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Written by: Joel Rheuben (Herbert Smith Freehills, Brussels) and Luke Nottage

It has been almost four years since the devastating triple disaster comprising a magnitude-9 earthquake, tsunami and meltdown of the Fukushima Dai-ichi Nuclear Power Plant struck northeastern Japan on 11 March 2011. While a variety of programmes exist to clean up serious nuclear contamination and assist residents of the affected areas, it is only victims of the third of these disasters – tens of thousands of evacuees (even now) as well as many affected local businesses – who have access to a comprehensive scheme of compensation, administered by the plant’s operator, Tokyo Electric Power Company (“TEPCO”). Claimants for compensation have three options for the resolution of claims: direct negotiation with TEPCO, mediation via the specially established “Dispute Resolution Centre for Nuclear Damage Compensation” (the “Dispute Resolution Centre”), and civil action under the Nuclear Damages Compensation Law (No 147 of 1961). Each avenue is outlined in turn below, based on an unfootnoted but updated version of our article published in October 2013 at pp126-31 of the Asian Dispute Review (supported by HKIAC and several other arbitral bodies) under the main title of “Now that the (radioactive) dust has settled”.

1. The Legal Framework
The Nuclear Damages Compensation Law is the principal law governing civil liability for nuclear accidents in Japan. It overrides the general tort provisions of the Civil Code, establishing liability that is strict, unlimited, and borne exclusively by nuclear power plant operators. In past cases the definition of “nuclear damage”, to which the law applies, has been interpreted expansively to apply to, for example, reputational damage for business in an affected area. Putting aside for now the question of state liability, TEPCO alone is therefore potentially liable for a staggering amount of compensation. In its 2013 annual report, TEPCO estimated its total liability at more than JPY 3.8 trillion (approx. USD 38.7 billion).

In order to cover the costs of compensation, the Nuclear Damages Compensation Law requires plant operators to be indemnified for at least JPY 120 billion (USD 1.2 billion) per plant. Beyond this, operators bear the costs of compensation alone, although the law requires the government to ‘assist’ operators where the government ‘deems it necessary’. In the case of the Fukushima disaster, assistance has been provided in the form of the Nuclear Damage Liability Facilitation Fund, a predominately government-funded corporation that has acquired a 51% stake in TEPCO in exchange for a rolling series of cash injections. In this way the government has effectively nationalised the claims resolution process while standing behind TEPCO as a separate private party (still listed on the Tokyo Stock Exchange).

2. Direct Compensation from TEPCO
As early as April 2011 TEPCO began to make provisional compensation payments of up to JPY 1 million (just over USD 10,000) to evacuees, to be supplemented by full payments once the company’s compensation scheme was in place. At the same time, the national government began making provisional payments to affected small and medium-sized businesses in the region, particularly in the tourism sector. In accordance with the Nuclear Damage Compensation Law, the government also established an expert “Dispute Reconciliation Committee for Nuclear Damage Compensation” (the “Dispute Reconciliation Committee”) under MEXT, to create a set of non-binding guidelines to inform payment amounts. The Dispute Reconciliation Committee issued its interim guidelines in August 2011.

In September 2011 TEPCO launched its formal compensation scheme. Although the Dispute Reconciliation Committee’s guidelines are non-binding, TEPCO has largely adopted them, although it treats the guidelines as a maximum, rather than a minimum as the Committee intended. Compensation extends not only to material loss by evacuees, but also to loss of earnings, mental suffering (generally available, even without evidence of a specific mental state), and loss of opportunity due to reputational damage.

Applications for compensation can be made by way of a detailed application form provided by TEPCO. Applications are processed by a dedicated unit within TEPCO, thought to number as many as 3,000 staff. As at 2 August 2013, TEPCO had received approximately 655,000 applications for compensation from individuals and businesses, of which it had settled 588,000.

