Commercial Lawsophia Legis

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Mika Takahashi^*
Souichirou Kozuka^‡

1. Sources of Maritime Law
2. Carriage of Goods
3. Who is the Carrier?
4. Who Else is involved?
5. Bills of Lading
6. Maritime Claims
7. Other Rules Unique to the Maritime Law
8. Scope of Application
9. Fora of Dispute Resolution

^* Associate Professor of Law, Rikkyo University.

^‡ Professor of Law, Sophia University.

1. Sources of Maritime Law

The Third Book of the Japanese Commercial Code¹ is titled as “Maritime Commerce.” It is, of course, the principal source of maritime law in Japan. However, it is not the only source. The reason is twofold.

First, after the codification of the Japanese Commercial Code in 1899, tremendous efforts have been made by lawyers in the world toward the unification of maritime laws of various jurisdictions. These efforts have been so successful that many uniform law instruments have been produced. This means that the original Japanese Code has become outdated in some respects. When Japan has acceded to some (not all) of these uniform laws, it was preferred to enact an independent statute to implement them rather than modify the Code greatly. Thus the International Carriage of Goods by Sea Act² (hereinafter “ICOGSA”), which implements the Brussels Convention on Bills of Lading (Hague-Visby Rules as amended by SDR Protocol)³ and the Act on Limitation of Liability of Shipowners and Others⁴ (hereinafter “ALLS”), implementing the 1976 Convention on Limitation of Liability for Maritime Claims⁵, form integral parts of maritime law in Japan.⁶

Secondly, the maritime law, though unique enough, is based on the general principles of civil and commercial law. The carrier's liability is nothing but the liability arising from contracts or torts, which is governed by the Civil Code⁷. Maritime liens and mortgages on ships are special kinds of secured interests, which again are regulated by the Civil Code. And a bill of lading, as a kind of instruments that is negotiable, requires comparative analyses with other instruments like a bill of exchange or a bill issued by a warehouse operator. Thus, due regard would be needed to be paid to the coordination between maritime law and other rules of civil or commercial law.

It might be added that the Book Three of the Commercial Code itself refers to numerous provisions of other parts of the same Code: the law of transport in general (principally governing the transport on land), as codified in Book Two, Chapter 8 of the Commercial Code. See art.766 and art.776 of the Commercial Code.

¹ Law no.48 of 1899, as amended.

² Law no.172 of 1957, as amended.

³ International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, 1924 (“Hague Rules”), as amended by the 1968 Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, 1924 (“Visby Amendments”) and the 1979 Protocol Amending the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, 1924 (“SDR Protocol”). Japan has acceded to the 1924 Convention and the 1979 Protocol, acceding to the latter having the effect of acceding to the 1968 Protocol as well. The Convention as amended by the two Protocols is hereinafter called as “Brussels Convention”.

⁴ Law no.94 of 1975, as amended.

⁵ International Convention on Limitation of Liability for Maritime Claims, 1976.

⁶ As regards the Brussels Convention, a separate statute has been enacted in order to ensure that the rules of the Brussels Convention applied only to international carriage of goods and to keep the provisions of the Commercial Code applied to domestic carriage. In the case of the Convention on Limitation of Liabilities, it was considered convenient to have the basic rules of procedure therefor codified together with the substantive rules but the former required so many provisions that they could not be included in the Commercial Code.

⁷ Law no.89 of 1896, as amended.

2. Carriage of Goods

An agreement of carriage of goods is a contract between a carrier, who undertakes the carriage, and his customer. Japanese law, as many others in the world, knows two types of such a contract. One is the carriage of general cargo, which means the carriage of one or some specified cargo(es). The other is a charter party, in which the carrier reserves the whole or partial space of the ship at the disposal of the other party (charterer) and undertakes to carry whatever cargo loaded onto the chartered space.

(1) Carriage of General Cargo

Under the contract of carriage of general cargo, the carrier owes obligation to exercise due diligence about the seaworthiness of the ship and about the goods. Pursuant to the Brussels Convention, the ICOGSA provides, as regards the duty of the carrier about the seaworthiness, that the carrier shall be liable for loss, damage or delay of the goods resulting from failure of exercising due diligence to make the ship seaworthy, to properly man, equip and supply the ship as well as to make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation⁸. It is understood that the seaworthiness is required at the beginning of the navigation only and not throughout the journey. Secondly, it is provided that the carrier shall be liable for the loss, damage or delay of the goods resulting form not exercising due diligence about receiving, loading, stowing, carrying, keeping, discharging and delivering of the goods⁹.

Under the ICOGSA, the liability of the carrier with regard to these duties is based on the “presumed fault system”. It means that the carrier shall be liable unless he is successful in proving that neither he nor his servants and agents (see below 4.) failed to exercise due diligence as required¹⁰. This is consistent with the general rule of contracts, since in Japan a debtor cannot rebut his contractual liability unless he proves that there has been no fault on his side about non-performance of the obligation¹¹. On the other hand, the principle of “presumed fault system” is not totally in concordance with the underlying idea of the Brussels Convention. The Brussels Convention derived from the rules of common law, which were historically based on the absolute liability, and the exemption clauses in the bills of lading to escape from it. It is because of these backgrounds that the ICOGSA is drafted in a slightly different way from the Brussels Convention and treated the list of “excepted perils¹²” as the list of events to shift the burden of proof about the existence of the carrier's fault¹³, rather than the list of exemptions from liability. Only a fault in navigation or in management of the ship¹⁴ as well as a fire¹⁵ are provided as exemptions in the strict sense¹⁶, since these two events normally constitute fault of the carrier and, therefore, render the carrier liable if there had not been a statutory provision of exemption.

There is also a special rule on the carriage of valuable goods. Unless the shipper declares the kind and the value of the goods at the time of consignment, the carrier shall be exempt from any liability¹⁷. This is because valuable goods require greater care in handling, which may, in turn, require special rate of charge. Declaration of the kind and value of the goods gives the carrier an opportunity to be prepared for careful handling as well as to claim the special charge.

The carrier, if found being in breach of his duties, shall be liable for the loss of or damage to, or delay in delivery of, the goods. In other words, the carrier has to compensate for the harm that the party interested in the goods has incurred from such accidents. The accidents must have “resulted from” failure of due diligence of the carrier¹⁸. According to the general principle of contracts, the harm that needs to be compensated includes (a) such harm as will accompany the accident at issue in the ordinary course of things, and (b) such harm resulting from the accident due to special circumstances as long as contemplated by both parties¹⁹. The amount of compensation must be such that puts the harmed party to the equivalent situation that he should have been in but for the accident²⁰.

The ICOGSA deviates from these general rules and provide that the compensation shall be determined by reference to the market price (or adequate price if there is no market) of the goods at the place where, and at the time when, the goods should have been delivered²¹, except when the damage resulted from an act or omission of the servant or agent done with intent to cause damage or recklessly or with knowledge that damage would probably result²². In the latter case, the provision of ICOGSA is excluded and the general principles described above governs.

