Product Liability Claims Involving Japan: How Is the Applicable Law Determined?

In an era of global supply chains and international markets, products manufactured in one country can easily find their way to consumers in another, leading to complex legal questions when defects cause harm. Product liability claims with an international dimension require a clear determination of which jurisdiction's law will govern issues such as defect standards, causation, and available damages. Japan's Act on General Rules for Application of Laws (AGRAL) (Hō no Tekiyō ni Kansuru Tsūsokuhō, 法の適用に関する通則法), specifically in its Article 18, provides a dedicated set of rules for determining the applicable law in such cross-border product liability cases. These rules aim to balance the predictability needed by manufacturers with the protection afforded to victims.

This article explores the intricacies of AGRAL Article 18, examining its primary connecting factors, exceptions, and its interplay with general tort principles and Japanese public policy.

Why Special Rules for Product Liability? The Rationale Behind AGRAL Article 18

The general choice-of-law rule for torts under AGRAL Article 17 primarily points to the law of the place where the harmful result occurred (lex loci damni). However, in the context of product liability, applying this general rule can be problematic:

• Unpredictability for Manufacturers: Products can circulate through extensive and sometimes unforeseeable distribution channels, potentially exposing manufacturers to the laws of numerous, unanticipated jurisdictions where harm might occur.
• Difficulty in Pinpointing "Place of Wrongful Act": The "wrongful act" in product liability could be the design defect, manufacturing defect, or inadequate warning, which might occur in different places, making the alternative connecting factor in Article 17 (place of the act) also complex to apply.

To address these issues and provide a more tailored approach, AGRAL Article 18 establishes special rules.

Scope of "Product Liability" under AGRAL Article 18:
It's important to note that "product liability" (seisanbutsu sekinin, 生産物責任) as a connecting factor in Japanese private international law is interpreted broadly. It is not strictly limited to the scope of Japan's domestic Product Liability Act.

• "Products" (seisanbutsu, 生産物): This can include not only manufactured goods but also unprocessed agricultural products and even real estate, if a defect in them causes harm in a way analogous to product liability.
• "Producers, etc." (seisan-gyōsha-tō, 生産業者等): This term is also construed widely to encompass not just the initial manufacturer but also those involved in processing, importing, exporting, distributing, or selling the product, as well as any party who represents themselves as a producer (e.g., by affixing their name or trademark). This broad scope aims to cover various actors in the product's journey to the victim.

The Primary Connecting Factor: Law of the Place Where the Victim Received the Product (AGRAL Article 18, Main Provision)

The main rule under AGRAL Article 18, for determining the law applicable to product liability claims, is:
"...the law of the place where the victim received the delivery of the product (seisanbutsu no hikiwatashi-chi-hō, 生産物の引渡地法)."

Rationale and Interpretation:

• Focus on the Market: This rule is generally understood to aim at applying the law of the market where the product was placed and acquired by the victim. The underlying idea is that both the producer (who places the product into that market) and the victim (who acquires it there) can reasonably foresee the application of that market's law.
• "Place of Receipt/Delivery": This refers to the place where the victim obtained possession of the product. It is not limited to sales; it can include situations like leases or rentals.
  • Complex Scenarios: Determining the "place of receipt" can be challenging in cases involving intermediaries or online purchases. For instance, if a victim purchases a product through an agent located in a different country, or buys it online and has it shipped, is the "place of receipt" where the agent received it, where the victim legally acquired title, or where the victim took actual physical possession? Scholarly opinion often leans towards the place where the victim legally and effectively gained control and the ability to use the product, as this aligns with the market-based rationale and foreseeability for the producer concerning that specific market.

The Exception: Manufacturer's Inability to Foresee Distribution (AGRAL Article 18, Proviso)

The primary rule is subject to a significant exception designed to protect producers from the application of laws of entirely unexpected markets:
"...provided, however,
that if the delivery of the product in that place was not ordinarily foreseeable by the producer, etc., it shall be governed by the law of the producer's, etc. principal place of business (or, if the producer, etc. has no place of business, their habitual residence)."

Conditions and Rationale:

• "Ordinarily Unforeseeable": This exception applies if the producer could not ordinarily foresee that the product would be delivered to a victim in that particular place. This might occur, for example, if a product is resold through informal channels or taken by the initial purchaser to a remote, unintended market.
• Shifting to Producer's Law: If the place of delivery was unforeseeable, the applicable law shifts to the law of the producer's principal place of business (seisan-gyōsha-tō no shutaru jigyōsho shozaichi-hō, 生産業者等の主たる事業所所在地法). This provides a default rule anchored to the producer's home legal environment when the market connection is broken by unforeseeability.
• Standard of Foreseeability: The foreseeability test is objective and normative. It's not about the producer's subjective knowledge but what a reasonable producer, considering factors like the nature of the product, their scale of operations, typical distribution channels, and overall market conditions, should have foreseen. For example, if a producer exports products to a specific country that is part of a larger integrated economic area with free movement of goods, it might be foreseeable that the product could end up in neighboring countries within that area.

The Plight of the Bystander Victim

A recurring question is whether AGRAL Article 18 applies to "bystander victims" – individuals who did not themselves purchase or receive delivery of the defective product but were harmed by it (e.g., a pedestrian injured by a defective car).

• Literal Interpretation: Article 18 connects to the "place where the victim received the delivery of the product." A strict reading suggests it presupposes the victim is the one who received the product.
• Prevailing View: The dominant opinion in Japanese legal scholarship is that Article 18 does not directly apply to pure bystander victims because the connecting factor (receipt by the victim) is absent. In such cases, the claim would be governed by the general tort rules in AGRAL Article 17 (i.e., typically the law of the place where the injury occurred, subject to foreseeability).
• Nuance for Associated Victims: However, if the bystander is closely associated with the person who received the product (e.g., a family member living in the same household, an employee using company-supplied equipment), an argument can be made that the rationale of Article 18 (market foreseeability) might still extend to them, or that their connection to the place of receipt is strong enough to justify applying Article 18 by analogy.

