Suing a Foreign Company in Japan: When Do Japanese Courts Have Jurisdiction Over Property-Related Cases?

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

When a dispute arises with a foreign company, one of the first critical questions for any potential litigant is: where can a lawsuit be filed? If considering legal action in Japan against a foreign corporation, understanding the rules of international adjudicatory jurisdiction (kokusai saiban kankatsu, 国際裁判管轄) applied by Japanese courts is paramount. Japan's Code of Civil Procedure (CCP) (Minji Soshōhō, 民事訴訟法), significantly revised in 2011 (effective 2012) concerning international jurisdiction, provides a detailed framework for when its courts can hear cases involving foreign defendants, particularly in property-related and commercial matters.

This article provides an overview of the key principles governing international jurisdiction in Japan over foreign companies in property-related disputes, excluding cases where specific agreements on jurisdiction exist (which will be covered in a subsequent article).

Distinguishing Jurisdiction from Sovereign Immunity

Before delving into adjudicatory jurisdiction, it's essential to briefly distinguish it from sovereign immunity (shuken menjo, 主権免除). If the foreign company is a state-owned enterprise or an instrumentality of a foreign state, the issue of whether it is immune from the jurisdiction of Japanese courts might arise. Japan's Act on the Civil Jurisdiction of Japan with regard to a Foreign State, etc. (Taigai Koku nado ni Taisuru Wagakuni no Minji Saibanken ni Kansuru Hōritsu, 対外国等に対する我が国の民事裁判権に関する法律), enacted in 2009, governs this area. Generally, foreign states and their instrumentalities are immune from jurisdiction. However, there are significant exceptions, most notably for "commercial transactions" (shōgyō-teki torihiki, 商業的取引) (Article 8 of said Act). The prevailing view for determining if an activity is "commercial" focuses on the nature of the act, rather than its purpose; if it's an act that private parties can engage in (like entering into a sales contract or providing air transport services), it's likely commercial, and immunity will not apply. For the remainder of this article, we assume sovereign immunity is not at issue or an exception applies.

General Jurisdiction over Foreign Companies in Japan (CCP Article 3-2)

The most straightforward basis for a Japanese court to exercise jurisdiction over a foreign company is if Japan can be considered the company's "home base." This is known as general jurisdiction.

CCP Article 3-2, item 3: Japanese courts have jurisdiction if the "principal office or principal place of business" of a corporation or other association or foundation is located in Japan.

This is analogous to "general personal jurisdiction" in U.S. legal terminology. If a foreign company's main operational headquarters or registered principal office is in Japan, Japanese courts can hear almost any type of claim against it, regardless of where the underlying events occurred. However, for most truly "foreign" companies, this basis will not be met.

Specific (Special) Jurisdiction Grounds for Property-Related Cases (CCP Article 3-3)

Even if general jurisdiction is lacking, Japanese courts may still have jurisdiction over specific types of claims if there are sufficient connections between the dispute, the defendant, and Japan. CCP Article 3-3 outlines several grounds for such special jurisdiction. For property-related and commercial disputes against foreign companies, the following are particularly relevant:

1. Jurisdiction Based on a Japanese Office or Place of Business (CCP Article 3-3, item 4 - Eigyōsho Shozaichi Kankatsu, 営業所所在地管轄)

Japanese courts have jurisdiction over an action against a person (including a corporation) who has an office or place of business in Japan, provided the action "relates to the business of such office or place of business."

  • Requirements:
    • The defendant foreign company must have an office or place of business (jimusho matawa eigyōsho, 事務所又は営業所) in Japan (e.g., a branch, a sales office).
    • The lawsuit must concern the "business of such office or place of business."
  • "Relates to the business": The interpretation of this nexus is crucial.
    • One view, "specific business connection" (gutaiteki gyōmu kanrensei), suggests that the claim must arise directly from activities conducted by or through that specific Japanese office.
    • A broader view, "abstract business connection" (chūshōteki gyōmu kanrensei), might argue that if the type of business involved in the dispute falls within the general scope of activities that the Japanese office could conduct, jurisdiction might exist even if that office wasn't directly involved in the specific transaction leading to the dispute.
      The legislative history indicates some ambiguity, but legal commentators often lean towards requiring a more concrete connection, meaning the Japanese office itself should have been involved in or responsible for the business that gave rise to the claim. The rationale is that such an office serves as a local center of operations, making it a fair and convenient forum for disputes arising from its activities, and facilitates evidence gathering.