2. Mediation via the Dispute Resolution Centre
Where TEPCO and claimants cannot reach agreement on compensation, or if claimants are disinclined to approach TEPCO directly, they may refer the dispute to free mediation via the Dispute Resolution Centre as an alternative to civil litigation. Other forms of private ADR – such as arbitration (in practice more like mediation) via local bar associations or through the Japan Commercial Arbitration Association (especially for commercial claimants), or mediation via the many organisations now certified under legislation enacted in 2004 – are also theoretically available to claimants. However, it seems unlikely that TEPCO would agree to become a party, or even that such bodies would agree to facilitate arbitration, given the predictability and cost-free service provided by the existing Dispute Resolution Centre system.

The Dispute Resolution Centre was established in August 2011, at around the same time as the Dispute Reconciliation Committee issued its guidelines. Under the Nuclear Damages Compensation Law, mediation of disputes is a responsibility of the Dispute Reconciliation Committee, but it soon became obvious that the volume of claims necessitated the creation of a larger and more sophisticated body. The Dispute Resolution Centre also sits under and is funded by MEXT as a subsidiary of the Dispute Reconciliation Committee, although lawyers’ groups had pushed for more independence. As at February 2013 the Dispute Resolution Centre had 463 staff, operating out of five branches in Fukushima Prefecture and two in Tokyo. This staff includes 200-plus mediators and more than 130 “investigators” – who act as rapporteurs, gathering facts and refining issues of contention – all of whom are lawyers (bengoshi).

Mediators are appointed to individual cases by the Dispute Resolution Centre’s steering committee, and according to the complexity of a case, can be appointed either individually or as a panel. Mediators can guide parties to settlement themselves, or can issue recommended terms of settlement where no agreement is reached. Interestingly, in November 2011 TEPCO announced that it would abide by settlement proposals made by the Centre’s mediators.

In the interests of consistency mediators are required to comply with the Dispute Reconciliation Committee’s guidelines in recommending terms of settlement, but the Dispute Resolution Centre has further developed a series of “general standards” for common categories of loss in order to ensure uniformity. In principle mediation is confidential. However, the Dispute Resolution Centre can publish settlement agreements or recommended terms of settlement with the consent of the parties, and has already published a small number of recommended terms online.

The Dispute Resolution Centre was initially slow to resolve cases, partly due to low staffing numbers (which have gradually increased), and to a lesser extent because it decided to select and hear in detail “champion” cases upon which to base general standards. In its first four months of operation, the Centre resolved only six cases in total. Two more factors have contributed to delay. The first is a tendency by mediators (and investigators) to be overly “lawyerly” in fact-finding. The second is the high proportion of litigants who are unrepresented: initially as high as 80%. The government has sought to relieve this problem by relaxing the requirements for legal aid for residents of affected areas. Mediators have also tried to streamline hearings, such as by allowing mass claims. As at 2 August 2013, the Dispute Resolution Centre had received 7313 applications for mediation, of which it had guided parties to reach settlement in 4239.

3. Civil Litigation
Nothing prevents claimants from bringing civil action against TEPCO in tandem with seeking mediation through the Dispute Resolution Centre, or even after a completed settlement. Indeed, it may be entirely rational to do so preemptively, given that the limitation period for actions in tort is 3 years, and so will expire in March 2014. Making a claim through the civil court system also potentially gives claimants access to court-annexed mediation services, which may be an attractive option to claimants who have relocated outside of Fukushima or Tokyo and so cannot easily access the Dispute Resolution Centre.

It is unclear how many claims have been brought by way of civil action, although the number would appear not to be large: only two cases to have reached judgment seemed to have been reported as of October 2013. The simple explanation for this initially low uptake may be the ease and low cost of Dispute Resolution Centre proceedings, rather than any supposed cultural aversion to litigation. However, the low number of reported cases makes it difficult to assess whether claimants who do choose the civil litigation route are able to achieve higher payouts. In addition, a mass claim against nuclear nuclear plant suppliers General Electric Co., Toshiba Corp. and Hitachi Ltd was filed in January 2014, which by March had attracted over 4000 plaintiffs, albeit only seeking a symbolic payment of 100 yen each.

