Originally from Arbitration in Asia - 2nd Edition

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[1] INTRODUCTION

Arbitration is admittedly not yet a popular method of dispute resolution in Japan. It is certainly less known than litigation in court or mediation provided by court called chotei. Even in the business community, Japanese businessmen are not generally familiar with arbitration as a method of dispute resolution. Accordingly, as far as domestic transactions are concerned, it seems rather rare for arbitration clauses to be included in contracts. While litigation is recognized as the ultimate means of dispute settlement, Japanese people for historical and cultural reasons have tended to avoid litigation, preferring instead to settle disputes amicably through negotiation with or without involvement of a third-party mediator.

There is, however, some evidence that arbitration was used more before the Second World War to solve business disputes within various trade associations such as the cotton trade association, etc. When Japan was occupied for seven years from 1945 to 1952 by the Allied Forces, the occupation authority’s anti-monopoly policy was not compatible with these trade associations and their dispute settlement function. Thus, a law of 1948 prohibited arbitration by all trade associations except the arbitration service by the Japan Shipping Exchange (‘JSE’). This organization was formed in 1921 after the English model and started a maritime arbitration service in 1926. JSE arbitration came to the brink of extinction but was somehow able survive the post-war crisis, perhaps thanks to its English origin. A more general arbitration institution, the Japan Commercial Arbitration Association ('JCAA'), was later formed in 1952, the last year of the post-War allied occupation, based on the model of the American Arbitration Association within the framework of the Japan Chamber of Commerce and Industry.

Certain traditions were being built during the pre-war period under the arbitration law of 1890 (part of Code of Civil Procedure of 1890) but their further development was interrupted by the war and the post-war reform. From the 1950s on, therefore, a new history of Japanese arbitration had to be written almost afresh. Yet, the post-war economy under reconstruction was not mature enough for decades to require a sophisticated dispute resolution mechanism like arbitration. The present state of domestic arbitration should be understood against this unfortunate historical background.