Claim collection in Japan has become an increasingly challenging task in times of a difficult economical environment. Where claims cannot be successfully settled out-of-court, the sole remaining option is often the enforcement by court order against the debtor. This newsletter describes the most common court procedures for claim assertion in Japan to help foreign investors understand how to enforce their rights.
Japan offers standard legal instruments to assert and collect monetary claims, which, in essence, are similar to those under German law. Generally in Japan, settling a payment dispute out-of-court is more the rule than the exception. One reason for this is the fact that claim collection through court is a rather time and money consuming process and therefore is often avoided. In addition, the enforcement of a court approved titled fails in case of a lack of seizable assets of the debtor.
As a result, deciding whether to take legal action in order to pursue ones claim in Japan needs to be thoroughly analyzed in each case and is generally only recommendable if the monetary claim is substantial and sufficient assets of the debtor exist to satisfy the creditor.
2. Prior Out-of-Court Demand for Payment
Prior to initiating a court procedure of any nature, a creditor will usually request payment from the debtor by written notice as such reminder will be required in a later court procedure for evidentiary purposes. More importantly, a written demand in Japanese delivered by registered mail with certified content (naiyou shomei yuubin) often causes the debtor to enter into negotiations with the creditor to settle the claim, due to its quasi official character. This is particularly the case if the letter is sent by a Japanese attorney engaged by the creditor for such purpose. The ignoring of such formal demand letter by the creditor may also constitute a reason of urgency justifying provisional enforcement proceedings (see item 3 below). If negotiations fail, one the following court procedures should be considered.
3. Provisional Enforcement (Kari Sashiosae)
In case the debtor ignores payment requests, one potential option for the creditor is to file an application for provisional enforcement. This procedure is available without payment title (e.g. enforceable judgment, enforceable notary deed) and has the purpose to secure the assets for the realization of payment claims prior to the initiation of a civil action. The application, which needs to make the claim and the urgency of a provisional enforcement plausible, is usually prepared and filed by an attorney; together with the application, a security deposit determined by the court (usually approx. 15 ~ 30% of the asserted claim) needs to be paid to the court issuing the provisional enforcement order. Urgency is often admitted when a debtor has ignored a formal payment request by the creditor and/or the creditor’s attorney (item 2 above), or when there is a risk that the debtor tries to hide its assets or might become insolvent. The following assets of the debtor are often target of preliminary enforcement proceedings: (i) real estate, (ii) production machines or company cars, (iii) bank accounts, (iv) claims of the debtor against business partners; or (v) deposit for office lease paid by the debtor to the lessor. Sources of information to locate respective assets of the debtor are, e.g., the land registry, data bank reports of private information services like Shogo Research or Teikoku Data Bank, company websites, an attorney enquiry through the bar association (bengoshikai shokai, etc). In particular the enforcement into bank accounts, production machines or office lease deposits often encourage debtors to enter swift negotiations with their creditors.
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