• 2023.01.25
  • Dispute Resolution

A case of debt collection from an American company

Outline of International Dispute Case

A Japanese company, X, a client of our firm, sold a machine tool to an American company, Y, for approximately 30 million yen, but the American company, Y, did not pay the 30 million yen by the deadline specified in the contract. Company X has done business with Company Y several times in the past, and each time the payment was settled without problems, so this is the first time that payment has been delayed. Company X’s representative has sent numerous e-mails to Company Y’s representative demanding payment, and at first the response was, “Please wait for the payment,” but in the end, there was no response from Company X to any of my inquiries. A possible reason for the lack of payment and loss of contact could be a significant deterioration in the financial condition of the company. Company X’s representative came to Kuribayashi Sogo Law Office for advice on how to collect the accounts receivable from Company Y.

Dispute Resolution by Kuribayashi Sogo Law Office

After consulting with the representative of Company X, Kuribayashi Sogo Law Office examined the Sale & Purchase Agreement, Purchase Order, Delivery Slip, Waybill, and Invoice, etc., and found that that there was no mistake in the Japanese company X’s claim, and that there was no justifiable reason for Company Y to refuse payment. With the consent of the representative of Company X, Kuribayashi Sogo Law Office entrusted a law firm (American law firm Z) located in the location of Company Y to handle the collection. The U.S. law firm investigated the registration information, the status of the security interest, and whether or not bankruptcy proceedings had been initiated against Company Y from public records, and also conducted an Internet search and obtained a credit report from a credit reporting company. However, no special information about Company Y was found. After that, we translated the documents related to the transaction and sent them to Z Law Office, and also asked Z Law Office to send a Warning Letter and file a lawsuit as soon as possible. Suddenly, Company Y paid the full amount of the claim, and the case was resolved.

Key Points in International Dispute Resolution

When a Japanese company conducts overseas transactions, it is necessary to pay sufficient attention to the collection of accounts receivable. In transactions between Japanese companies, it is normal to conduct credit checks by obtaining a certificate of registered matters and a credit check from the Teikoku Databank, etc. In the case of overseas transactions, however, transactions may be initiated without sufficient credit checks. If payment is delayed by the counterparty to the transaction, there may be a problem with the credit standing of the counterparty, and it is necessary to obtain accurate information as early as possible as well as to proceed with debt collection procedures. In particular, American companies may file Chapter 11 petitions more easily than Japanese companies, so care must be taken to ensure that accounts receivable do not become bankruptcy claims. Kuribayashi Sogo Law Office appoints a local law firm as close as possible to the location of the debtor, obtains information on the debtor’s company, and requests the firm to negotiate collection as soon as possible. In some cases, we may only be able to collect a small amount of the debt and may be forced to waive the remaining amount. However, considering the risk of the debtor’s bankruptcy, it may be a race against time, and we will seek a compromise through thorough discussions with the client. Kuribayashi Sogo Law Office also considers filing a lawsuit as an important measure in the event that payment cannot be received from the debtor. If the debtor has sufficient financial resources and we believe that there is a possibility of collecting the debt by obtaining a judgment, we will file a lawsuit through a local law firm to collect the debt. In many cases, the debtor is well aware of the risk of losing the lawsuit, and considering the large amount of attorney’s fees that will be incurred in filing the lawsuit, the debtor will most likely offer to settle as early as possible (at least before trial or discovery begins). Thus, it is considered important to collect the debt as early as possible, with the local law firm sending warning letters, negotiating in consultation, and filing lawsuits.

Kuribayashi Sogo Law Office Services

Role of Japanese Lawyers

Since the qualification of an attorney is recognized only in his/her own country, he/she cannot appear and argue as an attorney in a foreign court. Local law firms are responsible for handling legal proceedings in foreign countries. However, in many cases, simply throwing the case to a foreign law firm will not necessarily lead to a good resolution. It is important to communicate your company’s ideas to the local lawyer to ensure accurate communication. In addition, foreign law firms charge on a time-charge basis, so unless Japanese lawyers intervene to curb their high charges, legal fees may become extremely high. Since foreign law firms do not know what kind of company the Japanese company itself is, they often feel more comfortable having a Japanese lawyer act as an intermediary.

