Japan
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. The concept of a freezing order most closely corresponds to a provisional attachment order under Japanese law. An applicant can apply for a provisional attachment order over the specific assets of a respondent including debts that are owed to the respondent by a third party. An applicant must, in its application for a provisional attachment order, designate the assets that will be the subject of the order. Once a provisional attachment order is granted, the respondent is prohibited from disposing of the assets referred to in the order.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No.
3. Briefly what is the relevant legal test?
The Civil Provisional Remedies Act stipulates the requirements for the Court to issue a provisional attachment order. The applicant has to demonstrate prima facie that:
(i) the applicant has a monetary claim against the respondent; and
(ii) it is likely that compulsory enforcement of the judgment will be impossible or will be very difficult.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The claimant makes an application to the Court setting out the basis on which the two requirements above are satisfied, with supporting evidence. The process is typically conducted on an ex parte basis and the Court can issue a provisional attachment order without any notice to the respondent. Whilst the Court has a discretion whether or not to hold ex parte hearings, they are normal practice in the Tokyo District Court and the Osaka District Court.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes. The Court has the discretion to order the applicant to provide security for damages to the respondent by depositing a designated amount of money with the public depository in case the provisional attachment order is revoked in the future. In practice the Court will only rarely grant a provisional attachment order without such security.
6. Can it be sought against third parties?
A provisional attachment order will be issued against the assets held by the respondent only. If the applicant succeeds in proving that the ownership of a designated asset that appears to be owned by a third party in fact belongs to the respondent, the Court will issue a provisional attachment order against such asset.
Where a bank holds an account in the name of the respondent and is served with a provisional attachment order, the bank is prohibited from paying to the respondent the amount that is specified in the order.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible and intangible assets that are transferable, whether within or outside Japan, can be the subject of a provisional attachment order, provided that the Court finds that it has the jurisdiction to grant a provisional attachment order over such assets. If assets are located outside Japan, the jurisdiction of the Court is limited to circumstances where the Court has the jurisdiction over the underlying litigation.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes, a provisional attachment order can be obtained if the respondent holds assets that are located in Japan.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes, if the respondent holds assets that are located in Japan, or if the seat of arbitration is within the territory of Japan.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
Theoretically, at any stage. However, it is typical to file an application for a provisional attachment order prior to commencing the claim.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. If a provisional attachment order is granted over movable assets, a Court executor can enforce the order by obtaining possession of the assets from the respondent. The Court executor may allow the respondent to retain the assets subject to an acknowledgement that such assets are subject to seizure, if the Court executor considers it reasonable to do so. In practice, it is usual for the respondent to be allowed to retain such assets pending the conclusion of the formal claim. In addition, the enforcement of a provisional attachment order is subject to a statutory limitation that excludes from the subject of the enforcement certain items such as daily necessities and money for two months’ worth of living costs.
12. What happens after a freezing (or equivalent) order is granted?
The order will be served on the respondent and any relevant third party by the Court. Even prior to the service on the respondent by the Court, the applicant can enforce the provisional attachment order. The respondent may apply to Court to set aside the order.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant pays to the Court the costs of the application for the attachment order (this is a small sum), although, under Japanese law, each party is required to bear its own legal costs (such as its attorneys’ fees) other than the Court costs, which the Court generally orders the losing party to bear.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
A provisional attachment order is granted over the respondent’s designated assets and public notice will be given for third parties in respect of the order via appropriate channels in light of the nature of the assets. For example, in respect of real estate, a record will be made in the public land registry.
Where the third party owes a debt to the respondent, the third party debtor can pay those sums to the public depository instead of the respondent. In addition, the third party can exercise any rights of set-off arising prior to the service of the provisional order.
15. What are the consequences of breach of a freezing (or equivalent) order?
If a respondent disposes of the frozen assets in breach of a provisional attachment order, a third party who receives assets arising from a breach will be unable to claim its title to the assets against the applicant. That means if the Court issues a final judgment in favor of the applicant at a later stage, the applicant can enforce the judgment against such assets irrespective of the third party’s claim. As a result, the respondent will have to compensate the third party, as they will lose such assets.
The disposal of assets in breach of a provisional attachment order itself is not subject to criminal penalties. However, criminal penalties may be imposed if a respondent conceals the assets which are subject to compulsory enforcement or otherwise interferes with enforcement (Please see Q11 above).
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
No.
17. Can a freezing (or equivalent) order be enforced abroad?
This depends on the laws of the relevant jurisdiction, although the Civil Provisional Remedies Act does not restrict the enforcement of a provisional attachment order over assets located abroad provided that the Court has jurisdiction over the underlying litigation.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
It is generally understood that freezing orders from overseas jurisdictions cannot be enforced in Japan.
Contacts
Masahiro Yano Partner Anderson Mori & Tomotsune Tokyo, Japan masahiro.yano@amt-law.com www.amt-law.com Junichi Ueda Partner Anderson Mori & Tomotsune Tokyo, Japan junichi.ueda@amt-law.com www.amt-law.com
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