Date of the last update: 19th January 2024.
Until 2013, Japanese law provided for only a few traditional ways of collective pursuit of claims, i.e. (i) a joint suit, by which connected claims may be jointly pursued before the court, (ii) a possibility to appoint one common representative to act on behalf of several persons who share a common interest and (iii) a mechanism of consumer collective protection by competent consumer organisations (a representative action), excluding the possibility of pursuing monetary claims.
In December 2013, the Act on Special Measures Concerning Civil Court Proceedings for the Collective Redress for Property Damage Incurred by Consumers (消費者の財産的被害の集団的な回復のための民事の 裁判手続の特例に関する法律) was adopted, introducing a mechanism referred to as the Japanese class action in consumer cases. This act entered into force on 1st October 2016. In June 2022, an amendment to this law was adopted, entering into force on 1st October 2023. The amendments include an expansion of the scope of cases that may be covered by the procedure in question, as well as cases that may be subject to a settlement.
The collective redress mechanism was based on the opt-in model and applies only to consumer protection cases, related to consumer contracts. Japanese class action model limits the range of entities entitled to bring an action and the range of potential defendants as well as scope of claims which may be pursued. An action under the discussed manner may only be brought by a consumer organisation certified by the Prime Minister, and the defendant has to be an entrepreneur (exceptionally, an employee of an entrepreneur or an entity managing an enterprise). Under Japanese group proceedings, only monetary claims may be pursued (a certified consumer organisation cannot, for example, demand that the defendant be ordered to repair or replace a defective product).
The above-mentioned features significantly distinguish the group redress mechanism introduced in Japan from the classic American class action.
The regulation that has been in effect since 2016 assumes two-stage proceedings. The subject of the first stage is the determination whether a particular entrepreneur shall be liable (so-called “common liability”) towards a numerous group of consumers on the basis of common factual and legal basis (Action for Declaratory Judgment on Common Obligations, 共通義務確認の訴え– kyotsugimu kakunin no uttae – cf. Art. 3 et seq. of the Act). At this stage, the entitled consumer organisation may reach a settlement with the defendant regarding their liability to the consumers. However, the settlement may not refer to the amount of their respective claims.
In the event of the issuance of a judgment establishing the entrepreneur’s liability, in accordance with the request of the consumer organisation, in the second stage of the proceedings – which may only begin after the decision ending the first stage has become final – the court verifies the existence of claims made by consumers and determines the amount of the benefit (e.g. compensation) due to each of them. A simplified procedure is then applied, whereby the existence of claims and the amount of each claim is determined on the basis of the parties’ statements and documents, while the possibility of taking evidence from witnesses’ statements is excluded. If none of the parties (or consumers involved in the proceedings) contests the existence of the claim or the amount of the benefit thus determined, the judgment of the court shall become binding. However, if any of the above-mentioned parties objects to the existence of the claims or their amount, the case is referred to ordinary proceedings, where the existence (and the amount) of the claims is determined using the full catalogue of evidence, including witnesses.
With the commencement of the second phase of group proceedings (Proceedings for Determining the Target Claims, 対象債権の確定手続 – kanni kakutei tetsuzuki – cf. Art. 12 et seq. of the Act), authorised consumer organisations are obliged to individually inform affected consumers about the commencement of the proceedings. At the request of consumer organisations, the court may oblige the defendant to publicly inform consumers about the pending proceedings. The Japanese equivalent of the President of the Office of Competition and Consumer Protection has published special guidelines on how to do this. In addition, at the request of a consumer organisation, the defendant must disclose documents containing information about the injured parties. Upon becoming aware of the pending proceedings, persons who wish to pursue their claims in the second phase of the group proceedings should authorise the consumer organisation to represent them in this regard.
Compensation in the second stage of the group proceedings may only be awarded to those consumers who, at that stage, have clearly made a claim against the defendant entrepreneur. However, consumers who do not do so will be entitled to seek protection of their rights against the defendant in individual proceedings (the opt-in model).
As indicated above, the material scope of the provisions providing for a collective redress mechanism under Japanese law is limited to cases against entrepreneurs concerning consumer contracts and certain categories of non-contractual compensatory claims.
In the first stage of the proceedings the court assesses if the following premises of the collective redress mechanism admissibility are met (however, there is no special certification procedure):
The non-fulfillment of the above conditions is a prerequisite for rejecting the claim in group proceedings. The court may also do so, if it turns out that a quick and appropriate resolution of the case in the discussed proceedings will prove excessively difficult. Rejection of the statement of claims in group proceedings for the above reasons does not deprive consumers of the right to pursue their claims against the defendant in individual proceedings.
As a rule, only an entrepreneur may act as a defendant. In case of damages caused by an employee of the entrepreneur to a third party, the defendant may also be the employee who caused the damage. The defendant may also be a manager of an enterprise.
In the procedure described above, after establishment of the defendant’s common liability, only the following types of monetary claims can be awarded in favour of the consumers:
Since the 2022 amendment, it is also permissible to claim compensation, when relevant facts being the basis for calculating compensation are common to a significant number of consumers. Specifically, a claim for compensation for personal harm may be pursued either jointly with a compensation for property damage, or on condition that it was caused intentionally.
The damages awarded may not cover secondary loss, lost profits, non-pecuniary damages or damages for other personal injury, neither so-called punitive damages.
The general rule is that the costs of civil proceedings are borne by the losing party. However, the newly introduced class action mechanism introduced special provisions on the rules for bearing these costs. It provides that costs related to the recovery of individual claims are to be borne by the losing party and any other costs arising in the second stage of the proceedings are to be borne jointly by both parties. In turn, public information about ongoing proceedings is always at the expense of the consumer organisation and the latter cannot claim reimbursement from the entrepreneur. Both parties are, in principle, responsible for settling claims which, in the light of the general principles, do not constitute costs of proceedings (e.g. attorney’s fees).
A contingency fee may be agreed upon. However, it should be noted that the remuneration of the attorney should not be excessively high, and the agreement concerning this remuneration is subject to government control.
Consumers do not directly bear costs of the proceedings, as the consumer organisation is a party to the proceedings. It is, however, possible to agree – in a contract with the organisation – on a remuneration paid by consumers.
Third-party funding of proceedings is permissible but not popular.
Since the 2016 legislation came into force, only seven cases have been brought under the Act on Special Measures Concerning Civil Court Proceedings for the Collective Redress for Property Damage Incurred by Consumers. More popular is the procedure for collective redress prohibition and injunction claims arising from consumer laws (since 2007 there have been approximately 950 cases).
To this day, the collective redress mechanism has not been very popular or effective. This was the reason for the enactment of the amendment, which took effect on the 1st October 1 2023.