Asia is undergoing constant development to improve its economy and international relations and with expanding connections, dispute resolution, mediation and arbitration are everpresent and increasingly necessary. Nozomu Ohara is the Managing Partner of Ohara Law with years experience in ADR and dispute resolution. He speaks to us about how arbitration in Asia has grown and what is yet to be done. He gives valuable insight into past cases, effective leadership and the benefits of ADR methods.
As a dispute resolution expert, what trends have you noticed in terms of methods of dispute resolution over the last few years throughout Asia and Japan?
As the South-East Asian economic market has been expanding recently, the number of disputes has also been on the rise. Under these circumstances, South-East Asian countries, especially Hong Kong, Singapore, South Korea, Malaysia and India, as stated below, have been making efforts aimed at marketing their countries as dispute resolution centres in South-East Asia and enhancing their own ADR organisations to increase the number of accepted cases.
First, Hong Kong, from the time it was an English colony, has acted as a financial centre for Asia and in order to provide measures to resolve disputes through arbitration in 1985, Hong Kong established the Hong Kong International Arbitration Center (HKIAC) and reformed its arbitration infrastructure. As a result, it has served for many years as the central arbitration hub for Asia.
However, in response to Singapore’s recent rise in prominence, in order to further improve Hong Kong’s ADR, in 2017 Hong Kong plans to open a new arbitration centre that is open not only to HKIAC but also to arbitration institutions and arbitration focused law firms from around the world.
In order to realise the goal of making Singapore a world-wide arbitration hub, Singapore has put efforts into becoming the centre of Asian international dispute resolution. In 1990, the Singapore International Arbitration Center (SIAC) was established and in order to promote this new institution, Maxwell Chambers, the world’s first combined international dispute resolution centre, was opened in 2009. The major European and American arbitration institutions, including the ICC, AAA and ICDR, hold offices at this centre along with the world’s leading arbitration focused law firms.
In Korea, the Korean Commercial Arbitration Board was established in 1966 and took its current name in 1980, but it has recently started to approach the current global standard. In 2013, the Seoul International Dispute Resolution Center (SIDRC) was opened in a prime location in Seoul and it has become much more convenient to arbitrate in Seoul. SIDRC has established cooperative agreements with the AAA, HKIAC, ICC, LCIA and SIAC among others, and both the government and private sector have worked hard to make Seoul an inviting location for arbitration and to promote arbitration in Seoul.
The Kuala Lumpur Regional Center for Arbitration (KLRCA) was established in Malaysia in 1978 and in 2014 the former Sharia court building was completely renovated into a dispute resolution centre. The centre has 19 hearing rooms and 22 preparation rooms along with offices for the PCA, CIArb and ADR focused law firms.
The Indian Council of Arbitration was established in 1965 and an international alternative dispute resolution centre was opened in Delhi in 2008, but presently many Indian disputes are still being resolved in Singapore. Therefore, in order to make India a major hub for international trade dispute resolution in Asia, in 2016 the Mumbai Centre for International Arbitration (MCIA) was opened in Mumbai. Currently, around 20% of the international arbitration cases heard at SIAC involve at least one Indian party but India is hoping to have these cases heard at the MCIA in the future.
In Japan, an international arbitration organisation for international commercial dispute resolution was set up in 1950 as the International Commercial Arbitration Committee of the Japan Chamber of Commerce and Industry. Thereafter, it became independent in 1953 and was reorganised several times, including on April 1st 2009 with its current name: The Japan Commercial Arbitration Association (JCAA). Its main operations are arbitration, ADR, advertisement, organising seminars, ATA Carnet and SCC Carnet.
However, the number of international arbitration proceedings have been no more than between eleven and twenty-seven arbitrations per year over the ten-year period between 2005 and 2014. When compared with the number of arbitrations in other countries, this figure is significantly low. Considering the gap in economic power with South-East Asian countries where international arbitration is active as described above, such number of cases cannot be said to be enough for Japan’s international dispute resolution organisation.
