Appointing and Remunerating Insolvency Practitioners in Japan: The Roles of Japanese Courts

This excellent review of insolvency practice in Japan provides an instructive perspective for those of us from Western legal traditions, although with familiar and settled insolvency principles clearly evident.

The article is written by an Australian expert on Japanese law, Associate Professor Stacey Steele, of the Asian Law Centre, Melbourne Law School.  It appears in the International Insolvency Review.

The article examines the high level of court involvement in Japan, in contrast to Australia’s, for one, holding the court more in reserve.  The courts have a role in appointing and setting the remuneration of insolvency practitioners in Japan, and this, the article suggests, has resulted in only a few formal complaints against insolvency practitioners. And while court involvement does not necessarily lead to cheaper costs for private parties overall, the case studies analysed in the article support the view that court involvement has in fact reduced costs in Japan.

The article goes on to suggest that Japan’s high degree of court intervention has implications for its approach to new developments, such as the emergence of pre-petition practitioners who are not appointed by the courts and of increasing numbers of informal workouts. Australia, and other comparable jurisdictions, report a shift from formal insolvency appointments, and also the growth of pre-insolvency advisers in that ‘informal’ space. Australia’s current ‘safe harbour’ reforms for directors seek to provide some structure around that informal workout approach.

The Japanese approach to remuneration and practitioner regulation also contrasts with Australia’s new laws which leave remuneration assessments to the creditors, but who now have greater rights to request information, to seek to direct the course of an administration and ultimately replace the practitioner. 

The article appears at a time when INSOL International has just issued its review of practitioner remuneration across a number of jurisdictions, though not including Japan. And pending is the report on the international research project, headed by INSOL, into the regulation of insolvency practitioners around the world.    

While INSOL International’s conference in Sydney allowed us all to absorb many useful cross-jurisdictional perspectives, continued contributions to the literature allow ideas from these perspectives to have continued momentum.

These comments of mine do not purport to do justice to the depth of analysis and very useful comparative law contained in the article. 

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