Civil Litigation After The Introduction Of IT, As Suggested By Scheduled Proceedings In Commercial Arbitration - Civil Law

Ⅰ．INTRODUCTION

Arbitration and litigation are two major methods of resolving disputes, but there are various differences in their systems and practices. This paper focuses on the difference in the planned nature of commercial arbitration and Japanese civil litigation and examines the implications of scheduling practices in arbitration for court proceedings, including the impact of the ongoing introduction of IT into Japanese civil litigation.

Ⅱ．PLANNED NATURE OF ARBITRATION PROCEEDINGS

1. Rules of procedure for arbitration

Arbitration is a means of dispute resolution that is available only when the parties to a dispute have agreed to resolve the dispute by arbitration. Given that the nature of arbitration is that it is based on an agreement between the parties, the arbitration procedure is essentially also governed by the agreement of the parties (Article 26(1) of the Arbitration Act (Act No. 138 of 2003, as amended)). However, in practice, the parties to an arbitration usually agree on the arbitration procedures by agreeing to use existing arbitration rules, and such arbitration rules serve as procedural rules in most arbitration cases.

2. System and practice of scheduled proceedings under arbitration rules

Various arbitral institutions have established their own arbitration rules which are available for use by disputing parties. In ad hoc arbitration, arbitration rules established for that purpose are also available. Therefore, it is not possible to provide a uniform overview of the system of scheduled proceedings under arbitration rules. However, in general, the arbitration rules of major arbitral institutions require or encourage arbitral tribunals to conduct proceedings in a planned manner or to establish a schedule of proceedings based on consultations with the parties. For example, Article 43(2) of the Commercial Arbitration Rules of the Japan Commercial Arbitration Association requires the arbitral tribunal to consult with the parties and make a schedule of the arbitral proceedings in writing to the extent necessary and feasible as early as practicable¹. For this reason, it is a matter of course that arbitration proceedings based on such arbitration rules should be conducted in a planned manner with a procedural schedule.

Practically, it is common for the arbitral tribunal that is formed to hold a preparatory meeting after the claimant submits a written request for arbitration and the respondent submits a written answer, and then to consult with the parties who attended the meeting to formulate a procedural schedule. While it is up to the arbitral tribunal to decide what kind of procedural schedule to draw up, in my case, when I have served as an arbitrator, my basic policy is generally as follows, and necessary revisions are made based on the intentions of the parties in each case².

The entire proceedings shall proceed in three steps: (i) determination of issues through the submission of written arguments and documentary evidence; (ii) witness examination; and (iii) conclusion of each party's arguments.
In step (i), the submission of written arguments and documentary evidence between the parties other than the request for arbitration and the written answer and the documentary evidence submitted with them shall be scheduled for two rounds of back and forth between the parties. Any further submissions shall require the approval of the arbitral tribunal³. The initial submission deadline is set at a specific date and the subsequent submission deadline is until a certain period elapses from the date on which the last preceding submission was actually made by the other party. No hearings are scheduled during step (i), and if a request for explanation by the arbitral tribunal is necessary to determine the issues in dispute, it is conducted by means of communication such as e-mail (if verbal discussion is necessary, telephone or web conferences may be held as appropriate). Upon the completion of the submission of written arguments and documentary evidence between the parties, another preparatory meeting shall be held to confirm the results of the determination of issues, and the necessity and method of examining the evidence, the method of summarizing the arguments by each party and other matters shall be discussed and decided.
In step (ii), a hearing shall be held if witness examination is necessary. If the hearing cannot be completed in one day due to many witnesses or for other reasons, the hearing shall be held on consecutive days to the extent possible.
In step (iii), each party shall submit its final written argument or orally explain presentation materials at a hearing in a manner determined based on the intention of the parties.

Ⅲ．PLANNED NATURE OF COURT PROCEEDINGS

1. Rules of procedure for litigation

Litigation is a means of resolving disputes provided by national courts and the Code of Civil Procedure of Japan (Act No. 109 of 1996, as amended; the "CCP") serves as the procedural rules for court proceedings. Unlike in the case of arbitration, generally, the parties to a dispute in litigation cannot decide the procedure by agreement⁴, and the procedure proceeds according to the rules set forth in the CCP.

