Obstacles for Japanese Investors in International Arbitration (kokusai chūsai) to Resolve Commercial Disputes

Japanese investors’ presence in the international arbitration scene is minor compared to its economic scale. The Japanese arbitration law conforms with the UNCITRAL model law, and Japan is a member of the New York Convention. In contrast, the Japanese legal terminology corresponding to arbitration (chūsai), incorporated into modern Japanese in the 19th century, is confusing. Chinese law restrains domestic entities, including those with foreign capital, from going to foreign arbitral tribunes, which may undermine Japanese investors in China to settle disputes in arbitration. Direct/cross-examinations, popularly seen in international arbitrations, are not substantial in Japanese court proceedings. As the TPF (Third Party Funding) is not implemented in arbitrations in Japan, Japanese investors may suffer from idea gaps in arbitration tactics. The importance of CISG/UNIDROIT in international arbitration is increasing. Since the Japanese court does not actively refer to them, Japanese investors may access them less frequently than their peers abroad, which is a potential risk in forming arbitration strategies. The scarcity of arbitrators possessing Japanese legal education is a matter. The Japanese legal mentality opts for choosing dialogues rather than confronting the other party in court or arbitral tribunes. Since the Japanese arbitration law fulfills the latest UNCITRAL requirements and the government has been keen on ratifying the newest arbitration treaties, including the 2019 Singapore Convention on Mediation (ratified by Japan on 1 October 2023), Japanese investors would be more recurring users in international arbitration in the future.