article3-7 (6) (i)) in writing or by means of an electromagnetic record (Article3-7 (2) (3)). However, it should be borne in mind that an agreement on international jurisdiction is considered not to be exclusive, but as an additional agreement, that is, an agreement under which a filing for an action in the court of a country other than Japan is allowed (Article3-7 (6) (i)).
 

1The Japanese government is now preparing for the implementation on April 1, 2012.

2All the articles described below are ones of Code of Civil Procedure after the Amendment.

3“Consumer” shall mean individual(s), however, the same shall not apply in cases where said individual becomes a party to a contract as a business or for the purpose of business.

4“Business Operator” shall mean juridical person(s), association(s) and individual(s) who become a party to a contract as a business or for the purpose of business.

5Although the court in Japan has jurisdiction, it may dismiss the case if it finds the case harms a equity of the party, or any other special circumstances (Article 3-9).

6For example, Individual Labor-Related Disputes include disputes with respect to validity of dismissal or payment of wage or retirement allowance, but do not include collective labor disputes or disputes with respect to recruiting or employment.

 

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