Legal Services in Japan - Essay Example

LEGAL SERVICES IN JAPAN – A CRITICAL ANALYSIS FROM THE PERSPECTIVES OF FOREIGN ENTERPRISES By Name Course Instructor Institution City/State Date Legal Services in Japan – A Critical Analysis from the Perspectives of Foreign Enterprises Introduction The Japanese employment and labour laws would impose severe obligations as well as restrictions on companies that seek to set up their business in Japan. All the human resource related activity should be conducted in compliance with the laws. Non-compliance with the laws could lead to criminal penalties against the employees, management, or the companies. Furthermore, this could place the company at momentous monetary and reputational risks. Employment and labour laws vary significantly from one country to another and are complex. Therefore, most companies that expand their operations to another country normally desire to espouse their global HR systems. Still, implementing this global system in Japan is challenging since it can hardly match the Japanese customs. For the multinational companies, expatriates are likely to experience difficulties in understanding how their local employees feel or think and how to communicate effectively in order to solve everyday troubles. The majority of multinational companies normally transfer their employees to the Japanese branch or subsidiary, but this normally results in scores of labour-related issues for the expatriates, like fringe benefits, governing law, immigration and visa status, and issues related to employment termination. Foreign and Japanese businesses normally have competing and differing beliefs and views regarding openness in Japan. The majority of the foreign businesses are sceptical regarding the country’s foreign direct investment (FDI) friendliness. The Japan’s relative openness with reference to its key partners in trade demonstrate foreign investors motivations, potential economic as well as social effect of FDI, changes expected and intended in orientation, and the partnership of foreigners with Japanese companies. The behaviours, activities, and actions of foreign firms illustrate the intricacy associated with the Japanese market. These firms have observed experiences, whereby the policies set forth by the government have superimpose on exceptional interactions with different factors of Japanese economy like cross-shareholding, lifetime employment, as well as the banking system. This is meant to magnify the entry barriers into the Japanese market. The objective of this piece is to critically examine the legal Services in Japan from the foreign enterprises’ perspectives. The essay will mainly try to highlight the problems that exist on the system of legal service provision in Japan and possible solutions for foreign enterprises seeking to set up as well as operate businesses in Japan. Analysis Japan has traditionally been recognised for its low number of lawyers, but recently the number of bengoshi (practising attorneys) has increased tremendously considering that as of 2015, there were approximately 36,000 bengoshi. This connotes that every attorney represents roughly 3,500 people.1 This number is low when compared to other countries like the United States where there is one lawyer for every 265 persons. Besides that, the largest law firms in Japan have between 300 and 500 bengoshi, in contrast to other large law companies in the United Kingdom and the United States that have over 2,000 lawyers. Besides that, the mandatory apprenticeship ordered by the Japanese Supreme Court for all people that has passed the national bar exams are largely designed to prepare them for domestic litigation. Therefore, companies seeking to set up their business in Japan are likely to experience a shortage of attorneys to represent them in a court case or legal proceedings. This problem can be solved by increasing the components for new attorneys’ cross-border as well as transactional practices. Given that Japan is one of the world’s largest economy that critically relies on international trade, it largely requires cross-border and transactional legal services. Globalising the Japanese legal practice should be discussed in the public interest lawyering spheres, like international environmental law and international human rights. Japan supported by its influential administrative initiative achieved a fair income distribution that censored the poverty and income gaps expansion by means of economic and employment policies. Still, economic globalisation lessened Japan’s economic growth because of capital flight. Besides the capital flight, the number of people working part-time and the unemployed population has increased since the 1990s; thus, leading to the emergence of poverty and income gaps alongside the deregulation and review of public works. Presently, Japan needs the development of social safety nets. Furthermore, social exclusion has since the 2000s become a major issue, which consequently affects the provision of legal aid.2 Economic globalisation also resulted in a massive capital inflow to East Asian countries and the region has since the 1990s expanded its ‘factory of the world’ role. Still, the East Asian economy plunged as a result