JAPANESE MARITIME LAW NEWS LETTER (Vol. 1, September 2020)

I. CASE REPORT

Summary: The dispute arising from the Time Charterparty which has an arbitration clause for Maritime Arbitration in London can be referred to Tokyo District Court in case the dispute is regarding the construction of the provisions in Japanese insolvency law (Judgment by Tokyo District Court on 28th January, 2015 cited on Page 100, Vol 2258 of “Hanrei Jiho”))

2. Facts

A tanker (the “Vessel”) owned by the Plaintiff (“X”) had been chartered to the Defendant (“Y”) pursuant to a Time Charterparty between them (the “Charterparty”), which provides for the 13-years charter period and has an arbitration clause for London Maritime Arbitration and a governing law clause for English law. X is a Panamanian company which is a subsidiary of a Japanese shipping company and Y is another Japanese company.
About 4 years later after the delivery of the Vessel from X to Y, Y applied for the commencement of a Japanese insolvency procedure, “Corporate Reorganization Procedure”, which is similar to “Chapter 11” under US law, with Tokyo District Court. The court then issued the order to commence the procedure for Y and appointed “Z” as the trustee for the procedure.
About 20 days later, Z cancelled and terminated the Charterparty according to its power as provided for in Japanese “Corporate Reorganization Act” (the “Act”).

2. Claims

X contended that its claim against Y for unpaid hire from the time when Y applied for the procedure until the time when the trustee cancelled the Charterparty is a “Common Benefit Claim”, which is under the Act a kind of claim for which Z should pay its full amount immediately when it obtains the enough money, but Z denied it. X then filed its case with Tokyo District Court to obtain the confirmation of the character of its claim by the court.
Z objected the X’s case on the ground that the case should be referred to the arbitration in London according to the clause in the Charterparty and Tokyo District Court does not have the jurisdiction over the case.

3. Judgement

The court held that before deciding the character of X’s claim, it should be decided whether the court has the jurisdiction over this case or not by the summary judgment as the precedent for the final judgment.
As to the jurisdiction, the court further held that the dispute between X and Y is only relating to the character of the X’ claim under the Japanese insolvency procedure and the construction of the provisions in the Act, and such matters can be decided by a Japanese court better than the English arbitration, therefore, Tokyo District Court should have the jurisdiction over this case.

4. Comment

This judgment permitted the jurisdiction of Japanese courts over the case in spite of the arbitration clause for London arbitration under the Charterparty. However, this should be regarded as a special case because only the concept under the Japanese insolvency procedure was disputed and examined in this case. Japanese courts have recognized for a long time that the jurisdiction clauses in the contracts or BLs for arbitrations or court procedures in foreign countries are effective under Japanese law.
The decision in this case by the court can be justified by the reason that the English law does not have an insolvency procedure equivalent or similar to the Japanese Corporate Reorganization Procedure (or the US Chapter 11) as examined in this case.

It is also recognized that in this insolvency procedure the Japanese court firstly confirmed the calculation of the amount which the Owners can claim against the Time Charterers in case the charterparties are cancelled by the Time Charters before the expiry of the charter period. The court calculated that the amount for the Owners should be the hire amount as provided for in the charterparties minus the market rate at the time of the cancellation by the Time Charterer for the remaining charter period as their loss of earnings in the following formula.

[ (hire amount as provided in the charterparties – market rate at the cancellation) x remaining charter period ]

Such claims by the Owners against Y as Time Charterer is regarded as “Ordinary Claim” under the Act, for which Z as the trustee should pay fairly in proportion for each claim amount of each Owner as dividend from the fund, amounting to only some percentage, but depending on the length of the remaining charter period, some Owners obtained the considerable amount as dividend.
The above-mentioned calculation by the Japanese court can be evaluated as adopting the approach similar to those of the English courts as held in the case of The London Explorer ([1972] AC 1).

Recently, the Japanese Supreme Court permitted the X’s claim for set-off between its claim for the unpaid hire and the claim by Z for the price of the bunker which remained at the time of the cancellation based on the provision in the Japanese “Corporate Reorganization Act”.

II. NEW MARITIME LAW LEGISLATION (Series – Part 1)

1. The Japanese “Commercial Code” (the “Code”) has a chapter for Maritime Law, but it had not been amended substantially since it was first enacted in 1899. But in 2018, the Japanese Maritime Law finally underwent a substantial amendment and the amended or “New” Japanese maritime law came into effect on 1st April, 2019. This article provides a summary of the main aspects of the new Japanese Maritime Law.

2. Japan COGSA was first enacted in 1957 to incorporate the Hague Rules into Japanese law, and amended in 1993 to adjust its provisions to follow the Hague-Visby Rules. It is provided that Japan COGSA shall apply to the carriage of goods by the ocean-going vessels, i.e., “the case where the either of the loading port or the discharging port is outside of Japan”. On the other hand, the Code shall apply to the voyages other than those which Japan COGSA shall apply, i.e., the carriage by the domestic vessels only. The number of cases where the carriage by the ocean-going vessels resulted in claims has been more than the cases of the domestic vessels, therefore, the Code has not attracted much attention from the lawyers or in the market.

However, the advancement in technology in the Japanese shipping industry since the Code was first enactment meant that some provisions in the Code had become completely out of date and the necessity for amendment had been contended for a long time.

The Japanese government then started to discuss and consult the amendment of the old Code in February, 2014 and the working group in the Ministry for Transportation published their official proposal for the amendment in February, 2018. After the discussions in the Parliament, the new Code, i.e., the new Japanese Maritime Law was enacted in 2018 and came into effect in April, 2019.

3. Some important aspects introduced by the new law are as follows.

(1) The obligation of the Shippers to provide notice of the loading of dangerous goods has been newly adopted.
(2) The old law had a provision to prohibit the Owners for the domestic voyages from making the provisions in their contract to obtain the exemption for the “error in navigation”, but the new law abolished such provision. In other words, such Owners can obtain such exemption in case they successfully provide for the provision in their contract. As to the ocean-going vessels, Japan COGSA, which has the express provision for such exemption, has been applied.
(3) The new law provides the words as “Time Charterer” and “Time Charterparty” for the first time in the Japanese Maritime Law.
(4) The “Multimodal Transportation” and the concept of B/Ls for such transportation have also been newly adopted.
(5) Rules for collision and salvage have been amended to follow each new International Convention.
(6) The new law deletes some old, out of date provisions for Maritime Lien and it adopted some new provisions for the claims which attach the liens.

4. The amendment of the Japanese Maritime Law this time has a wide range, so the new law is to be introduced in this News Letter by some issues in series.

Yosuke TANAKA
Tanaka & Partners, LPC.