Tokyo Managing Shareholder, Greenberg Traurig · Greenberg Traurig, LLP | gtlaw.com Title of...

Koji Ishikawa,

Tokyo Managing Shareholder,

Greenberg Traurig

G R E E N B E R G T R A U R I G , L L P | A T T O R N E Y S A T L A W | W W W . G T L A W . C O M

Doing Business in Japan

Koji Ishikawa

Managing Shareholder, Tokyo office

Title of PresentationGreenberg Traurig, LLP | gtlaw.com

What is Japan?

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Some may say “the country of paradox”

Zen Garden:Infinity in limitedness

Noh:Stillness in action

(Wikipedia) (Wikipedia)

Haiku – Infinity in 17 characters

Matsuo Bashō(松尾芭蕉, 1644 – 1694)

夏草や兵どもが夢のあと

Natsukusa-ya tsuwmono-domoga yumeno-ato

Ah, summer grasses!All that remains

Of the warriors’ dreams

なつくさやつわものどもがゆめのあと

(R.H. Blyth)(Wikipedia)

Some may say “the country where you can apologize”

Everybody knows your apology is moral one, not admitting legal responsibility.

Some may say “the country where atmosphere rules”

(Japan is changing but still) many things can be decidedby “inaction”, or “atmosphere” in the meeting room.

Why Japan Now?

(source: JETRO)

http://www.jetro.go.jp/en/invest/whyjapan.html

Japanese Business Culture

> Some of Japanese companies are stillconservative. They need precedent todo things (like judges).

> Process and formality are important -sometimes more important thanresults.

> Why so? Life time employment andrelatively small compensation. Upsidepotential is limited but downside riskis substantial – losing job.

> Punctual. We make very bestefforts to meet the deadline.We don’t go home or sleep ifnecessary to get things doneon time.

> A promise is a promise. We doas promised, even immediatelyafter the 3/11 earthquake andnuclear disaster.

> Japanese government andprivate sector are generallyvery clean.

> They don’t accept evensmall gifts (e.g., less thanUSD 100).

> Sometimes too muchcompliance.

> Business mantra: “報連相 ” (hou-ren-sou), meaning“report, communication and consultation”.

> If you say “hou-ren-sou is very important” to Japanesebusiness partners, they will regard you as a “friend”.

> Japanese companies appreciate a long-term perspective.

> We might not be good at “quarterly”.

> But we are very good at “several hundred years”.

The World’s 10 Oldest Companies: 7 from Japan!

So, when you deal withJapanese companies…

> Be patient.

> Preparation and morepreparation. We lovepreparation – sometimes morethan output.

> We are working hard(internally), even if we remainsilent (externally).

> But, once a decision is made,we move pretty quickly.

> We expect you to keep the samelevel of punctuality and precision.

> Japanese companies hate surprise(more than Chinese or Koreancompanies). Even a small surprisecould kill a deal entirely.

> On a personal level, we aregenerally polite, have goodwill andfriendly – some even understandhumor.

> We like drinking but get drunkeasily – an open national secret.

> If you can make them drunk, youcan win business (and drinking).

Contract Law

Overview

> The general ideas and principles of contract law of Japanare provided in the Civil Code.

> Although Japan is a civil law jurisdiction, the Civil Code hasbeen supplemented by over the years by court cases.

> Consumer Contract Act is a particularly importantsupplement to the Civil Code.

No consideration is required.

> Under Japanese contract law, the common law concept ofconsideration (i.e., an exchange of something of value) isnot required to form a contract.

> As a result, what would be considered an unenforceable“gift” contract in other jurisdictions is valid and enforceablein Japan.

No parol evidence rule.

> Japanese contract law does not have aparol evidence rule.

> Japanese courts may, at its discretion,look beyond the written agreement toother evidence (e.g., writtencorrespondence or oral discussions) asthe court deems necessary to confirmthe intent of the parties.

> In addition, Japanese courts haverelatively broad discretion inexercising discretion wheninterpreting contracts.

Damages

Employment Law

Overview> Japanese labor laws are very

employee-friendly (probably morefriendly than PRC labor law…).

