International arbitration law and rules in Japan

We would like to thank City-Yuwa Partners for their contribution to the Guide.

1.1.1 The first version of the Arbitration Act of Japan (Arbitration Act) was enacted in 1890 as part of the Civil Procedure Act of Japan. 1  In 1961 Japan also adhered to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), while declaring the reciprocal application of the New York Convention to contracting states only.

1.1.2 In 2003, the government enacted a new Arbitration Act relying largely on the provisions of the UNCITRAL Model Law. However, although Article 17 of the UNCITRAL Model Law was revised to include provisions relating to interim measures and enforcement of such measures in 2006, the Arbitration Act did not adopt such revisions until recently. 2  The government became concerned that the use of arbitration has not grown in Japan and has recognised the enhancement of international arbitration as a key priority. As part of such effort, the amended Arbitration Act came into force on 1 April 2024, to align with the 2006 reforms to the UNCITRAL Model Law. This enabled the arbitration procedure in Japan to become aligned with international standards and more useful and user-friendly. The details of the reforms are explained in section 3.

1.1.3 Additionally, in November 2024, the first-ever Japan Arbitration Week was held in Tokyo. This event aimed to promote international arbitration and develop the skills of professionals in the field through various seminars and discussions with practitioners and scholars from around the world. These recent developments exemplify Japan’s growing awareness of the importance of international arbitration in resolving cross-border disputes and highlight the jurisdiction’s arbitration-friendly nature. As a result, it is expected that more business owners will choose arbitration as one of the most effective and efficient ways to resolve disputes in Japan.

2.1.1 In principle, the Arbitration Act governs arbitration procedures when the seat of the arbitration is Japan. 3  However, the Japanese court may dismiss an action concerning a civil dispute subject to an arbitration agreement upon the defendant’s request 4  and allow a party to seek interim measures from a Japanese court despite the existence of an arbitration agreement, 5  regardless of whether the seat of arbitration is in Japan, outside Japan, or has not yet been determined. Further, the Arbitration Act also applies to the enforcement of arbitral awards in Japan, even when the seat of arbitration is outside Japan. 6

2.2.1 The Arbitration Act reflects the provisions of the UNICITRAL Model Law as much as possible. However, certain provisions differ from the UNICITRAL Model Law, to align with the legal system and practices in Japan. For example, the Arbitration Act includes the following provisions: 7 the court may deliver a written notice in arbitral proceedings at the request of the sending party, in circumstances where the court considers it necessary and where it is difficult for the sending party to certify the notice has been served successfully; 8

• a request made in arbitral proceedings has the effect of postponing the expiration of prescription periods; 9
• the arbitral tribunal, or one or more arbitrators designated by it, may attempt to facilitate settlement when the written consent of both parties has been obtained; 10  and
• in the absence of an agreement between the parties, each party bears its own cost. 11

3.1.1 In 2024, several amendments were made to the Arbitration Act aiming at enhancing the framework of arbitration procedure in Japan to align with the latest international standards and further promote its use. The most notable amendments are explained below.

3.2.1 When the Arbitration Act was enacted in 2003, the amendment to Article 17 of the UNCITRAL Model Law was still under discussion. Due to this uncertainty, Article 24(1) of the Arbitration Act included only a general provision for interim measures, without specifying their requirements or types. It merely stated, in an abstract manner, that:

[U]nless otherwise agreed by the parties, an arbitral tribunal may order any party to take interim measures or provisional measures as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute, upon the petition of a party.

3.2.2 Consequently, the interim measures under the pre-amended Arbitration Act in were not enforceable under Japanese law and compliance with such measures depended solely on the parties’ voluntary performance. However, to be aligned with Article 17H(1) of the UNCITRAL Model Law, the interim measures must be enforceable and therefore the content of the interim measures and its requirement should be clarified by law. Accordingly, Article 24(1) of the Arbitration Act now clarifies the types of provisional measures that may be granted and their respective requirements, as follows:

• Article 24(1)(i) prohibits the disposal of or any change to the respondent’s property necessary for collecting the claimed amount, if the monetary claim is likely to become unenforceable or extremely difficult to enforce;
• Article 24(1)(ii) prohibits the disposal of or any change to the respondent’s property which is the subject of a claim seeking the provision of property benefits (excluding a monetary claim), if such claim is likely to become unenforceable or extremely difficult to enforce;
• Article 24(1)(iii) prevents substantial loss or imminent danger that would occur to the petitioner, taking necessary measures to prevent such loss or danger, regarding the disputed property or relevant rights, or restoring the status quo of such property or relevant rights if it has been changed;
• Article 24(1)(iv) prohibits actions that cause harm or prejudice to the proceedings in the arbitration procedure (excluding the actions stated in the following item); and
• Article 24(1)(v) prohibits actions such as disposing, erasing or altering evidence necessary for the proceedings in the arbitration procedure.

3.2.3 When the arbitral tribunal issues an interim order, it may order the provision of appropriate security if necessary. 12

3.2.4 Article 24(1)(i) applies, for example, when a seller wishes to collect sales proceeds from a buyer. In such cases, the seller may request an interim measure to prohibit the buyer from withdrawing money from its bank account, selling its sole property, etc. 

3.2.5 In non-monetary claims, e.g. when the claimant is seeking the surrender of land, the claimant may request an interim measure to prohibit the respondent from transferring its possession of the land to a third party, pursuant to Article 24(1)(ii). 13

3.2.6 An example of the application of Article 24(1)(iii) arises when a business owner is likely to face operational difficulties before the final award is issued. This could occur, for example, if a vendor discontinues product supply, a licensor stops licensing IP rights essential for product sales, or a subcontractor halts construction under the initial contract. 14  The arbitral tribunal may order such counterparty to continue performing its contractual obligations until the final award is rendered.