2. System and practice of planned proceedings under the CCP

Article 147-2 of the CCP requires courts and parties in all civil suits to endeavor to abide by the planned progress of the litigation in order to achieve fair and speedy proceedings. Article 147-3, Paragraph (1) of the CCP stipulates that "If due to the complexities of a case, such as the large number of particulars that shall be examined or complications involving the same, or if due to any other circumstances, it is found to be necessary in order for the court to hold fair and speedy proceedings", the court shall consult with both parties and formulate a procedural plan based on the outcome of that consultation. These provisions were newly established in the CCP under the "Act for Partial Amendment to the Code of Civil Procedure and Other Acts" (Act No. 108 of 2003) in 2003.

However, in practice, there have been almost no plans based on Article 147-3 of the CCP. In addition, if "plan" is taken literally to mean considering in advance the methods and steps needed for carrying out a certain thing or the contents thereof, it seems difficult to consider that the procedures are being conducted in a planned manner based on Article 147-2 of the CCP⁵.

Ⅳ．CAUSES OF FAILURE TO CONDUCT SCHEDULED PROCEEDINGS IN LITIGATION

With the amendments to the CCP in 2003, the ideal form of scheduled court proceedings had been studied mainly by practitioners⁶, but in recent years, such a move seems to be rare. From the viewpoint of the difference between arbitration and litigation, the following describes my personal view on the main reasons why scheduled proceedings, such as those in arbitration, are not conducted in litigation.

1. Inquisitorial nature of procedure

Court proceedings proceed under the initiative of the court on an ex officio basis. Article 147-3 of the CCP requires that a procedural plan be drawn up when certain requirements are met, but the subject that is obliged to do so is the court, and according to the text of the said Article, the consultation with both parties shall be required only if the court decides that, "... due to the complexities of a case, such as the large number of particulars that shall be examined or complications involving the same, or if due to any other circumstances, it is found to be necessary in order for the court to hold fair and speedy proceedings". However, the main ground for the need to formulate a procedural plan, i.e., "the complexities of a case, such as the large number of particulars that shall be examined or complications involving the same," is usually not clear to the court, at least at the beginning of the proceedings. Even if it is found later that such circumstances exist, the proceedings are usually already well underway at that time, and it is not practical to make a procedural plan then. For these reasons, the requirements of this Article are rarely fulfilled in practice.
On the other hand, since the arbitration procedure proceeds under the initiative of the arbitral tribunal, it is the same as court proceedings in that respect. However, in arbitration, since the parties can agree on procedural details, the arbitral tribunal often consults with the parties at an early stage about the procedure. In the process of such consultation, the parties discuss such matters as what issues are expected, the number of opportunities for making arguments and proof required for the proceedings, and the period of time required to secure such opportunities, which form the basis of the procedural schedule. As described above, in arbitration, the degree of active involvement of the parties in the proceedings is stronger than in litigation, and the inquisitorial nature of the proceedings has declined accordingly. As a result, in the case of arbitration, the information necessary for making a procedural schedule is usually shared at an early stage between the arbitral tribunal and the parties.

2. Existence or absence of a party representative

In order to establish an appropriate procedural plan, it is necessary to consider, among others, what issues are expected, and the number of opportunities and period of time required for making arguments and proving the case. However, since the parties themselves usually lack legal knowledge, it is difficult to accurately grasp the issues in the dispute and foresee what kind of arguments and proof should be made about the issues. In order to grasp and foresee such matters, it is essential that an attorney who is a legal expert familiar with judicial practice act as a counsel for a party. However, in Japanese court proceedings, the ratio of cases in which the parties themselves conduct proceedings without a representative is high⁷. For this reason, it is difficult to establish a procedural plan in a high proportion of cases in Japan, and accordingly, it is also difficult to establish the practice of proceeding therewith.
On the other hand, in arbitration proceedings, at least in commercial arbitration cases, it is normal for both parties to have representatives who are attorneys. Therefore, in almost all cases, there is no lack of legal knowledge on the part of the parties necessary to develop a procedural schedule and proceed therewith.

