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Oxford University Comparative Law Forum

Litigation or Litigiousness? Explaining Japan’s “Litigation Bubble” (2006-2010)

by Giorgio Fabio Colombo* and Hiroshi Shimizu**

(2016) Oxford U Comparative L Forum 4 at ouclf.iuscomp.org | How to cite this article

Table of contents

1. Introduction

In Japan, the period from 1986 to 1991 is often referred to as the baburu keiki (literally, “bubble economy”), which is a colloquial Japanese expression to indicate the “Japanese asset price bubble”. During this period, the Japanese economy experienced rapid growth followed by a sharp decline that eventually led to a long period of stagnation.

This paper would like to critically address another “bubble”. In the period 2006–2010, litigation in Japan was abnormally inflated by some peculiar factors and then started to decline in 2011. The main point is that the proportions of this wobbling increase and decrease are too big to be explained by physiological factors, and therefore its possible causes need to be analyzed in detail. This would also lead to some broader comparative reflections on the increase of litigation in Japan and about Japanese law in general.

In comparative law, dispute resolution in Japan is a very popular topic. When approaching the field of Japanese Law, the first theme one is usually confronted with is the long-debated1 issue of the Japanese approach to litigation and its almost mythical2 preference for amicable means of dispute resolution, primarily conciliation. The ‘Japanese way’ (whatever this would mean) of litigation has been studied widely and in depth by almost all the leading scholars of the field in the world as a distinctive trait of the Japanese legal system.

This is not the place for entering into the sixty-year debate about litigation in Japan; here it should just be mentioned that many theories have been proposed to explain the peculiar Japanese framework: cultural, institutional, rational, informal, political, hybrid. However, while a detailed depiction of each theory would be inappropriate here, we should take the opportunity to canvass the main scholarly positions.3

The first theory, usually known as “cultural”, was proposed by eminent Japanese sociologists of law like Kawashima and Noda.4 According to those scholars, Japanese people were culturally adverse to litigation because of the influence of Confucian thought. A society based on hierarchy and tight group relationships would inevitably prefer informal means of dispute resolution, and primarily conciliation. Litigation, based on objective parameters, careless of underlying social relationships, and highly disruptive, is something external to Japanese culture.

This assumption, which was widely accepted in comparative law, was challenged in the late 1970s by Haley,5 who is considered to be the first to propose the so-called “institutional” theory. According to him, the cultural argument was overrated, and the Japanese had no “natural” hostility to litigation. Rather, the problem was institutional, i.e. Japan lacked the institutional structure to provide efficient dispute resolution services. The shortage of lawyers and judges, and the limited power conferred to the latter (at least compared to the judicial system of the USA) made litigation slow, cumbersome, expensive, and therefore largely unattractive.

In the late 1980s, employing the tools of law and economics, J. Mark Ramseyer (often assisted by other scholars in joint research projects)6 came to the “rational” theory. The decision not to bring legal actions to the court was, according to this theory, the result of a rational cost-benefit analysis. The Japanese judicial system is largely predictable: judges are trained all in the same way, they mostly come from similar backgrounds and they tend to comply with the decisions by the Supreme Court. Therefore parties to a dispute may easily guess the outcome of litigation: this maximizes the incentive to reach an agreement on the basis of the likely decision, rather than sustain the cost and time investment of litigation. Even when the parties are not informed enough to foresee the outcome of the dispute, Ramseyer maintains, Japanese civil procedure gives the judge many occasions to let disputants know how he is likely to decide, as hearings are few and far apart. Hence, the decision not to litigate is mostly a matter of economic rationality.

Other theorists tried to explain institutional factors through the political management of dispute resolution, and two main theories can be identified from these efforts: Upham’s “informal” theory7 and Tanase’s “political” theory.8 Upham mostly focuses on disputes arising out of situations which could potentially lead to mass litigation, for example environmental disasters: in these cases, if things were left to ordinary litigation the result could be an increase of social tension. Hence, the government would prefer to intervene providing alternative (amicable) channels of dispute resolution, like administered conciliation, which is an informal procedure.

From a slightly different perspective, Tanase also maintains that the political power has a positive interest in keeping litigation rates low, also to protect governmental actions from interference from the judiciary. Therefore, there is a “political” decision to reduce formal dispute resolution, admittedly also by not investing in an efficient institutional structure, but mostly by providing more attractive forms of conciliation and ADR.

Unsurprisingly, the long debate sparked by this line of research eventually lead to the opinion, shared by the vast majority of scholars, that each position has some elements of truth and it is very difficult nowadays to find somebody exclusively relying on one or the other theory. That is why the latest versions of the debate mostly refer to a “hybrid”9 theory, defining the attitude of the Japanese towards litigation as “context-based rationality”.

It is worth mentioning that, until the late 1970s, the approach to the study of Japanese litigation was mostly qualitative, relying on cultural and socio-anthropological factors. At the time, the catchphrase was still “Japanese do not like law”,1 especially when it came to dispute resolution. Formal dispute resolution was plainly considered something external to the Japanese (traditional) social order and therefore, notwithstanding the significant imitation of Western legal models, the underlying (traditional) social norms prevailed. As mentioned, this view was dominant for some decades, and it is still quite widespread outside the small group of Japanese legal scholars. Due to the contribution of legal sociology, researchers (from Haley11 onwards) started employing statistical methods, coming to the conclusion that litigation rate in Japan was not as low as had always been believed. Figures were of course lower than the United States (the classic land of litigation), but much higher than, for example, Scandinavian countries. This was a turning point, after which most scholars invariably employed quantitative studies based on litigation statistics to build their analyses.

