Shinzo Abe’s economic policies and fluctuations in global markets have impacted Japan in a variety of ways. Incoming employment law reforms, recent regulatory scandals and austere financial circumstances are turning Japanese corporate culture away from its established dogmas. Where the corporate titans of Toshiba or Panasonic would have once gritted their teeth through distress, they are now disposing of non-core assets to foreign investments funds; where boards of directors would have huffed and puffed at regulatory fines, they are now proactively consulting counsel to establish fine-tuned transparency and whistle-blowing protocols.

One of the most notable areas of metamorphosis within Japan is its progressive mastering of dispute resolution, particularly those disputes that have a cross-border element. Japanese corporate culture has traditionally kept clients from engaging in dispute resolution, making domestic contentious work traditionally rare and typically placing Japanese companies on the defendant end of international litigation. However, both local and international law firms in Japan have repeatedly reported a marked uptick in cross-border disputes and international arbitration mandates on behalf of foreign and domestic clients.

The island nation’s ageing and shrinking population continues to push corporate interests beyond its border towards China, Europe and the United States where growing markets promise greater financial opportunities and expansion. But international arbitration clauses are a staple of any international or partnership transaction and Japanese clients are having to adapt quickly to their prominence.

‘Japanese companies and law firms now pay closer attention to potential disputes’, explains Mugi Sekido, dispute resolution partner at Mori Hamada & Matsumoto. ‘In M&A transactions, for example, it is essential to be able to prove that the terms and conditions of a deal were fairly and reasonably agreed upon through transparent negotiations. Solid evidence of this is therefore prepared pre-emptively throughout the transaction process.’

In 2012, the US Department of Justice pursued a group of Japanese manufacturers on the grounds of cartel behaviour in the autoparts industry, thereby starting a series of landmark antitrust actions widely credited as being one of the main catalysts of the international litigation space in Japan. Not only have these disputes exposed Japanese companies to the enforcement of foreign and international regulations but the ensuing class-actions seeking compensation for losses suffered at the hands of anticompetitive behaviour has also had an impact.

A thriving projects industry is typically synonymous with high-value construction disputes, and big Japanese conglomerates find themselves at the centre of multi-million Japan Commercial Arbitration Association (JCAA) proceedings. The volume and spread of wind and solar power generation projects in Japan make it an attractive prospect for international investors, while Japanese heavyweight industrials are among the most common stakeholders in power projects in emerging markets in Africa and South East Asia. And, of course, the incoming Tokyo 2020 Olympic Games has also generated appealing construction schemes for multi-jurisdictional parties to fight over. These were made all the more significant by the thriving real estate market in Tokyo where high prices and a reluctance to acquire and dispose of assets only raise the stakes.

Another notable factor driving Japanese companies towards litigation is their awakening to the value and importance of intellectual and industrial property. Bonnie Dixon, partner at Atsumi & Sakai, partially credits this to the presence of foreign specialists: ‘American firms have done a great job explaining to Japanese clients the value of intellectual property and the importance of enforcing their patents abroad.’

So what next for disputes in Japan? The Abe government is currently attempting to transform the country into an attractive alternative to the popular Hong Kong and Singapore arbitration seats by building the International Arbitration Centre in Tokyo (IACT). This centre will focus on the one-stop resolution of multi-jurisdictional SEP disputes, such as the iconic Apple v Samsung case, through the cooperative efforts of officials from key jurisdictions.

This push was further illustrated by a recent series of recommendations by the Justice Ministry to ease regulations surrounding the activities of gaiben – foreign lawyers registered in Japan. Gaiben are extremely restricted in what they are legally allowed to do within Japan; they can advise on foreign laws but are not permitted to participate in international arbitration conducted overseas, for example. The proposed reforms would remove some of the limitations placed on gaiben, giving them the liberty to jointly establish firms with local bengoshi practitioners in the hopes this would attract more international expertise to the island nation.

Some are less-than-optimistic about Japan’s odds, however: ‘While the JCAA is pushing for the establishment of international arbitration facilities in Kyoto, nobody will come to Japan until it becomes clear that foreign lawyers – whether they practice in Japan or not – can intervene in arbitration
proceedings in Japan,’ says Dixon.