3. Whether to plan the proceedings based on regular scheduled hearing dates

In Japanese court proceedings, it is common that a hearing date for oral arguments in a court room open to the public or for preparatory proceedings in a court room closed to the public is regularly scheduled approximately once a month, and on such date, the judge and the parties themselves or their representatives meet and proceed with the determination of issues through oral consultation. However, if a party does not submit a written argument in a timely manner in advance (due to the absence of counsel or other reasons), the scheduled hearing date may become impossible to proceed with or lose its practical meaning, and the material resources of the court, such as the time of the judges and the court rooms, which have been set aside for that date, may be wasted, resulting in a delay in the subsequent hearings. Therefore, it is normal to schedule a specific date, time, and place for the next hearing only, and not for any subsequent hearings. This means that the date for the proceedings will typically be set about one month ahead only.
On the other hand, in many arbitration cases, a method is adopted in which each party plans in advance the number of times and the due dates for the submission of written arguments and documentary evidence, and during the period for such submission, a hearing is not held on any particular date, and even if a request for explanation by the arbitral tribunal is necessary to determine the issues, the matter is settled by e-mail (if verbal discussion is necessary, a telephone or web conference may be held as appropriate). By not using regularly scheduled hearing dates as the base for planning the proceedings, the burden of arranging the schedule of the parties concerned and securing the place for holding the hearings can be largely avoided, and accordingly, it is possible to make a procedural schedule for several months to a year ahead⁸.

4. Existence or absence of a change in the decision-making body

In Japan, judges who constitute the main body for making decisions are transferred from one court to another across the country through periodic personnel changes. This is important because it ensures that people have access to equal justice across the country. When a judge is transferred, he/she will hand over his/her cases to his/her successor at the place of his/her old assignment, and the cases of his/her predecessor at the place of his/her new assignment.
Such periodic changes often result in a change of the assigned judge(s) in a case, and it may be anticipated that the assigned judge(s) will change during the course of proceedings even when the proceedings have just commenced after the filing of a complaint. In such a case, the former judge's observations on the case would not necessarily be shared with the successor. Judges, therefore, may be reluctant to develop a medium- to long-term procedural plan in advance so as not to unreasonably restrict the direction of judgments by their successors.
On the other hand, the arbitrator, who is selected by the agreement of the parties, is the one who will render the final arbitral award unless special circumstances arise such as the challenge or resignation of the arbitrator. Therefore, the arbitrator will not hesitate to develop a medium- to long-term procedural schedule with the assumption that the assigned arbitrator will not be replaced during the proceedings.

Ⅴ．IMPLICATIONS OF THE PLANNED NATURE OF ARBITRATION FOR LITIGATION

1. Conditions for conducting scheduled proceedings in litigation

In view of the main reasons for the failure to conduct scheduled proceedings in litigation as described in Section IV, the following are possible conditions for conducting scheduled proceedings as far as possible under the current CCP.