Another important rule of the ICOGSA is the limitation of liability. It is provided, pursuant to the Brussels Convention, that the carrier is not liable for the total amount thus determined but shall be relieved of his liability exceeding (a) 666.67 SDRs per package or unit, or (b) 2 SDRs per kilogramme of gross weight of the goods, whichever is the higher²³. Though the carrier is free to agree to higher (but not lower) amount of limitation of liability in the contract of carriage of goods²⁴, in many cases it is stipulated in the conditions of carriage that the liability of the carrier shall be limited to (a) or (b), whichever is the higher. Here again, the carrier is not entitled to this limitation of liability if the damage resulted from an act or omission of the servant or agent done with intent to cause damage or recklessly or with knowledge that damage would probably result²⁵.

In Japan, a carrier who failed to deliver the goods duly may also be accused of a tort. According to the Civil Code, one shall compensate the damages when he infringes upon the right of another with intent or by negligence²⁶. If the carrier fails to exercise due diligence in making the ship seaworthy or in handling of the goods and causes damages to the goods, the owner of the goods may claim that his right to ownership (property right) has been infringed by negligence of the carrier. The Supreme Court of Japan has established a case law to the extent that this tortious liability coexists with the contractual liability, even in a case where both liabilities are owed to the same person (i.e. where owner of the goods is the other party of the contract at the same time)²⁷. Therefore, art. 4bis (1) of the Brussels Convention,²⁸ as taken into ICOGSA as art.20-2 (1) is of great significance. Though the coexistence of contractual and tortious liabilities is the basic principle commonly relevant to all other cases, the issue is thus solved by a provision in the Convention only with regard to international carriage of goods by sea.

(2) Charter party

The basic type of a charter party is a voyage charter party, in which the charterer is allowed to use the whole or part of the ship during the specified voyage. It may be noted that the provisions of the ICOGSA (or those of the Brussels Convention as well) can be modified or departed from by an agreement of parties to the charter²⁹.

Under the voyage charter party, the carrier owes a duty to let the specified ship, which must be seaworthy, proceed to the port designated by the charterer. The charterer shall ensure that the designated port is a safe port. At the notice of readiness from the ship³⁰, the charterer starts loading the cargo. The charterer has to finish loading by the end of the laytime. Failure of doing so causes the charterer to pay to the carrier demurrage as agreed in advance³¹, which is nothing but liquidated damages to compensate the loss that the carrier incurs from his ship being kept longer than was originally planned³². It may be added that liquidated damages are to be enforced to the full extent under the Civil Code of Japan³³. The carrier, not the charterer, is responsible about stowage and trimming of the goods unless a clause to the opposite, normally called “Free In Free Out (FIFO)” clause, is stipulated. The same rules as those on loading are applied to discharge at the port of destination.

Time charter is a special type of a charter party on which no specific statutory provision is found under the Japanese law. It is an agreement of chartering a ship during a specified time period. There are a few versions of general conditions to this type of charter party that are used worldwide, such as NYPE (New York Produce Form) or BALTIME. These general conditions contain such clauses on the sharing of risks and responsibilities as Let & Hire Clause³⁴, Net-charter Clause³⁵, Payment of Hire Clause³⁶, Employment & Indemnity Clause³⁷, and Responsibility & Exemption Clause³⁸.

Under a time charter, the voyage that the ship is going to make is not determined in advance but is left to the directions from the charterer. It means that the charterer holds a larger power under a time charter as compared with a voyage charter. The Employment & Indemnity Clause, which authorises the charterer to direct the Master and the crew, supports it. Still, it is the carrier and not the charterer that employs the crew member. The Supreme Court of Japan, emphasising the latter point, distinguished a time charter from a bareboat charter, under which the charterer is deemed to be the carrier³⁹.

⁸ ICOGSA, art.5.

⁹ ICOGSA, art.3.

¹⁰ ICOGSA, arts.4 (1), 5 (2).

¹¹ Civil Code, art.415.

¹² Brussels Convention, art.4 (2).

¹³ ICOGSA, art.4 (2).

¹⁴ Brussels Convention, art.4 (2)(a).

¹⁵Id., art.4 (2)(b).

¹⁶ ICOGSA, art.3 (2).

¹⁷ Commercial Code, art.578 as applied through art. 766. It is understood that the provision is excluded if the damage to the valuable goods has been caused intentionally by the carrier (as opposed to by servants and agents of the carrier).

¹⁸ See ICOGSA, arts.3 (1), 5 (1).

¹⁹ Civil Code, art.416.

²⁰ This is the commonly held understanding with regard to contractual liabilities in general, though no particular provision is found on this issue.

²¹ ICOGSA, art.12-2 (1).

²² ICOGSA, art.13-2.

²³ ICOGSA, art.13 (1). The text of this provision does not appear to be exactly in accord with art.4 (5)(a) of the Brussels Convention. However, it is understood that the ICOGSA should be interpreted as an implementation of the Convention and be, therefore, read as such.

²⁴ ICOGSA, art.15.

²⁵ ICOGSA, art.13-2.

²⁶ Civil Code, art.709.

²⁷See e.g., Nippon Tsuun KK v. Nihon Kasai Ksajo Hoken KK, Hanrei Jiho no.575, p.71 (Supreme Court, 17 Oct. 1969).

²⁸ Art. 4bis (1) of the Brussels Convention provides “The defences and limits of liability provided for in this Convention shall apply in any action against the carrier in respect of loss of or damage to goods covered by a contract of carriage whether the action be founded in contract or in tort.”

²⁹ ICOGSA, art.16.

³⁰See Commercial Code, art.741 (1).

³¹ Commercial Code, art.741 (2).

³² However, art.741(2) of the Commercial Code calls it as “remuneration to the shipowner”.

³³ Civil Code, art.420.

³⁴ The shipowner lets the charter to hire (use) the ship.

³⁵ The charterer shall pay all the costs incurred in the course of voyage.

³⁶ The charterer shall pay for the use and hire of the ship.

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³⁷ Though the crew are employed by the shipowner, the charterer holds a right to give directions about the voyage to the crew members and retains an option to require change of the membership of the crew if there is a good reason.

³⁸ The shipowner and the charterer are exempt from the respective liability according to the list of exemptions provided in this clause.

³⁹ Toyo Kasai Kaijo Hoken KK v. Kanki Gaiko KK (“the Jasmin”), Minshû vol.52, no.2, p.527 (Supreme Court, 27 March 1998).

3. Who is the Carrier?

Historically, it was not conceivable to undertake carriage of goods without owning a ship of his own. The only exception was a bareboat charterer, who leases the ship from her owner and then mans and equips her to make her ready for voyage. The Commercial Code of Japan, being codified at the end of the last century, is based on this classical idea. It is why the Commercial Code employs the term “shipowner” instead of “carrier,” while providing that a bareboat charterer shall be deemed to be equivalent to the shipowner⁴⁰.