While the principle of operator-centered liability under the Nuclear Damages Compensation Law precludes civil action against other private defendants, at least under Japanese law, it does not affect the potential for negligence claims against the Japanese government under the State Compensation Law (No 125 of 1947). It is an open question as to whether the national government’s historic failure to adequately regulate the nuclear power industry could give rise to state liability. One early ham-fisted attempt has already failed, but another group of victims has more recently launched a more organised mass suit against the government. The potential for state liability, quite broad compared to Anglo-Commonwealth and especially American law, may be one explanation for the Japanese government’s willingness to finance TEPCO’s compensation payments and to support the Centre’s mediation process.

4. Assessing the Dispute Resolution System
Japan’s latest experience in dealing with mass claims is instructive from a broader comparative perspective. Suits for state responsibility are quite frequently filed, especially in mass claim scenarios – sometimes impacting, for example, along with criminal prosecutions, on settlement patterns (including the establishment of partly government-funded compensation schemes) in product liability suits against manufacturers. Admittedly, individual claimants – even if coordinated through informal networks of lawyers – find it difficult to prevail in the absence of an ‘opt-out’ class action mechanism, and because the government organises its own litigation services very effectively pursuant to a vision of the “rule of law” that emphasises uniformity and certainty.

Nonetheless, the government itself has increasingly recognised that greater scope needs to be provided for citizens to bring ex post claims for redress if public or private entities do cause harm, to offset a shift away from ex ante regulation or direct control by public authorities over socio-economic ordering. This deregulatory shift in policy underpins comprehensive reforms to Japan’s civil and criminal justice systems since 2001. These range from measures to expedite civil proceedings through to the promotion of privately-supplied ADR, to reforms to legal education, resulting in significant increases in bengoshi lawyer numbers.

In that context, the Fukushima Dispute Resolution Centre process involves several novel features compared to earlier ADR schemes established with Japanese government support. In particular, it is operated by (private) lawyers, rather than primarily by government officials (as in environmental pollution or noise pollution cases). Secondly, the Centre applies guidelines and other principles derived from tort law, including an extensive accumulation of court judgments, rather than invoking non-legal norms based on the mediators’ (often “didactic”) notions of broader community expectations.

Rights-based ADR is also found within Japan’s court-annexed mediation system, but its part-time lay mediators are not necessarily lawyers or even legally-trained individuals. In addition, the Dispute Resolution Centre system displays some continuities with other ADR schemes in Japan. For example, Product Liability Centres were established by industry associations (in the shadow of some governmental guidance) from around 1994, when new strict-liability legislation was enacted. These PL Centres see a major role for their staff – even prior to formal mediations—as being the identification of the relevant manufacturer as well as the provision of other key factual and legal information, in order to facilitate directly negotiated settlements. The Dispute Resolution Centre can serve a similar role, probably in a more objective manner, by publicising important case outcomes. From this perspective, there seems little difficulty if claimants can pursue mediation through the Centre while continuing direct negotiations with TEPCO. Litigation also rightly remains open to claimants, allowing them to try to extend “the shadow of the law” if it remains unacceptably narrow – despite potentially involving the Centre in dealing with TEPCO.

Nonetheless, there is a downside to rights-based adjudication and “evaluative” mediation procedures. Japanese victims of accidents are hardly alone in often seeking emotional release, or sincere accountability expressed by potential tortfeasors, as a starting point for restoring inter-personal relationships, through dispute resolution processes. A good example may be the mass lawsuit commenced in early 2014. Yet Japan still has little tradition of more party-centred “facilitative” mediation, including under the Centre’s new regime, which might address such needs. Developing that capacity remains a major challenge for ADR in contemporary Japan.

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Japanese Law in Asia-Pacific Socio-Economic Context
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