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Foreign lawyers fight for reform in Japan

24 Comments
By Allison Bettin for EURObiZ japan

In 2009, the Japanese Ministry of Justice (MoJ) was set to pass legal reforms that would help foreign law firms expand their businesses in Japan. It was an exciting moment for people like James Lawden, a partner at Freshfields Bruckhaus Deringer, who had been fighting for years for such liberalisation. But before the law was passed, things went sour. A group of "benrishi" (patent attorneys) went to the Diet to lobby for the elimination of the bill. “I don’t know why they were upset,” says Lawden, “but I think they had some problems in America trying to get registered as patent attorneys in California.” Whatever the cause, the law passed — but with massive restrictions that rendered it almost entirely useless.

Such are the setbacks of the foreign law community in Japan, whose members argue that rules and restrictions here are discriminatory and outdated. Take, for example, the legislation that effectively bans foreign legal firms from forming corporations. Rika Beppu, partner at Hogan Lovells and chairman of the EBC Legal Services Committee, explains that, in Japan, one must form a "hojin," or corporation, to establish branches across the country. “At the moment, a firm is a gathering of foreign-qualified lawyers on their own, [and] we have to all be in one location. There’s no branch. So if you have ambitions to have an office in Osaka, Fukuoka, etc. we’re prohibited,” she says.

The restriction, in Lawden’s opinion, has “no grounds in reason at all”. For years, Japanese law firms have been able to incorporate and, therefore, open branches throughout the country, a fact both Lawden and Beppu find discriminatory. “Our point is that there is a difference, and we should be treated in the same way as Japanese lawyers,” adds Beppu.

In 2008, the MoJ formed a committee to discuss the "hojin" issue, which Lawden says “was always on our shopping list of things to beat the MoJ over the head with”. Progress was made; and, as mentioned, the reform was about to pass until the "benrishi" got involved. The resulting legislation, finally passed in 2013, was substantially compromised: only law firms exclusively comprising foreign lawyers were allowed to form "hojin." Foreign law firms composed of a mixture of Japanese and non-Japanese lawyers, were still excluded from incorporating. In reality, the reform made little to no difference. Beppu and Lawden can only name a few foreign law firms in Tokyo that are covered; all others include Japanese lawyers.

“In Tokyo, amongst all the big international law firms, I think only two do not have Japanese law as an in-house practice,” says Beppu. “Which means that everybody is in joint business with Japanese lawyers. So [with] the change in law, everybody was like okay, but who’s going to use the law? It was half-baked.”

The "hojin" issue, argue Beppu and Lawden, is not the only one on the foreign lawyers’ shopping lists. More pressing is the issue of becoming a "gaiben" (licensed foreign lawyer) in Japan.

To become a "gaiben," the MoJ requires foreign lawyers to satisfy two requirements: they must be registered as a lawyer in another country, and they must have practiced law for at least three years. That sounds simple enough, but there’s a catch. Only one of those three years can take place in Japan, while the other two must be completed abroad. There are no such restrictions for "bengoshi" (Japanese lawyers). What this means is that no lawyers who have been in Japan since their qualification are able to practice law here, a fact that Beppu says throws off the hierarchy of a typical law firm.

“In my practice area, which is corporate M&A, we work in teams,” she explains. “I need a range of people’s experiences in order to take a client through buying a company, setting up a joint venture or selling a business. So in Tokyo, potentially because of the three-year experience rule, the business reality is that it is difficult to have an evenly balanced team.” It also means that the client is absorbing the costs of a team composed of more expensive, senior legal experts.

While the ministry claims that this requirement protects Japanese people from malpractice, foreign lawyers argue that a firm would never allow junior lawyers to give legal advice to clients in the first place. “In England, no junior lawyers are ever let out on their own,” says Lawden, meaning that all legal advice would be run past senior lawyers before being passed onto the client. In this way, law firms are self-regulatory, grooming junior lawyers in their first and second years to steadily climb the company ladder, and eventually become partners.

Because of Japan’s "gaiben" requirement, this structure fails. Foreign law firms can hire fresh overseas graduates, but junior lawyers would be prohibited from getting a "gaiben" license, and could not give law advice directly to clients.