3.2.7 Article 24(1)(iv) allows the arbitral tribunal to prohibit a party from disrupting the arbitration procedure (excluding the actions of destruction, erasure or tampering of evidence covered by Article 24(1)(v)). For instance, if a respondent is attempting to file a lawsuit in court to delay the arbitration proceedings, despite an existing arbitration agreement in relation to the same dispute, the arbitral tribunal may prohibit the respondent from filing such a lawsuit or order the respondent to withdraw it. 15

3.2.8 Article 24(1)(v) allows the arbitral tribunal to prohibit a party from interfering with the arbitration process by destroying, erasing, or altering evidence. For instance, the arbitral tribunal may order a party not to delete existing email data which may serve as evidence beneficial to the other party or not to intimidate a witness or a potential witness. 16

3.3.1 For the purpose of enforcement, the interim measures explained in section 3.2 are divided into two types: prohibitory measures and preventive and restorative measures. The measures in Article 24(1)(i), (ii), (iv) and (v) of the Arbitration Act fall into the former category, while those in Article 24(1)(iii) belong to the latter. 17

3.3.2 After successfully obtaining a preventive and restorative interim order issued by the arbitral tribunal, the party seeking to enforce such interim order may file a petition for an enforcement order. 18  Subsequently, the petitioner may request the competent court to enforce the interim order along with the enforcement order. Enforcement can be conducted by the way the court directly compels the debtor (respondent) to do a particular action stipulated in the interim order, substitute performance (ie enforcement by allowing the third party to perform the required act) or indirect enforcement (ie enforcement by ordering the debtor (respondent) to pay a fixed amount of money the court deems reasonable to ensure performance of the obligation).

3.3.3 On the other hand, for prohibitory measures, a petitioner can request a court to order the respondent to pay a penalty if the respondent violates or is likely to violate the interim order. 19  The petitioner may then file a petition to enforce such a payment order to collect the penalty from the respondent. 20  The amount of penalty is determined by the court taking into consideration the content and nature of the interest that would be harmed by the violation of the interim order and also in what manner and to what extent that interest would be harmed. 21  In short, although the respondent cannot be directly compelled to comply with a prohibitory order, it can indirectly be compelled to do so by the prospect of a substantial penalty being imposed for failure to comply.

3.4.1 Under Article 5(1) of the pre-amended Arbitration Act, a petition related to the arbitration procedure could only be filed with a court pre-agreed by the parties, the district courts which had jurisdiction over the place of the arbitration, or with the district courts which had jurisdiction over the respondent’s domicile or principle place of business. Following the reform, parties can now choose the Tokyo District Court or the Osaka District Court as a concurrent jurisdiction as well as the courts provided in Article 5(1). 22  This amendment was made because these courts have a significant number of judges capable of handling arbitration-related cases even if the translation of the award is not attached. 23

3.5.1 Even before the reform in 2024, if an arbitration agreement was in electronic format (or another computerised format), it was deemed to be in writing. 24  The 2024 reform has further relaxed the requirement for written formality. Even if a contract is not concluded in writing, an arbitration agreement is deemed to be in writing, as long as a document containing a clause of an arbitration agreement is referenced in such contract as constituting a part of the contract. 25  One example where the provision may apply is oral salvage contracts. Salvage contracts for recovering sunken vessels at sea are often concluded orally. 26  In such cases, if a standard form including an arbitration clause is referenced orally as constituting a part of the contract, it is considered that the requirement for written form is satisfied. 27

3.6.1 Article 46(2) of the pre-amended Arbitration Act provided that a party who filed a petition to enforce an arbitral award had to submit a copy of the written arbitral award and its Japanese translation. Since the reform in 2024, a party may omit the submission of the Japanese translation of the arbitral award if the judge deems it unnecessary after hearing the respondent’s opinion. This new provision is expected to significantly reduce the translation cost incurred by a party, as well as the burden associated with translation, given that an arbitral award can be voluminous. 28

4.1.1 The term “arbitration agreement” is defined as “an agreement to refer the resolution of all or certain civil disputes which have already arisen or which may arise in the future in respect to a certain legal relationship (irrespective of whether contractual or not) to one or more arbitrators, and to accept the determined award”. 29

4.1.2 Although there is a view that an arbitration agreement must contain (i) an agreement entrusting the resolution of disputes to arbitration procedure and complying with the arbitral award handed over by the arbitral tribunal; and (ii) an agreement not entrusting such resolution to litigation procedure at courts, in practice, an arbitration agreement is considered valid if it includes (i) above. In this regard, the Osaka High Court held that, as long as an arbitration agreement includes (i), such agreement remains valid, even if the parties did not expressly agree to exclude litigation in court. 30

4.2.1 An arbitration agreement must be in writing between the parties. 31  If an arbitration agreement is made in an electronic record, such agreement is still considered to be in writing. Moreover, the written formality requirement has been eased under the 2024 reform as stated above in Section 3.5 above. 32

4.3.1 An arbitration agreement is valid only when its subject matter is a civil dispute that may be resolved by settlement between the parties (excluding that of divorce or separation). 33  Almost all types of civil disputes can be settled, including claims for damages under the Securities Exchange Act and Antitrust Law, administrative disputes and commercial disputes which can affect third parties. Therefore, arbitrability is broadly recognised under the Arbitration Act. However, it must be noted that arbitration agreements between a consumer and a business entity as well as those between employer and employee concerning future labour disputes are exempted from the principle above (explained in section 12 below).

