QThe following is the text of my speech delivered in 1979 before local employees of Hitachi's overseas subsidiaries.





QQQQPeople who wish to be a judge, a public prosecutor or a private attorney in Japan must pass the national bar examination. After passing the bar examination there is a two-year period of training in the government-sponsored legal training institute, including various types of apprenticeship. The apprentice is given a chance to work for four months each at the civil and criminal division of a district court, a prosecutor's office and a private law office. When I was an apprentice at the criminal division of the Fukuoka District Court, I encountered an interesting case which made me think about the peculiar way of thinking of Japanese people.

QQQQThe case before the court was a so called "Yakuza" case. Yakuza is a popular name for gangsters. But among the gangsters themselves the term Yakuza is usually used to mean gangsters of a clan with a long history and tradition. So you might hear the hero in a Yakuza movie say, "I'm a Yakuza; he's just a gangster."

QQQQAnyway, the case was a Yakuza case, a dispute between two clans of about 20 to 30 gangsters, both having their territories in the city of Fukuoka. The facts as stated by several arrested members of one of the clans were that they killed a member of the other clan with a hand gun during a dispute over the territory. Each of the arrested gangsters pointed to one young member as the one who shot the victim. And the young man, named Terao, admitted the charge. So it first seemed to the court that this was an easy case.

QQQQHowever, the police revealed that there was a discrepancy between their investigation and the testimony of Terao. The investigation showed that the victim was shot from very close range, but Terao testified that he had shot him from some distance. The judges were concerned since it was possible that Terao was being made a scapegoat by the clan. It is not uncommon in Yakuza criminal cases that the one who surrenders, often a young, unknown gangster, is not the actual culprit. By doing so, the clan is protected and the young member, after a stay in prison, is welcomed back by the clan with a higher position.

QQQQIf I explain the situation this way, you might be tempted to think that there is an agreement of some sort between the clan and the young member -- you might even think of it as a contract. But if you examine the situation more closely you will see that no promise is involved in the series of events and thus no contract. Rather, you will find there is a code of behavior strictly followed by Yakuza. For example, if you were a member of Yakuza society, and if you were treated by a Yakuza clan to one night's lodging and a meal, you would be obligated to do whatever ordered by that clan. This rule is called "lsshuku Ippan no Giri" or "Giri of one night's bed and a meal". Giri is a term often used by Japanese, which means duty or obligation. Giri is probably the most important law governing all groups and societies in Japan. It says in general that if someone gives you a benefit without asking for something in return, you are bound to return a benefit equivalent or exceeding that which was given.

QQQQLet's get back to that Yakuza case at the Fukuoka District Court. The judges examined Terao, trying to find out what actually happened. Terao by that time knew what the judges were getting at, and changed his testimony to fit the result of the police investigation. On that hearing date I was watching the hearing from the gallery and when the examination was over Terao smiled at someone in the gallery as if he were proud of his good job. Terao was facing away from the judges so they could not notice this interesting scene. The result was that Terao successfully performed his role and was sentenced to 15 years of criminal servitude. He should still be in jail today.

QQQQWhat impressed me most in this case was the attitude of Terao. I do not believe he was the killer. Assuming this is true, you might think Terao was forced to give himself up by the pressure of the clan. My impression was that this was not the case. Terao was very relaxed when he was talking with the members of the clan who were in the gallery. He looked proud and acted as though he were some sort of martyr for his faith.

QQQQI don't think, either, that he could seriously have been counting on getting a higher position in the clan when he gets out of jail. It only takes a moment to realize that a small clan of 20 to 30 members will not likely exist in 15 years. I rather think that the law of Giri had become so second nature to Terao that he was more comfortable acting in accordance with such law, regardless of the personal consequences. At least in prison he must be getting the respect of his fellow prisoners, since he is considered a hero in Yakuza society.

QQQQYou might think that the Yakuza are an exception, and that what is true in Yakuza society would not be true for the rest of Japan. I would agree to the extent that Yakuza society is not typical Japanese society. However, I think Yakuza society preserves what is in fact the traditional code of Japanese behavior, and which exists throughout Japanese society, but less prominently.

QQQQYukio Mishima, the famous author, once said that you can learn most traditional Japanese good manners from Yakuza movies. From the story of Terao, it is clear that there is a strict code of behavior in Yakuza society, and a person may be required to sacrifice 15 years of their life to protect the group to which they belong.

QQQQOkay, so what about all the Japanese who are not gangsters? How far will they go to protect their groups? Let me read from a newspaper editorial in the Daily Yomiuri dated February 2, 1979, about a man named Shimada:

QQQQ"Mitsuhiro Shimada, an executive director of Nissho-Iwai Company, who was regarded an important witness in the suspected McDonnell Douglas and Grumman payoff cases, leapt to his death from a building Thursday.

QQQQ"Prosecutors were to interrogate him more closely later. Now that he is dead the investigators have lost a valuable witness who could possibly shed considerable light on the case.

QQQQ"We already know that Shimada and his company's vice-president, Hachiro Kaifu, were involved in the conclusion of a secret contract with Harry Kern [a noted consultant and go-between].

QQQQ".....According to the contract if 21 planes had been sold Kern would have received as much as \600 million. Why did Nissho-Iwai agree to pay Kern so large a commission? Obviously, part of that money was meant for government officials who would help conclude a deal.

QQQQ"At a press conference on January 25 Shimada said he had lied when he claimed 'I knew nothing about the secret contract' . He said he was feeling bad that he told a lie..... Shimada apparently was torn between conflicting demands of truth and interests of his company. He perhaps thought he had caused his company trouble and chose to pay for it with his life."

