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Japan: New class action system

Takeho Ujino
The Act on Special Provisions of Civil Court Procedures for Collective Recovery of Property Damage of Consumers (Act 96 of 2013 – the Act) was promulgated on December 11 2013, and is scheduled to come into force within three years – the specific date to be designated by a cabinet order. The Act introduces a new class action system that sets out procedures which enable a group of consumers to recover damages collectively in a simple and prompt manner (the system).

The system consists of two stages. In the first stage, the court will render a declaratory judgment on the common liabilities of the accused business operator, which must arise from a common legal and factual cause and be shared by multiple aggrieved consumers (common liabilities). Only a specified qualified consumer organisation certified by the Prime Minister as fulfilling the requirements of the system may file a first stage procedure. If the organisation succeeds at the first stage, the amount to be paid to each aggrieved consumer will be determined at the second stage, during which the group of aggrieved consumers delegates the resolution of their claims to the organisation, which then brings the relevant claims to the court. The court will then issue a decision regarding the amount of compensation that can be recovered from the accused business operator by each of the aggrieved consumers.

Claims brought under the system must arise in relation to a contract concluded between a consumer and a business operator, and such claims must fall within the certain types of claims permitted under the Act. Moreover, the system limits the kinds of damages that can be recovered. Due to these differences, the scope of possible recovery under the system is comparatively limited when compared to the class action system in the US. For instance, according to the Consumer Affairs Agency of Japan's answers to public comments, claims brought under the Financial Instruments and Exchange Act for damages suffered by a group of acquirers of securities resulting from fraudulent statements in the annual securities report submitted by the issuing company, do not fall within the scope of the system. Also, claims under the Financial Instruments and Exchange Act may not be brought under the system against securities companies that handle public offerings in which the issuing company submits a securities registration statement containing fraudulent statements.

Takeho Ujino

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