of the 1997 Asian Financial Crisis; thus, leading to confusion and vulnerability of the region’s welfare and economy. Still, in spite of the economic crisis, Japan has rapidly expanded its welfare policies, which is related to the expansive improvement of legal aid. The Japanese judicial system has over the past decades experienced major reforms. For instance, a Justice System Reform Council was established by the government in 1999 to examine the basic programs and policies that would result in a more accessible judicial system that promotes greater participation from the public. The council was also mandated to enhance the abilities as well as skills of the legal profession. The council issued an opinion paper in 2001 called fundamental reforms and these reforms facilitated the transition from what was considered as a small-scale justice into a large-scale justice. The objectives of the reforms were to expand the rule of law towards every aspect of the society in addition to orienting Japan from ‘prior regulation’ towards ‘after-the-fact relief’, in the deregulation context. The opinion paper led to the enactment of 24 laws associated with the reform of the justice system. Still, the major issue associated with the judicial reform is realising an increased number of people seeking to join the legal profession. As of 2005, the number of legal professionals in Japan was roughly 25,000, but projections indicate that the number would increase to 50,000 by 2018. Without a doubt, this demonstrates a considerable stepping up towards a reliable judicial system.3 Japan willingness to reform its judicial system can be evidenced by the opening of first graduate-level law schools in 2004, which are currently offering training to new lawyers. Legal education and training have since 2004 been implemented in Japan. Clearly, this reform seeks to change the legal training into training by means of the broader professional legal education process at law schools. Japan Legal Support Centre was established in 2006, which is a legal aid organisation funded by the government and has offices in all district courts across Japan and in areas that have few bengoshi. The centre serves as an access point for legal services not only for civil cases but also the criminal cases. Other reforms in the Japanese judicial system include different systemic changes with regard to the criminal justice system like providing the suspects a court-appointed bengoshi; reforming the administrative litigation system like expanding different parties eligible to file legal suits; reforming the country’s intellectual property system by establishing Intellectual Property High Court; and many others. Complaints by foreign companies regarding various aspects of their operations in the Japanese market are increasing. For instance, a pharmaceutical company seeking to set up a subsidiary or branch in Japan can only sell products that have been studied locally. Japan has continually forced foreign drug enterprises to carry out bridging studies with the Japanese locals and also to perform global trials. Clearly, well-established drugs would take long before they are introduced in the market because of this requirement. The Japanese companies’ reactions to the likelihood of mergers led to the creation of ‘poison pill schemes’ that enable the existing shareholders to purchase the stocks cheaply.4 The poison pills were widely adopted by the shareholders after 2006; thus, resulting in a subsequent decline in the investor activism. Until 2009, the triangular merger had happened on once, whereby Nikko (a Japanese company) was acquired by Citibank (a foreign company). Although the Japanese and the Western economies are anchored in the models and ideologies of the free market, they have continually demonstrated differing forms of capitalism. The Japanese government has the tendency of collaborating with big companies in order to drive entrepreneurial and economic growth. As a result, a number of industries have been characterised by cartels (both formal and informal). Many believe that the collaboration between large conglomerates and the government is the same as cartel-like arrangement. This can be well understood by considering the Japan's tobashi, the act of reconciling the accounts of the favoured clients with the aim of compensating for the stock losses. For instance, the presidents Nikko and Nomura, which are Japan’s top Japanese securities firms quitted in 1991 following the uncovering of their links with underworld figures as well as compensation to some clients for losses made during stock-trading.5 The big-firm capitalism in Japan is facilitated by and related to close government officials. Foreign enterprises seeking to do businesses in Japan should be ready to experience frustrations attributed to the Japanese bureaucracy. The power of the Japanese bureaucrats is enormous because of their precedent success in planning, guiding, as well as implementing the Japanese developmental state model that resulted in the economic miracle. The overreliance on bureaucrats by Politician has resulted in a barrier to the institutional change. Still, crucial political and economic changes have resulted in new strategies, considerations