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“Comprehensive Analysis on Diversity of Legal Systems in Asia-Pacific Region and Convergence towards Establishment of the Rule of Law”

—Report No. 1: “What is this research project all about?”—

Nobuyuki Sato
Professor, Chuo Law School
Areas of Specialization: Public Law, British/American/Canadian Law, Information Law

1. Introduction

“Comprehensive Analysis on Diversity of Legal Systems in Asia-Pacific Region and Convergence towards Establishment of the Rule of Law” is a new international joint research project of Chuo University which started in the 2016 academic year. This research project is one of 23 research projects that were selected by the MEXT in 2016 as a “Private University Research Branding Project (Type B; Global Development Category).” Also, it is the only one in the legal field.

This joint research project is a mid- to long-term project which is currently scheduled to receive grants for a five-year period until 2020. This article is the first installment of research reports which I will publish on Chuo Online as needed. The theme of this article is “In the first place, what is this research project?”

2. Diversity and convergence of legal systems

In actuality, there is great diversity in laws and systems formed by those laws. To start with, laws are one type of social rules. As such, laws originate based on the lifestyle and culture of people living in a certain region. However, in some cases, this diversity converges into a certain direction. Today, this convergence is being encouraged by the globalization which continues to accelerate in economic fields. The reason is that for economic activities conducted across national borders, legal systems that might change whenever a border is crossed sometimes increase cost and are sometimes a barrier to effective economic performance.

What emerged as a result was the concept of avoiding confusion and reducing cost by unifying laws to match cross-border economic activity unit. Of course, this concept itself is worthy of consideration. However, in order to achieve such unification, if we affirm the legal system and cultural background of certain countries and regions as correct and deserving of maintenance/promulgation, and deny those elements in all other regions as inferior, further confusion would arise. For example, consider the issue of extraterritorial application in which antitrust laws and other laws of superpower nations are also applied to regions outside the sovereignty of those nations. In the past, this issue has triggered friction among countries. Recently, new types of extraterritorial application such as money laundering regulations, anti-terror measures, bribery measures, and M&A regulations are important issues.

In response, it is vital to start by recognizing the diversity of legal systems, pay respect to that diversity, identify points to harmonize, and finally establish stable rule of law. This research project explores such legal development. Accordingly, in order to accurately express this concept, the term of convergence is used instead of unification or assimilation.

3. Consideration based on Supreme Court judgment

Now, based on a judgment of the Supreme Court of Japan, let’s take a slightly more in-depth look at the issue of this research project.

On July 11, 1997, the Supreme Court of Japan handled a case seeking approval and enforcement in Japan of a judgment by Superior Court of California, United States. The Supreme Court denied a part of the claim. This case is a classic example of collision in legal diversity.

The case arose when the Japanese corporation “Company A” was planning to operate a factory in the US based on expectations for special measures to attract foreign investment, however, it ultimately abandoned the plan. In this case, Company A withdrew even though it had concluded a land acquisition contract with a landowner. That landowner filed an action to recover damages in Superior Court of California, which awarded plaintiff more than $420,000 in actual damages and $1,125,000 in punitive damages. However, since Company A did not possess any assets in the US, the plaintiff filed a lawsuit in Japanese court for approval and execution of a judgment by Superior Court of California (foreign judgment) in Japan, seeking the ability to receive payment from the domestic Japanese assets of Company A.

In respect for the sovereignty of foreign nations, foreign judgments are fundamentally approved and executed without examining the contents of the judgments. However, it is required that “the content of the judgment and the court proceedings are not contrary to public policy in Japan.” (Code of Civil Procedure, Article 118-(iii)). The issue in the case was how to deal with punitive damages, a system which does not exist in Japan.

Punitive damages are a monetary sanction imposed in addition to actual damages for especially malicious torts and a breach of contract. The use of punitive damages is one characteristic of American law. The Supreme Court of Japan ruled that the Japanese legal system is designed to implement such sanctions as criminal charges, and that ordering payment of punitive damages in Japan is a violation of public policy.

Now, the facts introduced above may be interpreted as follows by some readers: The Supreme Court of Japan protected the diversity of Japanese law by denying an attempt to force American (Californian) law on Japan and marginalize Japanese law. However, the problem is more complex. From the perspective of the United States, this judgment unilaterally denied American law, which necessitated a discussion of countermeasures against Japanese laws. In other words, this judgment of the Supreme Court of Japan is both the conclusion of one issue and start of the next issue. (In this case, the next problem could also arise in terms of attempts to expand the scope of the judgment. One example is litigation asserting that foreign judgments which order payment of child support exceeding base amount in Japan are violations of public policy and therefore should not be approved or enforced. Japanese courts denied such assertions. May 20, 2015 judgment by the Tokyo High Court.)

As an example of the chain of issues, consider the FTA negotiations between the United States and South Korea, as well as amendments to Korean Copyright Act based on those negotiations. Similar to Japan, South Korea does not have a system for punitive damages. During US-Korea FTA negotiations, however, America argued for implementation of a punitive damage system in order to strengthen copyright protection across national borders. As a result, in 2011, Item 2 was added to Article 125 of the Copyright Act of South Korea. This amendment recognized orders for paying punitive damages of a reasonable amount within a legally-defined scope instead of actual damages. Although the name of the Korean system does not explicitly use the term of punitive damages, the actual function of the system is in fact very close.

Should this conclusion be viewed as American law being forced on another country? Or should it be seen as setting a point to harmonize based on mutual respect between American law and Korean law? Of course, there is no easy answer to this question. Nevertheless, in order to reach a reasonable answer, it is not enough to simply take a superficial view of the US-Korea FTA and articles in the Copyright Act of South Korea. Clearly, it is also necessary to assess actual legal conditions, including the operation of related laws. This creates the necessity for international joint research.

4. Conclusion

There are an infinite number of issues surrounding legal diversity. In response, this research project targets the Asia-Pacific Region including Japan; with special emphasis placed on the six countries of Japan, South Korea, Thailand, Hong Kong, Singapore and Australia. The project focuses on three specific issues: international transactions (contract), dispute resolution, and data privacy. Research methods will start with a questionnaire-based survey aimed at clarifying the diversity of each form of legal systems. Also, a database will be constructed to store survey results. The results will then be broadly disclosed and numerous parties will be included in discussions on the form of convergence. We will also conduct concurrent research for assessing culture and social structures which are the foundation for legal diversity. It is an important mission of this research to prevent unilateral enforcement of specific legal systems without first obtaining the necessary knowledge and engaging in required investigation.

In the next installments of this series, I will report on research results while introducing specific examples.

Nobuyuki Sato
Professor, Chuo Law School
Areas of Specialization: Public Law, British/American/Canadian Law, Information Law
Nobuyuki Sato was born in Fukushima Prefecture in 1962.
He finished the Doctoral Program in the Chuo University Graduate School of Law in 1992. He holds a PhD in law (Chuo University, 2000).
After serving as a Full-Time Instructor at Kushiro Public University of Economics, he assumed his current position in 2006. In 2016, he was appointed as Director of the joint research project introduced in this article.
His edited works (all co-written/edited) include First Encounters with Canada (2009, Yuhikaku Publishing), Abridged Constitutional Cases 205 (2007, Gakuyo Shobo/Henshukoubou Q), Fundamental Knowledge of Information Education (2003, NTT Publishing) and more.