However, numbers are not perfect. In fact, they may be very deceptive. This happens basically for two reasons, one of which is particularly relevant to the present analysis.

One issue that has often been overlooked is that a comparison of litigation numbers automatically implies a comparison of judicial systems and civil procedure. Some kind of proceedings which may be considered litigation in a country maybe be treated as out-of-court in other jurisdictions. Some countries (like Japan) provide for a separate system for claims vis-à-vis the public administration; others deal with them in ordinary civil courts. As eloquently explained by Wollschlaeger,12 in this field the risk of comparing “apple and oranges” is extremely high.

The other complexity associated with sheer numbers is that they do not reflect exceptional circumstances, e.g. mass litigation arising from a contingent problem. Imagine, for example, assessing the litigation rate of an area in which a major environmental accident has happened (e.g. the spilling of some chemicals from a production plant): merely relying on the count of proceedings in that region without knowing the background facts may lead a researcher to establish that people in that area are indeed very litigious.

This paper will try to address the unusual growth of Japanese litigation rate especially from this latter perspective: a temporary phenomenon created by exceptional circumstances. But before addressing numbers critically, it is appropriate to present the raw data.

2. Litigation in Japan: Key Facts and Figures

As discussed in the previous paragraph, most theoretical depictions see Japan as a country where litigation is expensive and time consuming. Also, the shortage of lawyers and judges is considered one of the main problems in securing swift and cheap formal dispute resolution. But is it really so?

The World Bank publishes a comparative ranking13 every year evaluating each country’s economic efficiency under many parameters, one of which is “Enforcing Contracts”. Under this indicator, the quality of the civil judicial system is ranked on the basis of time and cost necessary to enforce a contract by litigation.14 In this ranking, Japan occupies the 26th place (out of the 189 economies analyzed).

In detail: the average time for commercial litigation is 360 days from the outset of the procedure to the final enforcement. In this regard, Japan’s performance is notably better than the average in the OECD: 539.5 days. However, bringing a contract to court could be an expensive venture, as the total cost is, on average, 32.2% of the claimed amount (18.5% for the attorney’s cost, 13.3% for court’s fees and 0.4% for the enforcement procedure). That is significantly above the OECD average of 24.4%.

It seems, therefore, that the claims relating to the excessive length of litigation in Japan are (at least, comparatively) not fully grounded, but complaints about the cost of proceedings are legitimate.

The picture is more straightforward when it comes to the shortage of lawyers and judges. In this sense, Japan is an exception because of its scarcity of legal professionals.

The category of “legal professionals” in Japan is quite broad and includes a number of figures like the benrishi (usually translated as “patent attorney”), the shihō shoshi (judicial scriveners, mainly specialized in real estate registration), the kōshōnin (loosely equivalent to the Civil law notary public), etc. Still, the main actors are of course the practicing attorneys (bengoshi) and the members of the judiciary, both judges (saibankan) and prosecutors (kensatsukan). However, in the system of civil litigation the kensatsukan is rarely, if ever, involved. To assess whether, and to which extent, the Japanese mechanism of civil litigation is understaffed it is therefore necessary to focus only on attorneys and judges.15

The path to enter the legal profession in Japan is broadly modeled on the German experience (but it was given an “American flavor” in recent years. See infra, para. 4), which means that the decision to become an attorney, a judge or a prosecutor is taken after having passed a highly selective test, the same for all the three (the shihō shiken). Successful candidates are admitted to the Legal Training and Research Institute where they receive a 1-year mandatory training, during which they actually choose which professional career to pursue.

The Japan Federation of Bar Associations (Nihonbengoshirengōkai, usually referred to as Nichibenren) publishes a very complete and illustrative White Paper on Attorneys every year, which also provides data on the legal profession.16

Japan has one of the lowest proportions of lawyers per population among developed countries. In The United States in 2013 there were 269 people for every lawyer. In the United Kingdom the number was 430, while in Germany and France it was 509 and 1,165 respectively. In Japan, in contrast, there were 3,786 people for every lawyer.

The situation is quite similar with reference to judges. In the same year (2013), in Germany there was one judge per 4,010 inhabitants. The proportion was 1:9,816 in the USA; 1:11,186 in France; 1:15,549 in the U.K. and 1:43,789 in Japan. This of course is reflected in a heavy caseload per judge. In 2015 in Japan, there were 1,897 judges in charge of first instance civil affairs (both at the district court and summary court level) and they received 506,350 new trial cases (about 267 new cases per each single judge). This means, of course, an unmanageable individual workload for judges and a major headache for the governments, who are supposed to ensure a fair and quick management of civil litigation. Of course one very simple solution to the problem would be to increase the number of judges: however, nations dealing with a complicated financial situation and a legendarily high ratio of national debt/GDP are rarely willing to consider further increases in public expenditure to staff the judicial systems.

