Japan
Japan is marked by a dynamic and evolving litigation market. Over the next few years, the landscape is expected to be shaped by several key trends including regulatory disputes which are anticipated to increase in areas such as cybersecurity, data protection, and compliance with evolving healthcare regulations.
It is anticipated that class actions will continue to plot an upward trend especially in consumer protection and securities litigation with product liability, data breaches also expected to grow. ADR will continue to play an important role in the Japanese litigation market with mediation and arbitration driving dispute resolution and costs efficiencies.
Climate change litigation is expected to grow with more cases being brought against corporations as failings to meet environmental standards causing disputes to arise of green policy implementation. Alongside this, growth is expected in employment related disputes driven by changes on labour law and workers’ rights. With continued innovation in Japan in the technology space, an increase in IP litigation including trademarks, patents and trade secrets is expected with companies taking measures to protect their assets and navigate laws in this area.
1. Is third party funding permissible for disputes?
The status of third-party funding for disputes in Japan is not clear-cut, but there is reason to believe it will be permitted. There are no explicit laws that either permit or prohibit third-party funding, and it is not commonly used in Japan. That said, the concepts of champerty and maintenance, which are concerns in some jurisdictions, do not exist under Japanese law.
Third-party funding for international arbitration involving Japanese clients or seated in Japan is generally considered permissible. Furthermore, at least one case before the Tokyo courts was funded, which become known in the course of the proceedings, without any opposition from the court. The Japanese government has shown interest in developing and promoting international arbitration, which includes considering how to utilize and regulate third-party funding. This means we might see more clarity and potential regulation in the future.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
Yes, lawyers in Japan can work on a contingent basis, but there are some nuances and restrictions to be aware of.
Contingency Fee Arrangements
- Permissibility: Lawyers in Japan are allowed to enter into contingency fee arrangements. This typically involves a combination of a retainer fee (a percentage of the claim amount) and a success fee (a percentage of the award obtained).
- Pure contingency: Pure contingency fee arrangements, where the lawyer only gets paid if the case is won (“no win, no fee”), are permitted but are not commonly used.
Restrictions
- Ethical considerations: While 100% contingency arrangements are not explicitly prohibited, the rules of ethics for lawyers may discourage such arrangements. This is to prevent any potential conflicts of interest or unethical practices.
- Practical use: Due to these ethical considerations, pure contingency fee arrangements are rarely adopted in practice.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, in Japan, a court can order the losing party to pay the court costs of the winning party (court fees, expert fees, service fees). However, this typically does not include the winning party’s attorney fees. Each party generally bears its own attorney fees unless the successful party claims these fees as part of its damages under contract or tort law, and the court orders their payment (although this is limited to a maximum of 10% of the total damages awarded).
If the plaintiff is only partially successful, the court may apportion the costs between the parties based on the outcome. This approach aims to ensure fairness in the distribution of costs.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Yes, insurance is available in Japan to protect against adverse outcomes in court proceedings. This type of insurance is known as “After the Event” (ATE) insurance. ATE insurance can cover several risks associated with losing a case, including court fees, expert fees, and other litigation costs.
ATE insurance is particularly useful for parties who want to mitigate the financial risks of litigation. It can be purchased after a legal dispute has arisen but before the case is resolved.
Contact
Joaquin Terceño Partner
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