Yoshiaki Muto, Takeshi Yoshida, Dominic Sharman and Yuko Kai
A. LEGISLATION AND RULES
International arbitration in Japan continues to be governed by the Arbitration Act of 2003, which took effect in 2004 and to which no legislative amendment has been made since.
A.2 Institutions, Rules and Infrastructure
The major international arbitration institution in Japan is The Japan Commercial Arbitration Association (JCAA). In late 2018, the JCAA announced its intention to amend its current rules and also to introduce a new, distinct set of rules, while acknowledging that it “has yet to play a significant role in the resolution of international disputes.” Subsequently, in January 2019, the JCAA introduced amended JCAA Rules, amended Administrative Rules for UNCITRAL Arbitration (“Administrative Rules”), and its new rules, the Interactive Arbitration Rules (“Interactive Arbitration Rules”). 
The new JCAA Rules include several substantial amendments. The changes concern cost-effectiveness and making the costs of the dispute “as predictable as possible at the time of drafting an arbitration agreement.” With these revised rules, the JCAA noted that its aim is “to provide optimal arbitration rules that suit the current and potential needs of businesses.” Among key amendments are a marked increase to the financial threshold for the application of expedited procedures, adjustments to arbitrators’ fees, and changes to the scope of arbitrators’ duties to ensure impartiality.
The purpose of the amended Administrative Rules is to facilitate the conduct of ad hoc arbitrations by the JCAA. There are limited changes to the previous Administrative Rules, with the most significant revisions relating to the remuneration of arbitrators. The rules state that an arbitrator’s hourly rate is to be fixed in principle by the JCAA at between USD 500 dollars and USD 1,500 dollars, with no reduction to an arbitrator’s rates due to time spent on an arbitration, and that an arbitrator may be remunerated prior to termination of the arbitral proceedings if these proceedings are expected to be prolonged. With these changes, the JCAA says it aims to attract “prominent international experts to serve as arbitrators…for larger cases” anticipated to take longer periods of time.
Lastly, the new Interactive Arbitration Rules are similar to the standard JCAA Rules, but they reflect a more civil law-style approach to arbitration, with the tribunal adopting a more active role in the arbitral proceedings. Indeed, when introducing the Interactive Arbitration Rules, the JCAA acknowledged that these rules were partially motivated by a “strong desire [of] parties in civil law jurisdictions to be informed of the state of affairs of ongoing arbitral proceedings.” Distinctive features of these rules are that the tribunal is required to inform the parties of its preliminary views during the proceedings, prior to any hearing, and that the arbitrators’ fees are fixed in line with the value of the dispute, at a notably lower rate than under the JCAA Rules.
The 2019 revisions to the JCAA Rules, the amended Administrative Rules, and the newly introduced Interactive Arbitration Rules, appear to indicate an attempt by the JCAA to widen its appeal to a range of potential users, both domestic and international, who may have different cost considerations, among other things.
From late 2017 through 2018, three new establishments relating to ADR were created in Japan: the Japan International Dispute Resolution Center in Osaka, which will provide facilities for arbitration and other types of ADR cases: (i) the Japan International Mediation Center in Kyoto, whose mandate is to provide mediation services for cross-border disputes between Japanese and non-Japanese parties; and (ii) the Japan International Arbitration Center in Tokyo, which will provide services focusing on the resolution of intellectual property disputes. Additionally, the JIDRC has announced that it will open similar facilities in Tokyo to those offered in Osaka in March 2020. These establishments represent, in part, an effort from the Japanese government and industry to support international ADR in Japan.
In a recent case, Japan’s Supreme Court overturned a decision of the Osaka High Court to set aside a JCAA award on the ground that the presiding arbitrator had failed to disclose relevant facts to the parties.
In the arbitration subject to this decision, the presiding arbitrator was a partner in the Singapore office of a global firm, and an attorney in the firm’s US office represented an affiliate of the claimants in an ongoing matter unrelated to the arbitration. This fact was not disclosed to the parties or the JCAA, as required both by Japan’s Arbitration Act and international best practice (under the IBA Guidelines on Conflicts of Interest in International Arbitration this was an “Orange List” matter for which a conflicts check should have been undertaken). After the tribunal rendered an award in favor of the claimants, the respondent commenced proceedings in Osaka District Court, arguing that, among other things, the non-disclosure had rendered the constitution of the tribunal contrary to Japanese law and triggered the right to seek a set-aside under Article 44(1)(vi) of Japan’s Arbitration Act.
