JAPAN Law and Practice Contributed by: Akira Matsushita, Norihito Sato, Hideki Ben and Nobuhiko Suzuki, Mori Hamada
In contrast, in the case of a partnership, parties are typically jointly and severally liable for the JV’s debts and obligations. 6.7 Minority Protection and Control Rights Board Representation Regarding board seats, the minority party often secures the right to appoint one or more directors to the JV’s board, ensuring direct involvement in strate - gic decisions. If not, they may seek the right to appoint a board observer. Reserved Matters/Veto Rights See 6.2 Governance and Decision-Making . Information and Audit Rights Regarding access to information, the minority party may have contractual rights to receive regular finan - cial statements, management reports and other key information. As regards audit rights, the minority party may have contractual rights to conduct its own audits of the JV’s books, records and other documents. Transfer Restrictions and Anti-Dilution Protections ROFR and tag-along rights are often negotiated. Pre- emptive rights on share issuances are also negotiated. Deadlock Resolution Mechanisms See 6.4 Deadlocks . 6.8 Applicable Law and Dispute Resolution in International JVs In international JVs where the JV company is incorpo - rated in Japan, the most common option for the gov - erning law of the JV agreement is Japanese law. This is because the CA will apply to matters regarding the JV company (such as incorporation, shares, govern - ance, liabilities of directors and dividend distribution), regardless of the governing law of the JV agreement. However, if the JV is between international parties, parties sometimes choose laws with which they are most familiar. In international JVs, the parties almost always agree on dispute resolution mechanisms, and it is one of the more important issues negotiated on. The par -
ties are also free to select dispute resolutions mecha - nisms, such as litigation in courts or arbitration, and the jurisdiction/seat of the dispute resolution. If the JV is incorporated in Japan, one common option is litiga - tion in Japanese courts, given the courts’ reliability and familiarity with Japanese law. Another common option is arbitration to ensure confidentiality of the proceedings and enforceability in the jurisdiction in which international parties are domiciled. The seat of the arbitration could be either Japan or a neutral third country (such as Singapore). Japan is a signatory to the Convention on the Recog - nition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), and accordingly foreign arbi - tral awards are generally recognised and enforceable in Japan, unless they fall under specific grounds for refusal (eg, incapacity, invalid arbitration agreement, public policy, etc). The party seeking enforcement must apply to a Japanese court for an enforcement order. On the other hand, Japan is not a party to any multi - lateral treaty (such as the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters) regarding the recog - nition and enforcement of foreign court judgments. Under the Code of Civil Procedure of Japan, a final and binding foreign judgment will be recognised and bind courts in Japan without any process if it meets the following conditions: • the foreign court had proper jurisdiction; • the losing party was properly served (or responded without being served); • the judgment and court procedures do not violate Japanese public policy; and • there is reciprocity (the foreign country would enforce Japanese judgments under similar circum - stances). However, such foreign judgments that satisfy said conditions will not be automatically enforceable in Japan, and the party seeking enforcement must first file a lawsuit in a Japanese court seeking an enforce - ment judgment for the foreign judgment.
59 CHAMBERS.COM
Powered by FlippingBook