Translation of documents related to international litigation

Materials related to international litigation, including judgments and decisions of foreign courts, can be extremely difficult and voluminous. We translate materials related to international litigation, including foreign judgments and decisions of foreign courts, as well as evidentiary materials submitted to foreign courts. Our professional translations enable our clients to accurately understand the content, procedures, and progress of litigation. If necessary, we will also analyze the judgment text and explain the client’s legal position.

Selection of Local Law Firm

The selection of a local law firm can have a significant impact on the success or failure of a lawsuit. We select and recommend a law firm, and our lawyers will meet with the client at the local law firm (or online) to determine whether the lawyer is qualified to handle the case (the selection of a foreign law firm is sometimes referred to as a “beauty contest”).  We also supervise and control the local law firms to prevent problems such as unfair compensation claims.

Litigation Strategy Planning

In foreign countries, where the court system is different from that of Japan, determining the right strategy is an extremely important factor in litigation and disputes. Even the purpose of a trial may vary, depending on whether the other party seriously intends to contest the case, whether the objective is to obtain a settlement, or whether the objective is to obtain information through interrogatories or witness examinations. The response we should take will vary.

Response to Discovery

In the U.S. and other countries with Anglo-Saxon laws, there is a discovery system (discovery procedures). It is necessary to consider from an early stage how to respond to such a situation, assuming that documents and their descriptions that are in the company’s possession will be disclosed to the other party. We will manage evidence in accordance with the system by identifying documents that may be important evidence and avoiding the production of unnecessary documents. The company should take care not to inadvertently dispose of data that will serve as evidence by following the procedures for retigation hold.

Schedule management

In the case of litigation overseas, the court sets deadlines for the submission of pleadings and evidence, and often will not accept pleadings or evidence that are late in meeting those deadlines. Litigation deadline management is extremely important in international litigation. We will manage deadlines throughout the entire litigation process, taking care not to delay the submission of evidence and claim documents. We also prepare affidavits and other evidence with sufficient time, paying close attention to deadlines.

Research and reporting on local laws and regulations

In international litigation and disputes, it is necessary to understand the local legal system and upcoming procedures, and to know the size of the risks involved in litigation. We conduct research on both substantive laws, such as civil law and corporate law, and procedural laws in the local jurisdiction, and provide advice to our clients based on our understanding of local laws and regulations.

Communication with Local Lawyers

In international litigation and disputes, it is fundamental to communicate the client’s intentions to the local law firm without discrepancies. In order to control all aspects of strategy, settlement, and procedure in a favorable manner, our lawyers communicate directly with local lawyers by telephone and e-mail, using appropriate legal terminology. All communications with local attorneys are translated into Japanese and passed on to the client.

Preparation of Evidence and Response to Depositions

We prepare evidence and affidavits to be submitted to local courts in English. Japanese-language evidence is translated into English and a certificate of translation is prepared. If necessary, we will obtain a notary public’s certification. We also handle a series of out-of-court depositions under Anglo-Saxon law, from preparation to witnessing. The preparation of evidence, such as the preparation of affidavits by company representatives or persons in charge, is extremely important in international litigation, yet the number of attorneys who can handle this task in Japan is extremely limited. We prepare affidavits that correspond to the format of the court where the case is pending and other evidence to be submitted to the court.

Expert Witnesses in Litigation and Arbitration Proceedings

The written opinions of expert witnesses are important in determining whether or not IP infringement has occurred and in calculating the amount of damages. We request various experts in law, accounting, medicine, and products from our firm to prepare opinion letters in support of our client’s claims.

Recognition and enforcement of foreign judgments

If a judgment in favor of the defendant is obtained in a foreign country and the defendant’s property is within the jurisdiction of that court, the said judgment will result in immediate seizure or other execution procedures. If the defendant’s property is located in a country other than the country where the judgment was rendered, a motion for recognition of the foreign judgment will be filed with the court of the country where the defendant’s property is located, and the assets will be seized after obtaining a recognition decision. Expert opinions are essential in obtaining a foreign judgment recognition decision and in the execution procedure. Our firm also handles the acquisition of a recognition decision for a foreign judgment and execution procedures (seizure of assets) in Japan.

Discount System for Attorney’s Fees

In principle, work related to the resolution of international disputes is billed on a time-charge basis. However, for client companies, in addition to legal consultation fees for international disputes, legal fees for litigation support, settlement negotiations and document preparation may be discounted by 20% from the normal case fee in case they have legal Consultant Agreement with our firm. For more information, please contact us through the Kuribayashi Sogo Law Office inquiry form.