Japanese Law and the Asia-Pacific

Emeritus Professor Peter Drysdale recently presented in Sydney a preview of his now-published consultancy report for Austrade, which urges (p3):

“a paradigm shift in thinking about Australia’s relationship with the Japanese economy. The Japanese market is no longer confined to Japan itself. It is a huge international market generated by the activities of Japanese business and investors, especially via production networks in Asia. It is a market enhanced by the economic cooperation programs of the Japanese government throughout the developing world, particularly in the Asian and Pacific region. And it is a market in which Japanese business now plays an increasingly important role from an Australian base in manufacturing, agriculture and services.”

The Australian Financial Review now confirms that Japan has led China and other Asian investors into Australia over the last year (“What Crisis? Asian Investors rush to our shores”, 24 September 2009). But many probably remain unaware of these facts highlighted by Drysdale’s report (pp 3-4):

“The stock of Japanese investment in Asia amounted to A$ 180 billion out of Japan’s global investment of A$ 772 billion at end-2008. The flow of export and import trade which Japanese business generates in Asia each year was US$ 690 billion in 2008. Procurements through Japanese corporate subsidiaries in Asia amount to A$ 1.2 trillion annually. In addition, Japan spent A$ 11 billion (901 billion yen) in Asia on Overseas Development Assistance programs and procurement through economic cooperation programs. Japanese business has now also established a platform for export to the region from Australia, with diversified investments across food, manufacturing as well as resources, that already delivers A$ 6 billion in Australian sales to Asian markets other than Japan. These are all large new elements in the economic relationship with Japan beyond the A$ 51 billion export trade and A$ 20 billion import trade that Australia already does each year with Japan itself.”

These pervasive economic ties are underpinned by very wide-ranging and stable relations between Australia and Japan at all sorts of levels: governmental, judicial, educational, working holidays, and so on. As pointed out in another recent report “Australia and Japan: Beyond the Mainstream”, by Manuel Panagiotopolous and Andrew Cornell for the Australia Japan Foundation, the GFC has led policy-makers as well as businesspeople to look again more favourably on relationships that combine lower risk with less return, compared to high risk/return ventures.

We can take advantage of these strong and still very profitable Australia-Japan bilateral relationships, as well as the investment and trading links each country (especially Japan) has developed in other parts of Asia particularly since the 1990s, by more actively joining Australian and Japanese partners for ventures throughout Asia. This spreads the risks typically associated with the possibility of higher returns, and also allows each partner to contribute goods or services in which that country has more of a comparative advantage. Thus, for example, Drysdale suggests (p25):

“partnership with Australian services firms in finance, legal services and engineering could be mutual productive. … In FTA talks with Japan the Rudd Government is trying to open the way for professional and financial services firms to set up in Japan, encouraging wider recognition of qualifications and the removal of barriers to obtaining licences in Japan”.

As an example of “legal and consultancy services”, Drysdale mentions that several Australian law firms have long experience in the Asian region, and gives the example of Mallesons Japan. But he concludes that “if we are serious about joining global supply chains and capturing service industry opportunities in Asia then Australian firms need to be there on the ground to capture the business”.

Unfortunately, unlike the major US and European law firms, neither Mallesons Japan nor any other Australian law firm has yet taken sufficient advantage of the now fully-liberalised and growing market for international legal services in Tokyo (described in a recent lecture by IBA Vice-President and ANJeL Advisor, Mr Akira Kawamura). A major opportunity opened up especially when full profit-sharing partnerships between Japanese and international lawyers were permitted from 2004, and many young Australian law graduates are now directly joining the Tokyo offices of US or UK law firms rather than going first through their head offices. If Australian law firms could also establish offices in Tokyo, they too would not only access burgeoning markets there, but also be better placed to pursue opportunities in other parts of Asia. For example, they could use their home client base to help link up Australian firms with firms in Japan interested in joint ventures in Asia. And the Tokyo office could liaise, for example, with an office say in Shanghai when its Australian client found itself dealing with a joint venture in China that in fact involves significant Japanese interests.

Educational services is another area where Australia has significant expertise as well as demonstrated export market potential, and this extends to legal education. For example, through the Australian Network for Japanese Law Sydney Law School partners primarily with Ritsumeikan Law School to offer intensive Kyoto and Tokyo Seminars comparing Japanese law. These are offered not only to Australian and Japanese students, but also to students travelling from other parts of Asia (especially Hong Kong and Singapore). Through its 400-strong membership, ANJeL coordinates lecturers comprising professors and practitioners from Australia and all around Japan, not limited to those at or already known to Ritsumeikan.

As another recent example, the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS) worked with our Research Institute for the Asia Pacific (RIAP) to bid for a United Nations “legal technical assistance” project to support a South-East Asian government interested in implementing judicial sector reform. The government was particularly interested in comparing Japan, China, Indonesia (for all three of which CAPLUS has particular expertise), Korea (where CAPLUS has close contacts) and Russia. Again in conjunction with ANJeL, we were able to bring in some Japanese partners to assist with the criminal justice aspects of the report on Japan. Those Japanese partners alone, again, would have been unlikely to have attempted such a project. Combining Australian with Japanese expertise therefore opens up another possibility for exporting legal education services to another part of Asia.

In sum, developments are already occurring in some law-related fields that illustrate Drysdale’s thesis very well. But there is certainly scope for doing much more, for example through more direct engagement with the legal services market in Tokyo on the part of Australia’s law firms. The key now is to think regionally (and globally), not just bilaterally.