Under the current situation, most of the international commercial disputes between Japanese companies and their related foreign companies would have to be solved in international dispute resolution organisations outside Japan.
JCAA’s offices are all small rented offices and they don’t have the latest equipment such as an arbitration courtroom or simultaneous interpretation booths as have been completed in foreign countries. Furthermore, without public financial support, maintenance expenses for such office are covered mainly by income from the Carnet operation. Income derived from management of arbitration proceedings provides only a small portion. Compared with the improvements in infrastructure recently promoted in South-East Asian countries, it can be said that Japan is extremely late to the game.
Over the past 20 years, as a thought leader, how have you pushed for the growth of ADR methods in Japan, and what has been the impact?
The move toward promotion of international arbitration in Japan can be said to have started through foreign pressure in relation to the practice of law by foreign lawyers in Japan. Japan enacted the Special Measures Law concerning the Handling of Legal Services by Foreign Lawyers (Foreign Lawyers Law) in 1986 to admit foreign lawyers to practice in Japan within a certain scope (such scope being limited to home country laws and designated laws) if they register themselves with the Japanese bar associations and become a ‘Registered Foreign Lawyer’.
However, because arbitration awards have the same effect as a final judgment, it was interpreted under the Foreign Lawyers Law that foreign lawyers would be unable to represent a party in an international arbitration proceeding in Japan. Due to the above reason, under strong foreign pressure from jurisdictions such as the US and European Union, liberalisation of the market for rice and foreign lawyers has become a serious issue in Japanese diplomacy for a while.
Under such situation, the Japan Federation of Bar Associations (JFBA) and the Ministry of Justice have co-hosted ‘The International Arbitration Representative Study Group’ since June 1994. The Study Group published a report on 25th October, 1995 and recommended to allow foreign lawyers to represent a party in an international arbitration proceeding in Japan.
According to the proposal, Japan revised the Foreign Lawyers Law in 1996, allowing registered foreign lawyers in Japan to become representatives of a party in an international arbitration proceeding conducted in Japan. In addition, foreign lawyers who are not registered in Japan can also become a representative of a party regardless of the governing law in the dispute in the event that his/her client in his/her home country becomes a party to an international arbitration in Japan.
Furthermore, with regard to improvement of international arbitration, the ‘International Arbitration Study Group’ was set up, being co-hosted by the JFBA and the Ministry of Justice in December 1997 and released its report on 31st March 1999. The following proposal was eventually made in the report.
(1) Setting up of Liaison Council
In order to develop international arbitration system in Japan to a higher level and make our country into one of the hubs of international commercial dispute resolution in the world, it is necessary to promptly set up a cross-sectional organisation for the arbitration organisation to work with and cooperate with, which will be called the ‘Liaison Council’. Also, specific issues should be discussed and reviewed to bring into view future establishment of an ‘International Arbitration Center’ aimed to provide human and physical support to existing arbitration organisation in the above ‘Liaison Council’.
(2) Improvement of International Arbitration Legislation
In order to revitalise the international arbitration system in our country, we need to enact easier-to-use arbitration legislation in order to make international arbitration more accessible in Japan.
Based on the above proposal (1) of the Study Group, ‘The International Arbitration Liaison Council’ was launched in December 1999 with its members consisting of JFBA, a wide variety of arbitration organisation and concerned personnel of related ministries and agencies. The Council’s meetings were held on a regular schedule and strategies were discussed to develop Japan’s arbitration system. Furthermore, based on the above proposal (2), a new arbitration law was promulgated in August 2003. The new arbitration law is modelled on the UNCITRAL Model Law (1985). Moreover, the above-mentioned International Arbitration Liaison Council was developmentally dissolved in March 2003, and the Japan Association of Arbitrators (voluntary group) was newly set up on 16th October of the same year. Later, the association was incorporated on 5th December 2005 to become the Japan Association of Arbitrators (JAA). It later became a public interest incorporated association on 16th January 2014.
