July 26-27, 1999
Montreal, Canada

Traditional Legal Concepts For The Internet And The Global Information Infrastructure: A Japanese Perspective

Kazunori Ishiguro
Professor Of Law
The University Of Tokyo

Paper submitted to the Session: "Traditional Legal Concepts: Basics from Three Experts" of The Internet Law & Policy Forum: "Jurisdiction: Building Confidence in a Borderless Medium" (held in Montreal, Canada, 26-27 July 1999)

Contents

1. Introduction
2. Choice Of Law And International Jurisdiction In Civil (Private Law) Matters
   1. Choice of Law
   2. International Jurisdiction in Civil Matters
3. Recognition And Enforcement Of Foreign Judgments In Civil Matters
4. Harmonization vs. Extraterritoriality--some Comments On State JurisdictioN
5. The Impact Of The W.T.O. System At Present And In The Future

Appendix I: International Copyright Infringements In Cyberspace: A Conflict-of-laws Analysis

Appendix II: Issues For The Next WTO Negotiations--a Quest For A Balanced Approach

Additional Paper: Some Comments On The "Country Of Origin" Rule Proposed By GBDe (Global Business Dialogue On Electronic Commerce): Issue Group Policy Paper Draft Version 4.0 (date: June 11, 1999)

I. Introduction This Forum intends to cover major cross-border legal problems surrounding the Internet. The topics are not limited to "private law" areas, as defined in European continental countries and in Japan, but cover "public law" areas, as defined in the same way^[1], including taxation and the role of the World Trade Organization. The role of this session is to analyze the "traditional" legal concepts and to show the "basics" for further discussions in the following sessions. Therefore, this paper supplemented basically by its APPENDIX I and II, should not confine itself to "private law" areas, and should include some basic messages on the WTO system and related areas of which I am one of the experts.

In "private law" areas, most of the problems posed here are in principle the same as those of "international infringements of intellectual property rights in cyberspace", as analyzed in APPENDIX I of this paper, except the territorial limits (the so-called territoriality) of those rights. It would be permitted to refer to APPENDIX I for detailed discussions of major points.

However, problems of "extraterritoriality and the doctrine of state jurisdiction" are not discussed in details in APPENDIX I. Therefore, some basic points should be shown here in this paper.

II. Choice Of Law And International Jurisdiction In Civil (Private Law) Matters

(1) Choice of Law Logically, the (civil) jurisdictional problems should be treated before choice of law problems. But, for the better understanding of lawyers from various countries, the "basics" of the U.S. choice of law revolution since Babcock v. Jackson (1963)^[2] should be mentioned first, because that revolution has had some theoretical impacts, in the U.S., upon problems of jurisdiction as well as recognition and enforcement of foreign judgments^[3].

A paper issued in 1997 from the ABA side^[4] compares the First Restatement with the Second Restatement (both on Conflict of Laws). Indeed, the former was too rigid in choice of law methodology, and the latter is quite flexible. From the viewpoint of traditional (Savigny-type) system of conflict of laws which has been supported by the Japanese theories and court practice as in most of the countries, the Second Restatement can be viewed as the most sound one, as compared to the U.S. revolutionary theories (B. Currie and D. F. Cavers are among those who are most influential there).

However, the cause of the basic discrepancy between the traditional choice of law system, including the First Restatement, and the U.S. revolutionary theories is whether, in determining the applicable law, to make "Sprung ins Dunkle (a jump into the darkness)" or not -- in other words, whether or not to seek justice at the level of conflict of laws of its own, as distinguished from that at the material law level. In the 1960s the U.S. revolution was deeply feared on the European side, but it is a long time since the crisis was over, at least in principle, although problems such as the treatment of mandatory rules of a third country, as seen in Article 7 (1) of the 1980 EEC Convention on the Applicable Law to Contracts, pose some difficulties within the framework of traditional choice of law system^[5].

Whenever harmonization of choice of law problems among nations is discussed in order for further developments of the Internet and for the establishment of the GII^[6], one should not forget that there is a big difference, in the depth of the most basic methodology, between the U.S., on one hand, and other countries including Japan, on the other hand, concerning the choice of law process^[7].

(2) International Jurisdiction in Civil Matters The U.S. long arm statutes have been posing serious problems with regard to business activities between the U.S. and Japan, including concurrent litigation as found in Hitachi v. IBM case^[8], just as between European countries and the U.S.^[9]. Undoubtedly, similar cross-border problems will occur more frequently concerning transactions in cyberspace.

The Japanese theories and court practice on international jurisdiction follow the "nexus" approach, rather modest one, as compared to the U.S. approach, actually guided by articles in Civil Procedure Law similar to those found in German Civil Procedure Law (Zivilprozessordnung)^[10], though the latter has now some explicit articles for "international" settings.

