Prescription management is essential as a prerequisite for debt collection. Always be aware of the prescription so that uncollected claims will not be extinguished. International debt collection requires deciding the applicable law. When the parties do not agree on it, it is often the law of the country or state where the creditor is located. Below, for reference, the system of Japanese law will be explained.
The extinction prescription is a system that extinguishes a right if the right is not exercised for a certain period of time. In debt collection, it is first necessary to confirm that the extinction prescription of the claims to be collected has not been completed. In a trial, even if the extinction prescription has been completed, the court cannot find the extinction of the right due to the prescription unless the debtor invokes the completion. However, it is rare for debtors to forget to invoke the extinction prescription, so prescription management of the claims remains extremely important.
Due to the amendment of the credit law, the period of extinction prescription has been changed. Therefore, the applicable provisions differ between claims that were established on or after April 1, 2020 (Reiwa 2) and claims that were established on or before March 31, 2020 (Reiwa 2).
Claims made on or after April 1, 2020 (Reiwa 2) will be extinguished due to the prescription (1) if 5 years passes from the time when the creditor knows that he/she can exercise his/her rights, or (2) 10 years passes from the time when he/she can exercise his/her rights. The claims arising from transactions often fall under (1) above, so the extinction prescription will be completed in 5 years. Prior to the amendment, the extinction prescription period for claims arising from commercial activities was five years.
The extinction prescription period for claims established before March 31, 2020 (Reiwa 2) is 10 years from the time when the rights can be exercised. However, there are the following exceptions, so if you have uncollected claims that fall under these exceptions, please consider taking immediate action.
(1) compensation claims related to design, construction and supervision: 3 years
(2) claims of producers, wholesalers and retailers arising from sales: 2 years
＊If you need further information or have any question on the extinction prescriptions in Japan, please let us know using the Inquiry form.