Presently, however, it is quite common for a shipping company to hire a ship owned by another and use her for carriage of goods. The ship may be owned by a financial company and be leased to a shipping company. Her ownership may still be retained by the shipbuilder for the purpose of securing the payment of the purchase price. In such cases, the “true” owner may appear as a bareboat charterer and act as a carrier. In other cases, a charterer by voyage charter party or, more frequently, by a time charter party does not consign the goods of his own but instead use the chartered ship for carriage of goods consigned by others, thus serving as a carrier against the latter. There are even freight forwarders or non-vessel operating common carriers (NVOCCs) who do not own a ship but always charter ships of others in order to undertake carriage of goods.

Another strange practice commonly observed is that a ship is registered under the name of a dummy company in order to benefit from an advantageous taxation or a looser regulation and is chartered to the true “owner”. A ship in such a case is called a “flag of convenience” ship (FOC ship). Thus it is more than usual to see a ship registered in Panama being chartered to a Japanese company by a bareboat charter party, then chartered to a company established in Hong Kong that man and equip the ship with Filipino seamen, chartered back by a time charter party to the Japanese company, which, in turn, charter her to another company by a voyage charter party, the latter being in a better position to find customers and enter into agreements of carriage of goods as a carrier. It is in these cases that a question about who is to be identified as a carrier annoys lawyers.

Though complicated enough, it is a special case of identifying the parties to the contract and is to be left to general principles of contract law. Fundamentally, the consignor of the cargo should know whom he talked with. The counter party is usually the last charterer (voyage charterer) or his local agent. The major problem is that the charterer or his agent signs a bill of lading on which the phrase “For the Master” is always printed in advance. This phrase is considered as a declaration that the signature has been made on behalf of the shipowner. If this understanding is to be accepted as such, then the party to the contract shall be the represented, i.e. the shipowner, and not the charterer. In addition, a “demise clause,” a clause to the extent that the party that may be physically in transaction with the consignor shall be regarded as an agent of the shipowner or the bareboat charterer, which may be the case, is often inserted in the conditions of carriage. The Supreme Court of Japan, in a case where the holder of the bill of lading that was not the original consignor sued the time charterer, held that the carrier was found to be the shipowner “under the circumstances of the case.”⁴¹ It must be admitted that the Supreme Court, having avoided articulating any clear rule on the identity of carrier, left the issue not totally resolved yet.

⁴⁰ Commercial Code, art.704 (1).

⁴¹ Toyo Kasai Kaijo Hoken KK v. Kanki Gaiko KK (“the Jasmin”), Minshû vol.52, no.2, p.527 (Supreme Court, 27 March 1998).

4. Who Else is involved?

The carrier cannot perform carriage of goods without employing various kinds of experts or servants and agents. It is usually these people that cause damages to the goods carried. Therefore, it is important to examine whether and to what extent the carrier shall be liable for acts and omissions of these people.

Some commentators distinguish two groups of people among these employed: those who are subject to the directions by the carrier and those who are not. The former includes the crew, who are a kind of laborers, and pilots. The examples of the latter are stevedores and classification societies. As under the English law, those included in the latter group is sometimes called as “independent contractors”, while those who belong to the former are normally referred to as “servants” and/or “agents”.

The ICOGSA provides that the carrier shall be liable when the carrier or those employed by him failed to exercise due diligence⁴². The common understanding is that “those employed” mentioned here include both servants and agents as well as independent contractors if the claim is based on the contract, since, according to the general principle of contract law, a debtor is liable for acts and omissions of his servants and agents as well as independent contractors⁴³. As regards the liability from torts, the Commercial Code provides that the shipowner (to be understood as “carrier”, as mentioned above) is liable for damages caused intentionally or negligently by his crew⁴⁴. It is a special rule to the employer's liability of torts (respondeat superior)⁴⁵. Commentators argue that this provision should be extended by analogy to damages caused by servants and agents of the carrier.

Since there are many unique rules on the exemption and limitation of liability with regard to the carriage of goods by sea (discussed above 2. (1)), the claimant may be tempted to sue the employed, rather than the carrier himself, to detour such unique rules. However, it would be rather strange if the servant or agent of the carrier should be held to be liable in full, while the carrier (the employer) can enjoy the benefit of exemption or limitation of his liability. Besides, in some cases the carrier is engaged to indemnify the employed for the sum that the latter owed to the claimant. Thus the carrier would in fact be deprived of his privilege of exemption or limitation of the liability, if he would have to fully indemnify his employee. Therefore, when such indemnification is agreed between the carrier and his employed, a clause is normally inserted in the conditions of carriage stipulating that those employed shall be able to rely upon any defence that is available to the carrier (“Himalaya Clause”). This clause is considered to be valid as an agreement of third party beneficiary. Regarding servants and agents (excluding independent contractors), this rule is codified in art.20-2 (2) of the ICOGSA, since it is considered to be probable that the carrier is engaged in the indemnification.

⁴² ICOGSA, arts.3 (1), 5 (1).

⁴³ Though there is no explicit provision, the understanding is shared by all commentators.

⁴⁴ Commercial Code, art.690.

⁴⁵ Civil Code, art.715.

5. Bills of Lading

The carrier, when the goods have been loaded, must issue a bill of lading at the request of the consignor⁴⁶. A bill of lading enables the right to the goods to be transferred to a third party. It is useful, for example, when the owner of the goods has been successful in selling the goods before the arrival of the ship or when the bank requires to take the goods on board as a security for the credit to the consignee, as in the case of the payment under a letter of credit.

For these purposes, two requirements must be fulfilled. First, one must be entitled to claim delivery of the goods, or to sue the carrier if the delivery is impossible, as long as he holds the bill of lading. Secondly, anyone other than the holder in due course of the bill must not be able to claim delivery of the goods. It is provided in Japan that, when the bill of lading has been issued, the delivery of the goods cannot be claimed without submitting the bill in exchange therefor⁴⁷. Though not explicitly stated, it is obvious that the carrier should be held to have lacked due diligence if he were to have delivered the goods to someone other than the holder in due course of the bill of lading.

Who is the holder in due course depends on what type of a bill it is that has been issued. If it is a “negotiable” bill of lading, which is the most typical case, the holder in due course is the person to whom the bill has been duly endorsed⁴⁸. The holder in due course shall be the named consignee if it is a “straight” bill, while in the case of a “bearer” bill the holder in due course is the person who has the bill in his hands. It may be added that, under the Japanese law, a bill of lading is deemed to be an “order” bill except when indicated otherwise⁴⁹. This policy is not the same as that of the English law, under which a bill is not negotiable unless indicated “to order (of the shipper)”.

