ADR in Japan's Financial Markets & the Rule of Law
65 Pages Posted: 6 Feb 2017 Last revised: 10 Feb 2017
Date Written: January 1, 2017
One practitioner recently described the number of cases resolved in private alternative dispute resolution in Japan simply as “unsatisfactory”. That statement aptly describes efforts to mediate disputes arising between financial service providers and their customers up to 2008. But in 2008 things changed: Japan amended each of the statutes regulating its principal financial industries, including the banking, insurance, and securities industries. In doing so, it established Japan’s Financial ADR System. Claimants have used this system in large numbers: in some industries, they are mediating more claims than they are filing in the courts. And they do so voluntarily. There are no mandatory mediation or arbitration clauses that require a customer to arbitrate or mediate instead of litigate. The system is far from perfect: practitioners and scholars find much to dislike. But there is also evidence to suggest that there are meaningful benefits: it offers speedy and inexpensive resolution of claims that are unlikely to be litigated. And the resolution is, on average, reasonable when measured against litigated outcomes. It reaches this result not by limiting the role of legal professionals and access to the courts, as found in previous statutorily-imposed alternative dispute resolution schemes. Instead, it does so by relying on legal professionals and judicially established norms. The numbers suggest Japan’s Financial ADR System warrants a closer look, which is what this article does.
Keywords: Japan, ADR, alternative dispute resolution, mediation, financial markets, securities law, rule of law, comparative fault
JEL Classification: K22, K33, K41
Suggested Citation: Suggested Citation