Process and Substance in Contract Law Reform in Japan – and Australia?

Japan’s is well underway on the path to completing its first comprehensive reform of contract law since enactment of the Civil Code in 1896. A driving force has been Takashi Uchida, a prominent participant in Japan’s intense discussions over contract law theory in the early 1990s. He resigned in 2007 as Professor of Civil Law at the University of Tokyo in order to spearhead deliberations within the Legislative Council (hosei shingikai) of the Ministry of Justice (MoJ), now charged with recommending specific reforms.
At the Council’s first Working Group meeting on 22 November 2009, one member reportedly suggested that deliberations should proceed “without paying too much attention to ‘the Basic Policy for the Law of Obligation Reform’ (draft proposals by [the] Japanese Civil Code (Law of Obligations) Reform Commission)” because it had been confirmed that the Working Group’s deliberations should start “from zero”. However, the Draft Proposals (DP) published in April 2009 by that semi-private Reform Commission, along with a detailed five-volume commentary written by its members, were clearly intended to frame the subsequent debate in the formal Working Group arena – and have mostly achieved that effect.

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“What do Australia and others expect from Japan in regional FTA negotiations?” (eg ISDS)

I was recently interviewed on this topic by NHK World Radio’s principal program director, Yutaka Konishi. His main questions and some of my points in response are outlined below. Some of our interview was broadcast on “Radio News in English” on 9 May 2013, at http://www3.nhk.or.jp/nhkworld/english/radio/program/), the transcript of the full interview is here (download PDF file), and my own notes are reproduced below.
Later I was also interviewed in Sydney by TV Asahi specifically about investor-state arbitration (and other ISDS) provisions in the expanded Trans-Pacific Partnership (TPP) negotiations, which Japan has now officially joined. The 14-minute special feature from their “Hodo Station” evening news on 24 May is also available on YouTube, and a video-clip of my edited comments (from 7m30s to 8m5s) can also be downloaded here (11MB .mov file). In the longer interview in Sydney, I reiterated that there is ample scope for this new FTA to include innovative ISDS provisions that appropriately balance the interests of host states (in regulating for the public interest) and private investors (seeking minimum and internationally-accepted legal standards before committing long-term investments). Em Prof Mitsuo Matsushita (former WTO Appellate Body judge) and especially Mr Shigeaki Koga (a former METI official) also emphasised this point in their comments for the Hodo Station special feature. As the TV Asahi website overview pointed out, this topic is now attracting considerable interest in Japan:
TPP検証『ISD条項』
TPP=環太平洋経済連携協定について考える。今回は、『ISD条項』について。国が制度を変えることによって、投資をしている企業が損をした場合、その企業が賠償金を求めて国際機関に訴えることができる仕組みだ。そもそも、ISD条項は、企業が安心して途上国への投資を行えるよう作られた制度で、これまでに提訴された国をみると、アルゼンチンやベネズエラ、メキシコなど、投資に関する法整備が遅れている国が目立つ。日本も、これまで結んだ投資協定のうち、ほぼすべてにISD条項が盛り込まれているが、実際に訴えられたケースはない。しかし、近年、先進国が訴えられるケースも増えている。メキシコ、アメリカ、オーストラリアの現場を取材。ISD条項をめぐり、各国が火花を散らすなか、日本はどうするのか。

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Sydney Law School students in Asia: (3) China

Sydney Law School has a close relationship with the East China University of Politics and Law (ECUPL) in Shanghai, which has been teaching a short-term course in Chinese Law for our students for almost 20 years. We also have relationships with many other leading law faculties in China, especially Shanghai Jiao Tong, Wuhan and (in Beijing) Tsinghua, Renmin and Peking universities. USydney LLB and JD law students can apply for semester-length exchanges at all these universities via university-level exchange agreements (except Renmin, for now, and Wuhan), although places are limited as students from other USydney faculties also apply for exchanges.
Angelica McCall, a final-year LLB student, reports below on her experience in the short-term Chinese Law course offered at ECUPL. She also enjoyed taking the short-term “Sustainable Development Law in China” course offered generally every second year in Wuhan, and in June will be attending an international law students forum hosted by Renmin University.

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Sydney Law School students in Asia: (2) Japan

As well as semester-length exchange opportunities, such as those described by Ganesh Vaheisvaran (presently at Yonsei University in Korea), Sydney Law School has already started to meet the challenge of ‘Australia in the Asian Century‘ by developing short-term offshore courses in various Asian countries.
Jenny Han, a final-year LLB student with a BA (Hons) in Japanese Studies, first reports below on two experiences in Japan. The Kyoto/Tokyo Seminars in Japanese Law are offered for credit to LLB/JD and Masters students over 10 days every February, to Japanese, Australian and other international students. Participation in the INC negotiation and arbitration competition in Tokyo usually attracts course credit (within the ‘International Moot’ LLB/JD unit), although Sydney Law School is moving towards fielding a team every two years (recommencing in the December 2015 moot). We are very grateful for financial supporters of these opportunities for closer engagement with Japan, especially Mr Akira Kawamura (LLM 1979, former President of the International Bar Association) and Mitsui Matsushima Australia Pty Ltd.
Glenn Kembrey then adds some remarks on his student exchange at Kobe University. He enjoyed it so much that he extended his stay beyond one semester (needed to complete his USydney LLB degree), studying in Kobe for another semester to hone his skills in comparative law.