Overriding Principles: Closer Connection and Party Autonomy

Like other torts, product liability claims under AGRAL are also subject to broader principles of flexibility and party autonomy:

1. The Flexibility Clause (AGRAL Article 20)

Even if Article 18 points to a specific law, Article 20 allows for the application of the law of another place if that place is "manifestly more closely connected" with the product liability claim. This could be relevant, for instance, if both the producer and the victim have their principal places of business or habitual residences in the same country, and the product was intended for use there, even if the technical "place of receipt" was elsewhere.

2. Post-Tort Choice of Law (AGRAL Article 21)

AGRAL Article 21 permits the parties (producer and victim) to agree on the law applicable to the product liability claim after the harmful event has occurred.

• Ineffectiveness of Pre-Incident Clauses: Critically, any pre-incident clauses attempting to dictate the applicable law for future tortious product liability (e.g., clauses in warranty documents or terms of sale) are generally considered ineffective for this purpose. The choice of law for torts, including product liability, must be made with full knowledge of the circumstances after the harm has materialized to ensure the victim is not disadvantaged by a pre-emptive choice imposed by the stronger party.

The Public Policy Filter (AGRAL Article 22)

As with general torts (discussed in a previous article), product liability claims governed by a foreign law under Article 18 are subject to the public policy filter of AGRAL Article 22. This means:

• No Claim if Not a Tort Under Japanese Law (Article 22(1)): If the circumstances would not give rise to product liability under Japanese domestic law, no claim can be made in a Japanese court, even if the foreign applicable law would allow it.
• Remedies Limited to Japanese Standards (Article 22(2)): Even if liability exists under both the foreign applicable law and Japanese law, the claimant can only obtain damages and other remedies that are recognized under Japanese law, and only to the extent so recognized. This would typically exclude, for example, punitive damages if the foreign law allowed them but Japanese law (which focuses on compensatory damages) does not.

Analyzing a Scenario

Let's adapt the scenario from Case 30, No. 11, Problem 1 of the reference material:

• Facts: Mr. A, a Japanese national, is on a tourist trip in Europe and purchases a gas lighter in Country X. The lighter was manufactured by Company B, an entity from Country Y. After returning to Japan, Mr. A is camping with his friend, Mr. C (also Japanese). When Mr. A tries to light a camping stove with the lighter, it flares up unexpectedly, igniting the stove and causing severe burns to both Mr. A and Mr. C. The cause was a defect in the lighter's ignition mechanism. Company B has an office in Japan that sells other types of lighters, but this particular model is not sold in Japan by Company B. Mr. A and Mr. C sue Company B in a Japanese court.
• Analysis:
  1. Mr. A's Claim (The Purchaser):
     • Applicable Law under AGRAL Article 18: Mr. A "received the delivery of the product" (the lighter) in Country X. Therefore, the primary candidate for the governing law is the law of Country X.
     • Foreseeability (Proviso): Was the sale of this lighter in Country X "ordinarily foreseeable" by Company B (from Country Y)? Since the lighter was sold in Country X (presumably through legitimate channels, e.g., a department store as per the PDF's original problem), Company B should have foreseen its products being sold in the Country X market. Thus, the exception (shifting to Country Y law) is unlikely to apply. The law of Country X would govern Mr. A's claim.
  2. Mr. C's Claim (The Bystander Friend):
     • Applicability of AGRAL Article 18: Mr. C did not receive delivery of the lighter. Under the prevailing view, Article 18 would not apply directly to his claim.
     • Applicable Law under AGRAL Article 17 (General Tort Rule): Mr. C's injury (the result of the tort) occurred in Japan. Was this result in Japan "ordinarily foreseeable" by Company B? Company B manufactures lighters (inherently portable items) and even has a business presence in Japan (selling other lighters). It is arguably foreseeable that a lighter it manufactures could cause harm in Japan, even if that specific model isn't officially distributed there by them. If foreseeable, Japanese law would apply to Mr. C's claim. If deemed unforeseeable (a higher bar to meet), the law of the place of the wrongful act (e.g., manufacture in Country Y) might apply.
  3. Effect of a Warranty Clause Stipulating Country Y Law: If the lighter's warranty documents had stated that "all claims against Company B shall be governed by Country Y law," this would generally be ineffective to choose the applicable law for a tortious product liability claim before the incident occurred (AGRAL Article 21).
  4. Impact of AGRAL Article 22 (Public Policy): Regardless of whether Country X law (for A) or Japanese law (potentially for C) applies, any remedies sought would be filtered through Article 22. For instance, if Country X law allowed for very high non-compensatory damages, these might be limited by Japanese standards.
  5. Potential for AGRAL Article 20 (Closer Connection): If, hypothetically, Company B was a Japanese company, and Mr. A bought the lighter in Japan for use in Japan, even if some technical element (like a component manufactured abroad) pointed elsewhere initially, Article 20 might strongly suggest Japanese law as the manifestly more closely connected law for all aspects.

Conclusion

Determining the applicable law for product liability claims with a Japanese nexus requires a careful application of AGRAL Article 18. This provision, with its primary focus on the place where the victim received the product and an exception for unforeseeable distribution, attempts to provide a balanced approach. However, complexities arise with bystander victims, the overriding effect of Japanese public policy under Article 22, and the potential application of flexibility clauses like Article 20. For manufacturers distributing products globally and for victims of defective products with international links, understanding these specific Japanese private international law rules is crucial for assessing rights, obligations, and potential exposures.