Currently, there is a consultation committee hosted by the MoJ where foreign lawyers are advocating for "hojin" and "gaiben" reform. The biggest problem, Lawden says, is reciprocity. While England doesn’t have a law regarding minimum experience for foreign lawyers, America does, something Japan also begrudges. This tit-for-tat mentality plays into the hands of those who want to maintain current restrictions.

“They point out reciprocity,” says Simon Collins, partner at White & Case. “They point to California where it is difficult for Japanese lawyers to practice Japanese law. And I think there is recognition that California is a very unhelpful example to our cause. But it is frequently held up.”

“The 'gaiben' system was put into place in 1987,” adds Lawden, “and this whole thing has the aura of the late 1980s when people were playing these games. You would have thought basically that the world would have moved on a bit.”

© Japan Today

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24 Comments
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Japan isn't keen on the world seeing how it makes its legal sausages.

4 ( +7 / -3 )

Where the word of God determines society the interpreters of his word have power. Where the rule of law is the putative guiding principle the interpreters of law have power. In Japan the law is abstruse which means the interpreters have to be initiated properly into this arcane world, especially where interpretation might relate to existing power structures. In that case the law is particularly vague and it wouldn't be right for people to be running around holding power to account on any basis, leave alone legal ones. However, as foreign lawyers have found out, the law can be very precise when applying to those who have less power and making sure they don't get more.

3 ( +5 / -2 )

I think the headline would be more accurate if it read 'Senior Partners, in search of higher profits and cheaper labour, fight for reform in Japan'. Your average foreign lawyer is quite happy to be protected from competition by the existing law.

By definition, all registered foreign lawyers in Japan already meet the 3 year experience requirement, so relaxing the rules is hardly in their interest. They certainly don't want to open up the flood gates to a.) thousands of newly minted lawyers from overseas, nor b.) to every Ichiro, Jiro and Saburo who failed the Japanese bar exam but then flew to California for a week to attempt the bar exam there (where you don't even need a law degree to become a lawyer).

2 ( +4 / -2 )

It is hard to understand how this Gaiben restriction operates. An English solicitor who is qualified has jumped all the hoops needed to provide English legal advice in London but cannot provide English law advice in Tokyo. So if a Japanese company emails that solicitor in London they can provide legal advice but if they email the same solicitor who is instead based in Tokyo, they cannot provide advice.

What if the solicitor is based in Hong Kong and flies regularly in and out of Tokyo? I presume there are plenty of lawyers senior and junior who visit japan and advise on English law relating to matters that have no real connection to Japan other than the client being Japanese for example a construction project in Dubai that uses English law as the choice of law.

Can anyone explain?

2 ( +2 / -0 )

This is another argument that has been going on for years, and I mean years. When the blue-eyed Shogun was running the shop way back when (the Occupation), foreign lawyers actually enjoyed a period when they could practice in Japan without restraint. However, once the old management moved back in, down came the shutters. Only those foreign lawyers who were lucky to register under the Allied Occupation were allowed to continue. Indeed, when I was at grad school we had one of these old fellas come along and give a lecture. It was rather interesting to listen to the extent to which the Japanese authorities tried to eliminate the foreign menace way back when. Reading this article, it doesn't seem that things have really changed.

Speaking more broadly, the legal profession in this country is very much a closed shop. Indeed, some steps have been taken over the years to establish new law schools and try and free up the law (specifically the obscene amount of time that it takes to do anything in Japan), but recently the wheels have fallen off these initiatives for a number of reasons including the institutional bias against law school graduates (as opposed to people who graduate from law as undergraduates) and the generally poor quality of law school courses (the Ministry of Education has actually issued a number of censures against certain grad schools to pick up their game). Moreover, the bar exam her in Japan is a joke. Although I haven't taken it myself, some smart fellas I know have passed it. Rather than being difficult, they judged it as being obtuse and pedantic. Of course, such examinations do nothing to help the legal profession, they merely maintain the status quo.