QQQQMr. Shimada left nine suicide notes. Let me read from two of them. In a note to a friend he said:

QQQQ"I am sorry for causing you much trouble. I have been exhausted by questioning at the Tokyo District Public Prosecutors Office and by the pressure from the mass media.....

QQQQ"I will defend my company -- my company's eternal life -- with my life.....

QQQQ"Live in the aircraft department and die for aircraft..... this, too, is a man's life."

QQQQAnd to the employees of Nissho-Iwai he wrote:

QQQQ"Dear colleagues: Men should behave themselves fairly and squarely. Our company is eternal, although we serve it only 20 or 30 years. We should devote ourselves to it. In order to do so, we should be bold and fair. I am quite sorry for the suspicion this time as I fear it will mar our company's image. I answer for it."

QQQQThese suicide notes, if written by an executive officer of a Western company, would surely be taken as evidence of insanity. I cannot imagine Western executives dying to defend their companies. These suicide notes are exclusively Japanese.

QQQQI do not mean, however, to say that this sort of statement is often made in Japan. Probably most company executives in Japan would say that what were stated in Mr. Shimada's notes were remnants of feudalistic thinking. They would say that work and private life are two separate things, and a Japanese company today would not ask its employees for total devotion of their life's energy to work. But if you look at the lives of top Japanese business people, you will find that their lives are totally devoted to work. Regardless of what people may say to make themselves look Westernized or civilized (these words are synonymous in Japan), deep inside every Japanese's heart there is a belief that it is a virtue to devote one's life to the prosperity of the group.

QQQQA leading Japanese cultural anthropologist, Professor Chie Nakane, said that Japan is composed of small groups consisting of five to ten people -- family, immediate co-workers, classmates, etc. She called them "primary groups". Professor Nakane also said that the social unit in Japan is not the individual, like in Western countries, but these primary groups. Therefore, for Westerners studying Japan, various phenomena taking place in Japan can be more easily understood if they consider a group as an individual.

QQQQLet's take the Yakuza case for example. If we consider the clan which Terao belonged to as an individual, it is natural that such individual prefers losing its little finger to its right arm.

QQQQIn the case of Mr. Shimada, it is also natural for Nissho-Iwai, or a certain group within Nissho-Iwai, to sacrifice a part of the group to save the group. Recall Mr. Shimada's words: "I will defend my company -- my company's eternal life -- with my life....." Self-protection is one of the vital functions of any creature.

QQQQWhen we talk about sacrificing one's life for a group, we should not omit mentioning the suicide planes, or Kamikaze, of World War II. The common reply from Western people when I ask what they think of them is "How awful that a fascist country could brainwash young men to do a thing like that." I would say, to some extent, they are correct. There must have been some who were brainwashed and some who were unwilling but were forced to go. My honest opinion is, however, that there were at least some, perhaps many, who were willing to die with full recognition of the situation. To many Japanese, it is still a sacred duty to die, if necessary, for the group, and a person who can perform such a duty is a hero -- whether a Westerner would call the act futile or not.

QQQQIncidentally, Western people often think that the Japanese emperor during the war was in the same league as Hitler and Mussolini. This is not correct. The Japanese emperor never has been a dictator, or even a powerful ruler except for a short period at the close of 19th century and the beginning of 20th century. Before and during World War II, the power was not with the emperor. The emperor functions as a symbol of Japanese culture. As I said before, Japan is composed of numerous primary groups. Several primary groups compose a bigger group, and several bigger groups compose still bigger groups. And at the top of the pyramid is the imperial family. This does not mean that imperial family is the most powerful group in Japan. It only means that the imperial family is the oldest family known in Japan. Seniority is a system common to most Japanese groups. At the same time, it is often the case that the most senior person does not rule the group. As you might know, middle management people in Japanese companies have a strong say.

QQQQBut let's get back to the Kamikaze pilots. It is said that their last words were "Long live the emperor." Some of you might remember that about two years ago a porno movie actor dressed as a Kamikaze pilot also shouted into his radio, "Long live the emperor," before crashing a plane into the house of Yoshio Kodama, a key figure in the Lockheed payoff scandal. These words, on their face, might be interpreted to indicate devotion to a certain individual, the emperor.

QQQQBut if the emperor is considered a symbol of Japanese culture, as I said before, it is not much different from saying, "Long live Japan." Furthermore, if what Japanese really imagine by saying "Japan" are the faces of their family and friends, it is not much different from saying, "Long live my family and friends."

QQQQJapanese are a practical but short-sighted people who are not comfortable with abstract ideas and ideology. In my opinion, even nationalism cannot be well rooted in Japan. What foreigners consider Japanese nationalism is in most cases group consciousness of some sort. During World War II, it was a strict rule of Japanese soldiers to avoid being captured by the enemy, even by committing suicide if necessary. So Japanese soldiers were tough fighters before being captured. But once captured they were much more cooperative than any other captives, in sharp contrast to Western prisoners who tried to escape whenever there was a chance. This phenomenon could be explained by using Professor Nakane's group hypothesis. While the soldiers were fighting, they of course belonged to the Japanese group. But once they were captured and put in prisoner camps, they would have more personal contacts with the Allied soldiers. Especially when they were treated better than they had expected, the Japanese soldiers would feel indebted under the law of Giri, and would eventually come to feel that they were members of a new group with the Allied soldiers. Once this had occurred, it was an easy task even to obtain confidential information from them.

QQQQLet me show you an interesting provision in a contract. This clause appears in the contract form of a Japanese baseball team, used for the team's foreign players.

