JAPAN

QUICK LAW
GENERAL INTRODUCTION TO COMMERCIAL LAW IN JAPAN
WHAT IS THE BASIS OF MODERN CIVIL LAW IN JAPAN? The legal system in Japan is based on civil law . The courts are bound by statutes. Although court precedents have no legal binding effect, Japanese courts will generally respect precedents as a matter of course, in particular decisions of the Supreme Court (saiko saibansho), the countrys highest court. WHAT ARE THE SOURCES OF LAW IN JAPAN? The Constitution of Japan The highest source of law is the Constitution of Japan, which was rewritten in 1946 and became effective in 1947. The Constitution effected three basic principles: it established sovereignty in the people, respect for fundamental human rights and pacifism. Major Codes Since the end of the nineteenth century, Japan began reducing its laws to systematic codes in the civil law tradition: the Civil Code, the Code of Civil Procedure; the Criminal Code; the Code of Criminal Procedure; and the Commercial Code. Along with the Constitution, the Codes form the main body of statutory law. Japanese contract law is based mostly on the Civil Code and Commercial Code. Other legislation In addition to the five basic codes and the Constitution, there are a number of other enacted laws. They merit discussion as these will be encountered with frequency in international commercial transactions. These specialized laws cover a wide variety of topics from labor law to tax and derive a large part of their significance from the rule of statutory construction.1 Legislation likely to be of interest to foreign investors is the Bills Act, the Checks Act, the Limited Liability Act, the Industrial Law, the Foreign Exchange and Foreign Control Law, the Foreign Investment Law and the recently enacted Corporation Law. It should be noted that in 2006 Japanese commercial law underwent major revisions in order to, among other things, modernize and streamline corporate laws in Japan. Other forms of officially promulgated guidance Ministries circulate detailed regulations, which are used to interpret and apply legislation. There are several types of official governmental regulations and the most important are cabinet orders. Ministers also have the authority to issue ministerial orders or ordinances. In certain circumstances administrative agencies or services can also issue regulations. Further, local assemblies may enact ordinances. Regulatory agencies often issue informal guidance in the form of circulars and although they are nonbinding, parties will generally comply with them. In addition, agencies may issue guidance to a particular entity based on an inquiry from that entity or based on an issue that comes to the attention of the agency. This type of administrative guidance is almost always followed by the receiving entity in Japan. Treaties While there is some dispute about the matter, many commentators agree that once a treaty has been properly ratified and approved this has the force of domestic law.

Quick Law 1 - March 2009

Custom Article 92 of the Civil Code is quite explicit with respect to the use of custom and the effect of customary law in business transactions. As long as custom does not conflict with legislation that deals with matters of public policy, it will regulate a transaction if the parties either expressly or implicitly act upon the custom.

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1 Generally, statutory construction requires that a specific statutory provision generally takes precedence over a more general one.

DISCLAIMER: This note is intended to jog memories and provide a simplified overview of the law of Japan. It is not a substitute for taking legal advice. The law is summarized as at the date of publication. DLA Piper Tokyo Partnership is part of DLA Piper Group, an international legal practice, the members of which are separate and distinct legal entities. For further information please refer to www.dlapiper.com/structure A list of offices across Asia, Europe and the US can be found at www.dlapiper.com Switchboard + 81 3 4550 2800

Quick Law 1 - March 2009

4136/MAR09/KP