2 ( +3 / -1 )

“no grounds in reason at all”... welcome to the Japanese legal system, which is about the preservation of outdated tradition, not fairness, equality, social relevance or change. Courts are both loathe to set precedent, or to ignore it, because doing so either narrows the scope of possible future legal interpretations, else undermines upholding the very traditions on which the judicial system is based. Thus the courts spend most of their time parsing previous cases, and splitting hairs. But the one thing they can all agree on is that foreign legal firms should not be allowed to play on even terms, or maybe not at all, as the potential for change would be intolerable. The courts are perhaps the most risk-averse sector in a pathologically risk-averse culture.

2 ( +3 / -1 )

The government does have some legitimate concerns. I think legal services is a highly profitable strategic industry and perhaps it should be protected from huge international firms who move around the world advising the biggest corporations on how to structure their tax affairs. (and who's partners may or may not be paying taxes here in Japan)

Countries like Germany and France have liberalised their legal systems and their biggest domestic law firms were essentially consumed by American and British mega firms.

2 ( +2 / -0 )

but then flew to California for a week to attempt the bar exam there (where you don't even need a law degree to become a lawyer).

It is true that you don't need a law degree, but you still need four years of experience working in a law office (with all sorts of requirements attached). Even then your chances of passing are abysmal.

2 ( +2 / -0 )

I'm a solo gaiben; I handle certain smaller or niche deals that result in my not competing with big firms for business. There are three levels of approval that are necessary -- the Justice Ministry, the Japan Federation of Bar Associations (Nichibenren), and a local bar association (begoshikai). As far as I recall, the rules about years of practice are set by the Ministry. However, the Nichibenren and separate bengoshikai also have rules, and people do often get dinged by either of them despite passing muster with the Ministry.

From conversations I had with the Ministry way back when, they were certainly aware of unregistered young associates at big foreign firms, but not taking strong action, as they were trying to negotiate with the firms instead -- actually that in itself seems quite nice on their part. Moreover at least one of the big English firms and one of the big US firms did go to the trouble to register all their locally-based associates and partners, so this wasn't impossible. All the bellyaching is purely economics for the other big firms, and frankly it always struck me as quite arrogant.

The paradox about emailing to London, etc. isn't a paradox at all. When I was at firms in the US we'd often need local counsel in Delaware, say. Just because we phoned or emailed them from L.A. or San Francisco didn't mean they were practicing in California. But if they had opened up an office in one of those cities, they would be practicing in California, and would have needed to get qualified locally. Same thing here.

Another situation is when someone from the Wall Street office comes to the Silicon Valley office to help on a deal. The fiction is that everything he or she does is "supervised" by a California attorney. But that is very often an absolute fiction, especially when the NY partner is on the firm's executive committee and the CA attorney running the deal is a 1st-year partner, or even a senior associate. In the US, it's customary to tolerate this sort of fiction, and usually it is here too -- lawyers visit Japan from overseas jurisdictions all the time.

Thing is, what the bigger foreign firms are asking for is NOT same sort of thing, but for tolerating it for some relatively inexperienced attorney who is actually living in Japan. Moreover, speaking as a consumer of gaiben services when I was on the business side in California, I did interface with young inexperienced (unregistered) foreign lawyers -- and in my experience they gave inexperienced-lawyer advice, i.e. worthless. So the Ministry's experience requirement doesn't strike me as unreasonable. As I mentioned, I don't compete with big firms in Japan, so I don't care if they grow bigger. But I do care about their professionalism, because their reputation affects mine and those of other foreign lawyers, too. A few years ago we formed a gaiben association, but its obsession with benefiting the profit margins of a few firms who want to import inexperienced lawyers is a disservice both to smaller gaiben offices and to Japanese clients, IMHO.

2 ( +2 / -0 )

Reform, Japan style. The closed shop of bengoshi in Japan is amazing. even graduates from prestigious law schools struggle to pass the exams.

1 ( +2 / -1 )

Zzzzzzzz,,,huh? Oh, m'kay... zzzzzzzzZZZZZ

1 ( +2 / -1 )

It's also worth pointing out that the lawyers working at many of these huge foreign firms in Japan are so narrowly specialised in the minutiae of corporate, tax and banking law that it's almost misleading to refer to them only as lawyers, rather than 'corporate lawyers' or 'tax lawyers'. The work they do is not what the average person would associate with a traditional lawyer. Most have never seen the inside of a courtroom, and many probably wouldn't even know how to file the basic paperwork needed to begin a lawsuit in their home jurisdiction. They would have to ask a lawyer about that.