QQQQ"The Player understands that the Player must surrender some of his individual rights and abide by the rules and regulations of the team, including decisions of the manager and coaches. "It is a requirement of the Player that he be imbued with traditional and fierce devotion to his organization, and be responsible for his performance as a professional baseball player both on and off the field."

QQQQA Japanese baseball team can have up to three foreign players at one time, so there are many foreign players in Japan, mostly Americans. Most American players are shocked to find how their game has been changed to fit Japanese society. What is most surprising to them is that, once they become a member of the team, the team never lets them alone. Some teams order the players not to drink, not to smoke, what to eat and when to go to bed -- not as a pre-game matter, like a road-trip curfew, etc., but every day of the player's life. One team even interfered successfully with the relationship of its No. 1 player and his "undesirable" girlfriend, and he recently married someone more "suitable" -- at least in the view of the team.

QQQQAs you can see, a group in Japanese society is like a family -- sometimes more than a family. People in the group are often offended if you try to keep a secret, and there is no such thing as having your "own life." This is of course bothersome, at least in the opinion of many, and I personally hate this kind of society. That's the biggest reason why I became a lawyer: because I can live without a group.

QQQQBut although I said I don't like Japanese society (at least this aspect of it), I recognize that it can be comfortable to be in group. At least there is security, and that is at the heart of the question we haven't asked yet: What does the group give in exchange for the kind of devotion which can, as we've seen, cause its members to give up their lives? Probably you are aware of the lifetime employment system here. That is one of the most visible and most often cited examples of security in Japan. As a lawyer, I have had to advise foreign corporate clients that the only time they can fire their Japanese subsidiary's employee is when the person commits a crime or goes crazy.

QQQQRecently there was an interesting incident which I thought was symbolic of the family-like attitude of Japanese corporations. This was the kidnapping of Mr. Takakazu Suzuki by the El Salvador guerilla group FARN. Mr. Suzuki was an executive of a joint-venture company in El Salvador called Incinca, formed by Toray Industries Inc., three other Japanese companies and the El Salvador government. Mr. Suzuki was sent to Insinca from Toray. Let me read from the Daily Yomiuri dated April 2, 1979:

QQQQ"Leftist guerillas Saturday freed Japanese textile executive Takakazu Suzuki, kidnapped 114 days ago. A guerilla communique announcing his release said Suzuki was freed 'after [his] company..... and the Japanese Government met our demands. The guerillas reportedly had demanded $4 million in ransom....."

QQQQAccording to what was reported in other newspapers, the ransom paid for Suzuki was of a magnitude which would "shake the foundation" of Insinca largest company in El Salvador. Another newspaper said that the amount of ransom could approach half the annual net profit of Toray, the parent company, one of the largest textile companies in Japan.

QQQQConsidering Mr. Suzuki's age, 40, he must have been part of the middle management of Toray before being sent to Insinca. At least we can be sure that he was not one of the top people. So it would be difficult to say that Toray paid the ransom because it thought Mr. Suzuki was worth the money. Rather, the decisive force must have been something like the feeling of family members toward each other, doing whatever possible, however difficult, in a crisis. And it illustrates rather well the kind of support each Japanese instinctively knows they will receive from their group.

QQQQIn contrast, two British bankers kidnapped by FARN at the same time were killed since, according to the guerillas, "Great Britain has shown itself to be arrogant, and did not take our demands seriously."

QQQQYou will notice other examples of this family attitude in Japanese society, and the government is no exception. You might recall the hijack of a JAL plane by the Japanese Red Army about two years ago. The response of the Japanese government was to completely acquiesce to the demands of the hijackers, and was sharply contrasted by the West German combat-team attack on the hijackers of a Lufthansa plane only about two weeks later. The German rescue resulted in only one civilian death, the pilot, and was widely applauded around the world. At the same time, the Japanese government was heavily criticized in the international press for its weak stand.

QQQQI think it's safe to say that, in that kind of circumstance, any responsible government official, whether Japanese or Western, will be primarily concerned with the lives of the hijacked passengers. But in the West, those with the authority, still seeking the safety of the passengers, may be led to take calculated risks in combating the terrorists. A Western government does not want to be seen as giving in to violent threats. The wisdom of retaining a government in power when it cannot effectively handle this kind of lawlessness will be debated. There will be concern about inviting future incidents, etc.

QQQQBut in Japan, all of that is secondary. No family member would go through that type of "balancing" process in deciding what to do when a loved one is in great danger, there would be only one objective, and all possible means would be employed to achieve it, whatever the cost. For the Japanese government in this situation, the death of even one Japanese in the rescue of all the others would be intolerable --and would be intolerable, as well, to the Japanese people. If you ask a Japanese today how the government here should handle another incident of that type, I believe the response would be, "Pay the ransom again."

QQQQI have been talking about the peculiar nature of Japanese in general. Now I will focus on the Japanese legal system and its function, and how it is affected by the nature of Japanese people.

QQQQSome of you may have read Shogun. If so, probably understand that it is historical fiction: just a novel, fashioned by the author in accordance own idea of what makes a good story, but based on a considerable amount of truth.

QQQQAt the end of the book, the main character, Toranaga, is clearly on his way to becoming shogun. In real life his name was Tokugawa Ieyasu, first of the Tokugawa dynasty of shoguns. Now, for all of his outward-looking farsightedness in the novel, once he was shogun, Tokugawa shut off Japan almost completely from the outside world for 250 years.

