• 2023.01.17
  • Dispute Resolution

A case in which an American company was sued in a Japanese court

Outline of International Dispute Cases

Our client, Company T, was introduced to an American company, Company Y, by a consultant residing in Japan, and asked the company to produce parts for a product to be manufactured in Japan. The American company Y required the payment (approximately 8 million yen) in advance because it needed to manufacture the parts for the product itself and export them to Japan. Therefore, Company T prepared a product sales contract with the American company and remitted the full amount of the product price (8 million yen) overseas as an advance payment. About three months later, the products were sent to Japan, but they were completely different from what Company T had expected and could not possibly be used as product parts. T. Company T demanded the full amount of the advance payment of 8,000,000 yen to be returned immediately, because the product was completely different from the specifications and the seller was in default. However, the U.S. company refused to return the money, and there was a fear that the claim would be subject to the statute of limitations. The representative of Company T came to Kuribayashi Sogo Law Office for a consultation regarding the future course of action.

Dispute Resolution by Kuribayashi Sogo Law Office

Based on the judgment that filing a lawsuit was necessary to suspend the statute of limitations, Kuribayashi Sogo Law Office examined the possibility of filing a lawsuit by referring to the sales contract and other documents. As a result, we found that there was no provision regarding jurisdiction in the sales contract, and if there was a place of performance, the court with jurisdiction over the place of performance might have jurisdiction over the case, but the place of performance was unclear. However, the consultant who represented the client in the transaction was not in Japan. However, it was known that the consultant who represented the client in the transaction resided in Japan, and it was believed that the consultant himself had failed to provide proper information. We decided to file a lawsuit against both the consultant and the U.S. corporation, adding a tort claim. In this case, it is possible to obtain jurisdiction through a consolidated case by naming the consultant residing in Japan and the U.S. corporation as co-defendants. By applying this rule, we were able to file a lawsuit in the Japanese court and suspend the statute of limitations, based on our judgment that we could obtain jurisdiction in the Japanese court. In this lawsuit, the defendant did not respond to the trial, and all the plaintiffs won the case.

Key Points in International Dispute Resolution

Defendant’s general venue

In litigation, the defendant’s general venue is the defendant’s domicile (Article 3-2 of the Code of Civil Procedure), so in principle, in the case of a foreign party, its home country is the competent court. In this case, Japanese courts do not have jurisdiction, and the lawsuit will be dismissed even if it is filed in a Japanese court. However, since the jurisdiction to respond to a lawsuit is applicable, if the foreign party does not dispute the lack of jurisdiction and responds to the lawsuit, the Japanese court will have jurisdiction over the lawsuit. Therefore, it is possible to decide to file a lawsuit in a Japanese court for the time being, even if it is a bad idea.

Agreed Jurisdiction

In addition to the jurisdiction of respondeat superior (Article 3-8 of the Code of Civil Procedure), jurisdiction may also be recognized by consent jurisdiction (Article 3-7 of the Code of Civil Procedure) in cases where the parties have agreed, jurisdiction over concurrent claims (Article 3-6 of the Code of Civil Procedure), jurisdiction over the place of performance of obligations in contractual actions (Article 3-3, Item 1 of the Code of Civil Procedure), etc. (Regarding jurisdiction over foreign parties, Articles 3-2 through 3-12 of the Code of Civil Procedure provide for such jurisdiction, so it is necessary to confirm these provisions.

Service on the defendant abroad

When service of process is made on an overseas defendant, the complaint and evidence must be translated into the local language. For evidence, a certificate of translation by an attorney will also be attached. For the list of parties, katakana notation must be attached, so it is necessary to decide how the names and addresses of the parties should be written.

Consular service

In most cases, consular service of process will be used to serve a foreign company. The court where the lawsuit is pending will request (commission) the local Japanese consulate or embassy to serve the documents. The commission is made by handing a document called a “written request for service. The embassy or consulate will send (1) a summons for the first oral argument date, (2) a notice of demand for written answer, (3) a request for notification of the place of service, as well as the complaint and evidence, etc., translated by an interpreter, by mail or other means. The result of the service will be reported to the General Secretariat of the Supreme Court through the Consular Affairs Bureau of the Ministry of Foreign Affairs by means of a report on the result of service.

Service under the Convention on the Service of Process and Service by the Central Authority

The Convention on Service of Process refers to the 1968 Convention on the Service and Notice of Judicial and Extrajudicial Documents Relating to Civil or Commercial Matters in Foreign Countries. Japan ratified the Convention in 1970. If Japan has ratified the Service Convention, the Service Convention takes precedence over the Civil Procedure Convention (1954 “Convention on Civil Procedure”). Service by a central authority is service made by request from the Supreme Court Secretariat to a foreign central authority (Ministry of Foreign Affairs or Ministry of Justice). If the defendant does not voluntarily receive the document by consular service, it will be necessary to make a central authority service.

Service in Absentia and Service by Publication

If the defendant did not receive the document served or could not be served because the defendant’s whereabouts are unclear, service must be made by way of service by publication. If service by consular service or service by the central authority is made, or if service by publication in Japan is made because the defendant did not receive the document for service by these methods, the Japanese court proceedings are legally pending. Therefore, if the foreign company is absent or does not contest the plaintiff’s claim in the Japanese court proceedings, the Japanese court will issue a judgment granting the plaintiff’s claim.

Enforcement against foreign companies

When a judgment against a foreign company is obtained, the property of the foreign company, if any, is seized in Japan. If the property of the foreign company does not exist in Japan, we will file a petition in the home country of the foreign company for a decision to recognize the judgment, and after obtaining a decision of recognition in the foreign country, we will seize and revalue the property located there.

Kuribayashi Sogo Law Office Services

As international transactions increase, disputes between foreign and Japanese companies are becoming more common. Most of these disputes are about payment for goods or about compensation for damages for defective goods. It is best if the foreign company and the Japanese company can settle the dispute through settlement discussions, but if this is not possible, the foreign company will have no choice but to file a lawsuit. Kuribayashi Sogo Law Office has represented Japanese companies in many cases in which they have filed lawsuits against foreign companies in Japanese courts. When a Japanese company sues a foreign company in a Japanese court, it requires knowledge of issues of jurisdiction and international service of process. Kuribayashi Sogo Law Office has handled many international litigation cases and can provide advice on international service of process and jurisdiction. The fee for filing a lawsuit in a Japanese court will be determined on a case-by-case basis according to the attorney’s fee regulations of the Japan Federation of Bar Associations (however, a translation fee will be added) or on a time-charge basis. In either case, however, client companies are entitled to a 20% discount on the regular attorney’s fee. For more information, please contact us at Kuribayashi Sogo Law Office using our contact form.