First, regardless of the concept that courts should lead proceedings on an ex officio basis, courts should provide the parties with an opportunity to express their desire or willingness to proceed with proceedings based on a procedural plan at an early stage of the proceedings, and if both parties express such desire or willingness, consult with the parties to formulate a procedural plan. This does not mean, as governed by Article 147-3 of the CCP, that a court shall consult with both parties to establish a procedural plan only "If...it is found to be necessary in order for the court to hold fair and speedy proceedings." Rather, the court should ask the parties about their desire or willingness to determine whether it would be useful to develop a procedural plan for fair and speedy proceedings and if both parties are willing to do so, develop the plan.
Second, unless there are special circumstances⁹, courts should explore the possibility of establishing a procedural plan only for cases in which both parties have counsel, so that the appropriate procedural plan will be formulated and the proceedings under the plan will not undermine the principles of fairness and justice. This is because, in the judicial practice in Japan where the proportion of cases in which one or both of the parties are not represented by counsel is high, if the possibility of making a procedural plan is explored in such cases, the adverse effects of making a procedural plan will become apparent, such as insufficient proceedings and undermining equity between the parties, which may result in the hindrance of the establishment of the practice of making a procedural plan.
Third, courts should make active use of proceedings under which the determination of issues is not based on regularly scheduled hearing dates; in other words, written preparatory proceedings (Article 175 and subsequent articles of the CCP). Written preparatory proceedings were introduced into the Japanese CCP on the model of prior written proceedings in the German Code of Civil Procedure, and it seems that there was a view that they were appropriate for cases where the issues can be determined appropriately without holding regularly scheduled hearings. In practice, however, they have been used in Japan in cases in which a party involved is an inmate of a penal institution, which makes it impossible for them to appear in court, and in cases before small and medium-sized court branches which have difficulties in scheduling hearing dates. The idea suggested by this paper, however, is that, unlike any of these cases that have been seen under Japanese litigation practice, when both parties have counsel and are willing to proceed with the proceedings in a planned manner, a procedural plan based on the written preparatory proceedings should be established, and the issues should be determined by the exchange of documents and (if necessary) through verbal consultation by way of telephone or web conferences (Article 176(3) of the CCP)¹⁰.
Finally, there is the issue of the replacement of judges through periodic personnel changes, which cannot be easily eliminated or avoided because it is a matter of the organizational personnel of the national courts as a whole. In this regard, one possible condition for the time being is that both the court and the parties explicitly confirm in advance at the stage of formulating a procedural plan that a review of the plan may naturally be required due to a replacement of the judge in charge¹¹.

2. Possible practices in litigation to conduct scheduled proceedings

Based on the conditions described above, the following are possible practices in litigation to conduct scheduled proceedings as much as possible under the current CCP.

In the case where both parties have counsel, at the stage where the complaint and the written answer are filed and the defendant has indicated its intention to substantially contest the plaintiff's claim, the court should, as far as possible prior to the first hearing for oral arguments, make a clerical communication to each party's counsel to inquire whether it has any desire or willingness to proceed based on a procedural plan¹².
If counsel for both parties indicates that they are willing to formulate a procedural plan, the court should hold a scheduling conference (by telephone or web conference, as appropriate) immediately after the first hearing for oral arguments or without delay thereafter and consult with both parties to formulate a procedural plan on the date of the scheduling conference.
Since the cooperation of both parties is necessary for the implementation of the procedural plan, if it is difficult to make a procedural plan that both parties can agree on, the court should not force them to do so.
When formulating a procedural plan, all parties including the court should share the common understanding that the procedural plan may be revised due to circumstances such as the appearance of new facts or materials, the emergence of new issues, and the replacement of counsel or the assigned judge, which may occur during the course of the proceedings. However, unless the plan is so revised, each counsel and assigned judge should endeavor to proceed in accordance therewith.
The procedural plan should specify the number of times each party has the opportunity to submit arguments and evidence, the respective deadlines for such submissions, and the approximate timeframe in which the determination of issues should be completed and the witness examination should be conducted, with the assumption that the plan may be reviewed later.
The court should not hesitate to consider using written preparatory proceedings where counsel for both parties have indicated that regularly scheduled hearings are not necessary.

Ⅵ．POSSIBLE IMPACTS OF THE ACT TO AMEND THE CCP

As described above, this paper has examined the potential practices for making it possible to conduct civil litigation proceedings in a more planned manner, in light of the scheduling practices in commercial arbitration. All of these practices are operational devices possible under the current CCP.

On the other hand, as is well known, the Act for Partial Amendment to the Code of Civil Procedure and Other Acts (Act No. 48 of 2022) was enacted in May 2022, in order to promote, among others, the use of IT in court proceedings. Three of the amendments made by this Act are related to the practices in litigation discussed above.

