Large Law Firms in Japan ("Daikibo Jimusho"): How Does Their Growth Impact Ethical Considerations for Corporate Clients?

The Japanese legal market has witnessed a significant trend in recent years: the emergence and continued growth of daikibo jimusho (大規模事務所), or large law firms. Some of these firms now house hundreds of lawyers, offering a breadth and depth of expertise necessary to handle the increasingly complex, large-scale, and specialized legal demands of modern corporate clients, both domestic and international. While this capacity brings considerable advantages, the sheer size and scope of operations in large law firms also inherently amplify certain ethical considerations, most notably the intricate challenges of managing conflicts of interest (rieki-sōhan, 利益相反). For corporate clients, understanding how these firms navigate the ethical landscape is crucial.

Heightened Ethical Risks in Large Law Firm Environments

The very nature of a large law firm—with its numerous lawyers, extensive support staff, and a vast and diverse portfolio of current and former clients—creates a more complex environment for identifying and managing potential ethical issues. Conflicts of interest, in particular, can arise more frequently and with greater subtlety due to:

1. Increased Number of Relationships: More lawyers mean more individual connections, past representations, and potential overlaps between the interests of different clients.
2. Diverse Client Base: Large firms often serve a wide array of industries and client types, increasing the statistical probability of clients having adverse interests.
3. Complex, Multi-Party Matters: The types of cases large firms typically handle (e.g., major M&A transactions, international arbitrations, large-scale litigation) often involve numerous direct and indirect stakeholders beyond the immediate client and their direct opponent. Each of these relationships needs to be considered in a conflict analysis.

The Core Regulatory Framework: Imputed Disqualification

A fundamental principle in Japanese legal ethics, highly relevant to law firms of all sizes but especially critical for large ones, is imputed disqualification. Generally, if one lawyer within a firm is prohibited from representing a client due to a conflict of interest, that prohibition is "imputed" to, or extends to, all other lawyers in the firm.

This principle is enshrined in Article 57 of the Basic Rules of Professional Conduct for Lawyers (弁護士職務基本規程) for joint law offices (kyōdō jimusho, which includes most partnership-style large firms) and analogous rules apply to lawyer corporations (bengoshi hōjin). The rationale is to protect client confidences (as information might flow within a firm) and to ensure the client receives the undivided loyalty of the entire firm.

The Crucial Exception: "Grounds for Maintaining Fairness" and Ethical Screens

If the rule of imputed disqualification were absolute, large law firms would find it exceedingly difficult to operate, as the number of potential conflicts would be immense. Recognizing this, the Basic Rules provide a critical exception: the imputation of a conflict does not apply if there are "grounds on which the fairness of duties can be maintained" (shokumu no kōsei o tamochiuru jiyū).

Establishing these "grounds" is a rigorous process and is not taken lightly. The primary mechanism through which large Japanese firms attempt to satisfy this exception, particularly when dealing with potential imputed conflicts that are not direct adversity in the same matter, is the implementation of effective information screening measures, often referred to internationally as "Chinese Walls" or, more neutrally, "ethical screens" (jōhō shadan sochi, 情報遮断措置).

Elements of an Effective Ethical Screen in Japan typically include:

• Physical and Electronic Separation: Lawyers and staff working on a matter where a screen is in place must be physically and/or electronically segregated from the "screened-off" lawyer(s) who possess the conflicting information.
• Restricted Access to Information: Strict controls must be implemented to prevent screened-off individuals from accessing any case files, documents, or electronic data related to the matter.
• Prohibition on Communication: Clear rules must forbid any discussion of the screened matter between the team handling it and the screened-off lawyer(s).
• Formal Undertakings and Training: Firm members involved must be made aware of the screen and often provide written undertakings to adhere to its protocols. Regular training on maintaining screens is also important.
• Notification to Clients: Typically, affected clients are informed about the conflict and the screening measures being implemented. In some cases, their explicit consent to proceed with a screen in place may be sought, especially if the potential conflict is sensitive.

It is important to note that the mere assertion of an ethical screen is not automatically sufficient. Its effectiveness is judged on a case-by-case basis, considering the nature of the confidential information held by the conflicted lawyer, the substantiality of the relationship between the matters, and the robustness of the screening procedures themselves. The precise definition and requirements for what constitutes a "sufficient" screen are still areas of evolving practice and interpretation in Japan.

The Case Acceptance and Conflict Screening Process (Junin Shinsa)

To navigate these complex rules, large Japanese law firms employ sophisticated and systematic case acceptance and conflict screening processes, often referred to as junin shinsa (受任審査 – case acceptance examination) or, more colloquially, konfurikuto chekku (コンフリクトチェック – conflict check). Article 59 of the Basic Rules encourages firms to establish systems to record client, opponent, and case names to prevent conflicted engagements.