The Osaka District Court dismissed the application for set-aside as: (i) there would not have been “reasonable grounds” to suspect the impartiality or independence of the arbitrator under Article 18(1)(ii) of Japan’s Arbitration Act and, even had the relevant circumstances been disclosed, they were not such as to affect the outcome of the award; and (ii) if there had there been any breach of the duty of disclosure, it was “minimal”: the arbitrator had submitted an “advance waiver” to the JCAA and the applicant did not make any objection to it. The Osaka High Court on appeal, however, overturned the Osaka District Court’s decision. According to the Osaka High Court, from the perspective of the applicant the non-disclosed fact was critical information bearing on the respondent’s decision whether or not to seek to challenge the presiding arbitrator and should have been disclosed. Moreover, the presiding arbitrator was subject to a duty to investigate whether there were facts to be disclosed by him. Specifically, he was bound to retrieve information that was readily accessible. He could have identified the non-disclosed fact through a conflicts check without any difficulty. This was information he should have disclosed. The Osaka High Court considered that the non-disclosure here was a significant procedural defect which, even on the assumption that it had no direct effect whatsoever on the outcome of the arbitration, triggered the ground for annulment under Article 44(1)(vi) of Japan’s Arbitration Act. To ensure the fairness of the arbitral procedure and award and to maintain confidence in the arbitral system, the Osaka High Court held it was necessary to set aside the award.
In December 2017, Japan’s Supreme Court overturned the Osaka High Court’s decision. The Supreme Court agreed with the Osaka High Court as regards the extent of disclosure and the ongoing duty to disclose, and it also agreed that an advanced waiver submitted to the JCAA by the arbitrator was not sufficient to amount to disclosure for the purposes of Article 18 of Japan’s Arbitration Act. The Supreme Court, however, did not agree with the standard set by the Osaka High Court. The court held that an arbitrator has a duty to disclose “all the facts that would likely give rise to doubts as to his/her impartiality or independence” if he or she either: (i) was aware of such facts; or (ii) could have normally discovered such facts by conducting a reasonable investigation. The Supreme Court found that it was unclear whether the arbitrator in this case was aware of the conflict and whether the arbitrator could have discovered the conflict prior to conclusion of the arbitration, even if the arbitrator had conducted a reasonable investigation. Consequently, the case was remanded to the Osaka High Court for further consideration of these issues.
It is at least debatable here whether the systemic considerations raised by the Osaka High Court, partially supported by Japan’s Supreme Court, ought to trump the interests of the parties in finality, given that the possibility of any actual bias on the part of the presiding arbitrator appeared remote. When one considers the time and expense needed to get to the final award, there may be much to be said for an approach like that taken by the Osaka District Court, whereby a set-aside application can be refused on discretionary grounds if the breach is minimal because, for example, it has no direct effect on the outcome of the award. Be that as it may, this case is one where the presiding arbitrator ought to have erred on the side of caution, but failed to do so.
 JCAA, Call for Public Comments on the Proposed Three Sets of Arbitration Rules, November 16, 2018, at page 1.
 The JCAA’s Administrative Rules that came into effect as of January 1, 2019 may be found on the JCAA’s website.
 The JCAA’s Interactive Arbitration Rules came into effect as of January 1, 2019 and may be found on the JCAA’s website.
 The JCAA’s arbitration rules that came into effect as of January 1, 2019 may be found on the JCAA’s website.
 JCAA, Reform of the JCAA Arbitration Rules: Three Sets of Rules in Response to All Business Needs (“Reform of the JCAA Rules”), November 16, 2018, at page 4.
 Reform of the JCAA Rules, at page 2.
 This change may have been due partially to the very low maximum monetary limit to which the procedures applied under the previous JCAA Rules. See J. Greer/D. Sharman, Expedited Procedures under the JCAA Rules: Time for More Change?, (2018) 21 Int’l Arb. L. Rev. 2, at pp 33-36.
 Reform of the JCAA Rules, at page 4.
 Reform of the JCAA Rules, at page 10.
 Supreme Court Third Bench decision on 12 December 2017, Case No. Heisei 28 (Kyo) 43. This decision overturned the ruling of the Osaka High Court in X1 and X2 v. Y1 and Y2, Osaka High Court 4th Civil Division 2015 (Wo) No 547, 28 June 2016, Hanrei Times No. 1431, p. 108.
 Arbitration Act, Art. 18(4).