QQQQNext came Commodore Perry's famous "black ships" in 1853, "opening" Japan again by force -- or at least the threat of it. Indeed, the military and technological power of the West was formidable, and the Japanese were under no illusions about that. Much happened in the succeeding years, including the early imposition on Japan of a series of extremely unfavorable treaties, guaranteeing the Western powers all sorts of advantages in trade, immunity from Japanese laws, etc.

QQQQWhen Japan had recovered sufficiently from the initial shock to begin seeking to renegotiate these treaties, in line with what we today almost universally recognize as every nation's "national sovereignty", its leaders found the West totally scornful of the attempt. The West refused, for example, to acknowledge that Japan even had a legal system --the one that developed during the Tokugawa period of isolation being quite unlike those known in America and Europe -- and refused to discuss the matter seriously in a framework so "strange."

QQQQI suppose there were other courses which Japan, as a nation, might have taken at that moment. But the decision that was made was: Okay, let's not be so strange! This was the Meiji Period in Japanese history, when delegations went out all over the world, seeking to bring back that which was best in every field. Japan was still "under the gun", so to speak, and had decided that the only way to deal effectively with the West was to face it on the Westerners' own terms.

QQQQWithin 30 years of the Meiji Restoration, the beginning of the Meiji Period, six major codes were promulgated, namely, the Constitution (76 articles), the Civil Code (1046 articles) , the Commercial Code (689 articles), the Criminal Code (264 articles), the Code of Civil Procedure (804 articles) and the Code of Criminal Procedure (334 articles) . These codes were really masterworks, incorporating the most advanced legal theory of Western Europe, but, for the most part, without much consideration or study of the actual legal status of Japanese society. Japanese society was still not much different from Tokugawa feudalistic society, and there was a wide gap between it and the codes.

QQQQLater, after World War II, the Constitution was completely rewritten under the strong influence of the United States. At the same time, major revisions were made in the Code of Criminal Procedure and the family law section of the Civil Code, to reflect the changes in the Constitution.

QQQQThis is just an outline of the history of Japanese statutory law, but from it I think you can see that the principles behind Japanese law have been mainly foreign. A little more than 100 years has passed since the importation began, so in many ways Japanese society has had time to conform itself to these foreign ideas and to adopt them as its own. But in many ways not. Traditional culture does not die out so completely in only a couple of generations, and many of the principles embodied currently in "Japanese law" are as alien to the traditional way of Japanese thinking as the Tokugawa system seemed alien to the Westerners during Perry's time.

QQQQFor example, it is practically impossible to discuss any sort of a legal problem without almost immediately having to refer to the "rights and obligations" of the parties. This is true today whether one is operating under an Anglo-American-type legal system, or under the codes of Japan and the Continental countries. But in Japan, to be demanding has always been thought to be unmannerly, and until the time of the importation of the European legal system, the Japanese language did not even have a word for "right". Today we say "kenri", but this is a new expression created at the time to correspond to "right", after such a word became necessary.

QQQQLet me explain how this can be how a word as basic as "right" could not exist. Of course there were contracts, and contracts of course include rights. But, even in a contractual situation, Giri was stronger. The obligated party under Giri must repay the benefit -- or perform the contract -- before being asked. It would have been improper to think in terms of having something "owed", something that could be claimed as a "right". In that way, although the concept existed, the word was never spoken, thus, there was no need for it.

QQQQOn the other hand, Japanese has always had plenty of terms for "obligation", including, again, the word "Giri". In Japanese society, it is required of the obligated party to pay the debt before being asked to do so. By "debt", I'm not referring only to contractual obligations, where the conditions (what, when and how) for performance are clearly defined by the parties. The obligation governed by the law of Giri, by its nature, is not clear. If someone gives a benefit without asking for something in return, the recipient may have difficulty in determining what to give back and when. But it is the general belief in Japan that you will somehow determine what is the right thing to do, when the time comes, without asking.

QQQQLet me emphasize that the essence of Giri is the giving without asking for something in return. If the giver makes known, expressly or implicitly, a desire for any kind of repayment, the original act of giving would be considered impure, and the recipient, if they felt any moral obligation at all, would certainly be entitled to feel less strongly about it.

QQQQLet me show you an example of how a debt is repaid. This is a story of one of my friends in the University. He was from a poor family and his mother was working to pay his tuition. His parents were divorced when he was a small child and she had refrained from contacting his father since then. When he was a sophomore, he got a notice from his father's family in Kyushu to the effect that his father was dying and wanted to see his son. With some hesitation he went there and met his father again before the old man died. He also discovered that his father had become quite successful in business and had made small fortune. After the funeral he told his father's new wife and children that he would waive his right to inherit any of the estate, since he thought that he did not deserve it.

QQQQSome days after he got back to Tokyo, he got a call from a man whom he met at the funeral and they had dinner together. The man, who happened to be one of the richest business people in that local city, told my friend that he would give \l00,000 per month to support my friend's study at the University until he graduated, and also offered him a good position in his company after graduation. He said my friend's father had been so good to him, many years ago, when he himself was starting up his own business, and he had to repay that debt.

QQQQThis kind of an arrangement could never be worked out by way of a contract. A Giri relationship is very flexible, and the kind, amount, time and method of repayment can be determined by the obligated party to attain the maximum result.

QQQQThe principle of Giri very much affects contractual relationships in Japan today, and contractual rights are seldom strictly enforced. I will talk on this matter later, contrasting it with Western contractual relationships.

QQQQAgain, the rule of Giri is not to be demanding; you will be repaid when you are really in need of help. My grandmother used to tell me that if you do good things to others, you may not get something back from that certain person, but you will be repaid from an unexpected person. This is true in a closely integrated society like Japan, where everyone feels these obligations. When it is not possible for you to repay the debt to the particular person you owe, you may try to repay that person's debt on their behalf.