4.4.1 Even if any of clauses other than the arbitration agreement are found to be invalid due to nullity, rescission or for any other reasons, the validity of the arbitration agreement in the same contract is not necessarily affected. 34  Whether the arbitration agreement is affected by the validity of the contract is a matter of the parties’ intention. In principle, the disputes around the validity of the contract which contains an arbitration agreement are subject to arbitration unless otherwise agreed by the parties. For example, when the subject matter of the dispute is whether the contract is validly terminated, the parties are presumed to have agreed that the validity of termination of the contract will be tested through arbitration unless otherwise specified. 35  The Tokyo District Court has taken the same view: although the plaintiff argued that it terminated the contract due to the defendant’s non-payment of patent royalties and, therefore, the arbitration agreement was also terminated, the court rejected this argument and dismissed the plaintiff’s lawsuit. 36

4.4.2 However, severability is not always recognised when a contract containing an arbitration agreement is formed as a result of one party’s unethical or immoral conduct toward another party. For example, if one party is defrauded by another into entering a contract containing an arbitration agreement, and the fraudulent behaviour constitutes a crime, having the matter decided by arbitral tribunal may not reflect the aggrieved party’s intention. 37  In such a case, severability may not be recognised.

Statutory provisions

4.5.1 If an action is filed for the civil dispute which is subject to an arbitration agreement with a court, the court must dismiss the action upon the defendant’s petition, unless:

• an arbitration agreement is invalid due to nullity, rescission or for any other reason;
• it is impossible to carry out an arbitration procedure based on the arbitration agreement; or
• the petition was filed after the defendant presented oral arguments on the merits or made statements on the merits in preparatory proceedings. 38

Objective scope of application

4.5.2 The objective scope of the application of an arbitration agreement depends on its wording. If the arbitration agreement broadly encompasses any difference or dispute between parties arising from the contract, the cause of action is not limited to contractual claims. It may also extend to tort claims and proprietary claims related to a breach or the enforcement of a contract. 39

Subjective scope of application

4.5.3 In principle, the arbitration agreement is only binding on the parties who entered into the agreement. As one of the exceptions, a successor in a contract (e.g. heir of one of the contracting parties or successor entity in the context of a reorganisation) which contains an arbitration agreement is also bound by such agreement. 40  On the other hand, whether an assignee of a claim is bound by an arbitration agreement is a matter on which both academic theories and judicial precedents are divided. In a recent court decision, it was determined that the assignee of a claim was bound by an arbitration agreement when the debtor accepted the assignment without reserving any objection regarding the existence of the arbitration agreement. 41

4.5.4 When the arbitration agreement is made by a company, the question of whether its parent company, directors or employees are bound by the agreement is also to be considered. In a recent case determined by the Sapporo District Court, the plaintiff started a solar power generation business while negotiating a contract to entrust the construction of a solar power generation facility to Defendant A, the parent company of Defendant B. Later, due to the internal circumstances of Defendants A and B, actual construction was planned to be conducted by the Defendant B and the construction contract, including the arbitration agreement, was entered into by the plaintiff and Defendant B. Defendant C, who was originally an employee of Defendant A (later transferred to Defendant B as the contract party became Defendant B), was also involved in the negotiation with the plaintiff and undertook the design and construction of the project as a responsible employee of Defendant B after the conclusion of the contract. The plaintiff filed a lawsuit claiming for damages arising from the non-conformity of the construction carried out by Defendants B and C.

4.5.5 The Sapporo District Court stated that the effect of an arbitration agreement is generally binding only on the parties who have entered into the agreement. 42  However, as an exception, a non-party may also be subject to its effect if, based on factors such as the non-party’s status, their relationship with the parties, and the degree of their involvement in the dispute, the parties to the agreement had intended to resolve disputes involving the non-party through arbitration. 43

4.5.6 Under the circumstances mentioned above, the court determined that Defendants B and C were subject to the arbitration agreement and dismissed the lawsuit. 44  To the author’s knowledge, this is the first case in Japan in which a court has held that an arbitration agreement was effective with respect to both the parent company and the responsible employees under Japanese law, thereby dismissing the claim before it. However, the scope of application of this judgement could be narrow: in this case, Defendants B and C argued that they were subject to the arbitration agreement and that the plaintiff’s claim should be tested by an arbitral tribunal. Therefore, the court did not need to consider the defendants’ right to a court trial. If Defendants B and C had requested a declaration that they had no obligations against the plaintiff in the court, arguing that the effect of the arbitration agreement was not extended to them, the result of the decision could have been different, as courts tend to be reluctant to extend the effect of an arbitration agreement to the point that they may remove a party’s right to a court trial. 45

Compatibility with interim measures

4.5.7 It is compatible with an arbitration agreement for a party to request, before or during arbitral proceedings, a court to issue an order for provisional remedies in respect of any civil dispute subject to the arbitration agreement based on the Civil Provisional Remedies Act of Japan. 46

Requirements for being appointed as an arbitrator

5.1.1 There are no qualification restrictions for being appointed as an arbitrator under the Arbitration Act. Any person can serve as an arbitrator, irrespective of nationality, citizenship or whether they possess a legal qualification, provided that the person is clear of conflict of interest.

