Japan Compliance

Seller's Lien and Subrogation After Buyer's Bankruptcy: A 1984 Japanese Supreme Court Clarification

In commercial transactions, a seller of movable goods who extends credit to a buyer is often protected by a "seller's statutory lien on movables" (動産売買の先取特権 - dōsan baibai no sakidori tokken) under Japanese law. This lien secures the unpaid purchase price against the sold goods. If

Bank's Lien on Promissory Notes in Japanese Civil Rehabilitation: A 2011 Supreme Court Stance on Collection and Set-Off

When a company enters civil rehabilitation proceedings (民事再生手続 - minji saisei tetsuzuki) in Japan, the rights of its creditors, including secured creditors like banks, are significantly impacted. While the Civil Rehabilitation Act aims to facilitate the debtor's business turnaround, it also seeks to ensure fair treatment of creditors.

Commercial Liens in Bankruptcy: A 1998 Japanese Supreme Court Ruling on Bank's Right to Possess and Collect Promissory Notes

When a company that has granted a commercial possessory lien (商事留置権 - shōji ryūchiken) to a creditor, typically a bank, over assets like promissory notes later enters bankruptcy, critical questions arise about the status and enforceability of that lien. Does the bank lose its right to physically hold the notes

Trust Over Earmarked Public Works Advance Payments: A 2002 Japanese Supreme Court Ruling on Contractor Bankruptcy

In Japanese public works projects, it's common for the contracting public entity to make substantial advance payments to the construction company to cover initial mobilization and material costs. To safeguard these public funds, a statutory guarantee scheme often requires the contractor to obtain a guarantee for the refund

Divorce Property Distribution in Bankruptcy: A 1990 Japanese Supreme Court Ruling on Reclamation Rights

When a marriage ends, Japanese law provides for the "distribution of property" (財産分与 - zaisan bun'yo) between the divorcing spouses. This can involve the division of assets accumulated during the marriage, spousal support, and even elements of solatium (compensation for emotional distress). A critical question arises

Client's Right to Reclaim Assets from a Bankrupt Commission Agent: A Landmark 1968 Japanese Supreme Court Decision

When a client entrusts funds to a commission agent, such as a securities brokerage firm, to purchase assets like shares on their behalf, and the agent executes the purchase but then declares bankruptcy before formally transferring those assets to the client, a critical question arises: Can the client reclaim those

Filing Priority Claims in Japanese Civil Rehabilitation: A 2013 Supreme Court Ruling on Procedural Choices and Their Consequences

In Japanese civil rehabilitation proceedings, certain claims are designated as "common benefit claims" (共益債権 - kyōeki saiken). These claims, akin to "estate claims" in bankruptcy, are afforded priority and are generally paid in full as they become due, outside the terms of the rehabilitation plan that

Subrogated Priority Claims in Japanese Insolvency: Two Key 2011 Supreme Court Rulings

In Japanese bankruptcy and civil rehabilitation proceedings, certain types of claims are granted priority status, ensuring they are paid before general unsecured creditors. These include "estate claims" (財団債権 - zaidan saiken) in bankruptcy and "common benefit claims" (共益債権 - kyōeki saiken) in civil rehabilitation. A crucial

"Excess Dividends" in Japanese Bankruptcy: A 2017 Supreme Court Ruling on Allocation When Sureties Pay Post-Commencement

In Japanese bankruptcy law, the "principle of the amount existing at the time of commencement" (開始時現存額主義 - kaishi-ji genzongaku shugi), particularly as enshrined in Article 104 of the Bankruptcy Act, plays a crucial role in determining a creditor's claim when co-obligors or sureties are involved. A

The "Existing Amount at Commencement" Principle in Bankruptcy: A 2010 Japanese Supreme Court Clarification for Multiple Claims

In Japanese bankruptcy law, a crucial principle known as the "principle of the amount existing at the time of commencement" (開始時現存額主義 - kaishi-ji genzongaku shugi), particularly its "non-deduction rule" component (非控除準則 - hi-kōjo junsoku), governs how a creditor's claim is calculated when co-obligors or

Voluntary Payments from "Free Property" in Japanese Bankruptcy: A 2006 Supreme Court Ruling on Public Servant Severance Pay

In personal bankruptcy proceedings in Japan, certain assets of the bankrupt individual are designated as "free property" (自由財産 - jiyū zaisan). These assets are exempt from being included in the bankruptcy estate that is distributed to creditors, and are intended to support the bankrupt's rehabilitation and

Scope of Bankruptcy Avoidance: Does It Cover All Pledged Assets or Just the "Insolvency-Causing" Portion? A 2005 Supreme Court Ruling

When a company grants security over multiple, divisible assets (like numerous parcels of land) and this act pushes the company into insolvency, a critical question arises if the company later enters reorganization or bankruptcy proceedings: Can the appointed trustee or supervisor avoid the entire security grant, or is the avoidance

