Product Safety and Liability Law in Japan: From Minamata to Mad Cows

Product Safety and Liability Law in Japan

Since its economic stagnation in the 1990s, Japan has experienced extensive deregulation. Pressure to harmonize product safety standards prompted calls for a strengthening of Japan’s product liability regime and added further avenues of compensation to consumers for harm suffered from defective goods, indirectly encouraging managers to promote product safety. Contesting the early culturalist view, which depicted Japan in the thrall of weak consumerism and legal consciousness, this book follows the evolution of its product liability regime, focusing specifically on the Product Liability Law of 1994. Japanese product liability law and practice are reassessed in a truly global context. Japan’s system is compared with that in the European Union and Australia, and contrasted with the US model. This also allows for a balanced appraisal of related topical issues in Japan, such as the outbreak of ‘mad cow disease’ and the government’s commitment to improve access to courts. Developing insights from a number of disciplines and with a detailed analysis of legislation, case law and academic theory, Product Safety and Liability Law in Japan contributes significantly to the understanding of contemporary Japan, its consumers and its law. It is also of practical use to all professionals exposed to product liability regimes evolving in Japan and other major economies. Dr Luke Nottage is a Senior Lecturer at Sydney University Law Faculty and founding Co-director of the Australian Network for Japanese Law. He has practised law in Japan, New Zealand and Australia.

Product Safety and Liability Law in Japan From Minamata to Mad Cows

Luke Nottage

First published in 2004 by RoutledgeCurzon 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by RoutledgeCurzon 29 West 35th Street, New York, NY 10001 This edition published in the Taylor & Francis e-Library, 2004. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.”

RoutledgeCurzon is an imprint of the Taylor & Francis Group # 2004 Luke Nottage All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Nottage, Luke. Product safety and liability law in Japan : from Minamata to Mad Cows / Luke Nottage. p. cm. Includes bibliographical references and index. 1. Products liability–Japan. 2. Product safety–law and legislation–Japan. I. Title. KNX846.5.N68 2004 346.5203’8–dc21 2003012042 ISBN 0-203-64417-4 Master e-book ISBN

ISBN 0-203-67543-6 (Adobe eReader Format)

ISBN 0–415–29685–4 (Print Edition)

‘Of making many books there is no end, and much study wearies the body’ (Ecclesiastes 12:12)

Contents

List of illustrations Preface Acknowledgements Abbreviations

viii ix xii xiv

1

‘Re-orienting’ Japan and its law

1

2

The still-birth and re-birth of product liability in Japan

23

3

Comparing the PL Law with other ‘strict liability’ regimes in Europe, Australia and the US

70

4

The PL Law in action

154

5

The future of PL in Japan: reformulation, reform and re-regulation

202

Appendix A: Translation of Japan’s PL Law Appendix B: Annotated translation of PL Law Case No. 10 (‘McDonald’s Orange Juice’) Appendix C: PL Law cases filed, 1995–2001 Appendix D: All PL suits filed, 1990–2001 Appendix E: PL ADR Centres Notes Bibliography Index

213 215 223 229 251 255 274 304

Illustrations

Figures 4.1 PL suits filed, settled or decided, 1990–2001 4.2 Proportions of Osaka listed firms expecting various effects from PL Law enactment, 1992

171 193

Tables 2.1 200 reported judgments resulting from defective products, 1945–94 2.2 Legal bases invoked in ‘Typical PL cases’, 1945–94 2.3 Summary of Kanemi litigation before settlement in Supreme Court 3.1 Implementations of optional provisions in EC Directive 85/374/EEC 3.2 Broader legal system comparisons 3.3 PL Law provisions and counterparts in the EC Directive, the TPA, and the Restatement Third 4.1 Impact of PL Law on US firm behaviour, 1987 4.2 ‘Personal’ vs. ‘business’, ‘minor’ vs. ‘major’ damages claimed under the PL Law 4.3 Amendments to minimum lawyers’ fees 4.4 Sources of PL ADR Centre cases 4.5 Types of cases reported, by PL ADR Centre 4.6 Resolution of PL ADR Centre cases 4.7 Overall appraisals of PL ADR Centres 4.8 Consumers’ reactions to harm from defective products 4.9 Most important disputes for Japanese corporations in 1995

