Although contingency fees are permitted and regularly used for litigation and other types of dispute resolution in Japan, the issue of whether third-party funding is permitted under Japanese law remains uncertain. While the common law doctrines of champerty and maintenance do not exist under Japanese law, no explicit law approves or prohibits thirdparty funding in Japan. Nonetheless, some Japanese companies have used third-party funding in international arbitration cases outside Japan. Because of the uncertainty regarding the legality of third-party funding, it is seldom used for proceedings in Japan.
No court decision dealing with this issue has been ofcially reported there. Alongside the increased attention from Japanese companies towards international arbitration in recent years, the Japanese government has provided support for developing and promoting international arbitration in its own jurisdiction. For example, in parallel with conducting a discussion on the Reforms of Arbitration Act, the government supported the establishment of the frst international arbitration facilities in Japan in 2018. The government taskforce’s report specifcally pointed out that ‘[the government] should consider how to utilize and regulate third-party funding in which third parties cover the costs of arbitration proceedings as a measure for responding to the demand for supporting the cost of arbitration in the private sector’. We anticipate developments in this area in the coming years.
The Japan chapter of Litigation Funding 2022 outlines the set of provisions and restrictions commonly discussed regarding third-party funding under current Japanese law: the Attorneys Act, the Trust Act and the Basic Rules on the Duties of Practicing Attorneys. If some forms of third-party funding arrangements are understood as a form of loan, then financial regulations, including the Money Lending Business Act and the Interest Rate Restriction Act, may apply.