Japan Allows Foreign Lawyers Greater Participation in Alternative Dispute Resolution

Effective August 29, 2020, the Japanese Diet has amended the Foreign Lawyers Act (the “FLA”) to expand the scope of services some foreign lawyers can provide in international arbitration and mediation proceedings in Japan. These changes will allow foreign lawyers to act in what were once considered “domestic arbitrations” (i.e., arbitrations between Japanese companies) where there is an international connection and to represent clients in international mediations in Japan. The involvement of foreign lawyers in these proceedings in Japan was previously restricted through onerous professional responsibility requirements that required multiple years of legal service abroad, among other requirements.

Japan’s Increasing Presence in International Arbitration
Lending credibility to Japan as a player in this market, Mitsubishi Heavy Industries and Hitachi arbitrated a multi-billion dollar settlement regarding a South African coal plant in Japan in front of the Japan Commercial Arbitration Association (“JCAA”). Since then, Japan has taken strides to broaden its role in the international arbitration market. The FLA amendments represent a further step in Japan’s concerted effort to position itself as an attractive seat for international arbitration proceedings. In addition to modernizing the FLA, Japan recently opened a new mediation center in Kyoto and new hearing centers in Osaka and Tokyo. The JCAA has also stepped up its game by revising its commercial arbitration rules, enhancing online dispute resolution capabilities and adding to its roster of arbitrators. These changes are intended to promote Japan as a seat for resolving international disputes and are important steps in positioning Japan as a competitor with other Asian international arbitration strongholds, such as Hong Kong and Singapore, who have typically dominated as first choice forums for foreign arbitration.

FLA Amendments
The FLA amendments aim to: (1) allow foreign lawyers easier access to becoming Registered Foreign Lawyers in Japan by lessening professional experience requirements; (2) facilitate cooperation between Registered Foreign Lawyers and local Japanese attorneys; and (3) redefine provisions directed at Registered Foreign Lawyers and Foreign Lawyers to broaden their ability to participate in alternative dispute resolution proceedings in Japan.

Specifically, the amended FLA will allow Registered Foreign Lawyers and qualified Foreign Lawyers to represent parties in “international” arbitrations. The amended FLA broadens the definition of international arbitrations to include arbitrations where: (1) any party to the case has a principal office or headquarters in a non-Japanese jurisdiction (this includes Japan-based parties that are majority owned by non-Japanese entities); (2) the governing law is not Japanese law; or (3) the place of arbitration is not Japan. If any one of these criteria are met, the matter is sufficiently “international” to trigger the FLA amendments regarding foreign lawyers.

Takeaways
These changes are intended to promote Japan as a seat for resolving international disputes. Allowing non-Japanese entities to retain home-country counsel is likely to increase those entities’ comfort level with agreeing to Japan as an arbitration seat and brings Japan more in line with (though still slightly more restrictive than) other major international arbitration hubs in Asia.

Many of the recent changes are also designed to encourage foreign lawyers to establish arbitration practices in Japan. To that end, to better serve our Japanese clients and clients doing business in Japan, including in arbitration, Mayer Brown has a Tokyo office, a solid base for addressing international business disputes.