37 38 47 71 73 77 157 163 164 181 182 184 187 190 194

Preface

Re-visiting Japan in the late 1980s was an exciting experience for an impressionable young New Zealander. Fuelled by the bubble economy, the country was awash with the latest consumer goods, especially electronic and other manufactured products. Their variety and reliability, as well as the attentiveness of sales staff, was a refreshing contrast to the situation in a small country like New Zealand, which began to dismantle extraordinarily high import barriers only from the mid-1980s. Along with the intriguing literature still celebrating ‘Japan as No. 1’ at the time (Vogel 1986), these aspects helped tip the scales in favour of pursuing postgraduate studies at Kyoto University Law Faculty from 1990. My Master of Laws thesis and initial coursework towards a doctorate there focused on comparative contract law and practice. However, the versatility of my supervisor – building on a fine tradition of minpogaku requiring ‘civil law scholarship’ in Japan to cover private obligations more generally – coincided with the growing debate over 1993 and early 1994 about enacting a strict-liability Product Liability (PL) regime for compensating harm arising from unsafe goods. Professor Zentaro Kitagawa’s seminars on this topic opened up a whole new world of law, especially for someone from New Zealand which in 1972 had abolished rights to sue for any personal injury by accident, in favour of a state-run no-fault compensation scheme. Work with various law firms in Osaka sometimes provided a further practical perspective on how to maintain standards and resolve disputes involving product quality and safety. After three years in legal practice in New Zealand, and lecturing back at Victoria University of Wellington, I returned to a significantly different Japan in early 1997, to teach at Kyushu University Law Faculty while completing my doctorate. The bubble had definitely burst, leading to economic stagnation and even dramatic failures of financial institutions. Japan had become ‘the system that soured’ (Katz 1998), Americans decried ‘the myths of Japanese quality’ (Eberts and Eberts 1995), and its legal system was viewed as needing dramatic reform rather than being a source of inspiration for Western nations. This change of mood seemed to contribute to a disjuncture between negative commentary on Japan’s PL Law of 1994, especially early on from the United States (e.g. Bernstein and Fanning 1996), and reports from a range of sources

x

Preface

within Japan more consistently perceiving the legislation – despite last-minute amendments – as a helpful contribution towards more balanced consumerism. Leaving Japan again in mid-2000, a broader vantage point on such issues was offered by fellowships at the European University Institute in Florence (funded primarily by the European Union or ‘EU’, the inspiration for an increasing volume of legislation in Japan – including its PL Law) and the University of Victoria in Canada (with its love-hate relationship to the United States and its legal system). This has been reinforced by the move to the University of Sydney in Australia (with its own variants of welfare statism, and strict liability PL legislation derived from the EU). Further, after a levelling off in discussion in the late 1990s, product safety issues in Japan suddenly regained prominence. In 2000, Japan experienced its first ‘summer of eating dangerously’ (Nottage 2000a). Bovine Spongiform Encephalopathy (BSE or ‘mad cow disease’) started spreading late the following summer, followed by scandals over mislabelling of beef and other foodstuffs (Nottage 2003b). A pressing issue has become whether these events and their aftermath should be interpreted negatively (proof that Japan and its laws remain hopelessly dysfunctional), or in a cautiously positive manner (evidence of further consolidation in consumer awareness and engagement with multiple facets of Japan’s legal system). In this book, I tend towards the latter appraisal, drawing on a broader comparative perspective combining both analysis of black-letter law (legislation, case law and academic commentary), and various more contextual aspects derived primarily from history, political economy, and legal sociology. The book incorporates considerable updated, expanded or extracted material from several works previously written solely by myself or with Japanese colleagues. The bane of drawing on prior publications is that they can restrict scope to develop new interpretations. The beauty is some opportunity nonetheless to do so when updating, adding, and juxtaposing these writings, and to supplement them with a more holistic view (as in the totally new Chapter One, and the bulk of the concluding Chapter Five). I am very grateful to co-authors of some earlier works, and our publishers who granted permission to build on their copyrighted material, for allowing me this possibility to review and extend my corpus of writings in this field. In addition to them and Kitagawa-sensei, my thanks go to participants at a workshop held in 1998 at the On˜ati International Institute for the Sociology of Law (especially David Nelken); colleagues over the years first at Victoria University of Wellington (particularly Tony Angelo, Geoff McLay and John Miller), then Kyushu University (Tom Ginsburg, Hiroo Sono, Kenji Yamamoto), the European University Institute (Christian Joerges, Karl-Heinz Ladeur), and now the University of Sydney (David Harland); as well as Kent Anderson, Harald Baum, Rod Freeman (and his team of PL lawyers at Lovells, producing the excellent European Product Liability Review), Aurelia George Mulgan, Ray Giblett, David Johnson, Jocelyn Kellam, Ross Kidd, Keijiro Kimura, Tsuneo Matsumoto, Itsuko Matsuura, Patricia Maclachlan, Colin Scott, Frank Schwartz, the late Gary Schwartz, Mikio Sekine, Jane Stapleton, Hirotaka Tadaka, Michelle Tan, Veronica Taylor, Leon Wolff, and Frances Zollers. I remain strictly liable for any defects in this final product.

