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The importance of arbitral hearing centres for the popularity of the arbitral seat – the case of Japan

Not only arbitral institutions and law firms, but also countries are competing more and more to become attractive for international arbitrations. In the latter case, the idea is that hosting an arbitral proceeding in a particular jurisdiction will have a positive influence on the local legal and service industries, and will generally improve the jurisdiction's international reputation. The choice of a venue for the arbitral proceedings is usually known as the choice of the "seat" or "place" of the arbitration. There are many factors that influence the popularity of an arbitral seat. An independent and arbitration-friendly judiciary, a modern arbitration law, a track record of enforcing arbitration agreements and arbitral awards, and the general reputation of the seat are often perceived as key success factors. Besides that, the impact of the availability of dedicated arbitration hearing facilities has continued to grow in significance in recent years. Both research and practical experience demonstrate that once a certain threshold of legal prerequisites is met, the existence and quality of hearing facilities plays a powerful role in determining the attractiveness of an arbitral seat. It is therefore not surprising to see that Japan has joined the jurisdictions that have undertaken efforts to increase their popularity among leading Asian arbitral seats.

The importance of a hearing centre for the arbitral seat

Experienced practitioners will usually prefer dedicated hearing centres as arbitral venues. Everyone who has gone through the experience of explaining the set-up of an arbitral hearing, from the arrangement of tables and microphones down to the requirement of sufficient electrical plugs, to a hotel manager unfamiliar with the process, will appreciate the equipment and service a dedicated hearing centre has to offer. Indeed, as the results of the 2018 Queen Mary White & Case International Arbitration Survey ('Queen Mary Arbitration Survey') show, once the factors most relevant to the attractiveness of an arbitral seat are satisfied, the quality of hearing facilities assumes a major role.

This theory can be confirmed by reference to the experiences of Hong Kong and Singapore, which are widely considered as leading arbitral venues in Asia. For example, the number of cases handled by SIAC has more than doubled since the establishment of Maxwell Chambers in 2010. A similar trend can be noted in Hong Kong, with HKIAC identifying its hearing facilities as instrumental in the city's success as a venue. Hong Kong's move from initial absence in the most-preferred seat category in the 2010 Queen Mary Arbitration Survey to third and fourth place in the 2015 and 2018 Surveys is arguably linked to users' satisfaction with the HKIAC's Exchange Square facilities. Likewise, one could not help but get the impression that South Korea's relatively new hearing centre, the Seoul IDRC, has played an important role in South Korea's concerted and successful efforts to increase its popularity as an arbitral venue in Asia.

Approaching the issue from a different angle, Tokyo and Japan were not listed at all in the two most recent Queen Mary Arbitration Surveys, after having made it into the top five in 2010. While Tokyo did not have a hearing centre back in 2010, it may have lost ground in recent years as new hearing centres were springing up elsewhere. Indeed, while singing the praises of its Asian neighbours, a recent survey saw its respondents lamenting the lack of suitable facilities in Tokyo. This may be somewhat surprising, considering that Tokyo is known for a flawless infrastructure, safety and cleanliness that is probably unmatched by any other city of its size. Nevertheless, the inference to be drawn is that the absence of a hearing centre in Japan has put it at a disadvantage in the region.

The correlation between the existence of a hearing centre and the attractiveness of the seat is further supported by the actions of successful dispute resolution service providers. In the past year, many centres have announced plans to push ahead with expansions or improvements of their hearing spaces. Notable examples include plans for Maxwell Chambers to treble in size, the Seoul IDRC which is to move locations to offer larger facilities, and also IDRC in London which aims to add a further two hearing suites.

Hearing centre developments in Japan

This trend has not escaped notice in Japan and there is now much movement on the hearing centre front, with support from both the public and private sectors. A key component of an economic reform policy established by the Government last year is to 'develop a foundation to activate international arbitration' in Japan. The Government subsequently established a working group to develop this element of the policy, and private sector entities have followed suit by setting up a government liaison council.

This public-private cooperation is paying dividends and saw the implementation of the Japan International Dispute Resolution Centre (JIDRC) in February 2018. Similarly to Maxwell Chambers, the JIDRC will not be tied to any one arbitral institution, such as Japan's JCAA, for example, but will host cases heard under the auspices of any (international) arbitral institution, as well as cases conducted on an ad-hoc basis or through other ADR mechanisms. In a first step, the JIDRC Osaka hearing centre opened its doors at the beginning of May 2018. At the opening ceremony, Japan's Minister of Justice emphasised the Government's commitment to working alongside the private sector to nourish the renascent arbitration industry in Japan. The need for providing appropriate venues in Japan was underscored by the fact that JIDRC Osaka, as of its opening, had already received first reservations for international commercial arbitration cases. The JIDRC, in the implementation of a second and arguably most important step, has committed itself to opening a hearing centre in Tokyo by the year 2019. On top of providing facilities for national and international arbitrations in Japan's capital, the centre is to serve as a venue for arbitration conferences and training sessions, and will also be equipped to deal with sports arbitration cases arising from the Tokyo 2020 Olympics.

For the sake of completeness, it is worth mentioning that the Japan Association of Arbitrators, in collaboration with Doshisha University in Kyoto, is in the process of establishing the Japan International Mediation Centre (JIMC) in Kyoto. Apart from facilities at Doshisha University, the JIMC-Kyoto will offer a range of services, such as appointing mediators, supporting ad-hoc mediations and administering mediations under its own (soon to be drafted) rules. On top of that, the city of Kyoto with its beautiful sights and peaceful atmosphere seems particularly conducive to creating an environment in which to conduct successful mediations.

With each of Tokyo, Osaka and Kyoto benefitting from efficient transportation, and being well-serviced by a range of hotels and other amenities, the facilities established in these cities are sure to prove convenient to the parties whose disputes they host.

Japan's missing puzzle piece?

Given that Japan is known known for its arbitration-friendly judiciary and modern arbitration law based on the UNCITRAL model law, there is a significant chance that Japan's international reputation will further improve following the establishment of its arbitral hearing centres. However, this will require that the facilities in Tokyo and Osaka be competitive with the offerings in other places, particularly in Asia. Among the yardsticks by which the new offerings will be measured will certainly be location, value for money, IT services and helpfulness of staff. This may present a number of inherent challenges, as Tokyo real estate counts among the most expensive in the world and not all of Japan's service industry is known for its ability or willingness to converse in languages other than Japanese. It is therefore to be hoped that Japan and the JIDRC will go the extra mile to create a hearing centre that in every respect comfortably matches, and ideally surpasses, the offerings in Singapore, Seoul, Hong Kong or elsewhere in the region.

With Tokyo providing the key criteria for a popular arbitral seat and boasting other benefits to boot, the long-overdue establishment of hearing centres may well be the missing puzzle piece for the reinvigoration of Japan's international arbitration industry. Additionally, the recent uptake in the use of international arbitration as the dispute resolution method of choice for many Japanese corporates means that the JIDRC and other Japan-based initiatives should be able to lure a strong initial clientele. Building from that base should enable Japan to establish a solid reputation as a seat of arbitration, which could finally see Japan move ahead in the arbitration game to a place fitting its position as the world's third largest economy.