What do you believe is still required to further and speed up the expansion of ADR methods in Japanese disputes?
While Japan has the Japan Commercial Arbitration Association (JCAA), the number of arbitration cases resolved in Japan is very limited as stated above. Japan is said to be economically powerful and its gross domestic product (GDP) ranks third in the word as of 2014 next to the United States and China. However, infrastructure development for international trade disputes has been seriously delayed. This is because, although the Japanese government made a huge financial contribution to Japanese industrial development after World War II, it didn’t provide any support to international trade dispute resolution measures.
It has been more than sixteen years since the publication of the above-mentioned report from the International Arbitration Study Group in 1999 which recommended the “future establishment of an ‘International Arbitration Center’ aimed to support existing arbitration organisations through both personnel and material support.” In the meantime, similar ideas have been steadily turned into reality in South-East Asian countries.
Carrying out the above-mentioned proposal and establishing a ‘Japan International Arbitration Center’ (tentative name) by way of gaining financial support of government, local government and economic organisations like in South-East Asian countries to make Japan a hub of international arbitration resolution in South-East Asia has become an urgent matter.
First of all, establishing a centre like the ones in the above-mentioned countries, setting up of a permanent secretariat office with bilingual staff, collecting information regarding international dispute resolution methods, enhancing of facilities (including an arbitration courtroom, arbitrator waiting room, party waiting room) and equipment (including simultaneous interpreting, TV conference system and translation of material) are required. All the international ADR organisations in Japan, including the JCAA, should have access to them. Furthermore, increasing the number of international arbitration cases in Japan by way of disseminating information worldwide through advertising that Japan has personnel and the necessary facility with which to resolve international disputes in Japan, and developing cooperative relationship with counterpart organisations in foreign countries (proposing Japan as a neutral third party place for arbitration) are thought to be needed.
As the Vice-President of the Japan Association of Arbitrators, what actions/lobbying have you taken to implement this?
Since its establishment in 2003, the JAA has been conducting activities aimed at dissemination of information about arbitration and training of arbitrators. The Japan International Dispute Resolution Center establishment preparation committee was set up with in the JAA in 2015 and has started to encourage the authorities and organisations concerned to achieve creation of a dispute resolution centre before the Tokyo Olympic and Paralympic Games in 2020.
The JAA has been carrying on the following operations with the purpose of promoting dissemination of information regarding out-of-court dispute resolution (ADR) such as arbitration and mediation. Such measures include: (1) Training of arbitrators, mediators and any other arbitration and ADR related personnel through providing seminars; (2) study of arbitration laws, ADR related laws, actual practice and cross culture issues related to the development of dispute resolution; (3) promotion of liaison and cooperation with practitioners, scholars and ADR related personnel; (4) hosting workshops and lecture meetings; (5) management and operation of the website of the legal body; (6) publishing and distribution of a newsletter and other publications; (7) collection of domestic and overseas material in connection with arbitration, ADR and cross culture issues; (8) liaison and cooperation with domestic and overseas arbitration and ADR organizations; and (9) advertising activity for arbitration and ADR. The JAA is reviewing and carrying out measures to revitalise international arbitration system in Japan which were proposed in the above-mentioned international arbitration study group report.
In 2015, an establishment review meeting for the ‘Japan International Dispute Resolution Center’ was established by the JAA to review specific measures necessary for success. Furthermore, more activities with the same purpose have been conducted in the International Commercial and Investment Arbitration ADR Working Group of International Operation Promotion Center of the JFBA Legal Service Development Head Office.
What are the most common types of dispute you work with and which ADR methods suit certain cases best? Why do you think this is?