In practice, more than one bills of lading are issued by the carrier at the same time. This is because at least three bills are required in a letter of credit transaction just in case for an accident in the postal delivery. The Commercial Code provides that, at the port of destination, the holder of only one bill is entitled to claim the goods⁵⁰, since otherwise the consignee could not be delivered the goods if one of the bills had been lost by accident. Outside of the port of destination, however, the carrier shall not deliver the goods to anyone but the holder of all the bills⁵¹, since it is likely that a holder of only some of the bills is the acquirer in bad faith, such as a thief.

In addition to the above, the transfer of a bill of lading transfers the constructive possession of the goods⁵². In other words, the holder in due course of a bill of lading is deemed to have possession of the goods, though the goods are in fact on board the ship somewhere on the ocean. Under the Japanese law of property, one is entitled to claim his right to a mobile property definitely against a third party when and only when he possesses it⁵³. Therefore, it is considered that the holder in due course of a bill of lading is assured of his right to the goods by the effect of this provision.

Particulars on the goods to be carried as well as on the agreement of carriage are stated in the bill of lading. The most important items among them are: marks on the goods, the quantity or weight, as the case may be, as well as the apparent condition, of the goods. Under the Brussels Convention, statements about these items constitute prima facie evidence of the receipt by the carrier of goods in the stated conditions⁵⁴. This so called evidentiary effect, which, though a statutory provision is lacking, has been approved by the Supreme Court of Japan⁵⁵.

When the bill of lading is transferred to the third party acting in good faith, the carrier is barred from relying on a proof to rebut the statement in the bill⁵⁶. This means that the carrier cannot rebut the prima facie presumption drawn from the statement in the bill, even if the statement has not been true. As a matter of course, this is not the case if the third party knew the truth before acquiring the bill.

However, a bill of lading, differently from a bill of exchange, is not a perfect “negotiable instrument”. In the case of a bill of exchange, a claim is founded on the act of issuing a bill itself. However, a holder of a bill of lading can merely exercise the claim that has arisen from the contract of carriage and nothing more. Therefore, if the goods do not exist and the bill is merely a fake, then the holder of the bill can claim nothing even though he had been acting in good faith. A liability for issuing a fake bill should be discussed independently.

⁴⁶ ICOGSA, art.6 (1).

⁴⁷ Commercial Code art.584 as applied through ICOGSA art.10.

⁴⁸ The Bills of Exchange Act, art.14 (1) (Law no.20 of 1932, as amended) as applied through the Commercial Code, art.519.

⁴⁹ Commercial Code, art. 574, as applied through ICOGSA, art.10.

⁵⁰ Commercial Code, art.771.

⁵¹ Commercial Code, art.773.

⁵² Commercial Code, art.575 as applied through ICOGSA, art.10.

⁵³ Civil Code, art.178.

⁵⁴ Brussels Convention, art.3 (4).

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⁵⁵ Mitsui OSK v. The Federal Insurance Co., Ltd., Minshu vol.27, no.3, p.527 (Supreme Court, 19 April 1973).

⁵⁶ ICOGSA, art.9.

6. Maritime Claims

In the course of maritime activities, shipowner and other relevant parties cause various claims. These claims, whether based on contracts or in torts, can be called maritime claims. It is a generally accepted idea to distinguish maritime claims from non-maritime claims and render ships subject only to the enforcement of the former, though Japanese law does not distinguish them. Such a distinction is found for example in the Arrest Convention of 1952 as well as its successor Convention of 1999⁵⁷.

(1) Maritime Liens

First, it may be noted that in many jurisdictions some of these maritime claims are given preference over other claims, being secured by maritime liens on the ship. Under the Japanese law, the claims secured by maritime liens are: law costs incurred for the forced sale of the ship with entailed costs; costs incurred for the preservation of the ship in the last port; dues and taxes imposed on the ship; pilotage dues and the charge for tugs; remuneration for assistance and contribution of the ship in the general average; claims resulting from contracts or acts that were necessary for the continuation of the voyage; claims arising out of employment of the Master and the crew; claims arising from the sale, building or equipment of the ship that has not commenced voyage as well as claims arising from equipment of, or supply of foods and fuels to, the ship for the sake of the last voyage⁵⁸; claims for damages to the goods if the damages were caused by the carrier that is a charterer of the ship⁵⁹; claims subject to limitation (see below 6. (4))⁶⁰ and claims arising from the oil pollution that are subject to limitation proceedings under the Act on Civil Liability and Compensation for Oil Pollution from Ships⁶¹. The list of secured claims is rather long, as compared with recent international conventions on maritime liens⁶², and a question has been raised by one commentator whether, above all, it is necessary to secure such claims as are subject to limitation only because they are not paid in full. The commentator argues that claims of the consignor of the goods may not deserve being secured by maritime liens, since damages to them can be covered by cargo insurance, while there is a good reason to secure pure tort claims such as those arising from collision or oil pollution.

In order for a maritime lien to arise, the debtor of the claimant does not have to be the shipowner: a claim caused by the bareboat charterer can also be secured by a maritime lien⁶³. One court held that the supplier of the fuel oil to the time charterer can be endowed with a maritime lien on the ship⁶⁴. Though not explicitly stated in the judgement, it may have been noted that, under the Net-charter clause of standard charter parties for a time charter, the time charterer is responsible for procurement of fuel oil.

The Civil Code of Japan also provides three types of liens: liens on an immovable, liens on a movable and liens of a general nature. Since the distinction between maritime claims and non-maritime claims is not familiar to the Japanese law, an argument could be made that these liens under the Civil Code can also arise over a ship. Such an allegation was made in a series of a case concerning Gion Maru by the dockyard that inspected the ship and did some repair to her. The dockyard alleged that it was entitled to a lien securing a claim for the preservation of a movable provided in the Civil Code. The Supreme Court accepted the argument of the dockyard, holding that a ship remains a movable notwithstanding her treatment similar to an immovable in some respects⁶⁵.

(2) Mortgages on Ships

Though a ship is mobile equipment, she can be hypothecated by a mortgage as long as she is registered⁶⁶. It is useful, in particular, for a shipbuilder or a financier to secure the credit given to the shipowner. However, maritime liens are given preferences over a mortgage on the same ship⁶⁷.

(3) Enforcement of a Maritime Claim

When a maritime claim, secured or not, is not satisfied voluntarily by the debtor, the claimant has to enforce his claim by arresting or attaching the asset of the debtor. The internationally accepted policy is that a ship, which may be the principal asset of the debtor, can be arrested only in respect of a maritime claim but no other claim⁶⁸. The Japanese law, however, has not followed this approach. Therefore, a ship registered in Japan is subject to attachment by any claim of her owner, in addition to the maritime claims.

The rules of the Japanese law on the attachment of assets as the enforcement of claims differ from those on the execution of security. In the case of the former, the claimant is required a certificate of enforceability (Vollstreckungstitel)⁶⁹. It is required for purposes of verifying the existence of a valid claim. A final judgement, an enforceable arbitral award or a similar instrument qualify as such certificate. The enforcement of a claim over a ship in the form of the execution of a judgement or an instrument of a similar nature is understood not to be an arrest of a ship⁷⁰. However, the provisional attachment of a ship based on a claim against the shipowner, which is available pursuant to the Civil Injunction Act in Japan⁷¹, qualifies as an arrest.