Valuing Assets for Monetary Restitution in Bankruptcy Avoidance: A 1986 Japanese Supreme Court Decision on Timing and Judicial Guidance

When a bankruptcy trustee in Japan successfully "avoids" (否認 - hinin) a pre-bankruptcy transaction, the primary goal is to restore the bankruptcy estate to the financial position it would have been in had the detrimental transaction not occurred. If the actual asset transferred by the bankrupt can be

When Avoided Payments Revive Guarantees: A 1973 Japanese Supreme Court Decision

In the complex world of bankruptcy, a payment made by a debtor to a creditor shortly before insolvency can sometimes be "avoided" (否認 - hinin) by the bankruptcy trustee. This means the creditor must return the payment to the bankruptcy estate so it can be distributed more equitably

Avoiding "Last-Minute" Collections via Execution: A 1982 Japanese Supreme Court Ruling on Trustee's Powers

When a debtor is on the brink of bankruptcy, creditors may rush to collect on their claims through compulsory legal execution. A critical question in Japanese insolvency law is whether a bankruptcy trustee can later "avoid" (否認 - hinin, or deny the legal effect of) such collections if

"Springing" Security in Bankruptcy: A 2004 Japanese Supreme Court Decision on Conditional Claim Assignments

In the world of secured financing, parties sometimes structure agreements where a security interest, though arranged in advance, only becomes fully effective upon the occurrence of a future "triggering event," often linked to the debtor's financial distress. These are sometimes referred to as "springing"

Avoiding Late Registrations in Bankruptcy: A 1970 Japanese Supreme Court Decision on Trustee's Claims and Court's Duty to Clarify

In bankruptcy proceedings, the trustee has the power to avoid (deny the legal effect of) certain transactions made by the bankrupt prior to insolvency if those transactions are detrimental to the general body of creditors. This power can extend not only to the underlying transaction itself (e.g., a sale

Gratuitous Act Avoidance in Japanese Insolvency: Supreme Court Clarifies No Need to Prove Debtor's Insolvency

A crucial tool for supervisors and trustees in Japanese insolvency proceedings (such as civil rehabilitation, bankruptcy, or corporate reorganization) is the power to avoid "gratuitous acts" (無償否認 - mushō hinin). This power allows for the recovery of assets transferred by the debtor without receiving fair value in return,

Director's Guarantee for Company Debt: A Gratuitous Act in Personal Bankruptcy? A 1987 Japanese Supreme Court Ruling

When an individual who is also a key figure in a company—such as its representative director and de facto manager—provides a personal guarantee or mortgages their own property to secure the company's debts, and that individual later faces personal bankruptcy, can their bankruptcy trustee avoid these

When Collateral Returns: A 1997 Japanese Supreme Court Look at Avoidance and Seller's Liens

In Japanese bankruptcy law, a payment in kind (代物弁済 - daibutsu bensai) made by a debtor to a secured creditor using the very asset that serves as collateral is often not avoidable by the bankruptcy trustee, provided the transaction isn't otherwise detrimental to general creditors. This principle was

Secured Creditor Repaid with Own Collateral: A 1966 Japanese Supreme Court Ruling on Bankruptcy Avoidance

When a company faces bankruptcy, the trustee is empowered to "avoid" (否認 - hinin) certain pre-bankruptcy transactions that unfairly disadvantage the general body of creditors. A common scenario involves payments or transfers made to specific creditors shortly before insolvency. But what if the asset transferred to a creditor

Navigating Cultural Nuances in Japanese Litigation: Beyond the Law Books, What Should US Businesses Expect?

Successfully navigating civil litigation in any foreign jurisdiction requires more than just a solid understanding of its statutes, procedural rules, and case law. The "law in action" is profoundly shaped by underlying cultural norms, communication styles, and societal expectations. For US businesses and their legal counsel involved in

The Role of Case Law and Precedent in Japanese Civil Litigation: How Binding Are Higher Court Decisions?

The operation of any mature legal system relies on a blend of statutory law and judicial interpretation. While Japan is fundamentally a civil law jurisdiction, where codified statutes enacted by the legislature form the primary source of law, "case law" (判例 - hanrei), particularly the decisions of higher

Enforcing Japanese Civil Judgments: What is the Process and What Challenges Might Arise?

Obtaining a favorable judgment in a civil lawsuit is a significant milestone, but it doesn't always mean the dispute is over or that the awarded relief will be voluntarily provided by the losing party. When a judgment debtor fails to comply with the terms of a Japanese civil

Alternative Dispute Resolution (ADR) in Japan: How Prevalent Are Mediation and Arbitration Compared to Litigation?

While formal court litigation is a well-established path for resolving civil and commercial disputes in Japan, it is by no means the only avenue. Alternative Dispute Resolution (ADR) mechanisms—primarily mediation (chōtei - 調停) and arbitration (chūsai - 仲裁)—play a significant and evolving role in the Japanese legal landscape.