‘Legislation to permit that is under discussion, but by the time these are implemented, Japan will be much too far behind to compete with Hong Kong, Singapore and, more recently, Malaysia, as a popular forum for arbitrations.’ By contrast, Sekido is more confident: ‘Tokyo will have to offer something unique to stand out next to Hong Kong and Singapore, but there is an interesting endeavour there.’ Japan’s adaptation to international standards may take a few more years to fully realise but its corporate world is increasingly breaking down the barriers separating it from the rest of the world. With the prospect of the Olympics, the IACT, and fundamental legal reforms it is safe to wonder whether Japan’s history of relative socio-economic isolationism is reaching its conclusion.

The Czech Republic is ‘on top of the economy cycle,’ according to one law firm partner when I recently visited Prague. The unemployment rate is currently the lowest in Europe and the lowest in 22 years; the financial conditions appear to be the best ever and, together with low interest rates, are driving a healthy rate of transactional activity in the market. In comparison to the rest of the region, the Czech Republic’s M&A market is highly desirable and attracting considerable interest from investors. The real estate and technology sectors continue to thrive, and firms have noted a sharp increase in demands from clients in relation to data privacy and cybersecurity matters both prior to and following the implementation of the General Data Protection Regulation (GDPR) in May 2018.

Looking closely at the mid-market though – which is the primary focus of many firms – institutional funds had limited investment opportunities, with international private equity (PE) funds mostly exiting from existing investments during 2017. There were very few big-ticket transactions involving the prime PE players in the region, such as CVC Capital Partners, Mid Europa Partners or Avent, and the majority of the M&A transactions were financed by domestic funds, which are increasingly visible in the local and regional investment markets. With this in mind, several observers have reported that a new trend has emerged, with high-net-worth individuals and holders of considerable private capital, increasingly active in the M&A market.

Also of note, is the fact that there has been a noticeable drive by practitioners, both from international and local firms, to improve the reputation of domestic arbitration, which has suffered considerable damage over the past few years. The Czech Ministry of Justice has published a legislative proposal aiming to introduce, for the first time, a general class action regime. The proposal to introduce class actions into Czech law and significant reforms to the civil procedure generally have caused anxiety among some clients, and could result in an increased litigation risk for financial institutions.

An amendment to the VAT Act, which came into force on 1 July 2018, accelerates the process of terminating VAT group registrations, and there are also changes with regard to the tax exemption of employee benefits with new deductible items. Other major developments include the approval by the Ministry of Labour and Social Affairs to further increase the minimum wage, which came into effect as of 1 January 2018. Looking ahead, taxpayers can expect major changes in 2019: the concept of taxation of individuals is to change fundamentally, while corporate entities will be subject to the EU Anti-Tax Avoidance Directive, and a general anti-abuse rule will be introduced in the tax procedure rules. With such a raft of changes and with Czech businesses already wrestling with EU Directives, such as GDPR, there is an expectation that the considerable demand for tax advisory services and data protection expertise will continue.

But what of the domestic legal market? The Czech Republic features a balanced mix of local and international, full-service and boutique firms. In recent years, it is notable that many lawyers have left established international players to establish their own independent outfits, including Badokh, Rutland & Partners, Novalia, and UEPA advokáti s.r.o.

This is partly because the current M&A market is centred around medium to smaller transactions, which are neither profitable enough nor of major interest to international firms. As a result, the lawyers who previously worked for those behemoths have decided to leave for pastures new. During my meetings with lawyers in the Czech capital, it was also suggested that working for either a local firm or establishing a new firm is preferable for many practitioners from a personal development perspective. Sometimes the grass is greener on the other side of the fence.

This is further highlighted by the number of international firms that have left the market, such as Norton Rose Fulbright and Hogan Lovells, and according to some, ‘there will be others which will close their office in years to come’.

The US is commonly seen as the home of class action litigation, with thousands of claims brought every year and new securities class actions averaging one a day in 2017. However, in recent years Australia has well and truly embraced the class action culture and established itself as one
of the leading markets globally for such lawsuits.