QQQQSince Japanese society had been functioning well without resorting to the concept of right or the act of demand, to pursue one's right or to demand performance of another's obligation came to be considered as something improper, sometimes almost evil. This is true even when you have a clear, valid right under the law. The general rule is still to wait until the other party recognizes its obligation and voluntarily performs. It is of course against the rule not to perform one's obligation, but it is just as equally bad to demand performance.

QQQQThus, it is natural for Japanese to be reluctant to file a lawsuit. Professor Takayoshi Kawashima wrote in his book Japanese Legal Consciousness that "in Japan people who file lawsuits are called bad names such as 'queer', 'quarrelsome', 'litigation maniac', etc., even when it is natural for Western people to file lawsuits". Let me cite a part of this book which talks about why the Japanese are not litigious people.

QQQQ"According to the traditional Japanese legal consciousness, rights and obligations are considered something vague . . . and Japanese do not desire such to be made clear and settled . . . . The judicial system which modeled itself on Western judicial systems aims at clarifying the facts in dispute and making the rights and obligations of the parties clear and settled. A decision will be rendered as to whether or not there is a right, and the case is settled. This kind of settlement, however, is not only alien to the human relationship and consciousness of Japanese, but such settlement will change the vague and unsettled rights and obligations, making them clear and settled. Since a friendly and cooperative relationship between the parties is established and maintained by the fact that rights and obligations are not clear and settled, such a lawsuit would ruin the foundation of the . . . relationship by making things clear. To the traditional mind, therefore, a lawsuit is an apparent challenge to the opponent party, rather like a declaration of war."

QQQQIf I may add something to this opinion of one of Japan's leading legal sociologist, I suspect what he means by "the vague and unsettled rights and obligations" is a combination of rights and obligations of both a contractual and non-contractual nature, or, more correctly, contractual and Giri-based rights and obligations. Every contractual relationship inevitably involves a personal relationship, especially when it lasts for a long period of time. And the personal relationship will eventually give rise to a Giri relationship. Japanese law and courts, of course, have no jurisdiction over Giri. An obligation based on Giri is, by its nature, not judicially enforceable.

QQQQIf a court has to decide a case which is a combination of contractual and Giri situations the party who has the stronger contractual position will always win. For example, party A saves party B's life; later party B loans \l,000,000 to party A and party A cannot repay the money on the repayment date due to an automobile accident party A is in. Party B sues party A for the \l,000,000.

QQQQUnder the law of Giri, party B has an obligation toward party A which outweighs the loan amount, but this obligation has no value under the statutory law. Therefore, if all these facts were established, a Japanese court would undoubtedly render a judgment for Party B. Such an outcome, however, would not satisfy even one out of 100 ordinary Japanese, to whom Giri is the supreme law. What, then, would the result be if this case were brought before a mediator, say, an influential person in a town where party A and party B both live? It's easy. After listening to the explanation of party B, the lender of money, without even waiting to hear from party A, the mediator would be shouting at party B, "You good-for-nothing fool! How can you forget your Giri to party A?"

QQQQMediation is, as a matter of fact, a major method of dispute settlement in Japan. Let me read from an article titled "The Myth of the Reluctant Litigant", written by Professor John Owen Haley of the University of Washington School of Law, noted for its outstanding Japanese law program.

QQQQ"Typically, the parties to a dispute will move through stages -- from direct negotiation, to third party mediation and finally to litigation -- as a result of failure in the preceding stage to agree to an acceptable resolution. In this process, a relative lack of litigation can be explained by several factors.

QQQQ"One is the effectiveness of third party intervention. The availability of suitable third parties who are willing and able to perform this role reduces the need to invoke formal judicial intervention. At the outset, mediation requires the presence of persons who, because of position or personal relationships, command respect and are able to exercise some measure of authority. In other words, to be effective, the mediator must be someone who can command the parties' trust and their obedience to the settlement.

QQQQ"One would thus anticipate that suitable third parties are more readily available in a stable, closely-integrated and hierarchical society like Japan, than in a more geographically mobile, less cohesive society like the United States in which individual autonomy and social equality are emphasized. Societal expectations and habits are equally relevant. The role of the mediator becomes increasingly legitimate for both the mediator and the parties to disputes where there is repeated reliance on third parties to settle disputes. .....Japanese commonly rely on the police for assistance in settling disputes..... Another Japanese example is the mediating service some companies provide for employees involved in traffic accidents. In short, the Japanese may be more successful in avoiding litigation because of social organization and values more conducive to informal dispute resolution through mediation."

QQQQIt is interesting to note that even judges prefer to act as mediators, rather than "deciding" cases. Statistics show that more than half of the District Court cases (the court of first instance) are settled by amicable settlement either in or outside court, and many of the settlements outside court actually follow the recommendation of the court. A judge will first try to make the parties agree to a settlement by pressing the attorneys. On the occasion of a hearing specifically set for discussion of amicable settlement, the judge will talk with each party's attorney separately, tending to say to each of them that they have a losing case and should compromise. If the attorneys cannot persuade their clients to settle, the court will ask the parties themselves to come into court, even summoning executives of giant corporations to appear. Thus, parties who may have been reluctant to follow their lawyers' advice to settle are often cooperative when they must face the judge themselves.

