Originally from Handbook on Third-Party Funding in Internatonal Arbitration

When addressing the legal system of Japan, I have also addressed practices of the Japan Commercial Arbitration Association (“JCAA”) seated there.

1.1.   TPF Regime in Japan

1.1.1. Is TPF commonly used in your Jurisdiction? If yes, since when (is it a new trend or a well-established practice)? 

TPF is not yet common in Japan. I believe that the use of TPF in Japan is a new trend and that there is no well-established practice in the area.

1.1.2. Please shortly describe the TPF market in your Jurisdiction. Is it dominated by local or international Funders, which type of Funders are active, which cases get typically funded? Is there any source on Funders (like the overview published by the German Bar)?

In Japan, “professional” funders are not active in the market for arbitration. I understand that there are no local Funders in Japan. Therefore, even if there is the TPF market in Japan, it is considered that it is dominated by international Funders. I have no information as to which cases get typically funded. To my knowledge, in Japan, there is no relevant source on Funders.

1.1.3. Are there any statutes or case law dealing with TPF or regulating Funders? If yes, please address these. 

In Japan, there are no statutes or published case law dealing with TPF or regulating Funders.

1.1.4. Are there any legal restrictions? To what extent do common law concepts like champerty, maintenance, barratry, or comparable civil law concepts as usury or prohibition of pactum de quota litis affect TPF? Can a law firm act as a Funder?

Since Japan is conventionally classified as a civil law legal system, common law concepts like champerty, maintenance, and barratry are not common concepts in the Japanese jurisdiction.

It is considered that pure contingency fee arrangements are not specifically prohibited. However, attorneys’ fees must always be appropriate and contingency fee arrangements may be considered inappropriate if they result in an amount of attorneys’ fees becoming extremely high in comparison to the benefit obtained by the clients. In addition, attorneys are not allowed to lend money to their clients unless there are special circumstances, such as in the event of an emergency, which require the advance payment of litigation costs (Article 25 of the Basic Rules on the Duties of Practicing Attorneys).