The number of arbitrators

5.1.2 Under the Arbitration Act, the number of arbitrators is determined by the agreement of the parties. If no such agreement exists, the number of arbitrators will be as follows: 47

• if there are two parties in a dispute, the arbitral tribunal will consist of three arbitrators; or
• if there are three or more parties in a dispute, the number of arbitrators will be determined by the court, upon the petition of a party.

The procedure for appointment of arbitrators

5.1.3 In principle, the appointment process is determined by mutual agreement of the parties. 48  If the parties have agreed to refer their dispute to arbitration institutions, such as the International Chamber of Commerce (ICC), the Singapore International Arbitration Centre (SIAC) or the Japan Commercial Arbitration Association (JCAA) (which is a leading private arbitral institution in Japan), the appointment process follows the applicable institutional rules. Further, these institutions provide their own procedural rules which apply where the parties have expressly agreed to entrust the appointment of arbitrators to the institution. For example, JCAA provides the Appointing Authority Rules (2021), which applies where the parties have agreed to entrust the appointment roles to the JCAA in ad hoc arbitration or arbitration administered by another institution. 49  As such, even in the absence of an agreement to refer the dispute to an arbitration institution, parties can utilise the function of appointment of an arbitrator by the arbitral institution.

5.1.4 If no agreement between the parties has been reached and no institutional rules apply, the Arbitration Act provides for the appointment process as follows:

• If three arbitrators are to be appointed, each party must appoint one arbitrator, and the two appointed arbitrators must appoint the third. If either party or the two arbitrators fail to make an appointment within a specified time limit, the court has the authority to appoint the arbitrator upon a party’s petition. 50
• If a sole arbitrator is to be appointed and the parties fail to reach an agreement on the appointment or the appointment process, the court has the authority to appoint the arbitrator upon a party’s petition. 51
• If three or more parties are involved and they fail to agree on the appointment of an arbitrator or the appointment process, the court has the authority to appoint the arbitrators upon a party’s petition. 52

5.1.5 When the court appoints an arbitrator, the court must consider the following matters: (i) the requirements for the arbitrator as provided by the agreement between the parties; (ii) the impartiality and independence of the person to be appointed; and (iii) where there is one arbitrator, or where the two arbitrators appointed by the parties are to appoint the other arbitrator, whether it is appropriate to appoint a person whose nationality is different from those of the parties. 53

5.2.1 Parties may challenge an arbitrator if (i) an arbitrator fails to satisfy the requirements provided by the agreement of the parties or (ii) there are reasonable grounds to doubt the impartiality or independence of the arbitrator. 54  The Arbitration Act provides that the procedure for challenging an arbitrator is determined by the agreement of the parties. 55  If such agreement does not exist, the decision on the challenge of the arbitrator must be made by the arbitral tribunal, upon the petition of the party. 56  If the arbitral tribunal determines that the challenge of an arbitrator is groundless, the unsuccessful party may file a petition for the challenge of the arbitrator with the court, within a certain time frame. 57

5.2.2 If the parties choose JCAA as the arbitration institution, JCAA’s Commercial Arbitration Rules 2021 (Rules) will be applicable unless the parties agree otherwise. Under the Rules, a party may challenge an arbitrator if circumstances give rise to justifiable doubts as to the arbitrator’s impartiality or independence. 58  In such cases, the JCAA must decide on the challenge without giving reasons, after providing the other party and the challenged arbitrator an opportunity to comment. 59

5.3.1 Under the Arbitration Act, arbitrators have an obligation to treat parties with equality and give each party a full opportunity to explain their case in an arbitration procedure. 60  Further, arbitrators must disclose to the parties all the facts that would likely to give rise to doubts as to their impartiality or independence, 61  so that parties can determine whether they should challenge the arbitrator in accordance with the procedure set out in section 5.2.

5.3.2 Further, the Rules provide that an arbitrator must be, and remain at all times, impartial and independent during the arbitral proceedings. 62  The Rules also impose a disclosure obligation on arbitrators: an appointed arbitrator must promptly submit in writing its undertaking to the parties and the JCAA to disclose any circumstances which may give rise to justifiable doubts as to his or her impartiality or independence, or to declare that there are no such circumstances. 63

Arbitration costs 

5.4.1 The Arbitration Act does not specifically define the scope of arbitration costs. The scope of arbitration costs is generally considered to be determined by the parties’ agreement, as arbitration is a voluntary dispute resolution process based on mutual agreement. 64  If the parties agree to solve their disputes through arbitration institutions, the relevant rules, which usually clarify the scope of arbitration costs, apply to the disputes. For example, in the case of JCAA arbitration, the Rules specify that the costs of the arbitration include the administrative fee, an arbitrator’s remuneration and expenses, and other reasonable expenses. 65  The Rules also clarify, to a reasonable extent, the fees and expenses of the counsels and other experts incurred by the parties may be included. 66

The allocation of costs

5.4.2 The allocation of costs incurred by the parties in relation to the arbitration procedure is determined by the parties’ agreement. 67

5.4.3 Under the Arbitration Act, if such an agreement does not exist, each party must bear its own costs. 68  As such, the losing party does not necessarily bear all the costs incurred by the parties in connection with the arbitration procedure. 

5.4.4 On the other hand, the Rules provide that the arbitral tribunal may apportion the arbitration costs, taking into account the parties’ conduct throughout the course of the arbitral proceedings, the determination on the merits of the dispute, and any relevant circumstances. 69

5.5.1 The Arbitration Act does not provide for the immunity of arbitrators. Therefore, an arbitrator may be held liable for damages incurred by a party incurred as a result of the arbitrator’s negligence, under the Arbitration Act.

