Beyond Black Letter Law: Japan's Supreme Court on "Special Circumstances" in International Jurisdiction

Japanese Attorney at Law - Bengoshi L.L.

• 7 min read
Beyond Black Letter Law: Japan's Supreme Court on "Special Circumstances" in International Jurisdiction

Date of Judgment: November 11, 1997
Supreme Court of Japan, Third Petty Bench

When a legal dispute has international elements, one of the first hurdles is determining which country's courts have the authority—the international adjudicatory jurisdiction—to hear the case. For many years, before Japan specifically codified its rules on this matter in 2011, its courts developed principles through case law. A landmark Supreme Court decision on November 11, 1997, in a case concerning the return of a deposit, was pivotal in establishing the doctrine of "special circumstances" (特段の事情 - tokudan no jijō). This doctrine allows Japanese courts to decline jurisdiction even if a domestic venue rule might technically grant it, if exercising jurisdiction would be unfair or improper in light of the specific facts of the case.

The Factual Background: A European Business Deal Gone Sour

The dispute involved a Japanese corporation and a Japanese national residing and doing business in Germany:

  • X (Plaintiff): A Japanese corporation (K.K. Family).
  • Y (Defendant): A Japanese national who had been living and operating his business in Frankfurt, Germany, for approximately 20 years.
  • The Contract: In December 1987, X and Y entered into a contract in Frankfurt, Germany. Under this agreement, X commissioned Y to perform various services in Europe, primarily the purchasing of automobiles. To fund these purchases, X remitted a significant sum of money (over 91 million yen) to Y's designated bank account in Germany as a deposit (預託金 - yotakukin). The contract stipulated that Y should report monthly on the expenditure of these funds.
  • The Dispute: Over time, X grew concerned about Y's management of the deposit. X proposed a shift to using letters of credit for car payments and demanded the return of the unused balance of the deposit. Y refused this demand.
  • The Lawsuit in Japan: X filed a lawsuit in the Chiba District Court in Japan against Y, seeking the return of the alleged remaining deposit balance (approximately 24.9 million yen) plus damages for delay. X argued that Japanese courts had jurisdiction because the place of performance (履行地 - rikōchi) for the obligation to return the monetary deposit was X's head office location in Japan (a basis for domestic venue under Japanese civil procedure).
  • Lower Court Rulings: Both the Chiba District Court (first instance) and the Tokyo High Court (on appeal) dismissed X's lawsuit, finding that Japanese courts lacked international adjudicatory jurisdiction. X appealed this finding to the Supreme Court.

The central issue for the Supreme Court was whether, even if a domestic jurisdictional ground (like the place of performance of the obligation) could arguably be found in Japan, there were overriding "special circumstances" that would make it inappropriate for Japanese courts to hear the case.

The Supreme Court's Ruling: Introducing "Special Circumstances"

The Supreme Court dismissed X's appeal, affirming the lower courts' denial of Japanese jurisdiction. In doing so, it explicitly adopted and applied the "special circumstances" doctrine:

1. General Principles of International Jurisdiction (as understood at the time):
The Court reiterated its established approach from the 1981 Malaysian Airline System case (see case 76 in this series):

  • In the absence of specific international treaties, recognized international customary law, or domestic statutes directly governing international adjudicatory jurisdiction, such jurisdiction should be determined in accordance with "jōri" (reason, natural justice, or equity). This determination must be guided by the ideals of ensuring fairness between the parties and the proper and prompt administration of justice.
  • As a general rule under jōri, if any of the grounds for domestic territorial jurisdiction (venue) as prescribed by Japan's Code of Civil Procedure exist within Japan, it is in principle, appropriate to subject the defendant to the adjudicatory power of Japanese courts.

2. The "Special Circumstances" Caveat:
Crucially, the Supreme Court then formally endorsed the "special circumstances" doctrine as a limitation on this general principle:

  • "However, if it is found that there are 'special circumstances' (tokudan no jijō) under which conducting the trial in Japan would conflict with the ideals of fairness between the parties and the proper and prompt administration of justice, Japan's international adjudicatory jurisdiction should be denied."

3. Finding "Special Circumstances" in This Case:
The Supreme Court found that such "special circumstances" indeed existed in this dispute, warranting the denial of Japanese jurisdiction, even without definitively ruling on whether Japan was technically the "place of performance" for the deposit return:

  • Nature and Locus of the Contract: The contract was concluded in Germany and its primary purpose was for Y to perform various business services within Germany and Europe.
  • Lack of Explicit Connection to Japan in Contract: There was no explicit agreement in the contract designating a location in Japan as the place of performance for any obligations, nor was there an explicit choice of Japanese law as the governing substantive law.
  • Defendant's Expectations: Consequently, being sued in Japan for matters arising from this contract was likely beyond Y's reasonable expectations.
  • Defendant's Strong Connection to Germany: Y had resided and based his business operations in Germany for over two decades.
  • Location of Evidence: Evidence crucial for Y's defense, such as documents relating to car purchases from German dealers and payments made, was concentrated in Germany.
  • Plaintiff's Burden: X, being a company that imported automobiles from Germany, would not face an excessive or undue burden if required to bring its lawsuit in German courts.
  • Overall Fairness and Judicial Propriety: Considering all these factors, the Supreme Court concluded that compelling Y to defend the lawsuit in a Japanese court would indeed conflict with the ideals of fairness between the parties and the proper and prompt administration of justice.
  • Conclusion on Jurisdiction: Therefore, "special circumstances" existed to deny Japan's international adjudicatory jurisdiction over the case, regardless of whether Japanese law was ultimately found to be the governing substantive law of the contract or where the technical place of performance of the deposit return obligation lay.