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Sydney Law School students in Asia: (1) Korea

The Australian government is slowly following up on the agenda set out in last year’s ‘Australia in the Asian Century’ White Paper. An Implementation Plan has now been announced, along with an expanded Strategic Advisory Board, and public Submissions are sought on follow-up individual country strategies (by 31 May) for Japan, China, Indonesia, India and South Korea.
Of particular interest for Australian universities and their students, on 6 April the first round of applications opened for ‘AsiaBound’ study – with a deadline of 20 May 2013. The government had already announced on 31 October 2012, albeit in broad terms, the $37 million AsiaBound Grants Program:

AsiaBound provides funding in the form of $2000 or $5000 grants for around 3600 Australian students each year to participate in a study experience in Asia. Students are able to undertake short-term mobility for a variety of experiences including practicums, clinical placements, research trips or volunteer projects for up to 6 months. Students are also able to undertake semester based experiences for one or two semesters. In addition to study grants, AsiaBound offers grants of $1000 for preparatory Asian language study that can be undertaken prior to or concurrently with an approved mobility project.

Program Aims:
Increase the overall number of Australian students with a first-hand study experience of Asia through funding for short-term study and language grants as well as increased OS-HELP loans
Encourage more students to become Asia-literate by supporting institutions to diversify their mobility offerings in Asia
Enhance the skills and expertise of Australians through access to a variety of study opportunities in Asia
Support increased Asian language competency of Australian students together with mobility experiences
Increase collaboration and partnerships between Australian and Asian higher education and vocational institutions.

Hopefully this program will further encourage Sydney Law School student engagement with the fascinating world of law in Asia. Already they enjoy opportunities for short-term offshore courses in Japan (every February), China, Malaysia/Indonesia and Nepal. Our law students also have also competed successfully since 2005, as part of ‘Team Australia’ with ANU students, in the Intercollegiate Negotiation and Arbitration competition (INC) held in Tokyo each December. There is also growing interest in semester-length offshore exchanges to leading law schools in Asia, thanks to efforts to expand university- and faculty-level student exchange agreements (traditionally focused more on Europe and North America) as well as the growing numbers of law courses offered in English by partner institutions in the region. The government’s new ‘AsiaBound’ funding should further increase the attractiveness of these opportunities.
Already, our law students are taking the plunge. An example is Ganesh Vaheisvaran, who mooted at the INC in Tokyo (in the English-language division in 2011, and in the Japanese-language division last year). He is now spending a semester at Yonsei University in Seoul, thanks to a university-level student exchange agreement reinforced by a new faculty-level MOU. As you can read from the report below, Ganesh is obviously enjoying his Korean law and language studies – as well as some interesting extra-curricular activities!

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Guest Blog – Constitutional Amendment in Japan: Potential Lessons from Australia

Written by Joel Rheuben (LLM candidate UTokyo, LLB/BA (Hons) Syd, Solicitor (NSW))
In spite of Japan’s perpetual combination of economic, diplomatic and demographic challenges – not to mention the fact that the current House of Representatives faces potential invalidation by the Supreme Court – Prime Minister Shinzo Abe continues to focus an inordinate amount of political energy on his pet project of constitutional “revision”. Together with the hard-right alliance Nippon Ishin no Kai, Abe’s Liberal Democratic Party (LDP) has determined to attack first and foremost Article 96 of the Constitution, which sets out the mechanism by which the document can be amended.
Currently, that provision requires a two-thirds majority vote of each house of the Diet to initiate a popular referendum in order to effect constitutional change. Abe and others argue that the two-thirds majority requirement makes it too hard to put constitutional amendments to a vote. The LDP/Nippon Ishin plan would lower the threshold for a referendum to a simple majority in each house. Yet Australia has a similar threshold – without having resulted in many constitutional amendments, in practice.

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Book review – “Collateral Knowledge: Legal Reasoning in the Global Financial Markets”

This is a rich book, written by Cornell Law School’s Professor Annelise Riles (University of Chicago Press, 2011, xii+295 pages). It is full of ideas and observations drawn partly from extensive fieldwork – particularly in Tokyo over 1997-2001 (p. ix), just as Japan was implementing its “Big Bang” reforms aimed at making its financial markets more “free, fair and global” (p. 120). It deserves careful reading, and re-reading, by those researching Japan as well as those interested in financial markets, regulatory theory, contract law, international commercial law, socio-legal studies and anthropology more generally.

