Now, based on a judgment of the Supreme Court of Japan, let’s take a slightly more in-depth look at the issue of this research project.
On July 11, 1997, the Supreme Court of Japan handled a case seeking approval and enforcement in Japan of a judgment by Superior Court of California, United States. The Supreme Court denied a part of the claim. This case is a classic example of collision in legal diversity.
The case arose when the Japanese corporation “Company A” was planning to operate a factory in the US based on expectations for special measures to attract foreign investment, however, it ultimately abandoned the plan. In this case, Company A withdrew even though it had concluded a land acquisition contract with a landowner. That landowner filed an action to recover damages in Superior Court of California, which awarded plaintiff more than $420,000 in actual damages and $1,125,000 in punitive damages. However, since Company A did not possess any assets in the US, the plaintiff filed a lawsuit in Japanese court for approval and execution of a judgment by Superior Court of California (foreign judgment) in Japan, seeking the ability to receive payment from the domestic Japanese assets of Company A.
In respect for the sovereignty of foreign nations, foreign judgments are fundamentally approved and executed without examining the contents of the judgments. However, it is required that “the content of the judgment and the court proceedings are not contrary to public policy in Japan.” (Code of Civil Procedure, Article 118-(iii)). The issue in the case was how to deal with punitive damages, a system which does not exist in Japan.
Punitive damages are a monetary sanction imposed in addition to actual damages for especially malicious torts and a breach of contract. The use of punitive damages is one characteristic of American law. The Supreme Court of Japan ruled that the Japanese legal system is designed to implement such sanctions as criminal charges, and that ordering payment of punitive damages in Japan is a violation of public policy.
Now, the facts introduced above may be interpreted as follows by some readers: The Supreme Court of Japan protected the diversity of Japanese law by denying an attempt to force American (Californian) law on Japan and marginalize Japanese law. However, the problem is more complex. From the perspective of the United States, this judgment unilaterally denied American law, which necessitated a discussion of countermeasures against Japanese laws. In other words, this judgment of the Supreme Court of Japan is both the conclusion of one issue and start of the next issue. (In this case, the next problem could also arise in terms of attempts to expand the scope of the judgment. One example is litigation asserting that foreign judgments which order payment of child support exceeding base amount in Japan are violations of public policy and therefore should not be approved or enforced. Japanese courts denied such assertions. May 20, 2015 judgment by the Tokyo High Court.)
As an example of the chain of issues, consider the FTA negotiations between the United States and South Korea, as well as amendments to Korean Copyright Act based on those negotiations. Similar to Japan, South Korea does not have a system for punitive damages. During US-Korea FTA negotiations, however, America argued for implementation of a punitive damage system in order to strengthen copyright protection across national borders. As a result, in 2011, Item 2 was added to Article 125 of the Copyright Act of South Korea. This amendment recognized orders for paying punitive damages of a reasonable amount within a legally-defined scope instead of actual damages. Although the name of the Korean system does not explicitly use the term of punitive damages, the actual function of the system is in fact very close.
Should this conclusion be viewed as American law being forced on another country? Or should it be seen as setting a point to harmonize based on mutual respect between American law and Korean law? Of course, there is no easy answer to this question. Nevertheless, in order to reach a reasonable answer, it is not enough to simply take a superficial view of the US-Korea FTA and articles in the Copyright Act of South Korea. Clearly, it is also necessary to assess actual legal conditions, including the operation of related laws. This creates the necessity for international joint research.