Given this basic background data, the true focus of this paper being the litigation rate, the following analysis will mostly concentrate on data relating to the amount of disputes brought to court.

The Statistical Bureau of Japan (Sōmushōtōkeikyoku) releases a detailed account of the situation of judicial litigation in the country every year, focusing in particular on newly started litigation at each level of jurisdiction: summary court, district court, high court and Supreme Court.17

As mentioned before, in order to draw an accurate picture of the increase in litigation it is necessary to possess a basic knowledge of the Japanese judicial system. Ordinary civil cases are either heard by the chihō saibansho (District court) or, if the amount in dispute is lower than 1,400,000 Yen, by the kan’i saibansho (Summary court). Decisions by the District courts are appealed to the kōtō-saiban-sho (High Court), whose judgments can be referred to the Supreme Court. In case the starting decision comes from a Summary court, it can be appealed to the District court and then further to the High Court.

To assess whether litigation is increasing, it is appropriate to focus primarily on newly received civil cases in first instance, comprising therefore procedures started both at the summary court and district court level for the first time and excluding cases brought before the district court on appeal from a summary court decision.

The figures are as follows:
Fig. 1 Newly received civil litigation cases in first instance (table) – figures in thousands

1990 204 2002 467
1991 223 2003 495
1992 298 2004 488
1993 371 2005 488
1994 391 2006 547
1995 389 2007 657
1996 410 2008 751
1997 423 2009 894
1998 459 2010 808
1999 454 2011 719
2000 454 2012 564
2001 461

Fig. 2 Newly received civil litigation cases in first instance (graph) – figures in thousands

Fig. 2 Newly received civil litigation cases in first instance (graph) – figures in thousands

As can be seen, litigation increased sharply in the early Nineties, and then it continued to increase until 2005, albeit at a slow pace18. Thereafter, in 2006, a sharp increase occurs, and the number of new cases brought to Japanese first instance courts increases to 894,000 in 2010. Then, a strong decrease in the new legal actions brings the number back to 564,000 in 2012 and it is still decreasing. The Supreme Court of Japan offers the 2013 figures, but it does not provide a breakdown of newly received cases and newly received cases in first instance, which means that some cases received at district court level are not newly started but are appeals of summary court procedures. This notwithstanding, it is possible to assess a decline in new cases: at summary court level, in 2012 430,712 proceedings were commenced while in 2013 only 355,776 were; in Japanese district courts, 194.099 in 2012 and 174,945 in 2013. Overall, this represents a decline of 15.06% in one year.

Civil litigation, however, is not a monolith: procedures may be started in different fields, like personal affairs (e.g. guardianship, etc.) or real estate, but in the classification by Statistical Bureau of Japan, most proceedings are collected under the very broad and rather vague category of “civil litigation cases relating to money” (kinsen wo mokuteki to suru uttae). As far as numbers are concerned, this is the field in which it is possible to observe the most notable oscillation. The figures are as follows:

Fig. 3 Newly received civil litigation cases relating to money (table)

1990 148,784 2002 404,881
1991 168,707 2003 430,831
1992 243,228 2004 430,791
1993 316,535 2005 435,018
1994 336,228 2006 494,040
1995 336,339 2007 604,686
1996 356,545 2008 698,895
1997 368,613 2009 838,042
1998 402,234 2010 794,126
1999 395,775 2011 662,664
2000 393,014 2012 509,897
2001 398,759

Fig. 4 Newly received civil litigation cases relating to money (graph)

Fig. 4 Newly received civil litigation cases relating to money (graph)

This graph seems to replicate quite closely the progress in general civil litigation. However, the increase around 2006 and the following decrease in 2010 are even a bit sharper.

To complete the picture, it is necessary to mention the other primary means of dispute resolution in Japan, i.e. court-annexed conciliation (chōtei).19 If the trend in court litigation was to be a result of a change of cultural attitude, then conciliation numbers should be inversely proportional to litigation. Here are the figures:

Fig. 5 Newly received civil conciliation cases (table) – figures in thousands

1990 61 2002 490
1991 74 2003 615
1992 100 2004 441
1993 113 2005 323
1994 118 2006 304
1995 131 2007 255
1996 165 2008 150
1997 195 2009 108
1998 249 2010 88
1999 264 2011 75
2000 318 2012 56
2001 367

Fig. 6 Newly received civil conciliation cases (graph) – figures in thousands

Fig. 6 Newly received civil conciliation cases (table) – figures in thousands

Conciliation keeps on increasing at a faster and faster pace, especially around 2000, and in 2003 reaches a peak. Then, it sharply decreases and in 2012 there are actually less new chōtei cases than there were in 1990.

It is worth mentioning that in 2000 a new law on “Special conciliation for debt restructuring” (tokutei saimu-tō no chōsei no sokushin no tame no tokutei chōtei ni kansuru hōritsu) entered into force. That specific procedure absorbed most of the conciliation procedures: and so the number of “general” conciliation cases decreased from 222,026 in 1999 to 79,826 in 2000. The newly established special conciliation procedure started with an impressive figure of 210,866 cases in 2000, and reached a peak of 537,071 in 2003. Then it started a rapid decline, and in 2012 only 5,514 cases were recorded.