A typical screening process in a large firm involves several steps:

1. Initial Database Search: When a potential new matter arises, details of the prospective client, known opposing parties, and other significantly related entities are checked against a comprehensive, firm-wide electronic database. This database ideally contains records of all current and past clients, matters handled, consultations, and known adverse or related parties.
2. Firm-Wide Internal Circulation: Because databases may have time lags, input errors, or may not capture every nuanced relationship, information about the prospective new matter is typically circulated to all lawyers (and sometimes relevant senior staff) within the firm. This allows individual lawyers to review the information against their own knowledge of past and current engagements or consultations that might not yet be fully reflected in the central database. The information circulated usually includes names of key parties, a brief, non-confidential description of the matter, the nature of the work, and any known potential for adversity.
3. Analysis by Conflicts Specialists: If a potential conflict is flagged either by the database or through internal circulation, it is typically referred to dedicated conflicts partners, a conflicts committee, or experienced senior lawyers within the firm for detailed analysis. They will assess the nature of the conflict against the Lawyers Act and the Basic Rules, determine if it is an absolute prohibition or one that might be managed (e.g., through consent or an ethical screen), and consider the practical implications.
4. Internal Discussion and Decision: This often involves discussions between the lawyers who would handle the new matter, any lawyer(s) who have the pre-existing conflicting relationship, and the conflicts specialists. A decision is then made on whether the firm can ethically accept the engagement, and if so, under what conditions (e.g., specific client waivers, implementation of a robust ethical screen).

The Information Dilemma in Pre-Engagement Screening: A subtle but important challenge in this process is balancing the need to share sufficient information internally to conduct an accurate and thorough conflict check with the duty to protect the confidentiality of the prospective client's sensitive information, especially before a formal engagement agreement is in place. Firms must have protocols to manage this carefully.

Beyond Formal Ethical Conflicts: "Business Conflicts"

Large law firms, like any sophisticated business, also consider what are often termed "business conflicts" (bijinesu konfurikuto). These are situations where, even if no formal ethical rule is breached, taking on a new client or matter might:

• Damage a significant existing client relationship (e.g., acting for a direct and aggressive competitor of a major, long-standing client).
• Place the firm in an awkward commercial or reputational position.
• Contradict the firm's strategic direction or industry focus.

Decisions regarding business conflicts are typically based on the firm's client relationship management policies and strategic judgment, rather than being mandated by formal ethical rules. However, they are an important part of the overall case acceptance calculus for large firms.

Considerations for Corporate Clients Engaging Large Japanese Firms

When a corporation, particularly a foreign entity, considers engaging a large Japanese law firm, awareness of these ethical dynamics is beneficial:

• Provide Comprehensive Information: To facilitate an accurate conflict check, be prepared to provide your prospective Japanese counsel with detailed information about your own corporate structure (including parent companies, subsidiaries, and key affiliates) and any known or potentially adverse or related parties to the matter at hand.
• Inquire About Conflict Procedures: It is reasonable to ask about the firm's conflict-checking processes and, if a potential imputed conflict is identified that the firm proposes to manage via an ethical screen, to understand how that screen will be structured and maintained.
• Allow Time for Conflict Checks: Especially for complex matters involving multiple parties or jurisdictions, the conflict-checking process in a large firm can take some time. Factor this into your engagement timeline.
• Potential for Being "Conflicted Out": Given the extensive client rosters of large firms, there is always a possibility that a preferred firm may be ethically precluded from taking on a new matter. Having alternative counsel in mind can be prudent.
• Open Dialogue: If you have concerns about potential conflicts (even business conflicts), discuss them openly with the firm at the earliest opportunity.

Conclusion

The growth of large law firms (daikibo jimusho) in Japan has brought with it enhanced capabilities to serve the sophisticated needs of corporate clients in an increasingly complex legal world. However, this scale also magnifies the challenges of navigating ethical obligations, particularly the intricate rules surrounding conflicts of interest. These firms rely on diligent internal screening processes, a thorough understanding of imputed disqualification principles, and the careful application of mechanisms like ethical screens to meet their professional responsibilities.

For corporate clients, understanding this landscape—the emphasis on preventing conflicts, the systems firms use for screening, and the importance of client consent and information sharing—is key to fostering a transparent and ethically sound relationship with their Japanese legal counsel. This proactive understanding helps ensure that the chosen firm can provide an undivided loyalty and robust representation essential for navigating Japan's legal environment.