> Decisions made by an employerthat have a negative or potentiallynegative impact on employees areoften difficult to implement or maybe void if implemented improperly.

“At will” employment is illegal in Japan.

> There is no concept of “at will” employment inJapan.

> Termination of employees generally must be forcause. An employer’s right to dismiss a hiredemployee is severely restricted.

> A dismissal will be invalid under Japanese law asan abuse of rights if it “lacks objectivelyreasonable grounds and is not considered to beappropriate in general societal terms.”

Reduction in force.

> During the global financial crisisand recession, many employersconsidered downsizing theirworkforce in Japan.

> Case law has developed fourfactors which must bethoroughly considered in orderto justify termination based oneconomic conditions.

Reduction in force – Four Factors.

> There must be strong economic necessity to reduce theworkforce (“Economic Necessity Test”);

> There must be necessity to terminate employees(“Termination Necessity Test”);

> The employees to be dismissed should be selected using areasonable and fair standard; and

> Termination procedures must be reasonable and proper.

Reduction in force.

> Generally, it is not easy to prove the Economic Necessity Testand Termination Necessity Test.

> In relation to the Economic Necessity Test, there are nostatutory criteria, but case law suggests that a companymust be facing a real threat of bankruptcy suffering multipleyearly losses.

Reduction in force.

> In relation to the Termination Necessity Test, a court willlook to other measures explored short of termination suchas reducing executive salaries, transferring employees withingroup companies and offering severance packages to certainemployees or groups of employees.

> Reductions in workforce are typically achieved throughseverance packages offered to employees which arevoluntarily accepted.

Privacy Law

Overview

> The Act on the Protection of Personal Information (APPI) isthe central data protection legislation in Japan.

> APPI applies to “Personal Information” processing by datacontrollers.

> “Personal Information” is very broad: any information thatcould identify a living individual.

Overview (continued)

> The APPI is an administrative law that empowers theministries to enforce its provisions. It does not provide for aprivate individual cause of action.

> An individual who is damaged due to a violation of the APPImay have a cause of action against the data controllerunder tort or contract law.

Big Data and “JR Suica” case

> Despite the need and high valueof using so called “Big Data”,many Japanese companieshesitate to make use "personaldata” because of the ambiguitiesof the APPI.

> The conflict between the usageof big data and privacy is bestillustrated by “JR Suica” case.

Big Data and “JR Suica” case (continued)

> A “Suica” card is arechargeable smart card thatcan be used as a fare card ontrains in Japan. The card canalso be used for shopping ata number of stores.

> In June 2013, JR East decided tosell the processed travel recordinformation and purchasehistory recorded oncustomers‘ Suica cards to a thirdparty.

> JR East planned to delete eachperson’s name and telephonenumber before transferring theinformation so that the third-party recipient could notidentify the person.

> A number of objections were raisedby consumers and the press.

> Identification could be possible, ifcombined with other data andinformation available on theinternet and social networkingservices, and that privacy would beinfringed even if there were noviolation of the APPI.

> Consequently, JR East abandonedthe plan in July 2013.

2015 Proposed Amendment to APPI

> Under the current APPI, in principle, the transfer ofPersonal Data requires the advance consent of the person.

> The proposed amendment states that if the personal data isanonymized or otherwise processed so that there is areduced possibility that the person can be identified,consent of the person will not be required for the transferof such data.

> The Proposed Amendment will be soon submitted to theDiet.

Useful Links

JETRO (Japan External Trade Organization)http://www.jetro.go.jp/

Unofficial English translation of Japanese lawhttp://www.japaneselawtranslation.go.jp/?re=02

Monthly Economic Report (Cabinet Office)http://www5.cao.go.jp/keizai3/getsurei-e/index-e.html

Greenberg TraurigTokyo Office

Koji Ishikawa, Managing Shareholder

Koichiro Ohashi, Co-Head, Japan Practice

Yuji Ogiwara, Co-Head, Japan Practice

Litigation Corporate

FinanceLabor&Employment

Thank you / Arigato

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