QQQQPlease look at the chart on the number of lawyers which has been handed to you. As you can see from this chart, there are about 11,000 lawyers (private attorneys) in Japan, and the population per lawyer is about 10,000. If we compare this number with those of the Western industrialized countries, we find that the number of lawyers per capita in the United States is more than 20 times that of Japan; Great Britain, 6 times; France, 2.5 times; West Germany, 4 times; and so forth. The ratios of the number of lawyers against the population in Taiwan, Thailand and Malaysia are approximately the same as that of Japan. The Republic of Korea has a disproportionately small number of lawyers. This may be explained by the qualification system in Korea, limiting lawyers to only those with more than five years of experience as a judge or public prosecutor. The ratio of lawyers in Singapore and the Philippines is 2 to 3 times larger than that of Japan.

QQQQIt is difficult to reconcile these figures. However, it may be possible to say that, although Japan is a highly industrialized country, Japanese society is still a part of Asia, with a lesser demand for lawyers. In the case of Singapore and the Philippines, it could be that the societies of those countries went through a change during their long colonial periods and were somewhat pushed in the direction of the Western countries.

QQQQAs discussed already, Japan also has a relatively small number of lawsuits compared to Western countries. The statistics show that Japan's per capita civil caseload is about one-quarter of Australia's and Denmark's, one-third of Great Britain's and one-half of West Germany's. I do not have any data on Asian countries.

QQQQYou might notice from the above figures that the number of lawyers in Japan is still conspicuously small compared to Western countries even taking into consideration the small number of lawsuits. For example Great Britain, with three times as many lawsuits, has six times as many lawyers; West Germany, double the number of lawsuits and four times as many lawyers. This phenomenon may partly be explained by the fact that certain functions of lawyers in Western countries are undertaken by various specialists in Japan, who are not lawyers but who perform work often associated with lawyers -- judicial scriveners (shihoshoshi), licensed tax accountants (zeirishi), patent attorneys (benrishi) etc.

QQQQBut perhaps what most contributes to the small number of lawyers in Japan is the richness of the non-lawyer legal staff of the big companies. In Japan, even lawyers get most of their substantive legal education as undergraduates. The legal training and research institute mentioned at the beginning of this speech primarily teaches the procedural aspects of the law, and provides the opportunity for on-the-job training as an apprentice. Seventy-six universities and colleges in Japan have undergraduate law departments and around 40,000 students are graduated each year with Bachelor of Law degrees. Only about 500 of these go on to the institute, eventually becoming private attorneys, judges or prosecutors.

QQQQMost of the remaining 99% become government officials or join companies, often, if the company is big enough, as part of distinct legal department. Although legal departments of companies are not necessarily composed of law graduates, it can generally be said that the legal staff has a basic knowledge of law. Therefore, most of the daily legal paperwork can be handled by these people. One of the few times companies have to ask for outside help is in a lawsuit. It is reported that legal fees paid to outside lawyers by major Japanese companies do not exceed a few million yen per year, except where such companies are involved in major lawsuits.

QQQQQQQQJapanese companies especially do not ask for outside legal help in entering into contracts. Even when they do they rarely have lawyers' involvement at the negotiation stage. I can think of two reasons which account for this. One is the reluctance of companies to disclose confidential information to outsiders. Although lawyers in Japan have a fiduciary obligation toward their clients and Japanese criminal law provides for penalties on disclosure of a client's confidential information, Japanese companies do not seem to think this is sufficient for their protection. As I have told you before, in Japan, the internal rules governing the group are generally stronger than the law. If someone within a group leaks confidential information, that person will certainly be expelled from that group, and, moreover, no other group would be willing to welcome such person. This is more or less like sentencing that person socially to death in Japanese society.

QQQQOn the other hand, lawyers comprise one of the few occupations in Japan which function without a group orientation, and an outside lawyer is of course free from the group sanctions of the corporate client. I suspect this is what makes the legal profession attractive to the 30,000 applicants to the legal training and research institute per year -- 60 for each vacancy -- people who are more or less individualists, nonconformists in Japanese society.

QQQQIn addition to distrust of lawyers, another reason for the reluctance of Japanese companies to involve lawyers in negotiations is the criticism common to lawyers everywhere, that they tend to foul up what could have been an easy negotiation. This criticism, which is not groundless, might be even more true in Japan where contractual relationships are always mixed with Giri relationships. The Giri side of a business transaction is rather impossible to adequately explain to outsiders, and an outside lawyer, however talented, could not know what is the best contract for the client without understanding the Giri.

QQQQOkay, let me talk about Japanese contracts and they differ from Western contracts. A Japanese contract like a marriage, not a modern marriage but a traditional Japanese marriage, the main purpose of which is not to make two people happy, but is to join two families. In a traditional marriage, the compatibility of the couple, whether or not they love each other -- even whether or not they choose to marry at all -- is secondary to a consideration of what benefits will accrue to the two families from the union --rather like a business merger.

QQQQIn a business deal between two Japanese companies, the sale of a certain amount of the product for a certain price, to be delivered at a certain time, is all secondary to determining whether the other party has the kind of "character" one wants to be associated with. So, rather than negotiating the terms and conditions of an agreement, each party will try to learn the personality of the other. In the case of companies, that means not only the credit standing, but also the reputation of the company, its business policy, the personality of the person in power, etc. If the information gathered is satisfactory, each can be confident that the other party will act reasonably in the performance of the contract.

QQQQAt that stage, with the typical Japanese provision that any difficulty in connection with the contract will be solved by mutual consultation, the contract is virtually complete. The rest of the document can be worked out by the legal staff, and the top management will sign, often without bothering to look at it.