Although is not appropriate to draw conclusions before the complete analysis is carried out, two preliminary points must be stressed. First, litigation and conciliation in Japan have experienced, within a period of about 3 years, a sharp increase followed by an approximately equally sharp decline. Second, this pattern was primarily due to disputes relating to money.

What happened then? The solution may be found in the premises of the Supreme Court of Japan, on a cold January day.

3. An Hypothesis: Interest rate in Japanese Law

On January 13th, 2006, the Supreme Court of Japan put a stop to an extremely long and fiery debate about overpaid interest in loans.20

The matter had been controversial for many years: under the original regulatory framework,21 an interest rate over a given threshold was to be considered illegitimate, and therefore any contractual provision to the contrary nullified, but payments made voluntarily could not be claimed back.22 The Supreme Court of Japan then intervened by stating that, while it was not possible to get the paid amount back, the excess had to be considered a partial reimbursement of the principal amount. The interpretation offered by the Supreme Court was stretched, to say the least, but it was largely followed by lower courts. In 1983, a new law23 intervened again in the matter: the voluntary payment of interest could be retained (up to 40%) only by those lenders who complied with some requirements both in their organizational structure and in the management of the specific loan. In 2003, an important decision by the Supreme Court24 first opened the door to the possibility of reclaiming overpayments against all lenders, but still in exceptional circumstances and under a strict burden of proof.

This situation, of course, was very confusing. Confusion created uncertainty and uncertainty created disputes. In the end, the Supreme Court intervened again, and with the above mentioned 2006 decision decided that any payment of interest above the legal limit could not be deemed “voluntary”, and therefore had to be given back to the borrower.25 To finally end this conflict between the judicial interpretation of the law and the intent of the legislator, the law was eventually amended in the sense wished by the Supreme Court.26 However, the new provisions only entered into force in 2010.

The key dates are therefore 2006 and 2010.

As shown before, in 2006, litigation started to increase almost vertically: most cases were about money. In 2010, litigation suddenly decreased, and again the most notable change was on cases related to money. On the other hand, the special conciliation for debt restructuring started in 2000 and reached its peak in 2003, then disappeared relatively quickly.

A (provisional) qualitative reading of this quantitative trend could be as follows: after the collapse of the bubble, the credit industry became more and more complicated and wild, and thus the problem of unsecured consumer credit and over indebted borrowers generated a huge number of disputes. In order to tackle this issue, the legislator provided for a specific form of conciliation to solve disputes informally, but the scheme proved to be unsuccessful and people started to refer to litigation. In a few years, contested cases made their way up to the Supreme Court, which eventually decided in favor of borrowers. This encouraged others in the same situation to bring their dispute to court, as precedents from the hierarchically higher body in the judicial system are scrupulously observed. Moneylending companies had no interest in spontaneously giving the contested amount back, but on the other hand they started to realize that resistance before the court was futile, as the outcome would very likely have been against them: hence, once summoned to trial, they settled. Meanwhile, the legislator intervened on the matter, but – oddly enough – with a new framework to be in force only in 2010.

In the period 2006–2010 there was, therefore a temporary situation in which the incentive to bring claims to court was maximized. In 2010 the law entered into force, solving the substantive-law situation and therefore drastically reducing the necessity of litigation.

The above explanation, albeit very simplistic and perhaps almost overambitious, could explain the trends in litigation and conciliation. It tends to be supported by other indicators.

In the period 2011–2012, one of us conducted research which also involved ad analysis of litigation in Japan.27 This research project also involved interviews with law professors interested in dispute resolution and ADR and (albeit limited in number) chōtei-in (civil conciliators). While the main focus of the interviews was different,28 the issue about litigation rate was incidentally discussed. All the subjects (22) agreed upon the fact that disputes about overpaid interest were abnormally inflating litigation in Japan. But of course that would be confined in the realm of opinions, or at least of pure qualitative analysis: law professors and conciliators are qualified observers, but, without reasons to assume the contrary,29 it would be largely inappropriate to attribute them an in-depth knowledge of this specific issue. Therefore, to complete this assessment and to be consistent with a dual qualitative-quantitative approach, it is necessary to rely also on solid data.

In 2013, the Society for the Study of the Civil Procedural System (Minji soshō seido kenkyūkai) published a voluminous report on civil litigation in Japan.30 This book illustrates in utmost detail the results of a survey about many aspects of litigation, like time and cost, understanding of the trial, quality and professionalism of judges and lawyer. What is most relevant to the present analysis is, however, what the report decided to leave out. Reading about the methodology how the book was drafted, the following sentence it is worth mentioning: “cases claiming refunds of overpaid interest, which have increased dramatically recently but for which no substantive trials are held were also excluded”.31 The reasons for this exclusion are spelt out in full a few pages later:

A report from the Supreme Court Deliberative Committee on Verifying the Expediting of Trials, has already pointed out that “Recently, the number of cases claiming refunds of overpaid interest has been rapidly increasing. These cases have several characteristics, including a trial that is often short, because the parties settle before the trial and the complaint is withdrawn at an early stage after the suit is filed […]. And the increase in this type of case is likely to be temporary from a mid to long-term point of view, so the data influenced by these cases do not necessarily reflect overall trends in ordinary civil litigation at first instance32

The above could still not matter if the cases excluded from the survey were to be statistically not particularly relevant. But later on in the report, percentages are given: out of 5,382 cases submitted to the reporters, 2,700 (50.16%) were about refunds of overpaid interest.33 Half of the entire civil litigation in the period analyzed by the surveyors was due to the problem mentioned above.