In case of disputes between parties of different countries, rather than resolving the dispute in the court of one party’s home country, arbitration with a binding award where neutral and private arbitrators render an award is the best method. Furthermore, it can be said that arbitration is better than a court judgment because the execution of arbitration awards is secured under the New York Convention.
What would you say are the three top benefits of alternative dispute resolution methods?
First of all, one of the benefits is that parties can select an arbitrator who is a neutral private judge by agreement. Secondly, as parties can decide their resolution method, such as applicable laws and rules, a more flexible procedure becomes possible. The third reason is that parties can decide the place of resolution and language through their agreement.
Can you detail a past case in which you applied particular thought leadership and concluded an ultimately creative and successful outcome?
I think that international trade disputes should be guided by three principles: 1) speed, 2) reasonable expense and 3) a good resolution. A recent problem for parties is that the expense for arbitration has been on the rise due to the rise in billable units of time charge for professionals’ fees. I think that an international arbitration case in 2015 (a dispute between a Japanese licensor and a Korean licensee) was resolved by settlement where all of the above conditions of 1), 2) and 3) were satisfied. In such regard, I believe that Med-Arb will become very important.
As a thought leader, do you see a need for any Japanese legislative changes that would facilitate dispute resolution in the country?
As stated above, in 2003 Japan enacted a new arbitration law modelled on the 1985 UNCITRAL Model law (1985). However, the UNCITRAL Model law was amended in 2006. As the Japanese arbitration law has not been amended for more than ten years, an amendment of the law is necessary to bring it closer to a more global standard considering the future international trends. Such amendment should include the introduction of systems such as emergency arbitrators and interim protective measures.
Are there any dispute directives in neighbouring countries that you like, and would see adopted in Japan?
I feel Singapore is gaining success in promoting its institutional reform for international dispute resolution aimed at catching up with and overtaking Hong Kong. I think that the institutional reform in Singapore, especially among South-East Asian countries, serves as a particularly useful model for Japan. However, Korean SIDRC is also a good model for a future Japanese centre because it offers space and facilities for various ADR organisations. Japan is considering a similar type of organisation.
Do you have a mantra or motto you live by when it comes to helping your clients?
“Client’s satisfaction is most important”
What do you feel you couldn’t live without?
What motivates you most about your role?
Finding a reliable solution.
Notable cases served as an arbitrator:
- Dispute over technical assistance provided by licensor between a Japanese patent licensor and Korean licensee (International arbitration proceeding with an amount in dispute of about $5.02 million dollars – 522.36 million JPY at an exchange rate of 104 JPY to USD).
- Dispute over architect’s fee between Japanese trading company and American architect (international arbitration proceeding with an amount in dispute of about $21.26 million dollars – approx. 2.2 billion JPY at an exchange rate of 104 JPY to USD).
- Dispute over non-renewal of contract between Japanese automaker and American distributor (international arbitration proceeding with an amount in dispute of about $14.163 million dollars – 1.47 billion JPY at an exchange rate of 104 JPY to USD).
Nozomu Ohara is the Managing Partner of the Ohara Law Office in Osaka, Japan and the Vice President of the Japan Association of Arbitrators. He graduated from Faculty of Law at Kyoto University and has also completed a graduate course at the Kyoto University (LL.M) and Harvard Law School (LL.M). He has since worked in law offices in New York and California. He is Committee Member of the ‘International Arbitration Representative Study Group’, ‘International Arbitration Liaison Council’ and ‘International Arbitration Study Group’. Ohara’s experience extends to being the Former Chairman of the “Foreign Lawyers and International Legal Practice Committee of the Japan Federation of Bar Associations” and the Former PPID Council of the International Bar Association (IBA).
Ohara Law Office has a strong history of taking on a variety of international and domestic Japanese legal matters. Based in Osaka, Japan and founded in 1979, our firm has continued to provide our clients with quality legal services in an efficient and cost effective manner. We have rich experience in handling a wide variety of international and domestic Japanese legal matters and we look forward to using that experience to assist you.