In order to file a petition for a compulsory enforcement, a petitioner is required to identify the location of the obligor’s property.  If a creditor wins a civil case against a debtor but cannot identify the debtor’s property, then the creditor would not be able to enforce the judgment against the debtor.  In this regard, the Japanese legal system has been unsuccessful in obliging the debtor to disclose its assets.  Traditionally, the creditor would be required to hire a private investigator to find the location of debtor’s assets (e.g., bank account information); however, this has been viewed as a questionable practice in light of the recent development in privacy laws in Japan.

Before 2001, the Civil Enforcement Act in Japan did not include any provisions regarding a property disclosure procedure.  In cases where the creditor did not have information about the debtor’s property or where the debtor hided his/her property, the creditor could not enforce his/her claim confirmed by a court .

In 2001, the Property Disclosure Procedure was introduced into the Civil Enforcement Act, which gave creditors the ability to obtain information about a debtor’s property through the debtor’s statement in court.  However, due to the lack of enforceability, as well as the rather low penalty for a debtor’s non-compliance with the disclosure obligation to identify his/her property, the Property Disclosure Procedure was deemed ineffective in general.

On May 10, 2019, a bill amending the Civil Enforcement Act was passed to make the Property Disclosure Procedure more effective. The amended Civil Enforcement Act will enter into force within a year from the date on which the Act was promulgated, May 17, 2019.

The main points of the amended Civil Enforcement Act are:

  • The Property Disclosure Procedure under the Civil Enforcement Act seeks to obtain information about a debtor’s property straight from the debtor.  In Japan, each attorney can request the bar association to which the attorney belong, to collect certain information from any relevant public and private entities such as government agencies, companies etc. (“the request for Information to the bar association”). The bar association reviews the necessity and connection with the case, and then once they permit the attorney to collect the information, they request relevant entities to submit certain information. Although a creditor may still obtain information about a debtor’s property from third parties above, which the present system restricts only to the Request for Information to the bar association, it is not always useful because some financial institutions refuse to disclose such information.  Under the amended Civil Enforcement Act, a creditor may ask for the issuance of a court order compelling the disclosure of the information about a debtor’s property from third parties.
  • A creditor can obtain information about deposits and savings, listed shares and government bonds etc. of a debtor from financial institutions such as banks, credit associations, labor banks, agricultural cooperatives and financial security companies etc. (Article 207).  For example, if a creditor knows the name of the bank where the debtor maintains his/her account, the creditor can obtain information about the debtor’s property, the existence of a deposit, the amount deposited, type of account etc. even though the creditor does not have detailed information about the debtor’s bank account, e.g., branch name and account number etc. Based on the information obtained, the creditor can enforce the claim against the debtor’s property with the support of the court.
  • A creditor can also obtain information about a debtor’s land and building from a registry office (Article 205) and the debtor’s salary information from municipal governments and the Japan Pension Service etc. (Article 206).
  • The amended Property Disclosure Procedure will expand the scope of petitioners who can file a petition for the Property Disclosure Procedure (Article 197).  We expect that the harsher penalties, including imprisonment of up to 6 months (Article 213), will make the Property Disclosure Procedure more effective.

To summarize, the amended Civil Enforcement Act enables a creditor to obtain information about a debtor’s property by means of a compelling court order.  The amendment is especially useful for a creditor seeking to implement a compulsory enforcement against a debtor’s property based on information obtained from financial institutions through a court order, even without detailed information about the debtor’s account.  However, it is still unclear whether a court can find a debtor liable for violating the disclosure obligation and apply the increased penalties.  Additionally, the creditor will still have to identify the specific bank where the debtor keeps his/her accounts.

Yuko Kai
Author

Yuko Kai is an associate in the Baker McKenzie Dispute Resolution team based in Tokyo,

Kengo Nishigaki
Author

Kengo Nishigaki joined Baker McKenzie in 2000. From 2004 to 2005, he worked at the Firm's Chicago office, where he assisted a major manufacturer of defense-related products with matters involving compliance with the US Foreign Corrupt Practices Act (FCPA). Kengo regularly lectures on issues related to fraud investigations and the US FCPA. He is admitted to practice in Japan and New York.