First, with regard to the preparatory proceedings (Article 168 and subsequent articles of the CCP) that are premised on the holding of regularly scheduled hearings, the CCP before the amendment allowed hearings to be held by means of telephone or web conferences, but only if one of the parties appeared at the hearing in person. The amendment makes it possible for both parties to participate in the hearings by means of telephone or web conference, thereby enabling the hearings to be held more flexibly than before. With this amendment, it is conceivable that a procedural plan could be formulated to schedule the hearing dates of preparatory proceedings for several months in advance, rather than through written preparatory proceedings, on the assumption that the dates can be revoked and redesignated flexibly. However, it is also conceivable to devise a procedural plan based on written preparatory proceedings, on the assumption that it is sufficient to switch to preparatory proceedings when a hearing is required.

Second, a new case management system will be constructed that allows litigants to view case records at any time on computers outside the court using the Internet, through which court documents will be served and sent. This system would also allow for electronic communication between the court and the parties, potentially making it easier for a judge to make a request for explanation outside of the scheduled hearing dates (Article 149 of the CCP). If this is the case, the need to hold hearings will be relatively reduced due to more frequent requests for explanation outside of hearings than in the past, which may make it more realistic to formulate a procedural plan using written preparatory proceedings.

Thirdly, a "special procedure with statutory proceeding periods" will be introduced as a new legal procedure. The outline thereof is as follows. If both parties agree to use this procedure, the court and the parties shall consult and designate in advance a date for concluding oral arguments within six months and a date for rendering judgment within one month thereafter. Actions concerning consumer contracts and individual labor relations civil disputes are naturally excluded from this procedure, and it is also not available when there is a risk of lack of equity or due process between the parties if this procedure is used. While it is considered essential that both parties have legal counsel, strictly speaking, that is not a legal requirement as it is not stipulated in the text of the relevant provisions of the amended CCP. Each party has the right to return to using the normal procedure at any time. The issues to be resolved in the reasons of a judgment shall only be those confirmed by the court in advance with both parties, and the method of filing an appeal against the judgment is an objection to the same court seeking resumption of proceedings.

This procedure has been introduced under the awareness of practical issues similar to those I have experienced, but the cases that are suitable for the use of this procedure and for which this procedure are actually used are considered to be limited. However, it seems likely that this will serve as an opportunity to expand the practice of establishing flexible procedural plans for cases that are not subject to this procedure, such as cases that clearly require a procedural period that is longer than six months. In addition, the litigation practice shown in this paper is merely an operational device and requires the voluntary willingness of both the court and the parties. However, if the contents of the new special procedure described above are reviewed in the future and the contents similar to the litigation practice shown in this paper are introduced as a stipulated procedure, it can be expected that scheduled proceedings will be more easily carried out in litigation. I hope that this paper will in some way help to make such future progress.

Footnotes

1. Other examples of rules governing scheduled proceedings or procedural schedules in arbitration rules of arbitral institutions include Article 24 of the ICC Rules of Arbitration and Article 15 of the LCIA Arbitration Rules. Article 17 of the UNCIRAL Arbitration Rules, which are arbitration rules for ad hoc arbitration, can also be considered as rules to the same effect.

2. This basic policy for procedural schedules is mainly based on the situation in which both parties are familiar with the Japanese litigation system. This is reflected in the structure in which witnesses are examined intensively after discussing and finding specific issues in dispute. However, if, for example, one or both parties to the arbitration are familiar with a court system that incorporates wide-ranging discovery and expect arbitration proceedings to follow that model, then the policy must be revised accordingly.

3. In the author's practical experience as an arbitrator, it is generally sufficient for each party, after submitting a request for arbitration or a written answer, to be given two opportunities to submit written arguments and documentary evidence, in order to make major arguments and prove them. However, it is not uncommon for one or both parties to request an additional opportunity to submit a written argument and documentary evidence in order to rebut the other party's last arguments or proof. In such cases, the author often allows each party at least one additional opportunity, considering Article 25(2) of the Arbitration Act, which requires that the parties be given a full opportunity to explain the case. However, it is rare for the parties to request an additional opportunity to submit written arguments and documentary evidence thereafter.