QQQQJapanese domestic contracts, even when they are for a huge project, do not go beyond a few pages. Japanese refer to a three-page contract as a long contract. Yet if a Western lawyer were given the task to reducing a 20-page agreement to three pages, the result would certainly not be the same provisions which the Japanese would want retained. For example, in a sale of goods, the manufacturer's warranty of quality and the procedures to be followed if defects are discovered might be totally omitted -- left to settlement by consultation.

QQQQOn the other hand, Japanese tend to regard a contract with detailed technical provisions as a good one. Legally speaking, if a contract says that a buyer must pay 3 million on June 15, that is sufficient. Any question as to the method of payment can be worked out by the appropriate staff people when the time comes, as it is clear that the buyer will be in default if it doesn't get the money to the seller on the specified date. But the Japanese will want the contract to contain information about the identity of the banks involved, account numbers, means of delivery and other such items, and a contract that does not will be considered a bad one.

QQQQThe whole idea behind this attitude is that the Japanese regard a contract as a document to facilitate performance and not as a document evidencing rights and obligations. In their mind, basic rights and obligations are evident from the oral agreement and no documentation is necessary to make them more clear. Furthermore, there is usually a specific intention not to make things more clear. Japanese tend to think that if rights and obligations are clearly stated, this will deprive them of a more flexible means of solving problems.

QQQQFor example, if liquidated damages are provided for in the event of delayed delivery, the obligated party must pay regardless of its financial position. On the other hand, if the contract states that, "If the Seller is unable to make the delivery on the delivery date, the parties shall settle the matter through good faith mutual consultation, the seller may succeed in persuading the purchaser to grant an extension of the delivery date, and the purchaser may get a price reduction in return. Thus, the so-called "good faith consultation clause" can work perfectly well. But this clause only obligates the parties to consult with each other, and does not provide for the case where settlement is not reached. The clause is therefore clearly inadequate from a Western legal viewpoint. Nevertheless, it appears in most domestic contracts, and, according to Professor Kawashima, the "good faith consultation clause is deemed to be included in any contract as a matter of course, even when there is no such specific provision."

QQQQAlthough a good faith consultation clause is not judicially enforceable to a final judgment, there is an aspect of Japanese society which will compel the parties to reach some kind of settlement. In a closely integrated society like Japan, dispute in itself leads to a bad reputation. If the society brands a certain company to be an unreasonable dispute maker, that company would certainly have difficulty in obtaining subsequent contracts. When it is not clear which party is responsible for the dispute, society puts the mark on both. A Japanese proverb says, "Both parties are equally to blame for the quarrel."

QQQQI am now working with a law firm which mainly deals with international transactions. We have about an equal number of foreign and domestic clients, and the foreign clients are mostly Americans. So we have an opportunity to observe legal transactions between Japanese and foreign parties from both sides.

QQQQInternational transactions is a field of legal work which many Japanese companies still have difficulty in handling only with their internal legal staff, and our services are not strictly confined to legal advice and paperwork.

QQQQLast year I was involved in the settlement of a contractual dispute. This dispute was concerning the amount of royalty payable by the Japanese licensee to the U.S. licensor. Our firm wrote the Japanese company a lengthy opinion letter stating that the company had a good case and they would probably prevail legally on several points. After reviewing the letter, the company sent their representatives to the United States for negotiations. When they came back, I asked one of the representatives the result. He replied that they were overwhelmed by the U.S. party and had conceded on all points but one, which was left pending.

QQQQNext, I had to go to the United States to negotiate on that last point. It was whether samples of the product manufactured under license which are given away free by the licensee to its customers should be included in the calculation of royalties. In my view, it was clear from the contract that royalties are not payable on these samples, so I thought it would not take more than 30 minutes to persuade the U.S. party. But we debated the point for two days and still the problem was not solved. The U.S. party was tough and whenever I thought I had won the battle they came up with some story about their other foreign licensees, all of which I thought was irrelevant.

QQQQI suspect the U.S. party was hoping that I would get lost somewhere or get too tired to talk. If the company people had been negotiating, they would have been defeated almost at once. Fortunately, I had had some experience with this kind of thing, and somehow kept talking until we both got tired.

QQQQIf contract negotiation is considered a kind of a game, there is no reason to criticize this approach. I suspect at least Americans are thinking this way, but to Japanese, it is beyond their understanding. If the opposing party is seriously and fervently demanding something, the Japanese party tends to think that there is some ground for it. To Japanese, contract negotiation is a method of reaching a true understanding between the parties, and not a means of getting the maximum benefit from the other party.

QQQQThis difference in approach to the "game" can also be seen at the initial stage of contract negotiation. Let's suppose a fair contract can be considered a 50-50 split of the benefits. In this situation, the American party might first come up with a proposal demanding 70%, allowing room for concessions. But the Japanese party would propose the "fair" 50%. As I said before, it is unmannerly to be demanding in Japan, and this is also true in contract negotiations. The Japanese party may even propose only 40% or 45% for itself, in order to show good faith and generosity, and would be surprised at the unexpected excessive demand of the American party. It would then find itself in a difficult position, without any room for compromise or concession.

QQQQIn the homogeneous and integrated society of Japan, there is a certain standard of fairness in each domestic contract. If one party concludes a contract on a conditions less favorable than the standard, it will give rise to a Giri obligation in the other party. If one party to the contract makes some concession or waives a right, such act will also give rise to a Giri obligation. At any given time, if you look at the combination of contractual and Giri obligations as a whole, the balance is maintained.

QQQQBut in international transactions, in the first place, it is difficult to determine what is a fair contract. This question is often asked by Japanese parties and our answer tends to be that it depends on bargaining power.