Of course this could be explained by other factors. So before offering any conclusions about the sudden increase and decline of litigation in recent times it is appropriate to draw a picture of what happened before and therefore analyze how scholars dealt with the litigation increase in previous years.

4. “Japan’s turn to litigation”?

In 2004, when litigation was slowly but constantly increasing, Ginsburg and Hoetker34 tried to provide a comprehensive explanation of the trend, relying on several concurrent factors. Starting from a remarkably structured prefecture-based database, those authors attempted to explain the objective and undisputed increase in numbers by different perspectives. In particular, those scholars tried to ascertain whether a direct connection exists between litigation and: 1) expansion of the bar; 2) reforms in civil procedure; 3) reforms in substantial law; 4) role (and number) of judges; 5) structural changes in the economy.

As far as the expansion of the bar is concerned, it would not be a big surprise if a large number of lawyers had generated a large number of new legal actions. In the mid-Nineties Japan had started thinking about a program to facilitate the accession to the legal profession, by creating a system loosely resembling American law schools.35 The system was actually implemented in 2004 and the first bar exam according to the new rules was carried out in 2006. However, even before the reform took place, due to political pressure on the bar to loosen the excessively high standards, the passing rate of the legendary shihō shiken had increased (from about 1% to about 2% of the applicants). The idea underlying the reform was that a shortage of lawyers hindered a proper dispute resolution mechanism and that by increasing the numbers of professionals, competition would make the market for legal services more competitive and therefore more efficient. So while an increase in the number of lawyers could have the positive effect of fostering a more competitive and therefore efficient market for legal services, it may also generate unnecessary litigation. Attorneys need to work, and judicial procedures are part of a lawyer’s activity: counsel may therefore encourage their clients to resort to litigation even when it is not strictly necessary.

But in the period 2009–2013 the number of members of the Bar increased from 26,930 to 33,624 (+24.85%) while litigation rate dropped by 60.84%. It seems, therefore, that Japanese lawyers are either extremely honest in advising their clients on whether litigation is a good option for them, or they are very bad at securing work for themselves, or that there is no direct correlation between the number of lawyers and litigation. In any case, the variation in the composition of the legal profession is unsuitable to explain both the sudden increase in judicial proceedings and their subsequent sharp decrease.

Moving on to the next factor, in 1996 Japan enacted a comprehensive reform of the Code of civil procedure (which entered in force in 1998). Cornerstones of that revision were mainly three. First, the powers of judges relating to evidence collection were strengthened, thereby partly relieving claimants from their probatory duties. Second, the access to Supreme Court was limited. Third, more simplified procedures for small claims were made available. Again, the reform was enacted with the positive purpose of making litigation faster and more efficient. However, it also had the negative effect of making it more attractive. Irrespective of the actual success of the 1996 reform,36 there are no subsequent substantial revisions of the Code of civil procedure capable to explain the sharp increase and equally sharp decrease in litigation already described.

As for the reforms in substantial law, in the early Nineties a number of legislative provisions, like the 1993 Products liability law, created new opportunities for litigation. Also, shareholder’s derivative actions37 were encouraged by some amendments in the law. However, those evolutions did not result in a substantive amount of new actions brought to the court.

Judges of course are a very important factor in litigation, and their role is analyzed by Ginsburg and Hoetker basically under two points of view, one being their number and the other being their independence.38 The number of judges is decided centrally every budgetary year, and it possible to observe a constant, albeit very slow, increase in the figures. But, as it was for lawyers, the number of judges kept increasing at about the same pace while litigation was slowly increasing, sharply reaching a peak and equally sharply decreasing. Hence it is very difficult to establish a causal relationship between those factors. As for their independence, an increase of independence could have led to more litigation in those areas of law that are somehow perceived to be a barometer of the people’s support of the government, like tax law or administrative law. But there is nothing which could lead one to think that in the period analyzed, judges became more or less politically independent than before.

The structural change in the economy is probably the most difficult factor to analyze, also because it requires tools from neighboring social sciences that legal scholars can rarely handle with skill. A very simple reflection could be that litigation may appear as countercyclical vis-à-vis economic growth, for the simple reason that when there are many opportunities for profitable investments it is better to allocate money to them rather than to litigation. At the risk of simplification: even when a contract is breached, the potential benefit from recovering damages or getting performance through litigation is, in most cases, lower than just giving up and investing the same amount of money that a judicial procedure would have required (attorney’s fees, court duties, etc.) in alternative ventures. However, a symmetrical and opposite phenomenon may also be justified: when there is more economic activity there are more deals, and statistically the chances that some of those contracts are infringed is higher. That would result in a higher litigation rate in absolute terms, but this would not mean higher litigiousness, as the proportion between the number of deals and the number of legal actions is likely not to be affected or to be affected negatively. Ginsburg and Hoetker39 could actually find both phenomena in Japan in the timeframe they analyzed. This explanation, however, could not be adapted to the following period as, while recently some significant changes in the Japanese economy happened, the economic trend is inconsistent with the litigation’s.

