1. Japanese Private International Law in Contract
for a seminar at the University of Johannesburg
26 September 2018
Koji Takahashi
Doshisha University Law School (Kyoto, Japan)

2. Background Civil law tradition First PIL statute with effect from 1898
Savignian approach: Quest for “the seat of legal relationships”, cf. statutist approach
Goal: ascertaining the law of the country with which the issue is most closely connected
Means: a concrete connecting factor prepared for each pre-grouped set of issues

3. Source of law
Ho no Tekiyo ni Kansuru Tsusoku Ho (Act concerning the General Rules for the Application of Laws)
Superseding Horei (Act on the Application of Laws) in 2007.
No principle of stare decisis. But the Supreme Court decisions are highly respected.
No Supreme Court decision as yet on the new Act.
Interpretation by reference to scholarly commentaries and the lower court decisions

4. Overview Capacity (Art. 4 for natural persons)
Formation, Substantive validity, Effects, Extinction (Arts. 7, 8)
Change of governing law (Art. 9)
Formal validity (Art. 10)
Special rules
Consumer contracts (Art. 11)
Employment contracts (Art. 12)
Public policy exception (Art. 42) and overriding mandatory rules (no provision)

5. Capacity Natural person (Art. 4) Legal person (No provision)
The law of the country of nationality of the person in question.
Exception: where the contract is concluded within the borders of a single country, the law of that country may alternatively confer capacity.
protects transactional certainty.
Legal person (No provision)
The law of the country to which the legal person is subjected (i.e. the law of the country of incorporation or of the principal place of business: Supreme Court ruling on 15 July 1975)
Scholarly opinion is in favour of the law of the country of incorporation.

6. Formation, Substantive validity, Effect, Extinction
Extinction includes limitation period.
Party autonomy (Art. 7)
Departure from the Savignian philosophy
But universally embraced for contract.
In the absence of the parties’ choice, the law of the country with which the contract is most closely connected. (Art. 8)
Faithful to the Savignian philosophy
But relies on no concrete connecting factor.

7. Party autonomy (Art 7) Only the law of a state, cf. Arbitration Act
No need for any connection with the contract.
Choice can be tacit (as well as expressed)
Must be an actual choice, cf. hypothetical choice
cf. under the previous Act (Horei)
See infra. for the default rules
Case-by-case analysis, cf. category-dependent analysis

8. Default rules (Art. 8)
The law of the country with which the contract is most closely connected.
cf. (Under Horei) the law of the country where the contract is concluded.
Instead of a concrete connecting factor, it sets up a rebuttable presumption.
Presumption in favour of the law of the country in which the party who is to effect characteristic performance is habitually resident.
A contract is usually characterised by the performance offered as a quid pro quo for the payment of price.

9. Benidai Trading v Gouws & Gouws 1977 (3) SA 1020
Facts
A sale contract between a Japanese company and a South African concern.
Price to be paid in US dollars in Japan.
Goods to be shipped to Japan.
Arbitration seated in London.
Ruling: No tacit choice of English law 'unless a clear inference is to be drawn to the contrary'.
Under Japanese PIL
No choice, express or tacit.
Characteristic performance by the seller. → Presumption in favour of the law of South Africa.
The presumption may be rebutted.

10. cf. Rome Convention
Article 4 Applicable law in the absence of choice 1. To the extent that the law applicable to the contract has not been chosen …, the contract shall be governed by the law of the country with which it is most closely connected. … 2. Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate, its central administration. … … 5. … the presumptions in paragraphs 2 … shall be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country.

11. cf. Rome I Regulation (of 17 June 2008 )
Article 4　Applicable law in the absence of choice
1. To the extent that the law applicable to the contract has not been chosen …, the law governing the contract shall be determined as follows:
(a) a contract for the sale of goods shall be governed by the law of the country where the seller has his habitual residence; …
2. Where the contract is not covered by paragraph 1 …, the contract shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence.
3. Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply.

12. Change of governing law (Art. 9)
By agreement only.
May be Tacit.
e.g. Both parties base their arguments in litigation on a legal system other than the governing law.
Note that the Japanese courts are supposed to take judicial notice of the governing law.
Without prejudice to the interests of third parties
e.g. the guarantor of a debt arising out of a contract with respect to interest rates, limitation period, etc.

13. Formal validity (Art. 10)
e.g. whether need to be put in writing, whether suffice to be in electronic format, whether need to be signed or dated.
Suffice to comply either:
the law governing the substantive validity of the contract; or
the law of the country where the contract is concluded.
“locus regit actum”

14. Consumer and employment contracts (Arts. 11 and 12)
The presumed weaker parties
Gravitates towards the law of the country where the consumer is habitually resident and the law of the country where the work is habitually carried out.
e.g. An employee may invoke the rules of Japanese law requiring “reasonable grounds” for dismissal.
Introduced by the new Act.
Another instance of the European influence.

15. Public policy exception (Art. 42)
Strikes out the application of a governing law where it yields results contrary to the public policy of Japan.
An exception to the “leap in the dark” principle
A high hurdle
e.g. the governing law gives effect to a contract for:
gambling
surrogacy
organ trading

16. Overriding mandatory rules
No provision.
Lex fori
Scholarly opinion is in favour.
eg Lower courts ruling:
Patent Act provision mandating a reasonable remuneration to an employee who has made an invention in the course of employment and assigned the employer the right to obtain a patent.
Anti-monopoly Act provision for granting injunction and damages for unfair trade practices.
The law of third countries
No scholarly or judicial support.

17. Merits of a dispute heard in arbitration
Special choice-of-law rules in Arbitration Act (Art. 36)
Arbitrators are supposed to follow them where the arbitration is seated in Japan.
The choice of a non-state law is permitted (as per the UNCITRAL Model Law).
In the absence of the parties’ choice, the law of the country with which the dispute is most closely connected.
cf. UNCITRAL Model Law: the law determined by the conflict of laws rules which the tribunal considers applicable.
cf. French law: the rules of law the tribunal considers appropriate.