2. Jurisdiction Based on Business Activities in Japan (CCP Article 3-3, item 5 - Jigyō Katsudō-chi Kankatsu, 事業活動地管轄)

Even without a formal office, a foreign company's activities in Japan can trigger jurisdiction. Japanese courts have jurisdiction over an action against a person who "carries on business in Japan," provided the action "relates to such person’s business in Japan."

  • Requirements:
    • The defendant foreign company must be "carrying on business in Japan." This doesn't necessarily require a fixed establishment but implies systematic and continuous business activity directed at or within Japan, rather than isolated or sporadic acts. The assessment is fact-specific.
    • The lawsuit must concern "such person’s business in Japan." Unlike item 4 (office-based jurisdiction), this explicitly links the claim to the Japanese business operations.
  • Rationale: This ground recognizes that companies can conduct substantial business in a jurisdiction without a physical branch, particularly in the age of e-commerce. If they purposefully avail themselves of the Japanese market, it is fair to expect them to be answerable in Japanese courts for disputes arising from those Japanese activities.

3. Jurisdiction Based on the Location of Assets in Japan (CCP Article 3-3, item 3 - Zaisan Shozaichi Kankatsu, 財産所在地管轄)

The presence of a foreign company's assets in Japan can also be a basis for jurisdiction, particularly for monetary claims. This is often termed "quasi in rem" jurisdiction in other legal systems, though the Japanese approach is statutory.

This ground has two distinct prongs:

  • (a) Subject Matter of the Claim Located in Japan: If the "subject matter of the claim is located in Japan," Japanese courts have jurisdiction. This applies, for example, to disputes over title to specific real or personal property situated in Japan.
  • (b) For Monetary Claims - Attachable Property in Japan: If the action is for the payment of money, Japanese courts have jurisdiction if:
    • Property of the defendant "against which an attachment may be effected" is located in Japan, AND
    • The value of such property is "not extremely low."
  • Rationale: The first prong is based on the strong connection of the dispute to property physically within Japan. The second prong for monetary claims is primarily to facilitate the enforcement of potential judgments. If the defendant has attachable assets of non-trivial value in Japan, a Japanese judgment can be satisfied there, making litigation in Japan more meaningful for the plaintiff.
  • "Attachable Property" and "Not Extremely Low Value": "Attachable property" is determined by Japanese civil execution law. Most types of property are attachable. The "not extremely low value" requirement is a qualitative assessment and doesn't require strict proportionality between the asset value and the claim amount, but rather that the assets have some meaningful value for potential enforcement.

Special Jurisdiction for International Air Carriage (Montreal Convention)

It's worth noting that for claims arising from international air carriage (e.g., damage to cargo, passenger injury or death), if Japan and the relevant foreign countries are parties to the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention, 1999), its specific jurisdictional rules (Article 33) will take precedence over the general CCP rules. The Montreal Convention allows suits, at the plaintiff's option, in places like the carrier's domicile, principal place of business, place of business where the contract was made, or the place of destination. For passenger injury/death, it also allows suit in the passenger's principal and permanent residence under certain conditions.

The Overarching Consideration: "Special Circumstances" (CCP Article 3-9)

A crucial feature of Japan's international jurisdiction regime is the "special circumstances" (tokubetsu no jijō, 特別の事情) provision in CCP Article 3-9. This article states that even if one of the statutory grounds for jurisdiction (under Articles 3-2 to 3-8, excluding cases of exclusive jurisdiction or valid jurisdiction agreements pointing to Japan) is met, the court shall dismiss the action in whole or in part if it finds that "special circumstances exist under which a trial and judicial decision by a court of Japan would impair fairness between the parties or hinder the realization of the proper and prompt administration of justice."

  • Purpose: This provision acts as a corrective mechanism, similar in function to the forum non conveniens doctrine in common law systems, but it is framed as a mandatory dismissal if the conditions are met. It allows courts to decline jurisdiction if hearing the case in Japan would be fundamentally unfair or highly impractical, despite a technical basis for jurisdiction existing.
  • Factors Considered: Courts will weigh various factors, including:
    • The burden on the parties (especially the defendant) of litigating in Japan.
    • The location of evidence and witnesses.
    • The applicable substantive law.
    • The possibility of enforcing a Japanese judgment abroad.
    • Whether a more appropriate forum exists elsewhere.
  • Restrictive Application: While broadly worded, this provision is generally expected to be applied restrictively, so as not to unduly undermine the certainty provided by the specific jurisdictional grounds. The legislative intent was to address situations where, for example, a minimal asset presence might technically ground jurisdiction, but litigating the entire dispute in Japan would be grossly inconvenient and unfair given that all other relevant factors point to a foreign forum.