On the other hand, the execution of a security needs no official certificate. It is only necessary to prove the existence of the security in a manner stipulated in the law. Since proving the existence of a security is much easier than acquiring a certificate of enforceability, a claimant with a secured claim usually resorts to the execution of the security. If the debtor wants to dispute the existence or the scope of the claim, he shall raise an objection after the procedure is commenced and require the cease of the procedure⁷². Thus the attachment of a ship in execution of a maritime lien or a mortgage can be understood as an arrest in the sense that it is subject to a later objection and, in this sense, not assured of its finality.

Though a ship is not fixed on the ground and, therefore, is not a movable in its nature, the Japanese law treats it in many respects as if it were an immovable. A ship with twenty tons or more can be registered⁷³. When registered, ownership and other rights on a ship are decided according to the registered record⁷⁴. Besides, a registered ship can be mortgaged⁷⁵ while they cannot be pledged⁷⁶. With regard to the procedure of the enforcement of claims on a ship, many provisions on the enforcement on an immovable are applied mutatis mutandis to the enforcement on a ship⁷⁷.

Still, the means of execution on a ship is much different from the enforcement on a land or a building. In the latter case, the court issues a decision to auction the property and orders attachment of it. The order of attachment is recorded in the register⁷⁸. In arresting or attaching a ship, the court, having decided to auction it, orders the bailiff to take up the certificate of nationality from the ship to have it kept under the custody of the court. Though this may be sufficient to prevent a ship from navigation, the prohibition of the departure of the ship shall be ordered at the same time⁷⁹. It is because a ship moves around and easily escapes from the execution that this unique measure has been devised.

Whether a claimant is entitled to attach any other asset of the debtor differs from jurisdiction to jurisdiction. A compromised rule accepted internationally is that a claimant of a maritime claim can arrest “sister ships” of the debtor, which mean ships owned by the debtor⁸⁰, but nothing else. Again the Japanese law does not share this view so that a claimant can arrest or attach any of the assets owned by the debtor (including the sister ships). Recently, however, the practice of establishing one-ship companies is widely observed. Each of the ships that constitute a fleet is pro forma owned by a different company so that a claimant with a claim caused by ship A cannot attach ship B belonging to the same fleet, due to the difference in their ownership. Faced with this type of situation, the Tokyo District Court applied the doctrine of piercing a corporate veil and admitted an arrest of the ship based on a claim against the sister company of her owner. Later the owner of the ship, the Cape Wind, raised suit and demanded compensation for damages allegedly caused by the unjustified arrest of the ship. The court rejected this allegation and held that the court order of arrest of the Cape Wind applying the doctrine of piercing the corporate veil was reasonable under the facts of the case⁸¹.

(4) Limitation of Liabilities of the Carrier

There is an international regime that subjects some kinds of maritime claims to the procedure of limitation of liabilities⁸². This regime, contrary to the regime of international conventions on arrest of ships, has been accepted by Japan and is codified in ALLS. The maritime claims subject to the procedure of limitation are: claims in respect of loss of life or personal injury or loss of or damage to property, occurring on board or in direct connection with the operation of the ship⁸³; claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage; claims in respect of other loss resulting from infringement of other rights, such as the right to fisheries; claims in respect of further loss caused by measures taken in order to avert or minimise loss; and claims of a person other than the person liable in respect of such measures⁸⁴.

The procedure of limitation of liabilities is a sort of “small scale bankruptcy”. The amount decided according to the tonnage of the ship⁸⁵ sets the ceiling upon the total sum that the shipowner or other type of a carrier is held responsible⁸⁶. The shipowner, charterer, salvor or their employee is entitled to apply for the limitation of their liability⁸⁷. The court orders the constitution of the fund up to the amount of limitation⁸⁸ and, having confirmed its constitution, decides to commence the limitation procedure⁸⁹ and appoints an administrator⁹⁰. The role of the administrator is to administer the procedure so as to ensure smooth and adequate distribution of the fund.

Once the commencement of the procedure is decided, the claimants subject to limitation can satisfy their claims only from the fund thus constituted⁹¹. The claimants are required to file their claims within a period stipulated by the court⁹². The amount of the filed claim is examined by the applicant for the procedure, debtor as well as other claimants present on the occasion of examination. The latter people can file objections if they are not convinced with the existence or amount of the filed claim⁹³. Claims not objected on this occasion is established with the amount filed⁹⁴, while claims objected are assessed by the court⁹⁵. Any of the parties above can file an objection to the assessment and raise suit to establish the amount of the claim within one month⁹⁶.

When the amounts of all the claims are established, the administrator writes up a table for distribution of the fund and submits it to the court for authorisation⁹⁷. The distribution shall be made pro rata⁹⁸. When the amount to be distributed is available to the claimant, the applicant and the debtor is not liable for the claim any longer⁹⁹.

⁵⁷See International Convention Relating to the Arrest of Sea-going Ships, 1952, art.1 (1); International Convention on Arrest of Ships, 1999, art.1 (1).

⁵⁸ Commercial Code, art.842.

⁵⁹ ICOGSA, art.19.

⁶⁰ ALLS, art.95.

⁶¹ The Act on Civil Liability and Compensation for Oil Pollution from Ships, Law no.95 of 1975, as amended, art.40.

⁶²See International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages (1967), art.4 (1); International Convention on Maritime Liens and Mortgages (1993), art.4 (1). The Japanese law is closer to the predecessor of these Conventions. See art.2 of the International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages, 1926.

⁶³ Commercial Code, art.704 (2).

⁶⁴ Pine Trio Corp. v. Marubeni International Petroleum Co., Ltd., Hanrei Times no. 561, p.150 (Appeals Court of Takamatsu, 2 May 1985).

⁶⁵Gion Maru I, Hanrei Jihô no.1787, p.157 (Supreme Court, 5 February 2002).The decision of the Supreme Court, however, raised a difficulty with regard to the procedure of executing the alleged lien, because there was no provision in the Civil Enforcement Act as to how a lien on a movable property can be executed on a ship. Under the Civil Enforcement Act at the time of the Supreme Court decision, a lien on a movable property was to be executed only when the property is handed by the claimant to the bailiff or when the person in possession of the property consents to its attachment.

⁶⁶ Commercial Code, art.848.

⁶⁷ Commercial Code, art.849.

⁶⁸ International Convention Relating to the Arrest of Sea-going Ships, 1952, art.2; International Convention on Arrest of Ships, 1999, art.2 (2).

⁶⁹ Art.22 of the Civil Enforcement Act.