Significance and Evolution of the "Special Circumstances" Doctrine

This 1997 Supreme Court decision was highly significant in the development of Japanese private international law:

  • Official Endorsement of "Special Circumstances": It marked the Supreme Court's first explicit adoption and application of the "special circumstances" doctrine, which had been emerging in lower court decisions after the broader 1981 Malaysian Airline System ruling. This provided a crucial mechanism for courts to exercise discretion and achieve fairness in individual cases, rather than mechanically applying domestic venue rules to international scenarios.
  • A Tool for Flexibility: The doctrine allowed courts to temper the potential for "exorbitant jurisdiction" that could arise if any domestic venue link automatically resulted in international jurisdiction, regardless of the overall fairness or practicalities of litigating in Japan.
  • Critique of Application in This Specific Case: Professor Nakano's commentary notes that while the "special circumstances" doctrine itself was seen as a positive development for ensuring concrete fairness, the Supreme Court's approach in this particular case drew some criticism. The Court deferred making a clear finding on whether Japan even was the "place of performance" (which was X's primary basis for asserting jurisdiction). Instead, it moved directly to a holistic assessment of various factors to find "special circumstances." Some scholars argued that the Court should have first determined if a prima facie jurisdictional ground existed under Japanese rules, and then, if such a ground was found, consider whether "special circumstances" negated it. The Court's method, some feared, could lead to less predictability if it encouraged an all-factors-considered balancing act in every case without first applying established jurisdictional rules.
  • Codification in the Amended Code of Civil Procedure (Article 3-9): The principles underlying the "special circumstances" doctrine were later codified in Japan's Code of Civil Procedure (CCP) through amendments that took effect in 2012. Article 3-9 of the current CCP, titled "Dismissal of Action due to Special Circumstances," now explicitly allows a court to dismiss a suit, even if Japanese courts would otherwise have jurisdiction under the rules, if "considering the nature of the case, the degree of burden on the defendant to respond, the location of evidence, and other circumstances, it is found that a trial and judicial decision by a Japanese court would impair fairness between the parties or hinder the achievement of a proper and prompt trial." This provision also lists exemplary factors, providing more clarity than the purely case-law-based doctrine. Article 3-9 notably does not permit such dismissal if jurisdiction is based on an exclusive choice-of-court agreement for Japan.

Place of Performance Jurisdiction: Then and Now

The issue of "place of performance" as a basis for jurisdiction was central to the plaintiff's argument in this case.

  • Pre-2012 Law: There was considerable debate among scholars and in lower courts about how to determine the "place of performance" for international jurisdictional purposes. The Supreme Court in this 1997 case did not definitively settle this debate.
  • Current CCP (Art. 3-3(i)): The amended CCP now has a specific rule for contract claims. Jurisdiction based on the place of performance is recognized if "the place of performance of the obligation under the contract... is in Japan according to the provisions of said contract" or if "the place of performance of said obligation is in Japan according to the law applicable to said contract as selected in the contract." This prioritizes the parties' explicit or implied agreement regarding the place of performance, often tied to their choice of law for the contract.
  • Outcome for this Case under Current Law: If this exact case were heard today, and assuming no explicit agreement on the place of performance for the deposit return or on the governing law of the contract, it is likely that Japanese courts would not have jurisdiction under Article 3-3(i). The "special circumstances" analysis of Article 3-9 would then not even be reached. If, however, an implied choice of Japanese law was found, and under that law (e.g., Japanese Civil Code Art. 484 regarding payment of monetary debts at the creditor's domicile) Japan was deemed the place of performance, then Article 3-9 would come into play, and factors similar to those cited by the 1997 Supreme Court (German nexus of the contract, Y's German base, evidence location) could well lead to a dismissal based on "special circumstances."

Conclusion

The 1997 Supreme Court judgment in this deposit return case was a crucial step in the evolution of Japan's rules on international adjudicatory jurisdiction. By formally embracing the "special circumstances" doctrine, the Court introduced a vital element of flexibility and fairness, allowing for a departure from a mechanical application of domestic venue rules to international cases. While the specific jurisdictional landscape has since been more comprehensively defined by the 2011 amendments to the Code of Civil Procedure, the underlying principles of ensuring fairness, considering party expectations, and seeking the proper and prompt administration of justice, as highlighted in this decision, remain fundamental to the assessment of international jurisdiction in Japan.