In the period when litigation was increasing (but before the peak reached in the late 2000s), the Japanese legislator did not just sit and watch this trend, but (to some extent) tried to implement a series of countermeasures to drive litigation out of court, by providing alternative outlets to dispute resolution. Two keys initiatives in this regard were the enactment of a new Arbitration Act40 and of the Act for the Promotion of Alternative Dispute Resolution41. Both of those initiatives failed for the following reasons.

The Arbitration Act was enacted to replace the old arbitration regulatory scheme, which was originally part of the old Meiji Code of Civil Procedure and then had become an autonomous law. The new law was largely modeled after the UNCITRAL 1985 Model Law on International Commercial Arbitration, filtered through the German law of 1997 and the Korean law of 1999. While the Arbitration Act is, technically speaking, a reasonably good piece of legislation, the lack of institutional support and the substantial ignorance of what arbitration is by Japanese lawyers42 prevented its success. Moreover, arbitration is successful in those countries in which litigation is too slow or the quality of judges is very low: as shown above,43 neither of those factors applies in Japan.

As for the ADR Act, the whole idea behind the new legislation was to create a network of private centers to provide professional alternative dispute resolution services, under the supervision of the Ministry of Justice. However, also this reform also failed for a number of reasons. First, it faced fierce opposition by lawyers, who were worried of being deprived of work from these new centers. Second, the government denied any financial support to these private institutions, intending instead that they recover their own costs. This was a problem also because the natural competitor to these private ADR mechanisms is chōtei, which is carried out by the State as a court-annexed procedure and it is almost free for the users. Finally, there were a number of procedural problems, like the lack of direct enforceability of the agreement reached through private ADR, which made the procedure unattractive. A revision of the law was scheduled for 2014, but the Japanese government decided to postpone the work on it indefinitely.

It seems, therefore, that the trend in litigation is unrelated also to legislative actions, as the new initiatives were taken a few years before litigation reached its peak.

5. Conclusions

This paper leaves a number of questions open for further research or discussion: what would be the trend in litigation if cases about overpaid interest are excluded? After the collapse of this “litigation bubble”, will litigation go back to the physiological increase it was experiencing before 2006? Would it further decrease?

While those important questions are still left open, some provisional conclusions may be drawn.

First, Japan is always an object of debate among scholars of comparative law and Japanese law is often depicted stereotypically, either to claim that is totally unique, completely similar to other countries or something in between those extremes.44 In general comparative law as well as among the restricted group of Japanese law scholars there is occasionally a tendency to depict Japan superficially, employing strong concepts to support or deny the assumption about Japanese “uniqueness”.45 The tendency to use “keywords” to describe the Japanese legal system is still very strong.46

How people in Japan deal with litigation is often the pivotal point around which this kind of debate is centered.47 While still perfectly fitting into this trend, this paper also would like to underline the limit of analyses centered on litigation, for the reasons which follow.

Comparing litigation is a very complex venture and it requires a vast knowledge of civil procedure, which is a highly complicated technical matter. Firstly, because, as already mentioned, some procedures are considered litigation in a given legal system but not in another. Secondly, because the very internal rules of litigation may be very different, leading to comparison of heterogeneous factors. Japan, for example, is often compared with the USA, a country in which the rules of civil litigation are very different. The Japanese civil procedure was in fact modeled after the German Zivilprozessordnung in the Meiji period, and has, notwithstanding a strong American influence after World War II, retained its characteristic Civil Law structure. That would lead to label as “Japanese” peculiarities which could actually be just “Continental European”.48

This paper would like to emphasize that numbers played a great role in the evolution of legal scholarship, but they, in themselves, are not enough. It was a Copernican Revolution indeed when jurists studying comparative law started to venture into the muddy waters of quantitative analysis, and that contributed to eventually overcoming a number of cultural stereotypes based on mostly qualitative reflections. However, the opposite attitude, i.e. relying largely on numbers, would paradoxically be equally dangerous.49 Imagine, for example, a crude comparison of the numbers in litigation in Japan in 1990 and 2009. Now imagine the same exercise comparing 1990 and 2012: although of course in both cases an increase could be observed, the proportion would be radically different (+438.23% and +276.47% respectively). Would it be appropriate to say that Japanese society has radically changed in the span of three years? Probably not.

Lessons about the “litigation bubble” of 2006–2010 will likely be very useful in future analyses, as Japan is now experiencing a situation which eventually may lead to some form of mass litigation, or at least mass dispute resolution. For example, the nuclear accident of Fukushima is still to spread its fallout on the judiciary. So far the government has established and sponsored a (complex and cumbersome, according to its critics) conciliation procedure;50 it is not producing the hoped-for results. Many disputes were unable to be settled under the conciliation scheme and eventually landed in the judicial system. Some of them already reached the appellate courts and will probably be finally resolved by the Supreme Court of Japan. A decision in this regard could be again be the spark igniting another “litigation bubble”.

As for the other research questions still open, a good closing could be a saying attributed to Niels Bohr: “Prediction is very difficult, especially about the future.”51

6. Endnotes

* J.D., Ph.D., Associate Professor of Law, Nagoya University Graduate School of Law.