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Political Change Versus Law Reform Continuity: Japanese Law After Three Years of Enthusiasm and Disillusionment

The 10th Asian Law Institute (ASLI) conference will take place in Bangalore at the National Law School of India University (NLSIU) over 23-24 May 2013. The following is an accepted panel proposal drafted primarily by Dr Dan Puchniak, ANJeL-in-ASEAN Convenor (NUS):
In autumn 2009, the progressive coalition led by the Democratic Party of Japan (DPJ) achieved a historic victory in the general election and came to power, expelling the Liberal Democratic Party (LDP), which had been in power continuously since its establishment in 1955 (except for a very brief break in the early 1990s). The new DPJ-led coalition intended to make the policy-making process more transparent and more strongly controlled by politicians, as well as to make the policy orientation of the Japanese government more progressive. After three years, the polls showed significant discontent among the public with the DPJ’s achievements, and power reverted to the LDP in the December 2012 general election.
It is timely for legal academics to examine whether, and in which sense, the DPJ-government affected law reform over the last three years. In this context, Nottage and Kozuka will explain how—perhaps, quite unexpectedly—the historic political turnover in Japan (“macro-politics”) has had a limited influence on important reforms that are taking place in the field of Japanese contract law. In contrast, however, the process of contract law reform has been substantially influenced by the politicking of lawyers and professional bureaucrats (“micro-politics”) who have a personal stake in the reform process. Ultimately, based on this experience, Nottage and Kozuka suggest that micro-politics is more important than macro-politics in Japan’s legal reform process.
Matsunaka will continue the discussion of politics and legal reform by analyzing the new round of corporate law reform, which was initially driven by the strong policy agendas of several DPJ members. As the corporate law reform deliberations progressed, however, the debates increasingly became dominated by elite academics and MOJ officials and, ultimately, the reforms now appear to reflect little, if any, of the DPJ’s core values. Matsunaka’s analysis of this “watering-down” of the DPJ’s policy based reforms provides an interesting perspective on Japan’s legal reform process and contributes to the broad literature on the politics of corporate governance law reform.
Kozuka will then extend on Matsunaka’s analysis by examining Japan’s recent reform of its broadcasting regulation, which was one of the most important agendas for the DPJ when it first came to power. Again, Kozuka’s findings suggest that the more extreme policy based positions of the DPJ gradually faded in the process of law reform, with the final result being more technical and modest deregulatory reforms in the new Broadcasting Law of 2010.
Puchniak will conclude the discussion by examining the recent introduction of the business judgment rule into Japanese corporate law. At least based on conventional wisdom, the fact that the business judgment rule—which is of critical importance in corporate law—was introduced into Japanese law purely through judicial precedent (without any mention of it in Japan’s codified/statutory corporate law) is astounding. Puchniak’s analysis of this unanticipated source of law reform in the DPJ era will shine a light on a substantial blind-spot in both the current understanding of Japanese legal reform and the more general comparative corporate law literature.
In sum, these four presentations offer a good opportunity to discuss the relationship between the political process and law reform, policy choice through the judiciary and the determinants of the role of law in a post-industrial society in Asia.

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Guest blog – The Implications of an Abe Government for public law in Japan

Written by Joel Rheuben (University of Tokyo)
After facing more than a year of deadlock in the Diet and a legislative agenda monopolised by earthquake recovery measures and the increase in the consumption tax, the outgoing Democratic Party of Japan (DPJ) Government has left in its wake a mess of unfinished business in a number of legislative areas. One of these areas is public law reform. The DPJ had been elected in 2009 on a platform of change after the long reign of the Liberal Democratic Party (LDP), and had promised a new era of government transparency and accountability. Behind the early pageantry of the “Government Revitalization Unit”, in which ministers publicly grilled senior civil servants over their agencies’ expenditure, the DPJ worked diligently to bring about much-needed change in matters such as local government, the civil service, freedom of information and administrative appeals.
With a more than comfortable majority in the House of Representatives and the passage of several of the more critical recovery measures out of the way, it remains to be seen which, if any, of the DPJ’s public law reforms the presumptive prime minister, Shinzo Abe, will run with. The LDP’s election manifesto calls for “administrative reform”, but is short on detail. However, the tenor of Mr Abe’s previous prime ministership (from September 2006 to September 2007) gives an indication of Mr Abe’s likely priorities.

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Negotiating and Applying Investor-State Arbitration Provisions in Free Trade Agreements and Investment Treaties: Australia, Japan and the Asia-Pacific

My recent Sydney Law School Research Paper No. 12/84, forthcoming in a special issue 119 (9&10) Hogaku Shimpo (Chuo University) for Professor Satoru Osanai, is an edited and updated collection of postings over 2012 on this ‘Japanese Law and the Asia-Pacific’ blog (and/or the East Asia Forum blog) dealing with investor-state arbitration (ISA) and other forms of investor-state dispute settlement.
The topic has become particularly controversial for Australia, given its ongoing Free Trade Agreement negotiations with Japan. Japan is also considering joining negotiations underway among Australia and 10 other states (including the US) for an expanded Trans-Pacific Partnership Agreement, and both are also interested in the more recent ‘Regional Comprehensive Economic Partnership‘ (RCEP) initiative (ASEAN+6). Both Japan and Australia have almost always included ISA protections in their investment treaties, but Australia omitted them in investment treaties with the USA and New Zealand, and recently declared that it will no longer accept ISA in future treaties – even with countries with less developed legal systems and economies.

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