⁷⁰ Art.1 (2) of the Arrest Convention of 1952; art.1 (2) of the Arrest Convention of 1999. See FRANCESCO BERLINGIERI, BERLINGIERI ON ARREST OF SHIPS 88, 93 (4th ed., 2006)

⁷¹ Art.48 of the Civil Injunction Act.

⁷² Arts.182 & 183 of the Civil Enforcement Act.

⁷³ Art.686 of the Commercial Code.

⁷⁴ Art.687 of the Commercial Code.

⁷⁵ Art.848 (1) of the Commercial Code.

⁷⁶ Art.850 of the Commercial Code.

⁷⁷ Art.121 & 189 of the Civil Enforcement Act.

⁷⁸ Art.46 of the Civil Enforcement Act.

⁷⁹ Art.114 of the Civil Enforcement Act. The attachment of a ship cannot be ordered when the ship is ready to sail (art.689 of the Commercial Code). This provision has been criticised as being out of date. More modern legislation as well as the Arrest Convention of 1952 (art.3 (1)) provides the opposite way because, with the modern technology of navigation, preventing a ship from sailing in the last minute may not cause so great a trouble as it used to be.

⁸⁰ International Convention Relating to the Arrest of Sea-going Ships, 1952, art.3 (2); International Convention on Arrest of Ships, 1999, art.3 (2).

⁸¹ Hanrei Times no.1015, p.197 (Tokyo District Court, 30 April 1998). See Mitsuhiro Toda, Piercing the Corporate Veil Concerning Arrest of Ship in Japan, WAVE LENGTH (JSE Bulletin) no.49, p.6 (2004).

⁸² The International Convention on Limitation of Liability for Maritime Claims, 1976, with the 1996 Protocol, and its predecessors (the International Convention for the Unification of Certain Rules Relating to the Limitation of the Liability of Owners of Sea-Going Ships, 1924, and the International Convention Relating to the Limitation of the Liability of Owners of Sea-Going Ships, 1957).

⁸³ By the amendment in 2005, the claim for the loss of life or personal injury to passengers of a ship was removed from the list of claims subject to limitation (ALLS, art3(4)). This is because the 1996 Protocol of The International Convention on Limitation of Liability for Maritime Claims allowed a State Party to regulate the system of liability to be applied to claims for loss of life or personal injury to passengers of a ship by specific provisions of national law (art.6 of the 1996 protocol).

⁸⁴ ALLS, art.3 (1).

⁸⁵ ALLS, art.7.

⁸⁶ ALLS, art.3 (1). Salvors are also entitled to limit their liability in the same way (see ALLS art.3 (2)).

⁸⁷ Art.17 of ALLS.

⁸⁸ Art.19 of ALLS.

⁸⁹ Art.26 of ALLS.

⁹⁰ Art.27 of ALLS.

⁹¹ Art.33 of ALLS.

⁹² Art.27 of ALLS.

⁹³ Art.57 & 58 of ALLS.

⁹⁴ Art.60 of ALLS.

⁹⁵ Art.61 of ALLS.

⁹⁶ Art.63 of ALLS.

⁹⁷ Arts.69 & 70 of ALLS.

⁹⁸ Art.7 (2) of ALLS.

⁹⁹ Art.76 of ALLS.

7. Other Rules Unique to the Maritime Law

(1) Torts Liability of the Carrier

The liability of the carrier with regard to collision is nothing but a usual tort liability governed by the Civil Code¹⁰⁰. However, as regards the case of collision between two or more ships, the general rule in the Civil Code is excluded unless all the persons interested belong to the same state as the court trying the case, as a result of Japan's being a State Party to the 1910 Collision Convention¹⁰¹. Contrary to the general rule that the shipowners shall be liable jointly and severally if all of them are found negligent¹⁰², under the said Convention, the shipowner of each ship shall be liable in proportion to the degree of fault respectively committed, except as regards damages caused by death or personal injury¹⁰³.

The liability for oil pollution resulting from the escape or discharge of the oil carried on board a ship as cargo is also a special case of tort liability. However, a very unique regime has been established and accepted by many states regarding this type of damages. The regime is devised in order to have the burden shared between the shipping industry and the oil industry, as well as to ensure larger compensation to the damaged party than is normally available to maritime claims under the limitation of liability procedure. Japan is a State Party to both of the two Conventions that make up this regime, namely the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended (CLC), and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971, as amended¹⁰⁴ (FC), and has enacted the Act on Civil Liability and Compensation for Oil Pollution from Ships to implement them.

The basic feature of CLC is the strict liability for oil pollution damages upon the registered owner of the ship, the compulsory maintenance of liability insurance to cover such liability, and the channeling of the liability to the registered owner¹⁰⁵. It is unique to this regime that the registered owner, contrary to the traditional shipowner or carrier, is held to be the subject of liability, even though the registered owner may be the financier or a lessor of the ship having no engagement with the maritime activities. These features are, of course, codified in the Act on Civil Liability and Compensation for Oil Pollution from Ships¹⁰⁶.

The FC has established the International Fund to provide additional compensation to the damaged besides sharing partly the burden that the registered owner owes under the CLC. Contribution to the fund is required of each state in proportion to the amount of the crude oil imported via carriage by sea¹⁰⁷. The Act on Civil Liability and Compensation for Oil Pollution from Ships provides that those who were delivered crude oil in the preceding year shall contribute to the International Fund in accordance with the amount delivered¹⁰⁸.

The Act on Civil Liability and Compensation for Oil Pollution from Ships goes beyond the scope of the CLC/FC and covers pollution caused by the bunker oil from cargo ships. The liability for the pollution shall be owed by the shipowner and the demise charterer jointly and severally with limited exceptions. Every cargo ship with a tonnage of 100 ton or more is required to be insured in order to meet the liability thus introduced as well as the responsibility to remove a wreck provided by the relevant regulation¹⁰⁹. Every ship is required to carry an official certificate of the state of the flag showing that she is duly insured. However, if the insurance is arranged with the International P&I Clubs, a copy of the insurance policy will suffice¹¹⁰. It is noteworthy that this scheme has been introduced without becoming a State Party to the Bunker Oil Convention¹¹¹.

(2) Regimes sui generis

The Commercial Code of Japan, as in all other maritime laws in the world, provides for a unique system of loss sharing called general average¹¹². It is a body of rules to share costs and losses incurred in the course of having the ship get out of emergency that would otherwise have endangered the ship and the whole cargo. However, it is to be noted that presently the provisions in the Commercial Code play a very limited role, since the York-Antwerp Rules promulgated by Comité Maritime International (CMI), updated most recently in 1994, are incorporated in the bills of lading without exception and govern all the cases of general average.

It is also provided in the Commercial Code that those who were successful in salvaging of a ship or cargo involved in an accident shall be entitled to remuneration¹¹³. This and related provisions, originally intended to encourage salvage by giving incentives for it, is again of a rather limited importance, since salvage is conducted by specialised enterprises these days. Such a salvage company enters into an agreement for salvage with the shipowner when an accident occurs. As conditions for such an agreement, the Lloyds Open Form (LOF) is widely used.

