Japanese Law Update #11: Recent Developments in Class Action - A Gender Discrimination Case in Japan

1. Discrimination in University Entrance Examinations

In 2018, one of the biggest stories in the Japanese media was the news about how a medical university in Japan had been unfairly discriminating against women and examinees who took their second or further repeat attempts at the entrance examinations. This news came to light as a by-product of an investigation on a different scandal at the university. Subsequent investigations at other universities revealed that a sizable number of medical universities had continued the same kind of discrimination in the admission process for years.

Since the results of university entrance examinations have significant impact on examinees’ life chances, including their future careers, fairness in the admission process is crucially necessary. This scandal attracted huge attention in Japan because, around that time, Japan's serious gender gap had finally become widely recognized and international buzzwords such as SDGs and ESG had become a topic of discussion among the public.

From a legal perspective, this case also has implications for class action lawsuits in Japan. This article analyzes the types of lawsuits that have been used in this discrimination case and discusses the initiatives which companies should implement to meet the higher standards expected of companies in an era of SDGs and ESG.

2. Remedies through Individual Civil Lawsuits

The immediate reaction of the examinees who had felt betrayed by the unfair admission process was to file individual civil lawsuits against these universities. The examinees claimed damages and compensation. In May 2022, the Tokyo District Court ruled in favor of some of the examinees’ claims that the university treated these examinees unfairly based solely on their gender in their entrance examinations.

According to media reports, several universities and their examinees have already reached settlements in other lawsuits. In Japanese litigation practice, lawsuits often end by a settlement after both parties reach an agreement before the courts. In such cases, the details of the settlements are not disclosed. Therefore, the details of the settlements are not yet known for these cases, but according to media reports, these universities agreed to pay damages to the examinees who were plaintiffs in the cases.

3. Remedies through Class Action

While it is common practice to file individual civil lawsuits, as described above, when an individual wants to seek judicial remedies, the interesting point about this case is that the victims are also using a remedy based on the consumer court procedure, known as the Japanese version of class action. This procedure is based on the Act on Special Measures Concerning Civil Court Proceedings for the Collective Redress for Property Damage Incurred by Consumers (the “Act”), which came into force in 2016.

The Act adopts a two-phase court procedure. In the first phase, a Specified Qualified Consumer Organization (the “Organization”), which is authorized by the Prime Minister of Japan, is required to file a lawsuit on behalf of consumers, demanding a judgement to declare that a company or any other type of business entity which provides goods or services to consumers, is liable for certain damages to each consumer represented by the Organization. In the process, the Organization obtains a judgment confirming the illegality of the business entity, which is the defendant in the case. The second phase is called the Simplified Finalization Procedure. In the second phase, the Organization authorized by individual consumers shall file a proof of claim by individual consumers, and after the court confirms the claim, the business entity shall be obliged to pay the consumers the amount of the certified claim.

The consumer court procedures have been rarely used, because only limited registered organizations are qualified to be plaintiffs in the court procedure, and because the two-phase court procedure is complicated. However, in the current discrimination case, a specific qualified consumer protection organization successfully used the court process. The organization filed a lawsuit against one of the universities in 2019 with the Tokyo District Court seeking the declaration of the obligation to refund examination fees and other expenses, and in September 2021, the court ruled in favor of the consumer protection organization. The court found that the university is obliged to refund examination fees to the examinees in the first phase. The consumer protection organization was able to successfully use this process because the damages caused to each examinee were easily generalized in the form of examination fees, and other expenses associated with the entrance examinations. The consumer protection organization, which successfully obtained the declaration judgment, announced that they had filed a proof of claim in the Simplified Finalization Procedure, the second phase, in April 2022. If the damages recovered through the consumer court proceedings in this discrimination case are significant enough, the Japanese class action may become an effective alternative for consumer protection cases in the future.

4. Meeting the Expectations for Creating Diversity-Conscious Organizations

In this discrimination case, the concept of diversity has once again become a point of contention. However, it is not an isolated example. All kinds of organizations are now required to meet the expectations to respect or improve diversity, not only in the relationship with customers but also in various internal processes.

For example, the Corporate Governance Code of Japan, revised in 2021, requires improving the level of diversity at both the management and employee levels. Diversity in management positions is considered an urgent goal to accomplish.

The human rights issue has gained attention not only within companies or other types of organizations, but also in the supply chain and other business activities. For instance, new regulations on human rights due diligence have been introduced in the EU and its member states. In Japan, the Ministry of Economy, Trade, and Industry's "Study Group on Guidelines for Respecting Human Rights in Supply Chains" released their draft guidelines in April 2022. The study group is expected to publish the guidelines this year. From now on, companies will need to pay more attention to human rights issues in their businesses.

With these initiatives, companies are now expected to create an organizational structure that improves diversity in various aspects of their operations, including corporate governance, human resources, and supply chain management. Adapting to these requirements will significantly change the culture of Japanese corporations in the long run.

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Author

Yoshie Midorikawa, Partner
Yoshie Midorikawa has extensive experience in complex disputes and arbitration under the rules of the ICC, SIAC, UNCITRAL, LCIA, and ICSID. Having worked with leading law firms in Japan and Singapore, she has handled parallel proceedings across multiple jurisdictions as well as domestic disputes before Japanese courts. She has also handled investigations on corporate fraud and compliance issues. Her recent interview on investigation practice includes Navigating the Fraud Landscape of Japan in Lawyer Monthly. She is listed in “Best Lawyers in Japan 2023 (Litigation)” and “Best Lawyers in Japan 2023 (Corporate Governance and Compliance)” by Best Lawyers. She is also a member of WWCDA (Women’s White Collar Defense Association).

The contents of publication are intended to provide general information only and do not contain or convey any legal or other advice.