5.5.2 On the other hand, Article 13 of the Rules provide that neither the arbitrators, nor the JCAA (including its directors, officers, employees and other staff) shall be liable for any act or omission in connection with the arbitral proceedings unless such act or omission constitute wilful misconduct or gross negligence.

6.1.1 An arbitral tribunal may rule on its jurisdiction, including on any objections regarding the existence or validity of the arbitration agreement. 70  If the objection has been made lawfully, and an arbitral tribunal has determined that it has jurisdiction, the arbitral tribunal must rule on the allegation by an independent decision made before or in the award. 71  Whether the arbitral tribunal rules by an independent decision before a final award is at the arbitral tribunal’s discretion, by considering several factors such as the strength of the argument. 72  If the arbitral tribunal rules that it has jurisdiction before a final award, a party may petition a court to rule on whether the arbitral tribunal has jurisdiction within 30 days of receipt of notice of the decision. 73

6.1.2 Conversely, if the arbitral tribunal has determined that it lacks jurisdiction, it must render a decision to terminate the arbitration procedure. In this case, the party challenging the arbitral tribunal’s jurisdiction cannot petition a court to rule that the arbitral tribunal lacks jurisdiction. 74

6.2.1 Upon the petition of a party, an arbitral tribunal may order the counterparty to take interim measures as explained in section 3.2. 75  When filing the petition for such an interim measure, a party must prima facie evidence the relevant rights that must be preserved and the grounds for the petition. 76  In issuing an order to take such measures, if necessary, the arbitral tribunal may order the provision of appropriate security. 77

7.1.1 Unless otherwise agreed by the parties, an arbitration procedure commences on the date on which one party notifies the other party of the request for the relevant dispute to be referred to arbitration. 78  However, the commencement of the arbitration procedure does not necessarily have the effect of interrupting the expiration of prescription periods. Instead, the Arbitration Act provides that a request in an arbitration procedure, not the commencement of the procedure, has the effect of interrupting the expiration of prescription periods. 79

7.2.1 The rules of an arbitration procedure which an arbitral tribunal must observe are subject to agreement between the parties, unless such agreed rules violate any articles concerning the public order (ie mandatory provisions) under the Arbitration Act. 80  If such agreement does not exist, the arbitral tribunal may carry out the arbitration procedure in such manner as it deems appropriate, unless such manner violates other provisions of the Arbitration Act. 81

7.2.2 As a general guideline, provisions of the Arbitration Act that include wording indicating that the parties are allowed to determine matters by agreement can be classified as non-mandatory provisions, whereas provisions that do not contain such wording can be classified as mandatory provisions. 82  For example, even if parties agree not to disclose each other’s submissions to the arbitral tribunal, which is contrary to Article 32(4) of the Arbitration Act, this agreement is invalid and any ruling by the arbitral tribunal under such circumstances may be set aside under Article 44(6) of the Arbitration Act. 83  

7.3.1 The seat of arbitration is provided by the agreement of the parties. 84  If such agreement does not exist, the arbitral tribunal determines the seat of arbitration considering the circumstances of the dispute, including the convenience of the parties. 85

7.3.2 Similarly, the language to be used in an arbitration procedure and the procedure to be carried out by using such language are provided by the agreement of the parties. 86  If such agreements do not exist, the arbitral tribunal determines the language and relevant procedure. 87

7.4.1 The Arbitration Act does not provide detailed rules on multi-party arbitration. It only states that if the multiple parties involved in the arbitral procedure fail to agree on the number of arbitrators, the court will determine the number of arbitrators, 88  and if they fail to agree on the procedure for appointing an arbitrator, the court will appoint the arbitrator. 89

7.4.2 On the other hand, the Rules include detailed provisions on the process and requirements for a third party to intervene in arbitral proceedings and an arbitral tribunal to consolidate its pending claim with another claim for which no arbitral tribunal has been constituted. 90  The Rules offer more predictability than the Arbitration Act for the parties who face multi-party arbitration.

7.5.1 When parties agree on the rules of an arbitration procedure, the arbitral tribunal must follow the agreement unless that agreement violates public interest. 91  In the absence of such agreement, the arbitral tribunal may carry out the arbitration procedure in the manner it finds appropriate. The arbitral tribunal may hold an oral hearing at its discretion to have the parties to produce evidence and state their opinions. However, the arbitral tribunal must hold an oral hearing if a party petitions the arbitral tribunal to hold an oral hearing.

7.6.1 The claimant must present the object of the petition, the facts supporting the petition, and a summary of the dispute, 92  while the respondent must present its allegations regarding the claimant’s claims, both by the deadline set by the arbitral tribunal. 93  If the claimant fails to meet the deadline, the arbitral tribunal may render a decision to terminate the arbitration proceedings, unless there is a justifiable reason for the delay. 94  On the other hand, even if the respondent fails to state its allegation by the relevant deadline, the arbitral tribunal must continue the arbitration proceedings without deeming that the respondent has admitted the claimant’s claims. 95  In such a case, the arbitral tribunal may render its ruling based on the evidence submitted by the claimant up to the point, unless there are justifiable grounds for the respondent’s failure to meet the deadline. 96

7.6.2 However, under the Rules, even if one party fails to submit its written statements within the time limits under the Rules or the time limits fixed by the arbitral tribunal, the arbitral tribunal must continue the arbitral proceedings without treating such failure in itself as an admission of the other party’s statements. 97  As such, the Rules treat default, especially by a claimant, more flexibly than the Arbitration Act does.