Article 1 of the Japanese Civil Procedure Law provides that the general (common) ground for jurisdiction shall be based on the domicile of a defendant. It is quite reasonable for a plaintiff to sue a defendant in a court of the domicile of the latter, according to the traditional notion of the Japanese civil procedure law, domestic or international. The same notion is shared by the Lugano Convention as the main principle^[11].

However, the U.S. Supreme Court chose a different way, as clearly seen in Piper Aircraft v. Reyno^[12]. A "foreign" plaintiff can sue a defendant in the U.S. domicile of the latter only in rather few cases where the doctrine of "forum non conveniens" is not a bar, although it seems reasonable to treat a foreign and a domestic plaintiff equally, as in Japan.

That point is surely among the most basic ones. If jurisdictional rules among nations are to be harmonized for the sake of further developments of cyberspace, one must think of whether such a fundamental difference can be overcome or not^[13], though that is only the tip of an iceberg.

III. Recognition And Enforcement Of Foreign Judgments In Civil Matters The Japanese Supreme Court rejected, in the Mansei Kougyou case (1997)^[14], the recognition and enforcement of the "punitive damages" portion of a judgment rendered by a court in California, relying upon the public policy clause in Article 200 No.3 (now Article 118 No.3) of the Japanese Civil Procedure Law. "Punitive damages" issues are slightly touched upon in an above-mentioned paper issued from the ABA side^[15].

However, in the U.S., there are other issues treatment of which would pose serious problems in cross-border settings. "Treble (or multiple) damages", "disgorgement", and even "parens patriae" are some of the examples in this regard^[16]. The role of private persons as "private attorney-general" in the enforcement of law, or "enforcement of public law by private remedies" is the real feature of “punitive or multiple damages"^[17]. "Disgorgement" and "parens patriae" are the examples of law enforcement by the authorities on behalf of private persons involved.

Along with problems of the applicability, in Japanese courts, of such U.S. (state or federal) rules in cases where they form part of the applicable law (lex causae), there are problems on recognition and enforcement of foreign judgments. The main characteristic of such U.S. rules, as remedies, is, from the Japanese point of view as mentioned earlier in this paper^[18], the unique way of a fusion of private and public law in the U.S.. After the Mansei Kougyou case such problems should be analyzed more deeply on the Japanese side^[19], and that would be needed also for the purpose of this Forum.

At the same time, however, deep consideration is needed concerning the fact that each country has some peculiar legal rules based on its own history, culture, social needs, etc.. Especially in the context of harmonization of national laws, one should think of, for example, the possibility or impossibility for the U.S. to abolish such rules mentioned above for the sake of furthering global developments of the Internet and the Information Society.

IV. Harmonization vs. Extraterritoriality -- Some Comments On State Jurisdiction There are views in the U.S. according to which foreign (in this context: foreign country's) tax or even penal judgments can be recognized and enforced^[20]. To do the same in Japan would mean the infringement of fundamental human rights protected under the Constitution. In other words, that would be viewed as an unlawful "bypass", or as one of the (disguised) patterns of cross-border enforcement of foreign sovereign power, and, if permitted, the forum court functions as a "bailiff" for the foreign authority^[21].

This problem relates to the doctrine of state jurisdiction, especially in this context the so-called enforcement jurisdiction, under customary international law, on one hand, and the protection of fundamental human rights, on the other hand. To clear up both sides of the problem, there is a route for the coordinating activities of foreign and domestic authorities, as seen in Article 26 (information exchange) and 27 (collection of tax levied by the authority of another country) of the U.S.-Japan Tax Treaty^[22].

Although such treaty routes, whether bilateral or multilateral, are undoubtedly important in order to prevent cross-border tax evasion, money laundering etc., "exclusiveness" of such routes depends on the constitutional system of each country and the actual practice which reflects, in a sense, such a (constitutional) background. In the so-called Auto Cases^[23] the IRS, on the U.S. side, did not use the treaty route (Article 26) mentioned above, insisting upon unilateral measures, and the U.S. court authorized such measures.

Another example is Société National Industrielle Aérospatiale v. U.S. District Court^[24]. As Prof. Perritt states, "[t]he 1993 amendments to Federal Rules of Civil Procedure 28(b) require treaty or convention procedures to be used if feasible for the taking of a deposition"^[25], but there still remains the problem with regard to the fundamental aim of the relevant Hague Convention^[26].

