JCAA introduces a new set of arbitration rules

The Japan Commercial Arbitration Association (JCAA) has introduced an amended version of its Commercial Arbitration Rules (the New Rules). The New Rules, which contain comprehensive amendments, came into force on 1 February 2014, following a consultation period. They will apply to all arbitrations initiated on or after that date. The changes are intended by the JCAA to update the rules in line with recent trends in the amendment of arbitration rules (such as the 2010 Amendments to the UNCITRAL Arbitration Rules). The changes largely achieve this aim, addressing current issues in international arbitration such as multi-party arbitration, emergency arbitrators and interim relief.

Key changes

Single arbitration for multiple claims

Under the New Rules a claimant may submit a single Request for Arbitration in respect of related claims in certain circumstances, including where this has been agreed between the parties or where the disputes arise in relation to the same arbitration agreement. A respondent to such a claim will have four weeks from its receipt of the notice of the Request for Arbitration to object to the single claim in writing. Objections will be considered by the tribunal. However, as a respondent no longer has a right to separate proceedings (see below), the actions will only be separated if the requirements for a multiple claim being brought have not actually been satisfied.

Repeal of a respondent's right to separate proceedings

Under the previous JCAA Commercial Arbitration Rules (the Old Rules), in a multi-party arbitration one of multiple respondents could submit a written request for the separation of arbitral proceedings. This required the claimant(s) to start separate proceedings in relation to that respondent. This provision guaranteed each party's right to appoint its own arbitrator if the respondents were unable to agree on a choice of arbitrator.

Under the New Rules this provision has been deleted in the interest of cases being dealt with efficiently. The New Rules also expressly provide for the JCAA to appoint an arbitrator, in the context of a multi-party arbitration, on behalf of any group of parties which fails to appoint an arbitrator itself. In order to avoid a situation whereby a group of claimants or respondents is said to have been prejudiced by an inability to appoint the arbitrator of their choice, which could lead to a challenge to an award (as happened in the case of Siemens AG/BKMI Industrienlagen GmBH v Dutco Construction Company), New Rule 29 provides that if the JCAA appoints an arbitrator in such circumstances it shall appoint all three arbitrators. By removing the opportunity for any party to appoint its own arbitrator, each participant is treated equally. If no objections are raised the JCAA may name the arbitrator already selected by one of the parties as one of its choices.

Addition of Chapter V, interim measures by arbitral tribunal, emergency arbitrator

The New Rules introduce provisions allowing for the appointment of an emergency arbitrator by the JCAA before the tribunal has been constituted. The emergency arbitrator can then grant interim measures. This is in line with, for instance, recent amendments to the HKIAC Rules which came into force on 1 November 2013. The new approach by the JCAA differs from the SIAC or HKIAC Rules however, because an emergency arbitrator can be appointed even before a notice of arbitration has been filed.  This approach adds to the options available to parties to an arbitration that, until the New Rules came in to force, had to approach the Japanese courts to obtain interim relief in the early stages of a dispute.

The JCAA must use reasonable efforts to make the appointment within two business days after a party's application and the emergency arbitrator must decide whether to grant interim measures within two weeks of his or her appointment.

New Rules 66-69 provide for interim measures to be put in place by the tribunal. New Rules 66-9 replace Old Rule 48 which simply provided for "such interim measures as the…tribunal may consider necessary".  The treatment of interim measures, which was previously very broad, has been provided with structure and limits have been placed on their availability.

The New Rules now set out specific examples of the interim measures which may be ordered by the tribunal. These include orders preserving assets or evidence, or preventing prejudice to the arbitral proceedings. New conditions are imposed on the grant of interim measures. There were no such explicit limits on the tribunal's discretion under the Old Rules. For example a party applying for an order preserving assets must now show that the harm caused by the order not being granted "substantially outweighs" the harm caused by its imposition and that the party has a "reasonable possibility" of succeeding on the merits of the claim.

The limits on the availability of interim measures should be reassuring to parties considering using the JCAA for arbitration. The addition of a requirement to balance considerations of convenience for certain interim measures is sensible and explicitly brings the tribunal's decision making process in line with that of the HKIAC.

Provisions encouraging mediation

New Rule 54 allows arbitral proceedings to be stayed at any time if the parties agree to refer the dispute to mediation under the International Commercial Mediation Rules of the JCAA. If the proceedings are stayed in this manner the arbitrators will not be permitted to act as mediators in the case without the agreement of the parties.

Other procedural changes include the relaxation of the definition of "writing" to include any electromagnetic record, changes to the ways in which time periods are calculated, and parties may now appoint arbitrators at the same time as submitting a Request for Arbitration (for claimants) and when submitting the Answer (for respondents).

Conclusion

The New Rules are an encouraging modernisation. Helpful improvements such as the imposition of limits on interim measures may make arbitration under the JCAA rules a more attractive option to international parties. However it remains to be seen whether this will be enough to increase the currently low number of JCAA arbitrations taking place each year.

For further information, please contact Peter Godwin, Managing Partner, Tokyo, Elaine Wong, Senior Associate, James Allsop, Senior Associate, or your usual Herbert Smith Freehills contact.