JAPAN Trends and Developments Contributed by: Colin Trehearne, Lexi Takakamatsu, Daniel Allen and Yoshinori Tatsuno, Mori Hamada & Matsumoto
once claims are formally filed, likely accompanied by additional reporting in the press. There have also been reports of third-party funding having been successfully used by parties in domestic Japanese litigation. If those reports are correct, they represent a significant advancement in the develop - ment of the Japanese third-party funding market. That is a development worth watching closely in the com - ing years. From a regulatory perspective, the situation remains largely unchanged. There are no specific legal rules in Japan relating to or regulating third-party funding as an autonomous legal concept, and experience shows that it is possible to make legally valid funding arrangements. Parties have successfully and profit - ably implemented such arrangements, and there is growing acceptance among legal practitioners that, at least in some forms, third-party funding is not legally problematic. Nevertheless, any potentially applicable ethical and other professional regulations must be strictly fol -
lowed. It is therefore strongly advisable for any poten - tial funding arrangement involving Japanese indi - viduals or entities to be carefully scrutinised under Japanese law to ensure enforceability and avoid any legal violations. Key points to consider include the avoidance of profit-sharing between lawyers and non- lawyers, and the importance of maintaining the client’s right to instruct counsel and control the conduct of the case. Depending on the circumstances, other issues may also come to light, and due care and consid - eration should be taken at all times in this emerging area. Despite the growing level of interest in the topic, many lawyers in Japan remain unfamiliar with third- party funding, and therefore it is advisable for parties to select counsel with experience in this area. In light of these developments, the question of wheth - er and to what extend third-party funding should be subject to direct regulation in Japan has become an increasing important topic of discussion within the legal community and among legal regulators. While it is difficult to identify concrete progress at this time, organic discussions are underway and visible devel - opments are expected in the not-too-distant future.
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