7.7.1 The Arbitration Act does not include rules regarding the admissibility of evidence, the necessity of examination nor weight of evidence. 98  These matters are left to the broad discretion of the arbitral tribunal, unless the parties agree otherwise. In practice, the IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules) are often used in arbitration proceedings. The IBA Rules are not binding on the parties unless they have agreed to be bound by them or the arbitral tribunal orders its application. However, the IBA rules often significantly affect the decision of arbitrators.

7.8.1 An arbitral tribunal may appoint one or more expert witnesses and may have them give an expert testimony on necessary matters and report the results thereof in writing or orally, unless otherwise agreed by the parties. 99  Following the submission of the report, the expert witness must appear at the oral hearing if requested by a party or deemed necessary by the arbitral tribunal. 100  At the oral hearing, the parties may question the expert witness regarding their report and may also instruct someone with the relevant expert knowledge to make statements concerning the expert testimony. 101

7.9.1 The Arbitration Act does not include rules regarding confidentiality. However, there is a widely accepted view that the relevant facts disclosed through arbitration proceedings should be treated as confidential, unless the parties agree otherwise. 102  Reflecting this view, the Rules stipulate that the persons involved in arbitral proceedings including arbitrators, parties, their counsel and the JCAA’s staff should not disclose facts related to or learned through the arbitral proceedings nor express any views on such facts. 103  If the Rules do not apply and there is no applicable confidentiality rule governing an arbitration , a party wishing to keep certain information confidential should negotiate a confidentiality agreement with the other party. 104

8.1.1 The choice of applicable law in an arbitration procedure is left to the agreement of the parties. 105  If no such agreement exists, the arbitral tribunal must apply the laws and regulations of the state with the closest connection to the civil dispute. 106

8.2.1 An arbitral award must be prepared in writing, with the date of issuance and the seat of arbitration stated in the document, and the signatures of the arbitrators who rendered the award attached. 107  The arbitral award must state the grounds for the decision unless the parties have agreed otherwise. 108  Once the arbitral award is rendered, the arbitral tribunal must notify each party of the award by sending a copy of it. 109  The Arbitration Act is silent on the timing of rendering arbitral awards.

8.2.2 On the contrary, under the Rules, the arbitral tribunal must make reasonable efforts to render an arbitral award within nine months from the date of its constitution. 110  To ensure this timeframe, the arbitral tribunal must set the schedule of the arbitral proceedings after consulting with the parties. 111

8.3.1 The Arbitration Act provides that an arbitral tribunal may attempt to facilitate a settlement of the civil dispute referred to arbitration, provided that the parties have agreed to it in writing, although such a provision is not found in the UNCITRAL Model Law. 112  This provision reflects Japanese court practice, where judges often attempt to facilitate settlements. However, practitioners in common law jurisdictions often disagree to have the arbitrator also serve as a mediator due to various concerns, in particular impartiality of the arbitral tribunal. To address this concern, the Arbitration Act establishes a clear requirement that the arbitral tribunal may only attempt to facilitate a settlement if both parties agree. 113

8.3.2 If the parties reach a settlement and both jointly petition the arbitral tribunal, the arbitral tribunal may render a consent award based on the terms of the agreement. 114  Such a consent award has the same effect as an arbitral award. 115

8.4.1 The Arbitration Act does not limit the arbitral tribunal’s authority to order a party to pay interest on the principal claim. Therefore, the arbitral tribunal may render such an order in accordance with the governing law, to the extent the claimant seeks. 

8.4.2 The Arbitration Act provides that each party must bear its own cost related to the arbitration proceedings, unless the parties agree otherwise. 116  If the parties have agreed on cost allocation, the arbitral tribunal may issue an order on cost allocation as part of award or as a separate award, based on such an agreement. 117

8.5.1 An arbitration procedure terminates when the arbitral tribunal renders an arbitral award or a decision to terminate the arbitration procedure. 118  An arbitral tribunal must render a decision to terminate the arbitral proceedings if (i) the petition of arbitration has been withdrawn without any objection from the respondent; (ii) both parties agree to terminate the arbitral procedure; (iii) a settlement has been reached between the parties regarding the matter referred to the arbitral procedure; or (iv) the arbitral tribunal has deemed it unnecessary or impossible to continue the arbitral procedure. 119

8.6.1 An arbitral award has the same effect as a final and binding judgment. However, a civil enforcement based on the arbitral award requires an enforcement order (meaning an order allowing the civil enforcement based on an arbitral award) issued by a Japanese court. 120

8.7.1 An arbitral tribunal may correct any miscalculation, clerical error and other similar types of error upon the petition of the parties or by its own authority. 121  The petition should be submitted by a party within 30 days of the receipt of the notice of arbitral award. 122  If the arbitral tribunal receives such a petition, it must render a decision to dismiss the petition or correct the arbitral award within 30 days, unless the arbitral tribunal extends the time limit. 123

8.7.2 A party may file a petition with the arbitral tribunal to give an interpretation of a specific part of the arbitral award, only if the parties have agreed to file such petition. Upon the filing of the petition, the arbitral tribunal must make a decision on the petition. 124  The time limits applicable to the petition and decision for correction of an award apply mutatis mutandis to those for interpretation. 125