¹⁰⁰ Civil Code, art.709.

¹⁰¹ The International Convention for the Unification of Certain Rules of Law Relating to Collision Between Vessels, 1910, art.12, proviso 2. The Convention is directly applied in Japan as a self-executing convention.

¹⁰² Civil Code, art.719.

¹⁰³ The International Convention for the Unification of Certain Rules of Law Relating to Collision Between Vessels, 1910, art.4. This Convention is directly enforced in Japan, without any national implementation statute.

¹⁰⁴ Japan has also acceded to the Supplementary Fund Protocl (Protocol of 2003 to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damages).

¹⁰⁵ Channeling of the liability means that the damaged party can sue only the registered owner and no one else. The registered owner, having compensated the damaged, can raise suit of recourse against others.

¹⁰⁶See arts.3, 13 of the Act.

¹⁰⁷ FC, art.10.

¹⁰⁸ The Act on Civil Liability and Compensation for Oil Pollution from Ships, art.30.

¹⁰⁹ The Act on Civil Liability and Compensation for Oil Pollution from Ships, art.39-5.

¹¹⁰ The Act on Civil Liability and Compensation for Oil Pollution from Ships, art.39-7.

¹¹¹ International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001.

¹¹² Commercial Code, arts.788-796.

¹¹³ Commercial Code, art.800.

8. Scope of Application

The scope of application of the maritime law does not differ from that of any other law. As long as the subject matter belong to the private law, which means the legal relationship between private parties, then the governing law shall be decided according to the rules on the choice of law of the state of the court trying the case. Since the conflict-of-law rules in Japan provides that the governing law on a contract can be decided by the agreement of the parties to it¹¹⁴, the ICOGSA was applied in a case where Malaysian lumber was carried from a port in Malaysia to a port of Taiwan by a Taiwanese carrier, just because every party agreed before the Japanese court that the Japanese law should govern¹¹⁵.

If, after this process, it is found that the Japanese law is to govern the case, the scope of application of relevant provisions must be examined. The basic rule is that the maritime law of Japan, being a part of the Commercial Code or special statutes to supplement the Code, is applied only to activities surrounding a ship used for commercial navigation¹¹⁶. Navigation means a journey on the sea, as opposed to inland waters, the latter being rivers, lakes and ports. However, considering that activities of a ship used for non- commercial navigation, such as ships used for fishery, may have much in common with the case of commercial navigation, the rules of maritime law is to be applied mutatis mutandis to activities of such ships¹¹⁷.

¹¹⁴ Act concerning the Application of Laws, art.7.

¹¹⁵ Taiwan Fire & Marine Insurance Co., Ltd., v. Unison Navigation Corp., Hanrei Jihô no.1737, p.135 (Appeals Court of Tokyo, 14 Sept. 2000).

¹¹⁶ Commercial Code, art.684.

¹¹⁷ The Shipping Act, art.35 (Law no.121 of 1959), as amended.

9. Fora of Dispute Resolution

Unlike P.R. China¹¹⁸, Japan has no admiralty court and the maritime cases are heard by the courts with general competence. Japanese rules on maritime procedure are not independently codified, which is common with other jurisdictons without specialized admiralty court. Some of them are found in statutes together with the corresponding substantive rules, such as the procedure of limitation of liability of shipowners is included in ALLS. Other sets of procedural rules can be found in codes of the general nature, such as the Civil Procedure Code, Civil Enforcement Act, and the Civil Injunction Act. Still others are formed by the case law.

(1) Rules in the Civil Procedure Code on Jurisdiction

Pursuant to the established principle of actor sequitur forum rei, the basic rule of jurisdiction under the Japanese law is that the court of the place in which the defendant has his residence hears the case¹¹⁹. If the defendant is a corporation, it is the court of the place of its principal office¹²⁰. Besides, The Civil Procedure Code provides a few additional jurisdictions.¹²¹ First, a case of tort can be raised before the court of the place where the tort occurred. Secondly, there are a few provisions relevant to maritime cases:

• a case against a seafarer (except for a family law case) can be raised before the court of the place where the ship is registered;
• a case against the shipowner or other users of the ship regarding the ship or navigation can be raised before the court of the place where the ship is registered;
• a case founded on a claim with a maritime lien or in other way secured by the ship can be raised before the court of the place where the ship is located;
• a claim for damages arising from a collision of ships or other type of an accident on the sea can be raised before the court of the first port that the damaged ship visited after the accident;
• a claim regarding salvage can be raised before the court of the place where the salvage was undertaken or of the first place that the salved ship visited thereafter.

(2) Jurisdiction in International Disputes

It shall be noted that these provisions are the rules concerning the domestic allocation of jurisdiction that determine the jurisdiction of the courts in Japan. No statutory provision exists with regard to the international allocation of jurisdiction. However, the abovementioned provisions in the Civil Procedure Code shall be consluted even when such an international jurisdiction is disputed in Japan.

The Supreme Court of Japan held in a non-maritime case of Goto v. Malaysian Airline System Bhd that the defendant with no address or principal office in Japan shall be subject to the jurisdiction of the Japanese court if the equity among the parties and the demand for fair and prompt court procedures so require¹²². Further, it was held to be reasonable to affirm the jurisdiction of Japan under this standard if a place provided in the jurisdiction provisions of the Japanese Civil Procedure Code is located in Japan unless exceptional situations are found¹²³.

The provisions in the Civil Procedure Code, therefore, give a presumption in determining whether or not an international case is subject to the jurisdiction of Japan, though not directly applicable to the issue. Thus in the case of the Pasithea, in which the negligence of leaving a port of Kashima in the typhoon was at issue, the court affirmed the jurisdiction of Japan, holding that Kashima on the Pacific Coast of Japan was the place of tort as the place where the negligence was committed. The decision was founded on the presumption given by art.15 of the Civil Procedure Code that provides the jurisdiction of the court of the place of tort over the case of the tort¹²⁴.

(3) Agreement on Jurisdiction

Parties to a maritime case can agree upon the jurisdiction of a certain court. For example, such an agreement is sometimes found in a letter of guarantee issued by the P&I club in order to release a ship from arrest. An agreement on the choice of court is valid under the Japanese law as long as it is in writing¹²⁵. If we apply the case law above to the effect that the provision in the Civil Procedure Code gives a presumption in determining the international choice of courts, a clause on an agreed jurisdiction in a letter of guarantee will be held valid as well¹²⁶.

More problematic is a similar clause in a bill of lading. As is well known, a bill of lading usually contains a clause providing the exclusive jurisdiction of the court named therein. Contrary to a clause in a letter of guarantee by the P&I club, a bill of lading is prepared by the carrier in advance and no substantial negotiation is likely in forming the clause. Besides, the holder of a bill of lading can be the third party who acquired the bill of lading after its issuance. Therefore, it is doubtful that there is an agreement in the true sense on the choice of court.