4. The proviso to Article 281(1) of the CCP allows the parties to agree not to appeal to the court of second instance while reserving the right to appeal to the highest court, but this is a rare exception.

5. In materials related to civil litigation, it is generally explained that the planned progress set forth in Article 147-2 of the CCP is being implemented (e.g., Mikio Akiyama et al. "Kommentale Code of Civil Procedure III [2nd Edition]" [Nihon Hyoronsha, 2018] p. 276). In such materials, it seems that the progress of the proceedings, in which intensive witness examination is carried out after discussing and finding specific issues in dispute, is evaluated as planned. However, the progress of such proceedings has been assumed by the CCP itself since before Article 147-2 was newly established in 2003. If such progress of the proceedings is evaluated as planned, the substantial meaning of this provision seems to be considerably diluted, at least at the present time when the practice of intensive witness examination after discussing and finding specific issues in dispute has been well established.

6. E.g., the Practice Committee of the Tokyo District Court "Practices for Scheduled Proceedings" (Hanrei Times, 2004).

7. According to judicial statistics in 2020, out of 122,749 ordinary cases which were completed in all district courts as the first instance, 54,625 cases involved lawyers representing both parties, accounting for approximately 44.5%. That is, in the remaining approximately 55.5% of cases, either or both parties were without legal counsel.

8. In order for such a procedural schedule in arbitration to function in practice, it is necessary for each party to voluntarily comply with the prescribed deadlines for the submission of written arguments and documentary evidence, and to carry out appropriate assertion and proof activities in order to effectively promote the determination of issues in dispute. As mentioned above, at least in commercial arbitration cases, it is normal for both parties to have representatives who are attorneys, and therefore such a voluntary response can be expected.

9. An example of a special circumstance is where a party is a corporation and an in-house lawyer who is an officer or employee thereof acts as the person in charge of the case.

10. Provided, however, that the verbal consultation in the written preparatory proceedings should not be treated the same as a proceeding conducted via a hearing and it should not be mandatory to make a recording of the consultation. It should therefore be noted that matters discussed and orally confirmed in such consultation should be reconfirmed in the brief to be subsequently submitted by the parties.

11. A bolder suggestion is that even if there is a personnel change, a judge should not change his or her position in a case until the case is finally settled. This would require a number of judges working in courts far away from each other to meet on a daily basis through web conferences or other means, and would also make it difficult for the courts to conduct personnel evaluations of judges. However, from the perspective of users of the judicial system, it is generally not desirable for judges to be replaced in the middle of proceedings, as this would delay proceedings and undermine the predictability of judgments based on the accumulated progress of the proceedings. In line with the introduction of IT into court proceedings, which will be discussed later in this paper, it is expected over the medium to long term that the use of IT in judges' work will lead to a review of firmly established practices that have previously been considered common sense.

12. From the court's point of view, it may raise the question whether it would be appropriate to seek a procedural plan only in cases where both parties have counsel, in light of the current CCP, which does not mandate counsel representation. In other words, since the CCP permits litigation without counsel, courts should treat parties with counsel equally with those without counsel, and the de facto refusal to allow the latter to proceed under a procedural plan is not in line with such equal treatment. However, I believe that such equal treatment should essentially be achieved between the parties in individual cases, and that it is inappropriate to seek the possibility of making a procedural plan in cases where only one party has a counsel, as this may lead to inequality. Furthermore, in cases in which none of the parties has appointed counsel, there is no inequality between the parties involved in such individual cases. However, as there is a risk that the proceedings will be concluded without the parties being able to make sufficient arguments and proof, the court should not look into the possibility of making a procedural plan from the perspective of due process, which is an appropriate method in line with the principles of the CCP.

Originally published by Japan Commercial Arbitration Journal VOL. 4 [2023].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Japan: Civil Litigation After The Introduction Of IT, As Suggested By Scheduled Proceedings In Commercial Arbitration