and views regarding foreign investments. A number of actors that represent the interests of the domestic as well as foreign firms normally compete for discursive legitimacy and power. International political events and natural catastrophes have abruptly pushed the Japanese politicians; thus, forcing them to take actions to that would help make the Japanese market more open to foreign investments. In a number of instances, political changes have resulted in institutional changes. For instance, the Democratic Party of Japan (DPJ) victory in 2009 impelled the Japanese to think critically regarding the country’s established economic models. By and large, there are sufficient indications of institutional changes which would probably influence the Japanese FDI landscape. As mentioned, the Justice System Reform Council made some recommendations that would help Japan government to bring legal services closer to the people. The council recommended that the participation opportunities in the process of judicial system should be expanded on the part of legal professionals and laypersons, professionals in non-legal fields. This would consequently improve efficiencies (particularly with regard to layperson involvement) which would be tied to the wider economic deregulation program that hastened following Japan’s economic stagnation in the 1990s.6 The reform efforts in the direction of greater social role for attorneys and increased number of lawyers would carry on for many years.7 In Japan, the legal expertise and services and from international law firms focus mainly on the corporate restructuring, cross-border mergers and acquisition (M&A), the new competition law and financial instruments, intellectual property rights, as well as privatisation projects. Although companies entering Japanese market are inclined to face various challenges as mentioned earlier, Japan has shown commitment to improving liberalisation. Given that the international business interests of Japan globally are extensive, it has been mandated to act in line with the opening and liberalisation, which is an important world markets’ objective of the WTO. Japan is a member state of WTO, OECD, as well as General Agreement on Tariffs and Trade (GATT); therefore, it is obliged to promote free capital flow between borders and ensure that its economic system is liberalised. Despite the slow elimination of trade barriers and market economy liberalisation, the government of Japan and the domestic businesses have started accepting this as crucial to the country’s ongoing capability to compete globally. Merging and acquisitions to Japan have recently increased considerably, and as of 2009, the M&A accounted for 18 per cent of its FDI.8 Government to assist foreign corporations in determining as well as exploring opportunities available in Japan is a crucial aspect of Japan’s investment and trade development. The Japanese government must acknowledge the fact that it has a role to play in protecting the interests of the foreign companies. Therefore, creating a liberalised legal system would help reduce the shortage of lawyers since the foreign law firms (FLFs) would be able to move into Japan easily. Before the introduction of the foreign lawyer law in 1987, the foreign lawyers were completely barred since 1955 from joining the Japanese legal sector. Despite numerous amendments to the foreign lawyers in order to promote the FLFs establishment in Japan, the legal sector liberalisation of has been a gradually evolving process. In 1994, the government introduced Gaigokuho-Jinni-Bengoshi (GJB), which is a system that allowed gaiben (attorneys at foreign law) and bengoshi to establish joint enterprises that would lead to sharing of profits also failed to attract many foreign law firms because of its conditions that were systemic restrictive. The presence of foreign lawyers started increasing in 2005. Still, the number of foreign lawyers in Japan’s legal system has remained stagnant because of the cultural and socio-economic protectionist arguments voiced by former members of Japanese legal system. Many Japanese oppose the government reforms that are allowing the foreign attorneys to work in Japan arguing that foreign law firms normally utilise ‘aggressive’ legal approach that would conflict with Japan’s unique legal culture directly considering that it utilises the conciliatory legal approach. Still, the socio-economic realities and the mounting pressure from abroad in addition to the government’s commitment to establish an attractive and favourable domestic environment for foreign investment and socio-economic has superseded the opposing domestic forces. Furthermore, the low number of licensed lawyers in Japan has coerced scores of clients to look for legal support as well as consultation from the foreign lawyers. Still, the Japan’s legal system should be liberalised so as to improve accessibility to the international legal capabilities and expertise of the layers from other countries by corporations operating in Japan. Given that the foreign law firms play an important role in promoting and protecting the Japanese institutions and corporations’ interests, Japan should introduce a key legislative reform that would help