QQQQSometimes the bargaining power of each of the parties with respect a certain transaction is clear in advance. If such is the case, the parties can have in their minds the same conception of the "fair" contract. But this is comparatively rare in international transactions. In most cases, the bargaining power of each of the parties will only be evident through the bargaining. There will be no prior appreciation of what kind of a contract would be fair to both sides. Therefore, even if the Japanese party began with a concession based on the contract it had in mind, the meaning, the motivation, behind such a concession would not be recognized by the foreign party. And even if the parties do somehow have the same conception of the "fair" contract, in international contracts, concession or waiver of rights would not be considered by the other party as a grant of benefit, creating a return obligation. Rather, such an act would generally be considered an indication of weakness.

QQQQYou may have seen a so-called "non-waiver clause" which is included in many international contracts. A typical non-waiver clause reads as follows:

QQQQ"The waiver, express of implied, by either of the parties hereto of any right hereunder or of any failure to perform or breach hereof by the other party hereto shall not constitute or be deemed a waiver of any other right hereunder or of any other failure to perform or breach hereof by such other party, whether of a similar of dissimilar nature thereto."

QQQQSimplified, such a clause could be applied to mean: Just because we accepted late deliveries from you in the past doesn't mean we give up our right to hold you to the schedule in the future.

QQQQThe fact that it is necessary to have such a provision shows two entirely different ways of thinking. In the Japanese view, waiver of rights would not give the other party any more advantage than was actually waived; on the contrary, it would give rise to a Giri obligation in that party.

QQQQBut in the West, it is clearly established, legally, that waiver of rights can result in a modification of the contract, with the result that the party which did the waiving can no longer enforce those rights.

QQQQFor these and other reasons, Japanese are bad negotiators on the international stage. I do not mean, however, to say that Japanese are in any way naive. What I want to say is that Japanese are, in general, not much aware of the peculiarity of their society and the fact that their negotiating style is not followed everywhere in the world.

QQQQI'm now working on a dispute between a Japanese licensor, a toy manufacturer, and a U.S. licensee over the legal fees incurred by the U.S. party in connection with a lawsuit in the U.S. against patent infringers. The U.S. party first asked the Japanese party to bear a portion of the legal fees. The Japanese party came to me for advice. My advice was that since the license agreement between the parties clearly stated that any cost required for litigation against infringers was to be borne by the licensee, the U.S. party, such a request should be refused. I even drafted a letter to be sent by the Japanese company. This letter was reviewed by the top management of the Japanese client and their reaction was to simply pay the money without any legal argument. The president of the company said to me, "I don't want to be looked upon as a man of small caliber."

QQQQThis man is in his sixties and he started his career as an apprentice to a toy wholesaler immediately after he got out of elementary school. After fifty years of strenuous effort he is the owner of a middle-size toy manufacturing company with its own eight-story building in Asakusa, Tokyo. Asakusa is an old district with temples and smaller, traditional industries. Toy making is one of them. It is also the backdrop for a good many Yakuza movies, and the name is often associated with that in the minds of many Japanese -- not in the sense of danger or criminality, but as a place where traditional Giri-based morality is at its highest. The president was brought up in this atmosphere and eventually became one of the most successful people in this district. As you might imagine, then, trustworthiness is his greatest asset, and he is in a society where he can trust other people. In his world, there can be no misunderstanding as to what one party owes another. Whenever he gives a benefit, the other party is made one of his psychological debtors. Thus, his own power is extended by each act of giving. After a life of this, it was simply impossible for him not to give this small concession to the U.S. party, though they were not entitled it.

QQQQSome time after this decision was conveyed to the U.S. party, the Japanese company got a letter from the U.S. party asking that the total amount of the legal fees be paid. Now the Japanese are a little bothered, but they are still determined to pay the amount requested in order not to impair the "friendly relationship" of the parties.


QQQQAs an international attorney, I have to be aware of the difficulty involved in achieving mutual understanding between different peoples. I hope I am reasonably successful at it; I do at least try. But it isn't easy. The differences, as I have attempted to illustrate with various examples, are quite real. It's common enough these days to talk about international cooperation and good will, and to say such things as, "People are basically the same all over the world." I am not here to say that isn't true, but it is misleading.

QQQQIn my work, and in yours, cross-cultural encounters are daily occurrences. Phrases such as "communications gap" and "international misunderstanding" are not abstract notions; they apply directly to ourselves and the people we know, and to the documents we read and write. In this setting, business must be conducted, agreements must be reached, policies must be implemented.

QQQQAll of you work for a Japanese company. You undoubtedly have Japanese associates and probably Japanese bosses. And you are involved in the business of your company right where it meets the non-Japanese world. Thus, your position is unique. You should understand by this time that there is at least a very good chance that the Japanese people you work with and the non-Japanese with whom they deal are not looking at the same thing the same way all the time. When that happens, you are in the same position I am in, where coordinating the thinking of the Japanese and non-Japanese is the essential task. This is difficult indeed.

QQQQWith the knowledge each of you has about Japanese people -- from your work, perhaps some study, your visit here, etc. -- you can be of great service to the cause of international understanding. If that sounds exaggerated, it's because you are forgetting how little most people know. You can undoubtedly explain a great deal about Japanese to the people in your countries. Perhaps easier, you can educate us about your cultures. I'm sure you will find Japanese truly eager to learn. But whichever way the information flows, the purpose of my talk today was to impress upon you one thing: To achieve true understanding cross-culturally, it is essential that you never assume understanding already exists.

QQQQQQQThank you.