However, the Supreme Court in the Tjisadane held a clause in the bill of lading to be a validly formed agreement on the choice of courts. It further stated that such an agreement is enforced as long as (1) Japan does not have the exclusive jurisdiction over the case and (2) the foreign court named in the agreement has a jurisdiction over the case according to the law of its country, (3) unless such an agreement is extremely unreasonable and against ordre public¹²⁷. Applying this rule to the case, the court in the Tjisadane held that the claim by the Japanese cargo insurer as the holder of the bill of lading not actionable, finding that a clause in the bill of lading issued by the Dutch carrier validly stipulated the exclusive jurisdiction of the court of Amsterdam.

The apparently broad recognition of the party autonomy in the Tjisadane, however, has recently turned out to be rather limited. The court in the Rokko (Tokyo Higashi Shin'yo Kinko v. SKB Marine Co., Ltd.) found a clause in the bill of lading that stipulated the exclusive jurisdiction of the court in Malaysia to be “extremely unreasonable and against ordre public.” The court found that the carrier was a company in Cyprus whose directors were all Japanese and had no office or branch in Malaysia. The clauses of the bill of lading appeared to have been copied from a bill of lading of a Malaysian shipping company. Although the port of loading was in Malaysia, the dispute concerned the delivery at the port in Japan and most of the parties to the case, inclusive of the holder of the bill of lading and the carrier (charterer of the ship) were located in Japan. The court, mentioning all these facts, held that the case had a good contact with Japan while the contact with Malaysia was next to nothing¹²⁸.

The jurisdiction clause in the bill of lading was again held not to be enforceable in the Core no.7 (Kyoei Kasai Kaijo Hoken KK v. Tessin Sempaku KK). The clause provided the exclusive jurisdiction of “the flag-state of the ship”. The ship was in fact registered in Belize. The Tokyo District Court held that the clause could not be admitted as a valid agreement over jurisdiction, since no specific name of a state, place or court was apparent on the bill of lading. The court then affirmed the jurisdiction of Japan, pointing out the fact that both the plaintiff (cargo insurer) and the defendant (charterer) had the principal office in Japan¹²⁹. It is notable that the court in the Core no.7, unlike the court in the Rokko, did not resort to the unreasonableness of the jurisdiction clause but rather denied that the clause at issue qualified as a valid agreement over the choice of court.

(4) Arbitration

It is common in charter parties to include an arbitration clause rather than a jurisdiction clause. An arbitration clause is also found in the Lloyd's Open Form used in salvage agreement.

The Arbitration Act of 2003 entered into force on 1 March 2004¹³⁰. The Act totally updated the law on arbitration in Japan, mostly adopting the provisions of the UNCITRAL Model Law on International Commercial Arbitration. Unlike the Model Law, the Arbitration Act is applied to any arbitration whose venue is in Japan, not limited to commercial arbitration.

As regards the arbitration agreements, art.13 of the Arbitration Act provides that such an agreement is valid if made in writing and if the subject matter is “a civil dispute that may be resolved by settlement between the parties.”¹³¹ A clause in a bill of lading qualifies as an arbitration agreement in writing. Although decided under the previous law on arbitration, the decision by the Tokyo District Court on the Amber Atlantic (Nissan Kasai Kaijo Hoken KK v. KK Kyokuyô) that enforced a clause in the bill of lading requiring all the disputes to be referred to the arbitration of the Japan Shipping Exchange (TOMAC arbitration) may still be relevant¹³².

(5) Incorporation by Reference

An often discussed issue in this regard is the validity of an arbitration agreement incorporated by reference. In the Arbitration Act it is provided that a written contract referring to a document that contains an arbitration clause is regarded as “the arbitration agreement in writing” as long as the reference is such as to make that clause part of the contract.¹³³ Attachment of the referred contract is not required.

The qualification “such as to make that clause part of the contract” is apparently taken from the UNCITRAL Model Law¹³⁴. However, its meaning is not sufficiently clear. The only precedent on this issue is the Tribeam, decided by the Osaka District Court in 1959¹³⁵, in which the court enforced the arbitration clause in the charter party incorporated by reference in the bill of lading and dismissed the action by the holder of the bill of lading against the carrier. According to the court, the relevant clause in the bill of lading provided “Charter party, dated 27th January, 1958 … …, all the terms, conditions and exceptions contained in which Charter are herewith incorporated.” The holder of the bill of lading had no chance to know the venue of the arbitration, which was in fact London. It is doubtful whether this case is still relevant under the new Arbitration Act.

¹¹⁸ Maritime Procedure Law of the People's Republic of China, effective since 1 July 2000. The translation is available as The Fourth Civil Division, The Supreme People's Court of the P.R.C., MARITIME PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA (2000).

¹¹⁹ Art.4 (1) of the Civil Procedure Code.

¹²⁰ Art.4 (4) of the Civil Procedure Code.

¹²¹ Art.5 of the Civil Procedure Code.

¹²² Minshû vol.35, no.7, p.1224 (Supreme Court, 16 Oct. 1981).

¹²³Id. In a later case, the court found the “exceptional situations” and denied the jurisdiction of Japan. KK Family v. Miyahara, Minshû vol.51, no.10, p.4055 (Supreme Court, 11 November 1997). See case summary in English in THE JAPANESE ANNUAL OF INTERNATIONAL LAW no.41, p.117 (1998).

¹²⁴ Hanrei Jihô no.1569, p.83 (District Court of Tokyo, 17 March 1995).

¹²⁵ Art.11 of the Civil Procedure Code.

¹²⁶ However, the agreement on the jurisdiction on merits was held not to preclude the jurisdiction of a Japanese court on the arrest of a ship when the ship was staying at a port of Japan. The OGON, Hanrei Jihô no.1610, p.106 (Asahikawa District Court, 9 February 1996).

¹²⁷ Minshû vol.29, no.10, p.1554 (Supreme Court, 28 November 1975).

¹²⁸ Kaijihou Kenkyûkaishi no.154, p.89 (Tokyo District Court, 13 September 1999).

¹²⁹ Kaijihou Kenkyûkaishi no.151, p.57 (Tokyo District Court, 18 June 1999).

¹³⁰See generally Toshio Matsumoto, Recent Developments in Arbitration in Japan, WAVE LENGTH (JSE Bulletin) no.48, p.1 (2004).

¹³¹ The English translation is taken from WAVE LENGTH (JSE Bulletin) no.48, p.27 (2004).

¹³² Kaijihou Kenkyûkaishi no.147, p.45 (Tokyo District Court, 27 August 1998).

¹³³ Art.13 (3) of the Arbitration Act.

¹³⁴ Art.7 (2) of the UNCITRAL Model Law on International Commercial Arbitration.

¹³⁵ Kaminshû vol.10, no.5, p.970 (Osaka District Court, 11 May 1959).