increase the number of foreign lawyers in the country. On the surface, the Japanese approach towards corporate governance looks like many other models applied in different countries. The Japanese law resembles the Anglo-Saxon shareholder-value model, but the similarity is only in form, which is concealment behind the operation of a peculiar corporate governance system, which is somewhat different from the outside look. Behind the legal norms façade purporting to control corporate governance there is corporate governance (real world) governed by both the non-legal and legal values which are based on the Japanese culture.9 Big companies (publicly traded) structure are conventionally typified by keiretsu (cross-shareholding), which can be described as mutual shareholding whereby a network interconnects numerous companies in which all of them are partly owners of the other companies (they have shares). Basically, Keiretsu is a Japanese firms’ structural arrangement which is normally typified by close business relationships interconnected with enduring commitments amongst the members. Another factor associated with the Japanese model is the long-term employment, which is anchored in informal practice and norms. In this case, the employees are directly recruited from university or school and they are expected to work for the company for the total length of their careers. The company will in not discharge or fire them, save for some unexpected circumstances. A number of Japan’s legal reforms have resulted in symbolical because of cultural barriers, which normally lead to delays on actual changes, especially when cultural factors are in line with the business elite’s interests. The majority of bengoshi depend heavily on the ‘code’ system. The Japanese law is a combination of the American law, Roman law (particularly the German codes), and historic laws espoused in the 19th and 20th centuries.10 There is no contemporary culture that is very distinct as the Japanese; therefore, its market is somehow peculiar to Western firms. To establish a presence in the Japanese market, the foreign enterprises must learn to balance the act between a robust traditional value system and an established corporate culture. Therefore, a corporate culture corresponding to the employees’ interests is an important factor for business success and will certainly influence the business. A company seeking to enter the Japanese market should understand that fair does not mean equal; therefore, the company should take into account Japan’s cultural specifics and implement a certain level of localisation in order to get used to the Japanese practices.11 Furthermore, having a skilled legal professional is a must for the company to function appropriately. Given that the number of legal professionals is insufficient to meet the citizen’s legal needs, the government should take drastic steps to increase the number of attorneys. In so doing, a high quality, dynamic and open Japanese society would be created through the attorneys’ efforts to expand the freedoms and rights of the citizens and corporations operating in Japan. Therefore, the government should reform the country’s training system for lawyers.12 The Japanese legal services market, as it is now, has complexities and nuances which offer cultural challenges to new companies entering the market. A new foreign law firm would not only need a bengoshi, but also registered foreign lawyers (gaikokuho jimu bengoshi), tax and patent attorneys as well as foreign attorneys so as to operate adequately(Grimley 2014). With regard to internationalisation, foreign law firms have turned out to be the major competitors to the main Japanese firms for foreign business. The Japanese attorneys will have to face the brave new world of Japan’s judicial system that is filled with foreign lawyers.13 Conclusion In conclusion, this piece has endeavoured to highlight the problems that exist on the system of legal service provision in Japan and possible solutions for foreign enterprises seeking to set up as well as operate businesses in Japan. As mentioned in the essay, companies seeking to set up their business in Japan are likely to experience a shortage of attorneys to represent them in the court case or legal proceedings. This problem can be solved by increasing the components for new attorneys’ cross-border as well as transactional practices. To overcome the cultural issue associated with the Japanese Market, the new entrant should implement a certain level of localisation so as to understand the cultural specifics and operate effectively. Bibliography Aronson, Bruce E., 'The Brave New World of Lawyers in Japan Revisited: Proceedings of a Panel Discussion on the Japanese Legal Profession after the 2008 Financial Crisis and the 2011 Tōhoku Earthquake' (2012) 21(2) Pacific Rim Law & Policy Journal 285. Aronson, Bruce E., 'The Growth of Corporate Law Firms and the Changing Role of Lawyers in Japan' (2008) 28 Journal of Japanese Law 56. Grimley, John, PwC poised for success in the Japanese legal market (3 December 2014) Asia Law Portal . Groznay, Elena, The issue of cultural balance in foreign firms in Japan (June 2013) TCWorld . 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