Analyzing a Scenario

Let's apply these principles to an adapted version of the scenario from Case 30, No. 26 in the reference material:

  • Facts: Airline A, a state-owned enterprise of Country X, operates domestic flights within Country X. Mr. B, a Japanese national on a long-term business trip in Country X, purchases a ticket from Airline A for a flight within Country X. The aircraft crashes in Country X, and Mr. B dies. Mr. B's surviving spouse, C, and child, D (both Japanese nationals residing in Japan), file a lawsuit in Japan against Airline A seeking damages. There is no jurisdiction clause in the carriage contract.
  • Analysis:
    1. Sovereign Immunity (PDF Problem (1)): As Airline A is a state-owned enterprise, the first question is whether it's immune from Japanese jurisdiction. Under Japan's Act on Civil Jurisdiction regarding Foreign States, the "commercial transaction" exception (Article 8) would likely apply to passenger air transport services. Therefore, Airline A would probably not be immune.
    2. International Jurisdiction (assuming no immunity):
      • General Jurisdiction (CCP Art. 3-2): Airline A's principal office is in Country X. So, no general jurisdiction in Japan.
      • Office in Japan (CCP Art. 3-3, item 4 - related to PDF Problem (2)): Let's assume Mr. B's company purchased his ticket from Airline A's sales office in Japan. The claim (damages arising from the crash of the flight for which the ticket was sold) "relates to the business" of that Japanese office (the sale of the ticket and the carriage contract). Jurisdiction in Japan would likely be affirmed under this item.
      • Business Activities in Japan (CCP Art. 3-3, item 5 - related to PDF Problem (3)): Assume Mr. B bought his ticket online directly from Airline A's website (hosted in Country X) while he was in Country X. The website is available in Japanese. Does this constitute Airline A "carrying on business in Japan" in a way that this specific claim (for a domestic Country X flight) "relates to such person's business in Japan"? This is more tenuous. A Japanese-language website alone, without more evidence of Airline A targeting the Japanese market for its Country X domestic flights or conducting systematic business in Japan related to such flights, might not suffice. The purchase occurred in Country X for a Country X service.
      • Assets in Japan (CCP Art. 3-3, item 3 - related to PDF Problem (4)): Assume Airline A has no office in Japan but operates international flights between Country X and Japan, and it stores some spare aircraft parts at a Japanese airport for these international routes (not the domestic route Mr. B was on). Are these spare parts "attachable property" of "not extremely low value" sufficient to ground jurisdiction for C and D's wrongful death claim? The parts are likely attachable and may not be of extremely low value. Thus, a technical basis for jurisdiction might exist.
      • Special Circumstances (CCP Art. 3-9): This is where the analysis becomes critical, especially for the asset-based jurisdiction. Even if jurisdiction is technically established (e.g., through the presence of spare parts), a Japanese court would consider whether hearing a case about a domestic air crash in Country X, involving a Country X airline, would "impair fairness... or hinder proper and prompt administration of justice." Most evidence, witnesses, and accident investigation reports would likely be in Country X. The applicable substantive law for the accident itself would also likely be that of Country X (as the place of the tort). In such a scenario, there's a strong possibility that a Japanese court might find "special circumstances" exist and dismiss the action in favor of a Country X forum, despite a technical jurisdictional hook. For the office-based jurisdiction (if the ticket was bought in Japan), the "special circumstances" argument for dismissal would be weaker, as the airline has a direct business presence in Japan related to the contract.

Conclusion

Determining whether a Japanese court has international jurisdiction over a foreign company in a property-related or commercial case involves a multi-layered analysis under the CCP. While specific connecting factors like the location of an office, business activities, or assets in Japan can establish jurisdiction, the overarching "special circumstances" test in Article 3-9 provides courts with a necessary tool to ensure that asserting jurisdiction is fair and conducive to the proper administration of justice. For businesses involved in or contemplating litigation against foreign entities in Japan, a thorough understanding of these rules is indispensable.