Securities proceedings dominate the scene; notable shareholder examples include the shareholder action against GetSwift over its alleged breach of continuous disclosure rules, the high-profile AMP shareholder class actions, and Quintas’ shareholders bringing a claim alleging inflated profit statements. Product liability claims are not far behind in prominence, with key product fault issues including the Takata air bag actions against multiple car manufacturers and the action brought against Essure over failed contraceptive implants.

The development of the market is now beginning to spread to less conventional areas with increasing numbers of competition, employment, and environmental class action claims. However, two dominating trends have drastically changed the Australian market in the last few years and threaten to throw into question the validity of the market itself – the role litigation funders play and the current allowance of competing claims.

Third-party funding

The entrance of third-party funders into Australia is considered the main accelerant for the rapid market change in the disputes space. Currently unregulated, local and international funders are driving market innovation and competition in the space, and allowing greater access to justice regardless of claimants’ personal wealth.

Ben Phi, name partner at claimant class action boutique Phi Finney McDonald, argues that litigation funding has had a profound and positive effect on Australian class actions. ‘By providing capital and assuming litigation risk, funders have allowed class actions to be commenced which would otherwise have been economically impossible.

‘As commercially minded third parties, funders can identify issues or problems with claims in the course of their due diligence, improving the quality of cases before the courts. Increased competition has started, finally, to push down funding prices to the benefit of claimants.’

However, funders are also accused of putting pressure on commission rates, encouraging the misuse of the legal system and court resources, and exerting control over proceedings. All this increasingly highlights conflict of interest issues and ultimately casts doubt on the legitimacy of case outcomes.

The Australian Law Reform Commission (ALRC) recently proposed that third-party funders should be required to obtain a bespoke litigation funding licence to operate in Australia.

These permits to fund, it is argued, would ensure honesty and efficiency across services and communication, establish arrangements and procedures in cases of conflict of interest and risk management issues, and require funders to be regularly audited. Other options suggested by the commission include potentially making funders subject to cash flow rules and examining the character and qualification requirements of individual funders.

Competing claims

Competing class action claims are increasingly common with multiple proceedings being brought against a single defendant involving similar or the same allegations. The area has become so prominent that some claims are breaking records.

In mid-2018, financial services company AMP was staring down the barrel of five competing shareholder class actions (one in the New South Wales Supreme Court and four others in the Federal Court of Australia) relating to the same issue following the fees-for-no-service scandal revealed in the financial services royal commission.

While the four claims filed in the Federal Court have recently been consolidated into a single claim in the Supreme Court of New South Wales, the trend of multiple class action claims is not going away any time soon with firms becoming increasingly focused on this specialist area and boutique class action outfits springing up more frequently than ever.

As Jason Betts, a Sydney-based disputes partner at Herbert Smith Freehills, states: ‘The recent phenomenon of competing class actions over the same subject matter claim continues to grow, and it is more important than ever for organisations to understand the legal landscape in which competing class actions arise and how they are dealt with by the courts.’

Other approaches besides consolidating claims have also been taken in an attempt at tackling the competing class phenomenon. One example can be seen in the decision taken by the Federal Court in the GetSwift shareholder action, in which it permanently stayed two out of three competing class actions, with the final one proceeding.

Some view the move as a useful path for managing complex competing claims, while others highlight the lack of consistency in the market’s approach to the problem. ‘The GetSwift decision’, Betts says, ‘has implications for access to justice, the economics of the litigation funding model and the efficiency of the legal system and therefore the potential legal costs borne by defendants.’

Although the current activity in the Australian market is seen as problematic in some quarters, or suggestive that further controls are required, Phi says the increase in actions is producing an increasing body of interlocutory judgments based on judges exercising their broad discretionary powers.

‘While there has been some discussion of legislative reform, the current statutory class action regime gives the courts ample case management powers to deal with and manage this competition,’ he says. ‘The result is a thoughtful, incrementally developed, guide to class actions practice; one that balances the rights of defendants with the access to justice imperatives of the class actions regime, whilst also ensuring that judicial resources are used efficiently and effectively.’ While litigation funders and competing claims have undoubtedly shaped the market, both are also on the verge of potential change. The ALRC is examining both the potential regulation of litigation funders and their influence over proceedings (including efforts to improve information disclosure between funders and law firms to the courts and clients), as well as proposing reform to class action laws, which will limit potential competing claims and increase the court’s role in the management of the proceedings.