** LL.M, Professor of Law, Toyo University Graduate School of Law. This paper was made possible thanks to the JSPS/Kaken-hi Grant “Grant in Aid for Young Researchers B”, Best Practices in ADR in Europe and Japan: an Assessment for Future Legislation, ID 26780058.

01 The debate about litigation was already “old” more than ten years ago. See John O Haley, “Litigation in Japan: a New Look into Old Problems” (2002) Willamette Journal of International Law and Dispute Resolution, 121.

02 John O. Haley, “The Myth of the Reluctant Litigant” (1978) Journal of Japanese Studies 4, 359.

03 See also Eric A. Feldman, The Rituals of Rights in Japan: Law, Society and Health Policy (Cambridge University Press 2000); Luke Nottage, Christian Wollschlaeger “What Do Courts Do?” (1996) New Zealand Law Journal 369; L. Nottage, “The Present and Future of Product Liability Dispute Resolution in Japan” (2000) 27 William Mitchell Law Review 215; Mark .D. West, Law in Everyday Japan. Sex, Sumo, Suicide and Statutes (University of Chicago Press 2005)

04 Yoshiuki Noda, Introduction to Japanese Law, (II ed., Tokyo University Press 1976) (I. ed. Introduction au Droit Japonais, in Les Systèmes de Droit Contemporains, vol XIX, Dalloz 1966), 159 - 173; Takeyoshi Kawashima, ‘Dispute Resolution in Contemporary Japan’ in: Arthur Taylor von Mehren (ed.), Law in Japan: The Legal Order in a Changing Society (Harvard University Press 1963), 41. Although this theory is not very popular anymore, there are still scholars who believe culture plays a pivotal role in this regard. See, Stephen Givens, “The Vagaries of Vagueness: An Essay on “Cultural” vs. “Institutional” Approaches to Japanese Law” (2013) 22 Michigan State International Law Review, 839.

05 Haley, supra note 1.

06 J. Mark Ramseyer and Minoru Nakazato, “The Rational Litigant: Settlement Amounts and Verdict Rates in Japan” (1989) 18 Journal of Legal Studies, 263.

07 Frank K. Upham, Law and Social Change in Postwar Japan (Harvard University Press 1987).

08 Takao Tanase, “The Management of Disputes: Automobile Accident Compensation in Japan” (1990) 24 Law and Society Review 24, 651.

09 See the bibliography referred to supra at 3.

10 Noda, supra note 1.

11 Haley, supra note 1.

12 Christian Wollschlaeger, ‘Historical Trends of Civil Litigation in Japan, Arizona, Sweden and Germany: Japanese Legal Culture in the Light of Judicial Statistics’, in Harald Baum (ed.), Japan: Economic Success and Legal System (Walter de Gruyter 1997), 89 – 142.

13 The World Bank Group, Doing Business 2015, http://www.doingbusiness.org/.

14 This ranking has been widely criticized for its mostly quantitative approach. Limiting the analysis to cost and time, it may happen that countries in which the quality of judgments is low or where there is widespread corruption still can receive a positive evaluation.

15 Although data are including both civil and penal judges.

16 Japan Federation of Bar Associations, 2013 White Paper on Attorneys, http://www.nichibenren.or.jp/library/en/about/data/WhitePaper2013.pdf, 6.

17 Statistical Bureau of Japan, Japan Statistical Yearbook 2015 http://www.stat.go.jp/english/data/nenkan (07/01/2015). The Supreme Court itself publishes yearly statistics, http://www.courts.go.jp/english/vcms_lf/20140909stastical.pdf.

18 For the sake of completeness, it is necessary to mention that with the Personal Status Litigation Act in 2004 the competence over judicial divorce cases (and litigation over other personal matters) was transferred from the District court to the Family court. Although the number of judicial divorces in Japan is fairly low, that factor needs nevertheless to be taken into account.

19 The translation of the Japanese term “chōtei” creates some problems about the very well-known taxonomies in the world of ADR, in particular between “conciliation” and “mediation”. The Standard Legal Term Dictionary (March 2015 edition) published by the Japanese Ministry of Justice, offers both translations. However, it seems that the word “mediation” it is suggested to translate the activity of mediating disputes (fungi no chōtei), while the procedural institution of chōtei is more appropriately translated as “conciliation” (and so the chōteiiinkai is translated as “conciliation committee”; the chōteian is the “conciliation proposal”, etc.).

20 Saikō Saibanshō, 13 January 2006, Minshū 60,1. See also S. Kozuka, “Judicial Activism of the Japanese Supreme Court in Consumer Law: Juridification of Society through Case Law” (2009) 27 Zeitschrift für Japanisches Recht, 81.

21 Act 100/1954.

22 This is one typical example of obligation naturelle.

23 Act 32/1983, Kashikin-gyō no kisei-tō ni kansuru hōritsu (Moneylenders Control Law).

24 Saikō Saibanshō, 13 July 2003, Minshū 57,7, at 895.

25 “[…] it is appropriate to construe that where […] the debtor has paid, as interest, the amount of money that exceeds the statutory upper limit of interest, he cannot be deemed to have paid the interest in excess at his own free will, unless there are special circumstances”. Unofficial translation available on website of the Supreme Court of Japan.