1 ( +2 / -1 )

@Adam Perry

So if a Japanese company emails that solicitor in London they can provide legal advice but if they email the same solicitor who is instead based in Tokyo, they cannot provide advice.

As far as I know, this has been unclear for decades.

In the UK for example, the 'Legal Services Act' describes a few specific 'activities' which only a lawyer can perform (such as probate and litigation). It's very clearly stated that it's a criminal offence to do any of these activities if you are not a solicitor or barrister or you pretend to be one.

In Japan however, the law just describes how to become a Bengoshi (or Gaikokuho Jimu Bengoshi) and all of the additional rights that a Bengoshi has (such as being heard in court), but Article 74 of the Attorney's Act only makes it illegal to do this:

2 弁護士又は弁護士法人でない者は、利益を得る目的で、法律相談その他法律事務を取り扱う旨の標示又は記載をしてはならない。

(2) No person who is not an attorney : 弁護士(べんごし)attorney or a Legal Professional Corporation shall, for profit, use a designation or reference indicating that he/she or it handles legal consultations or provides other legal services.

What does this mean? Is it illegal to provide advice to the public if you are not a Bengoshi? Or is it just illegal to provide advice while using some designation other than Bengoshi, like 'UK Solicitor' while you are giving the advice? (Gaikokuho Jimu Bengoshi are specifically exempt from Art 74 under their own qualification law.)

In otherwords, it's arguable that this doesn't mean anyone is actually forbidden from selling legal advice to the public, provided that they don't represent themselves as either a Bengoshi, a Gaikokuho Jimu Bengoshi or use any other type of designation (foreign and domestic). So unlike the UK, the legal restriction in Japan might only be on the way you describe yourself, rather than on the activity you perform. But, I have heard that the Bar Association takes a somewhat different view.

What is quite clear is that an overseas lawyer is allowed to give legal advice to their employer, and if their employer is a Japanese Bengoshi or a Gaikokuho Jimu Bengoshi they can give advice to the client. In fact, the vast majority of non-Japanese lawyers in Japan are not registered as Gaikokuho Jimu Bengoshi (although the Bar Association tried to get law firms to hand over information on non-registered lawyers a few years ago before backtracking).

1 ( +1 / -0 )

If you read all that and got to here. Congratz

1 ( +1 / -0 )

Japan should put difference aside, praise Ms Beppu as a Japanese descendent lady whom Japanese women are proud of. No there are many remarkable ladies sho coped concnentration camp experience and became scholsrs but Japan just ignore women.

1 ( +1 / -0 )

OK does this reform help any hard working foreigners in japan? otherwise not intrested

0 ( +1 / -1 )

Foreign lawyers fight for reform in Japan. Translation: American lawyers demand preferential treatment in Japan.

0 ( +1 / -1 )

@zorken

It is true that you don't need a law degree, but you still need four years of experience working in a law office (with all sorts of requirements attached)

Thanks for the clarification.

0 ( +0 / -0 )

@Raybo - "If you read all that and got to here. Congratz"

My thoughts entirely. I had hoped to read something important, relevant, or just plain interesting... :-(

PS - What do you call a Japanese lawyer at the bottom of the sea?... ;-)

0 ( +0 / -0 )

Other than an American lawyer, who in their right mind would be in favor of American lawyers or American style lawyers in Japan?

-1 ( +3 / -4 )

Its not just about foreign lawyers; everything about Japan screams racism.

-2 ( +11 / -13 )

Its not just about foreign lawyers; everything about Japan screams racism.

No.

-3 ( +7 / -10 )

We have more than enough lawyers here in America. I can see why you want to keep as many as possible out of Japan. Most politicians in America used to be lawyers. Take our President, Barrack Hussein Obama. He went to law school. Just goes to show you how many lawyers are ignorant.

-6 ( +7 / -13 )

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