8.7.3 Further, if an arbitral award fails to address any claim or application submitted in those proceedings, a party may, unless otherwise agreed by the parties, request the arbitral tribunal to render an additional arbitral award on that claim or application. 126  The petition for an additional award must be filed within the same 30-day period applicable to correction and interpretation requests. 127  However, unlike requests for correction or interpretation of the award, which are subject to a 30-day decision period, the arbitral tribunal is granted a longer period of up to 60 days from the receipt of the petition to either render a supplemental award or dismiss the petition. 128

9.1.1 Japanese courts may exercise their authority in relation to arbitration procedure only in limited cases. Among others, courts may:

• serve notices in writing required in an arbitration procedure, upon the petition of the sender of such notices; 129
• issue a provisional order upon a party’s petition regarding a civil dispute which is subject to an arbitration agreement; 130
• determine whether there are grounds for challenge of an arbitrator after the arbitral tribunal determines that the challenge of the arbitrator is groundless; 131
• implement, upon petition by the arbitral tribunal or a party (if the tribunal deems it necessary), the commission of an investigation, examination of a witness, expert testimony, examination of documentary evidence and observation in accordance with the Code of Civil Procedure; 132
• set aside an arbitral award upon a party’s petition; 133
• issue and enforcement order and conduct enforcement of an arbitral award. 134

9.1.2 As mentioned in section 3.4, parties now have the option to choose either the Tokyo District Court or the Osaka District Court as concurrent jurisdictions alongside the courts specified in Article5(1): (i) the agreed court; (ii) the district court with jurisdiction over the place of the arbitration; and (iii) the district court with jurisdiction over the respondent’s domicile or principle place of business. 135

9.2.1 The Arbitration Act does not provide for the stay of court proceedings. If a party files a lawsuit despite having entered into an arbitration agreement covering the same subject matter, the court is required, upon the petition of the defendant, to dismiss the action, not merely to stay the court proceedings. 136

9.3.1 As mentioned in section 9.2, if a civil dispute subject to an arbitration agreement is filed, the court must dismiss the action, upon the defendant’s petition. However, this requirement does not apply if: 137

• the agreement is invalid due to nullity, rescission or for any other reason;
• it is impossible to conduct an arbitration procedure based on the agreement; or
• the petition was filed after the defendant had already presented oral arguments on the merits or made statements on the merits during preparatory proceedings.

9.3.2 In these cases, the court may examine the merits of the lawsuit and render a ruling accordingly.

9.4.1 As stated in section 4.5.7 , a party who has entered into an arbitration agreement may request a court to issue a relevant provisional order in respect of any civil dispute covered by the arbitration agreement, either before or during arbitral proceedings. 138  However, unlike a filing for an interim measure with an arbitral tribunal, the petition for a court-ordered interim measure must be conducted in Japanese. After the reform (stated in section 3.6) filing a petition for an interim measure with the arbitral tribunal may have become a more accessible option for international parties.

9.5.1 An arbitral tribunal or a party may petition a court to conduct an examination of evidence (i.e., the commission of an examination, examination of a witness, expert testimony, examination of documentary evidence, and observation) if the arbitral tribunal deems it necessary. 139  The court may conduct these examinations with binding force and may order a third party to be examined or to submit documents. 140  Therefore, this procedure is particularly effective when a third party is uncooperative with the evidence examination proceedings conducted by the arbitral tribunal.

10.1.1 Japanese courts have jurisdiction over challenges to an arbitration award if the seat of arbitration is in Japan. 141

10.1.2 Regarding domestic jurisdiction, the court agreed upon by the parties, the court with jurisdiction over the location where the defendant resides and the court where the arbitration proceedings are conducted have jurisdiction over challenges to an arbitral award. Further, as explained in section 3.4, the parties can now choose either the Tokyo District Court or the Osaka District Court for such challenges.

10.2.1 The Arbitration Act contains no provision permitting an appeal against an arbitral award and further provides that a court may exercise its authority only in the cases prescribed by the Act. 142  Accordingly, an arbitral award is not subject to appeal. Once an arbitral award is rendered, it is final and binding unless it is set aside or its effect is suspended by a judicial body.

10.3.1 A party seeking to set aside an award must file a petition with the competent court (see section 10.1) within three months of the notice of the award and by the time an enforcement order becomes final and binding. 143

The grounds for setting aside an arbitral award

10.3.2 The grounds for setting aside an arbitral award provided by the Arbitration Act are as follows: 144

• the arbitration agreement is invalid due to the limited capacity of a party;
• the arbitration agreement is invalid on grounds pursuant to the law designated by the parties (if such designation does not exist, Japanese law);
• the petitioner did not receive the notice required under Japanese law (or, if there is an agreement of the parties, in the agreement) either in the procedure for appointing arbitrators or during arbitration proceedings;
• the petitioner was unable to conduct a defence in the arbitration procedure;
• the arbitral award contains a decision on matters beyond the scope of the arbitration agreement or of the petition presented in the arbitration procedure;
• the composition of the arbitral tribunal or the arbitration procedure is in violation of Japanese law (or of the agreement between the parties, if there is one);
• a petition filed in the arbitration procedure relates to a dispute which may not be subject to an arbitration agreement pursuant to Japanese law; or
• the content of the arbitral award is contrary to public policy in Japan.

