The Japan Commercial Arbitration Association (the “JCAA“) recently issued new Commercial Arbitration Rules (the “Rules“), which will apply to all arbitrations commenced on or after 1 February 2014.
In doing so, the JCAA has indicated that they are intended to bring the Rules into line with updates to the UNCITRAL Arbitration Rules in 2010 and revisions to the rules of other arbitral institutions.
Perhaps one of the most significant amendments is to the provisions on mediation, which substantially expand upon the old rules.
While the option of med-arb with the same person acting as arbitrator and mediator remains (Rule 55), the new Rules contain additional provisions in relation to the conduct of the mediator/arbitrator, who may not consult separately with any party unless all parties agree in writing. Where consultations do take place, the mediator/arbitrator must disclose this (but not the contents of the consultation) to the other parties.
The Rules also include provision for mediation with a third party mediator to be appointed (Rule 54). In the case of mediation proceedings commenced under Rule 54, all offers, admissions or other statements by the parties and any recommendations by the mediator are inadmissible as evidence in the arbitral proceedings unless the parties agree otherwise.
In the past, the JCAA’s med-arb provisions have given rise to some concern about the impact on an arbitrator’s impartiality where they have has previously conducted an unsuccessful mediation between the parties. The new Rules should serve to address this concern to some extent.
Another key change is the introduction of emergency arbitrator procedures (Rules 70 to 74). Parties may now apply to the JCAA prior to the constitution of the tribunal for the grant of interim measures by a sole emergency arbitrator. The JCAA must use reasonable efforts to appoint an emergency arbitrator within two days of an application and the emergency arbitrator is required to make a decision on the emergency measures within two weeks of his appointment. A party may challenge an emergency arbitrator within two days of his appointment.
The parties are bound by any emergency measures awarded, provided that full arbitration is commenced and a tribunal constituted within three months of the grant of emergency measures. On constitution of the tribunal, the emergency measures are deemed to be “interim measures” granted by the tribunal. The emergency arbitrator may not be appointed as an arbitrator for the same dispute.
In contrast to SIAC and HKIAC rules, the Rules do not require claimants to submit a notice of arbitration before or at the same time as making an application for emergency relief. This reduces the administrative burden on claimants seeking the appointment of an emergency arbitrator.
However, it is important to note that emergency measures are not currently enforceable under Japanese law. It remains to be seen whether amendments will be made to the Japanese Arbitration Act to facilitate the JCAA’s new Rules.
The new Rules amend the provisions in relation to the use of expedited procedures. In particular, in cases where all parties agree, the financial threshold on the application of expedited procedures (JPY 20,000,000 / approximately US$ 200,000) may be lifted (Rule 75).
The welcome result is that in relatively narrow or simple claims, parties can now agree to the use of a short-form procedure, potentially reducing the length of arbitration proceedings to just three months.
CONSOLIDATION AND JOINDER
The new Rules also include expanded provisions, clarifying the circumstances in which arbitration proceedings may be consolidated or third parties joined to existing proceedings (Rules 52 and 53).
Under the previous rules, the consent of all parties was required to join a third party to the proceedings. The new Rules also permit joinder of a third party where all claims are made under the same arbitration agreement – provided that the joining party consents in writing where it is to be joined after constitution of the tribunal.
The new Rules expand the grounds for consolidation so that a request for arbitration (in respect of which no tribunal has been appointed) may be consolidated with an existing set of proceedings in the following circumstances: (i) all parties agree in writing; (ii) the claims arise under the same arbitration agreement (provided that consent of the party whose request is to be consolidated is required if such party is not a party to the existing reference); or (iii) the claims arise between the same parties, concern the same or a similar question of fact or law and are capable of being heard together.
APPOINTMENT OF ARBITRATORS
In order to expedite the appointment of arbitrators in cases where there is a three panel tribunal, the Rules now permit parties to appoint their respective arbitrator when submitting the Request for Arbitration or a Response (as applicable) (Rules 14.2 and 18.2).
Reflecting the position under the rules of a number of major arbitral institutions, the appointment of arbitrators by the parties or by already-appointed arbitrators is now subject to confirmation by the JCAA (Rule 25.3).
While the Rules do not contain any restrictions on the nationality of arbitrators, where the JCAA appoints an arbitrator it is now required to respect any party request that the sole or presiding arbitrator be of a different nationality to the parties (Rules 27.4 and 28.6). The JCAA has said that this is consistent with its practice (albeit that it was previously only obliged to give consideration to such requests).
In line with the new provisions relating to multi-party arbitrations, the procedure for the appointment of arbitrators where there is more than one claimant or respondent is also updated and expanded (Rule 29).
PROCEDURAL TIMETABLE AND OPTIONAL TERMS OF REFERENCE STAGE
The Rules include new provisions intended to expedite JCAA arbitration procedure. These include a requirement for the tribunal to use “reasonable efforts” to render an award within six months of its constitution (Rule 39.1) and an obligation on the tribunal to consult with the parties and produce a procedural schedule “to the extent necessary and feasible as early as practicable”.
A further significant change to the Rules is the introduction of an optional terms of reference stage (Rule 40). The tribunal must consult with the parties and make reasonable efforts to identify the issues in dispute and, if it considers it appropriate, may also prepare terms of reference detailing such issues. This may be contrasted with the mandatory terms of reference stage under the ICC Arbitration Rules.
Several more minor amendments serve to expedite and simplify the JCAA’s arbitration procedure and bring the Rules up-to-date with modern practice. Such revisions include:
(a) deletion of the “basic date” concept – time periods are now calculated by reference to the respondent’s receipt of the notice of request for arbitration – not by reference to a date falling three weeks after submission of the notice of arbitration as before;
(b) the definition of “in writing” has been expanded to include electronic, magnetic and other recording media used in information processing by electronic devices (Rule 2.2);
(c) expanded notice and communication provisions, including a deemed notice provision (Rule 5);
(d) in three panel tribunals, procedural matters may now be determined by the presiding arbitrator, provided the other arbitrators or all parties agree (Rule 7.3); and
(e) clarification of the calculation of time periods (Rule 12).
The amendments to the Rules represent a clear effort by the JCAA to improve the speed and efficiency of proceedings as well as to respond to revisions to the rules of other institutions (such as SIAC and the ICC, whose arbitration rules were amended in 2013 and 2012 respectively) bringing the JCAA in line with modern practice and recent trends in international arbitration.
This is most obviously reflected in the addition of emergency arbitrator provisions. As mentioned in a recent post, this has been a significant trend across international arbitral institutions – albeit that it remains unclear how much use is being made of emergency arbitrators in practice.
While international parties may continue to have concerns about the unfamiliarity of Japanese court proceedings (in particular in the context of seeking support from courts for arbitration), it is hoped that the new Rules will serve to make Japan a more attractive destination for international arbitration. The barriers to JCAA arbitration – such as concerns regarding med-arb and the relative lack of sophisticated procedures – are increasingly falling away.