26 This was the results of the combined interventions on the Interest Rate Restriction Law (Risoku seigen-hō) and the Moneylenders Law (Kishikin-gyō-hō).

27 Giorgio F. Colombo, JSPS Postdoctoral Fellowship, ID P11751, Alternative Dispute Resolution and Arbitration in Contemporary Japan: New Wine into Old Wineskins.

28 The focus was namely the relative ineffectiveness of private ADR and Arbitration in Japan.

29 Still Interviewees included prominent professors of civil procedure, bankruptcy law and sociology of law, and a chōtei-in with 40 years of experience.

30 Society for the Study of the Civil Procedural System, Report on Japan’s 2011 Civil Litigation Survey (Jigakusha 2014).

31 Id., XI.

32 Id., 7-8 (emphasis added).

33 Id., 14.

34 Tom Ginsburg, Glenn Hoetker, “The Unreluctant Litigant? An empirical analysis of Japan’s Turn to Litigation” (2004) Illinois Law and Economics Working Paper Series, Working Paper No. LE04-009.

35 Kent Anderson, Trevor Ryan, ‘Gatekeepers: a comparative critique of admission to the legal profession and Japan’s new law schools, in: Stacey Steele and Kathryn Taylor (eds), Legal Education in Asia. Globalization, change and contexts (Routledge 2010), 45-67; Colin P.A. Jones, “Japan’s New Law Schools: The Story So Far” (2009) 27 Zeitschrift für Japanisches. Recht, 248.

36 A technical assessment of the reform is offered by Yasuhei Taniguchi, “The 1996 Code of Civil Procedure of Japan – A Procedure for the Coming Century?” (1997) 4 The American Journal of Comparative Law, 767. A latter comment on provisional results can be read in Shōzō Ōta, “Reform of Civil Procedure in Japan” (2001) 4 The American Journal of Comparative Law, 561.

37 Dan W. Puchniak, Masabumi Nakahigashi, “Japan’s Love for Derivative Actions: Irrational Behavior and Non-Economic Motives as Rational Explanations for Shareholder Litigation” (2012) 45 Vanderbilt Journal of Transnational Law, 1.

38 Ginsburg, Hoetker, cit. supra note 32, 14-15.

39 Id., 21.

40 Act 138/2003.

41 Act 151/2004.

42 Arbitration is still not very popular in Japanese legal education, and not all universities or law schools offer classes on it.

43 See infra, para. 2.

44 See (inelegantly), Giorgio F. Colombo, “Japan as a Victim of Comparative Law” (2013) 22 Michigan State International Law Review, 731.

45 An example of the former is of course provided by Noda, supra note 4. For the latter, see how Ramseyer and Miwa tried to sweep away decades of literature by straightforwardly claiming that the keiretsu are a fable. J. Mark Ramseyer, Yoshiro Miwa, The Fable of the Keiretsu. Urban Legends of the Japanese Economy (University of Chicago Press, 2006). For an elaborate criticism to that book, see Dan W. Puchniak, “A Skeptic’s Guide to MIWA and RAMSEYER’s “The Fable of the Keiretsu” (2007) 24 Zeitschrift für Japanisches Recht, 273.

46 Colin P.A. Jones, “Introduction: My Keywords for Understanding Japanese Law” (2013) 22 Michigan State International Law Review, 707.

47 Unsurprisingly, Noda’s famous quote “Japanese do not like the law” is in the chapter about litigation (see supra, note 10). While everybody even slightly familiar with Japanese law is aware of this quote, less people know that Noda himself partly retracted this assumption in the (seldom read) introduction of the English edition.

48 To give some examples: Haley expressed his criticism towards the fact the in Japan there is no institution like the “contempt of court” of the USA: but the contempt is unknown in most Civil Law jurisdictions. Ramseyer remarked that litigation schedule, with few hearings distant in time serves the purpose of reaching an agreement: but in other Civil Law jurisdiction the same structure is employed, without any significant impact on settlement in court. Ginsburg and Hoetker noted that the lack of a full discovery of evidence in civil litigation prevents lawyers to carry out “fishing expeditions” [sic] pursuing difficult claims in the hope of finding information to enhance their chances of victory: nothing like this would be possible in most Civil Law countries.

49 For a very supportive analysis of quantitative/empirical method in legal research, see Thomas S. Ulen, “A Nobel Prize in Legal Science: Theory, Empirical Work, and the Scientific Method in the Study of Law” (2002) 4 University of Illinois Law Review, 875. For a more contrasted analysis, Russell Korobkin, “Empirical Scholarship in Contract Law: Possibilities and Pitfalls” (2002) 4 University of Illinois Law Review, 1032.

50 On the issue of law and the Fukushima nuclear accident, see the reports on the Symposium/Conference “Managing Disasters in Japan” (2012) 34 Zeitschrift für Japanisches Recht, 1 (contributions by Luke Nottage, Hiroshi Kabashima, Hatsuru Morita, Stacey Steele, Chun Jin, Rob B Leflar, Ayako Hirata, Masayuki Murayama, Shōzō Ōta).

51 Arthur K. Ellis, Teaching and Learning Elementary Social Studies (Pearson 2010), 431.

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