The application of Article 44(1) by the court

10.3.3 If none of the grounds listed above are found, the court cannot set aside the arbitral award. On the other hand, even if the court determines that one of the grounds listed above exists, the decision to set aside the arbitral award remains at the court’s discretion. 145  However, if the court is deemed to have exceeded its scope of discretion, particularly in light of the significance of the ground, its decision could be reversed by higher courts. 146

10.3.4 There are cases that demonstrate the Japanese courts’ arbitration-friendly attitude. In 2018, the Tokyo High Court rendered a notable decision. 147  In this case, the petitioner (the respondent in the arbitration) argued that the arbitral award violated several principles under the Civil Procedure Code of Japan and therefore fell within the scope of Article 44(1)(iv), (v), (vi), (vii) and (viii) of the Arbitration Act. The Tokyo District Court accepted the petitioner’s argument and set aside the arbitral award. On the contrary, the Tokyo High Court held that the criteria for determining whether there was a violation of laws in the arbitration proceedings are based not on the Civil Procedure Code of Japan, but on the Arbitration Act and the procedural rules agreed upon by the parties. It also pointed out that the petitioner’s arguments effectively sought a substantive review of the arbitral award by the court which is not contemplated under Article 44(1) of the Arbitration Act. Consequently, it rejected all of the petitioner’s arguments.

10.3.5 Another noteworthy case involved a petitioner (the respondent in the arbitration proceedings) who argued that the arbitral award was based on an argument that had not been raised by the defendant (the claimant in the arbitration proceedings) and, therefore, fell within the scope of Article 44(1)(iv) of the Arbitration Act, as the defendant was unable to defend against it. The Tokyo District Court held that, given an arbitration is a party-agreed, out-of-court dispute resolution process without an appellate procedure and that Article 4 of the Arbitration Act limits court intervention to cases expressly, arbitral awards should be respected to the greatest extent possible. The court subsequently stated that Article 44(1)(iv) should be interpreted as permitting the court to set aside an arbitral award only in cases of serious procedural violations that entirely deprived a party of the opportunity to defend itself, such as when proceedings were conducted in the party’s absence or when the decision was based on evidence that the party could not have recognised. Consequently, the court dismissed the petitioner’s claim for setting aside the arbitral award. 148

10.3.6 Thus, the scope of Article 44(1) of the Arbitration Act, which provides the grounds for setting aside an arbitral award, is generally interpreted narrowly by the courts, which tend to respect an arbitral tribunal’s discretion.

Maintaining the confidentiality of the arbitration procedure in court

10.3.7 Court proceedings leading up to the determination of whether an arbitral award is set aside are typically conducted in closed hearings. 149  Only persons with a legal interest in the court proceedings may submit a request to the court clerk to inspect or copy the court record. 150  Further, in practice, the court clerk usually assesses the legal interest of the requesting party strictly. Thus, the confidentiality of the arbitration procedure can be maintained even after a party files a petition to set aside the arbitral award.

11.1.1 An arbitral award has the same effect as a final and binding judgment, although a civil enforcement based on the arbitral award requires an enforcement order issued by a Japanese court. 151  The grounds for refusal of the enforcement order are almost identical to those for setting aside an arbitral award (as discussed in section 10.3). A court may also refuse to issue an enforcement order if the arbitral award is not yet final and binding, or it has been set aside or its effect has been suspended by a judicial body of the country where the arbitration was seated (in accordance with the laws and regulations of that country). 152

11.1.2 Japanese courts tend to strictly apply Article 45(2) of the Arbitration Act, which sets forth the grounds on which an enforcement order may be refused. In 2016, the Tokyo District Court issued an enforcement order dismissing all arguments raised by the respondent. 153  Among others, the petitioner contended that the arbitral award violated competition laws of the European Union and Japan and therefore fell within the scope of Article 45(2)(ix) of the Arbitration Act. However, the court held that “even if the content of the arbitral award violates EU competition law or is based on a misinterpretation of Japanese law, it does not immediately constitute a violation of public policy in Japan” and rejected the respondent’s argument without examining whether the award in fact breached the relevant competition law. The court also dismissed the respondent’s counterargument that the arbitral tribunal had misapplied the burden of proof under the relevant competition law, finding that the arbitrator’s view on the burden of proof had a certain degree of reasonableness. The respondent appealed against the Tokyo District Court decision, but the Tokyo High Court dismissed it briefly. 154

11.1.3 If there are no grounds for refusal found, the court must issue an enforcement order. 155  The court also has the discretion to issue an enforcement order, even if grounds for refusal exist. Therefore, even if a foreign court sets aside an arbitral award based on the law of the country where the arbitration took place, a Japanese court may still issue an enforcement order based on the same arbitral award, if the grounds for setting aside the award conflict with Japan’s public policy. 156

11.2.1 The provisions of the Arbitration Act in relation to the recognition and enforcement of an arbitral award apply equally to the case where the seat of arbitration is in Japan and the case where the seat of arbitration is outside Japan and the successful party wishes to enforce a foreign arbitral award. 157  Under the Arbitration Act, a foreign arbitral award has the same effect as a final and binding judgment, irrespective of whether or not the seat of arbitration is in Japan. 158  Therefore, foreign awards are recognised unless there is a ground for refusing recognition of the award.

12.1.1 Article 3 of the Supplementary Provisions of the Arbitration Act (Supplementary Provisions) provides a special provision allowing consumers who have entered into an arbitration agreement to terminate the arbitration agreement, unless they are the claimants in an arbitration procedure. To ensure that the consumers have an opportunity to terminate the arbitration agreement while being informed of the consequence of the arbitration agreement, the same article of the Supplementary Provisions requires the arbitral tribunal to conduct a special procedure for this type of arbitration.

12.2.1 Article 4 of the Supplementary Provisions stipulates that arbitration agreements between employers and employees concerning future disputes (but limited to individual labour-related disputes only) are deemed null and void.