JAPAN Law and Practice Contributed by: Koichi Saito, Wataru Shimizu, Suguru Yokoi, Ai Tanaka and Mai Kurano, Anderson Mori & Tomotsune
As stated in 2.2.4 Transparency and Reporting Requirements , with regard to the disclosure of sustainability information, false statements, etc, are subject to criminal penalties and surcharges as well as civil liability under the FIEA. Forced labour and child labour are prohibited under the Labor Standards Act, and penalties are stipulated for violations. While there have been no actual cases involving business and human rights litigated in Japan, companies could face lawsuits if human rights violations are discovered within their group com - panies or supply chains or if their due diligence is deemed insufficient. Additionally, investors may file lawsuits if a company makes false claims regarding its sustainability practices, such as reporting actions on human rights issues that it is not genuinely addressing. 3.2 Director and Officer Liability There is little discussion or precedent on this issue, so further discussion is needed. However, under the Companies Act (Act No 86 of 2005), directors have a duty to establish and operate an internal control system. It is possible to argue that the implementation of a human rights DD is a part of process of establishing and operat - ing an internal control system, and it could be a breach of a director’s duty of care if it is not conducted properly. In addition, the Tokyo Stock Exchange publish - es Japan’s Corporate Governance Code, which establishes fundamental principles for effective corporate governance in listed companies. This code stipulates that “the board should recog- nise that dealing with sustainability issues such as (…) the respect of human rights (…) are impor- tant management issues that can lead to earn- ing opportunities as well as risk mitigation.” It
is worth considering that such a statement can also be the basis for director liability. 3.3 Parent Company Liability In principle, the parent company and subsidiary have separate legal personalities and operate business independently. However, as stated in 3.2 Director and Officer Liability , directors are obliged to establish and operate an internal con - trol system that includes the management and monitoring of subsidiaries. In general, for exam - ple, when a subsidiary is involved in a scandal, it is thought that the parent company or the par - ent company’s directors will be held responsi - ble if there is active direction from the parent company’s directors or if they were substantially involved in the decision-making process, which would be a breach of the duty of care of the par - ent company’s directors. A February 2018 Supreme Court decision rec - ognised that where a parent company has established a compliance consultation system that includes employees of its subsidiaries, the parent company may have certain obligations to respond appropriately to users/whistleblowers who make reports. 4. Enforcement and Litigation 4.1 Enforcement Activities Companies violating the laws protecting human rights mentioned in 2.2 National and Regional may be subject to criminal or administrative pen - alties. However, as per 3.1 Criminal and Civil Corporate Liability , such laws and regulations are not actively enforced in the context of BHR. Rather, in Japan, some BHR issues are covered only by soft law, and in such areas, sanctions or other enforcement activities by national law
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