With the prevalence of class actions looking to only grow, and proposed changes looming on the horizon, Betts sums it up well: ‘One thing is certain; the class action space in Australia will be very interesting over the next 12 months.’

For months, the legal press has detailed a string of sexual harassment scandals within several of the world’s leading law firms. Baker McKenzie, Dentons, Quinn Emanuel, Linklaters, Herbert Smith Freehills, Latham & Watkins, and, more recently, Clyde & Co and Reed Smith have all found themselves under the glare of the media spotlight after allegations of inappropriate conduct by partners emerged.

In the midst of the #MeToo movement, there should be a heightened awareness of what constitutes inappropriate behaviour in a workplace setting. Unfortunately, some lawyers are failing to take note. Even in interviews with our team certain partners (not, it must be said, from the firms above) are displaying the same bullying and harassing behaviour that has dropped those at other firms into hot water.

In October, one member of our editorial team was subjected to unwelcome advances from a law firm partner that shall remain nameless. Then, only a few days later, she was told by a different partner at another firm that the secret to his youthful appearance was the number of women he’d ‘had’; information our co-worker neither requested nor had any interest in knowing.

Although able to brush off the second incident and focus on the reason she was there, the first encounter was more unsettling. Never for a minute did she feel in any danger – they were in a public place, in broad daylight, having coffee – but the partner’s constant touching, comments on her appearance, persistent dinner invites, and total lack of interest in talking about anything related to The Legal 500 made for a very uncomfortable meeting.

Aware the partner’s behaviour was unacceptable, our colleague was concerned that any reaction would come across as her ‘making a big deal of it’ and would increase the awkwardness of the situation. In the end, she was relieved the lawyer in question had somewhere to be immediately
after the meeting, allowing her to make an escape.

However, in advance of this meeting our co-worker gave this individual her mobile number so they could contact each other in the event either of them was running late. That evening she received a text message from the partner informing her he was ‘upset’ they couldn’t have drinks that night but that he would send through an invite to connect over Telegram – the encrypted cloud-based messaging app – for ‘a more secure communication line’. She didn’t respond and, fortunately, the lawyer hasn’t contacted her since.

Like many women, our colleague has experienced this sort of behaviour in bars and clubs, but she didn’t expect it in a fairly innocuous afternoon work meeting. Reports in the press have made it apparent that this sort of unseemly behaviour (and much worse) is fairly prevalent in some law firms, with associates, trainees, and support staff targeted by those in power.

It is a persistent problem that #MeToo has yet to fix, so perhaps it is inevitable such inappropriateness can cross over into lawyers’ meetings with representatives from the legal directories.

The above incident is not a one off. Having spoken to members of our editorial team, senior management at The Legal 500 were shocked to discover other examples of inappropriate or unprofessional conduct initiated by lawyers during the research process for our various guides. Although incredibly difficult for some to come forward with this information, we heard of unacceptable exchanges which ranged from ill-conceived attempts at flirting to misogyny and sexism directed at our female researchers, and even instances where well-known partners, unhappy with their current rankings, shouted at and belittled researchers during interviews.

This is the ugly side of law firm research. For the record, we will not tolerate abusive or harassing behaviour directed at any of our team. Our researchers should feel safe going into any meeting with any partner around the globe. It is not acceptable to treat research interviews as pick-up opportunities or to vent your frustrations at junior members of our team. While we don’t mind healthy debate, abuse and hostile questioning of our professional judgement is not acceptable. We expect our team to act with professionalism when meeting firms, and we expect the same in return.

Going forward, we’ll be encouraging our editors and researchers to call out unacceptable behaviour and will be empowering them to walk away from meetings where they feel unsafe or are not treated with the respect they deserve. A report of the offences will be sent to the firm’s senior management and, in the most extreme cases, research into those offending partners’ practices will be terminated. Clients depend on us to help them make the right decision when instructing external legal providers; how can we possibly recommend a practice if those inside it are behaving in the manner described above?