Even if a treaty is concluded between or among countries for the purpose of harmonizing legal rules with regard to problems in cyberspace, there remains room for "imbalance", or, in a sense, even "free riding", between or among the relevant countries. As stated before, the constitutional system of each country is, theoretically, the decisive factor in this respect.

In the U.S., for example, an officially ratified (self-executing) treaty has only the same rank as federal law, and the rank of customary international law is lower than federal law, but above state law. In Germany customary international law is above federal law, but the rank of treaty is the same as federal law. In Japan both customary international law and treaty are in principle above national law under Article 98(2) of the Japanese Constitution^[27].

The simple fact that there is such a fundamental "disparity" among countries should be always borne in mind for those who seek harmonization. This point is serious especially in cases where a country wants to use unilateral measures which contradict its treaty obligations or are beyond the extraterritorial reach permitted under customary international law^[28].

In this regard, some comments on Hartford Fire Insurance Co. v. California ^[29] might be needed here. The problem at issue was the extraterritorial application of the U.S. anti-trust law, namely the one which belongs to public law area according to the previously stated distinction^[30] from the Japanese side. However, the U.S. Supreme Court relied on the distinction between “true conflicts" and "false conflicts" as used in the U.S. revolutionary theories on choice of law. Such a revolution which stems from Babcock v. Jackson ^[31] has occurred in torts and other private law areas in the U.S. conflict of laws. From the Japanese point of view, the problems of extraterritorial application of national public laws are quite different from those in ordinary choice of law process, namely "private" international law.

The reason for such a "unified" approach to private (civil) and public laws in the U.S. might be found in the fact that the analysis of "governmental interests" is needed even for cases in purely private law areas like torts. However, there is a well-founded criticism even in the U.S. that the consideration of "governmental interests" in the choice of law process is "imaginary", and that the extraterritorial application of anti-trust (and other public) laws should be based upon the analysis of "real" governmental interests (and other factors)^[32].

If unilateral measures survive all attempts of harmonization because of the constitutional system of a relevant country or otherwise, one must reconsider the very notion of "equal footing" before one devotes oneself to such attempts. Of course, the same holds true of the problems surrounding the Internet or the GII.

V. The Impact Of The W.T.O. System At Present And In The Future

The issues of electronic commerce, a major application of the GII and the symbolic feature of the Internet, will be included in the WTO negotiations on further liberalization of trade and investment which will officially begin in the next year (the so-called "GATS 2000" and related negotiations). Detailed legal discussions are needed, of course. As seen in the agenda of this Forum, consumer protection in the digital age is an important aspect of the problems. However, the fundamental position of the general public, or even the society itself, should be viewed as more and more vital in this respect.

One should recall here that one of the most important premises of the GII is to remove the inequality between "the haves" and "the have nots" in the information society. However, as seen in the collapse of the OECD activities on the MAI (Multilateral Agreement on Investment), the reality in recent trade negotiations tends to reflect one-sidedly the major supply-side voices.

A more balanced approach is needed for sustainable developments of the world trading system. As the very prerequisite of individual legal discussions in various areas in this Forum, it would be permitted, in this respect, to refer to some basic points touched upon in APPENDIX II of this paper.

Notes:

