Introduction

April 21, 2023 saw the enactment of three laws arbitration- and mediation-related laws: the Law Partially Amending the Arbitration Act (Act No. 15 of 2023) (the “Amended Arbitration Act”), the Law Concerning the Implementation of the United Nations Convention on International Settlement Agreements resulting from Mediation (Act No. 16 of 2023) (the “Act Implementing Singapore Convention”), and the Law Partially Amending the Act on Promotion of Use of Alternative Dispute Resolution (Act No. 17 of 2023) (the “ADR Act”). These laws were promulgated on April 28, 2023, and are scheduled to go into effect on April 1, 2024.

These three laws are aimed at integrally strengthening dispute resolution procedures administered by private dispute resolution organizations, including international arbitration and mediation, by making the order for interim measures issued by the arbitral tribunal and the settlement agreement through mediation enforceable. A summary of the laws is as follows.

II.          Amendment Enabling Enforcement of an Order for Interim Measures

Japan’s current Arbitration Act (Act No. 138 of 2003) was enacted in 2003 based on the UNCITRAL Model Law (the original 1985 version) but has not reflected the latest UNCITRAL Model Law (amended in 2006). This has been an obstacle to Japan’s being selected as a seat of arbitration. In addition, under Japan’s current Arbitration Act, there is no means to enforce an order for interim measures issued by the tribunal until an arbitral award is issued, and there was a risk that property dispositions, etc. would be made before the arbitral award is issued, hampering the effectiveness of the order for interim measures.

Like the latest UNCITRAL Model Law, the Amended Arbitration Act allows for enforcement of an order for certain types of interim measures issued by the tribunal to preserve rights and evidence pending an arbitral award (an “Order for Interim Measures”). While there are a variety of types of orders for interim measures that are issued by the tribunal, the Amended Arbitration Act specifically provides two types of Order for Interim Measures that are enforceable: (i) measures necessary to avoid significant damage or imminent danger to the property or rights subject to dispute, or to restore the property to its original condition, and (ii) prohibition of the disposal of property, etc.[1]. After the Order for Interim Measures is issued, the petitioner may request the court to issue a compulsory execution[2]. The court will examine whether or not there are grounds for refusing compulsory execution, and if there are none, the court will issue an order allowing compulsory execution, etc.[3]. If the court’s order allowing compulsory execution, etc. is issued, compulsory execution is implemented based on the Order for Interim Measures as a title of obligation in the case of “(i)”, above, or, in the case of “(ii),” as a payment order for compensation for damages as a result of violation (which is to be issued by the court where there is a violation or threat of violation of the Order for Interim Measures as a title of obligation).

Prepared by the author based on the website of the Ministry of Justice (https://www.moj.go.jp/content/001395270.pdf)

In addition, in connection with this amendment, the following revisions have been made:

These amendments would make the Order for Interim Measures more effective and simplify the procedures for the enforcement of arbitral awards in Japan.

III.         Establishment of a System for Enforcement of Settlement Agreements Reached Through Mediation

(i)                Compulsory Execution of Settlement Agreement Reached Through International Mediation

Under the current legal system, there was no framework to enforce the settlement agreement even if a settlement agreement was reached in international mediation. In addition, in September 2020, the United Nations Convention on International Settlement Agreements resulting from Mediation (the “Singapore Convention on Mediation”) came into effect, and Japan acceded it in October 2023. In response to this trend, a system was established to allow courts to issue enforcement decisions based on settlements reached in international mediations[6]. In order for an enforcement decision to be issued, (i) the agreement must be an international settlement agreement[7], (ii) the agreement must be a settlement agreement pertaining to a commercial dispute (not applicable to disputes in which individuals are parties, individual labor disputes, or disputes concerning personal status or family matters)[8], and (iii) the parties must have agreed on enforceability of the international settlement agreement based on the Singapore Convention on Mediation or the Act Implementing Singapore Convention (an “opt-in reservation”)[9], and (iv) there must be no grounds for refusal of execution[10].

(ii)              Compulsory Execution of Settlement Agreement Reached Through Domestic Mediation

Under the current system, even if a settlement was reached through mediation in Japan, there was no mechanism for enforcement based on the settlement. The ADR Act establishes a new system which allows the court to issue an enforcement decision based on settlements reached in domestic mediations (Article 27-2 of the ADR Act). In order for an enforcement decision to be issued, (i) the settlement must be achieved via certified (accredited) dispute resolution procedures conducted by certified dispute resolution business operators, (ii) the settlement agreement must pertain to a commercial dispute (not applicable to contract disputes between a legal entity and a consumer, individual labor disputes, and disputes concerning personal status or family matters) (Article 27-3 of the ADR Act), (iii) the parties must have agreed in the certified mediation procedures on enforceability of the settlement agreement through domestic mediation (Opt-in Reservation) (Article 27-3 of the ADR Act) (Article 2, Paragraph 5 of the ADR Act) and (iv) there must be no grounds for refusal of execution (Article 27-2, Paragraph 11 of the ADR Act).

The above amendments will also ensure the effectiveness of settlements reached through mediation, and are expected to expand opportunities for the use of mediation in Japan as a dispute resolution tool.

View original article here.

Author: Kaori Sugimoto

Footnotes

[1] Article 24(1) of the Amended Arbitration Act

[2] Article 47(1) of the Amended Arbitration Act

[3] Article 47(7) of the Amended Arbitration Act

[4] Proviso to Articles 46(2) and Proviso to Article 47(2) of the Amended Arbitration Act

[5] Article 46(4) of the Amended Arbitration Act

[6] Article 5 of the Act Implementing Singapore Convention

[7] Article 2 of the Act Implementing Singapore Convention. As used herein, “international settlement agreement” means an agreement entered into by parties (i) whose head office, or parent company’s office, is located outside Japan, (ii) whose addresses, business offices, etc. are in different countries, or (iii) whose domicile, place of business, etc., as well as the place of performance of obligations under the settlement agreement, are in different countries.

[8] Article 4 of the Act Implementing Singapore Convention

[9] Article 3 of the Act Implementing Singapore Convention

[10] Article 5, Paragraph 12 of the Act Implementing Singapore Convention