Japanese Law Update #17: A Year-in-Review of Dispute Resolution in Japan (3/3) - ESG Litigation

2023 has seen significant developments in dispute resolution landscape in Japan. This article covers legislative changes in litigation, arbitration, and mediation as well as the developments in judicial decisions by the Japanese courts.

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Japanese Law Update #15: A Year-in-Review of Dispute Resolution in Japan (1/3) - Legislative Changes
Japanese Law Update #16: A Year-in-Review of Dispute Resolution in Japan (2/3) - Case Developments

1. ESG Litigation

In 2023, a number of corporate scandals in areas such as entertainment, insurance, IT, data security, and higher education were widely reported in Japan. Regulators and markets have also paid more attention to ESG-related matters, including handling of corporate misconduct. The coming years are likely to see legal actions in these areas.

2. Business and Human Rights Litigation

In Japan, business and human rights has garnered more attention in 2023 because several scandals, particularly in the entertainment industry, were broadly reported. Also, the government published its guidelines on business and human rights for companies in 2022 and the detailed reference guide on human rights in responsible supply chains in 2023.

Increased awareness of human rights in businesses makes it more likely that companies will face litigation risks as well as reputation risks in Japan if they mishandle this important issue. It has recently been revealed that a major entertainment company has been concealing many instances of sexual abuse committed by the founder for years. If this had been revealed in a listed company, the company would have faced substantial litigation risk from shareholders and victims, as well as face exclusion from the markets. 

3. Climate Change Litigation

Climate change litigation typically includes cases that raise material issues of law or fact relating to climate change mitigation, adaptation, or the science of climate change. As of 2022, there were five reported climate change litigation cases in Japan according to the Global Climate Litigation Report 2023 Status Review published by the UN Environment Programme. In the Kobe Coal-Fired Plant litigation, residents claimed an injunction against the energy company building and operating a coal-fired power plant in order to prevent global warming and climate change. The first instance court dismissed the claims in 2023. It is generally the case that claims cannot be granted if there is no concrete danger, such as provable imminent damage to health. It is expected that the upcoming appellate decision in the coming years could provide clearer guidance on climate change litigation.

4. Corporate Misconducts and Litigation

As discussed in our previous article, companies should be aware that, in the event of corporate scandal or misconduct, there is a real risk of legal action against the management and the company. In addition to the cases discussed in the previous article, for example, in October 2023, shareholders of a major power company, Kansai Electric Power Co., Inc., initiated a shareholder derivative action against the former directors of the company for the damages caused by a cartel among major power companies after the competition authority conducted an investigation into the company. Similar shareholder derivative actions were initiated against former directors of three other power companies connected to the cartel.

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Authors

Yoshie Midorikawa, Partner
Yoshie Midorikawa has extensive experience in complex disputes and arbitration. 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 served as a board member of listed companies in Japan, improving their corporate governance. Her deep understanding of the civil law system, her working experience in international environments, including common law jurisdictions, and her knowledge of business, enable her to bring practical and nuanced legal solutions to international businesses. She is listed among “Next Generation Partners (Dispute Resolution)” by Legal500 Asia Pacific 2023, “Best Lawyers in Japan (Litigation)” in the editions of 2021 to 2024, “Best Lawyers in Japan (Corporate Governance & Compliance)” in the edition of 2023 and 2024, “Best Lawyers in Japan (International Arbitration)” in the edition of 2024 by Best Lawyers.

Shunsuke Ebihara, Associate
Shunsuke Ebihara handles a wide range of corporate matters, focusing on commercial litigation, dispute resolution, corporate crisis management, and white-collar crime. After graduating from Waseda University School of Law, he worked in the Public Prosecutor’s Office as a public prosecutor and for a major law firm in Japan.

Daichi Ito, Associate
Daichi Ito handles a variety of cases including structured finance, real estate transactions, capital markets, corporate law and dispute resolution. After starting his career as a lawyer, he worked for a major law firm in Japan and is seconded to Slaughter and May in Hong Kong.