1. One must be aware of the fact that the way of distinction between the private and the public law is fundamentally different between the European continental countries and Japan, on one hand, and the common law countries, on the other hand. Often that point causes several confusions in cross-border legal problems. In common law countries, there seems to be a common understanding that, if the civil procedure is used, then the problem at issue itself is categorized as civil (private). However, it must be said, at least, that such a view is not universal among nations. See Ishiguro, Kokusai Minji Soshou Hou [International Civil Procedure], at 8ff, 21f, 64ff [1996 Shinsei-sha].
2. See supra note 1.
3. See Ishiguro, Gendai Kokusai-Shihou [Jou] [Modern Conflict of Laws in Japan, Vol. 1], at 534, 537ff [1986 Tokyo Univ. Press]. (There referred to are, among others: McDougal, "Judicial Jurisdiction: From a Contact to an Interest Analysis", 35 Vanderbilt L. Rev., 1ff [1981]; R. B. von Mehren, "Enforcement of Foreign Judgments in the U.S.", 17 Virginia J. of Int. L., at 401 [1977]; A. T. von Mehren, "Recognition and Enforcement of Foreign Judgments--General Theory and the Role of Jurisdictional Requirements, 167 Recueil des cours, 1980-II, at 9ff [1981].)
4. J. P. Donohue, "Litigation In Cyberspace: Jurisdiction And Choice Of Law--A United States Perspective", American Bar Association, Section Of Business Law, Committee On Law Of Commerce In Cyberspace, Subcommittee On International Transactions [1997], at 20f (V. CONFLICT OF LAW ISSUES).
5. See Ishiguro, supra note 3, at 85ff, 115ff; -----, Kokusai-Shihou [Conflict of Laws], at 49ff, 64ff, 74f, 85ff [1996 Shinsei-sha].
6. See, e.g., H. H. Perritt, Jr., "Jurisdiction in Cyberspace", 41 Villanova L. Rev., at 9 [1996]. He states there as follows: "American personal jurisdiction, ....., choice of law ..... rules must be reassessed and perhaps harmonized with corresponding rules in other countries."
7. For further discussions on choice of law problems see APPENDIX I of this paper.
8. See Ishiguro, supra note 1, at 138ff, 255ff.
9. Concerning the symbolic Laker Airways case see id., at 23ff, 78 (note 77 and 78), 80 (note 94), 256.
10. In details see id., at 133ff.
11. See J. Kropholler, Europaeisches Zivilprozessrecht, at 69 [Fourth ed. 1993 Verlag Recht und Wirtschaft].
12. 102 S. Ct. 252 (1981). The same way was followed, for example, In re Union Carbide Corp. Gas Plant Disaster, 809F. 2d 195 (2nd Cir 1987). See Ishiguro, supra note 1, at 141ff, 188 (note 466).
13. For further discussions see PART II, 2 of APPENDIX I of this paper.
14. See note 128 of APPENDIX I of this paper.
15. See Donohue, supra note 4, at 23 (VI. SOME IMPLICATIONS OF BEING FOUND TO BE DOING BUSINESS IN FOREIGN JURISDICTIONS VIA THE INTERNET: E. Punitive Damages).
16. See Ishiguro, supra note 1, at 86 (note 176). In details see -----, Borderless Economy heno Houteki Shiza [A Warning Concerning The Emerging Borderless Economy Vol. II], at 155ff [1992 Chuuou Keizai-sha].
17. In details see -----, supra note 3, at 501ff.
18. See supra note 1.
19. See supra note 16 and 17. With regard to the problem posed here the view of the present author is negative.
20. See Restatement of the Law, Third, Foreign Relations Law of the U.S., Vol. 1, at 611f (Section 483) [1987 American Law Institute].
21. See Ishiguro, supra note 1, at 41ff.
22. Treaty No. 6 (1972).
23. 567 F. Supp. 1158 (1983); CCH U.S. Tax Cases No. 9468 (6/21/83); 561 F. Supp. 354 (1983). See Ishiguro, supra note 1, at 25f.
24. 107 S. Ct. 2542 (1987). See Ishiguro, supra note 1, at 65f.
25. See Perritt, supra note 6, at 74ff.
26. See Ishiguro, supra note 1, at 65.
27. See in this regard -----, supra note 5 (Conflict of Laws), at 155f (note 327); I. Seidl-Hohenveldern, Voelkerrecht, at 146f [Seventh ed. 1992 Carl Heymanns]; -----, at 149, 150f [Eighth ed. 1994]; Hisakazu Fujita, Kokusai-Hou Kougi I [The Lecture on International Law Vol. 1], at 106ff [1992 Tokyo Univ. Press].
28. With regard to the "excessive" extraterritorial application of national laws see Ishiguro, supra note 1, at 20ff; Industrial Structure Council, Japan, 1999 Report on the WTO Consistency of Trade Policies by Major Trading Partners, at 278ff [1999 MITI].
29. 113 S. Ct. 2891 (1993). See Ishiguro, supra note 1, at 21f; Industrial Structure Council, Japan, supra note 28, at 283 (note 3). With regard to the "comity" doctrine the function of which is peculiar to common law countries see Ishiguro, supra note 1, at 47f, 75 (note 41). In details see -----, Tsuushou Masatsu to Nihon no Shinro [Trade Frictions and Japan's Future], at 207ff [1996 Bokutaku-sha].

    One must be very cautious when the word "comity" is used in discussions at the global level like this Forum. In continental European countries and Japan "comity" is theoretically not a legal rule at all. However, in common law countries, supported by a wide range of discretion, it often functions as if it were a legal rule. Although the word "positive (or negative) comity" has been used in the context of mutual assistance in anti-trust matters, it might be needed for the participants of this Forum, too, to recall the following message from Prof. Mann: "[I]t is time to forget comitas gentium [ie. "comity"] and to recognise the term as meaningless and misleading." (F. A. Mann, Foreign Affairs in English Courts, at 137 [1986 Oxford Univ. Press].)

30. See supra note 1.
31. See supra note 2.
32. See A. Lowenfeld, "Public Law in the International Arena: Conflict of Laws, International Law, and Some Suggestions for Their Interaction", 163 Recueil des cours, 1979 II, at 335.