Preface

xi

I also acknowledge research funding from the Matsushita Foundation (1998), the Tostem Foundation (1999), and the Legal Scholarship Support Fund through the University of Sydney (2001–3), as well as the exceptional research assistance of Melanie Trezise and the amiably efficient secretarial assistance of Terri Drage. I am also very grateful to Stephanie Rodgers and Zoe Botterill at RoutledgeCurzon for careful work and considerable understanding as I juggled this book project with settling with my family into a new country and academic environment. Finally, my greatest debts are owed to Hisae Kobayashi, for the cover artwork and her ongoing efforts to educate me in fresh ways about Japan and product safety issues, and to our daughters (Moana, Erica and Miah) for forgoing too much of a hot summer ‘break’. This book is directed primarily at readers more comfortable reading English than Japanese, unlike the textbook more narrowly focused on PL in Japan, being co-authored in Japanese with Professors Masanobu Kato and Hirotaka Tadaka for Shoji Homu K.K. in Tokyo. Accordingly, I give personal names in the order usual in English (surname last), and do not add macrons or other marks to indicate long vowel sounds in Japanese. All translations are my own, unless otherwise indicated. Sydney, May of the Year of the Sheep (2003)

Acknowledgements

Chapter 2 is a considerably expanded version of my chapter prompted by a 1998 On˜ati workshop: ‘The Still-birth and Re-birth of Product Liability in Japan’, in David Nelken and Johannes Feest (eds), Adapting Legal Cultures (Oxford: Hart, 2001) 147–85. I am grateful to the On˜ati International Institute for the Sociology of Law for allowing me to reproduce most of that work to include in this chapter. Chapter 3 is a greatly updated and expanded version of my article, ‘Global Harmony and Disharmony in Accident Compensation: Japan’s New Product Liability Legislation Compared to the EC Directive and Part VA of the Australian Trade Practices Act’, Hosei Kenkyu (Kyushu University Journal of Law and Politics), 66: F1-F40 (1999); abridged for paragraphs 85-620 to 85-740 of Luke Nottage and Masanobu Kato, ‘Product Liability’, in Veronica Taylor (ed.) CCH Japan Business Law Guide (North Ryde, NSW: CCH, 1999–2000). Chapter 4 mainly combines and develops material from paragraphs 85-320 through to 85-550 of the latter work with Professor Kato. This includes its Table 4.4, on PL ADR Centres, updated and slightly expanded for Appendix E of this book. Appendix A, my translation of Japan’s PL Law originally published in my Hosei Kenkyu article, is reproduced from paragraph 85-100. Appendix C, listing PL Law cases filed, is a considerably updated version of Table 2 in paragraph 85-300. All this original source material from the Japan Business Law Guide, a loose-leaf subscription service on the laws governing business in Japan, is reproduced or developed with kind permission from CCH Asia Pte Limited in Singapore, the current publisher and holder of copyright for the service. Appendix D, on all PL suits filed, contains my translations of combined and updated versions of the tables at pages 85-9 of: (i) Kinkibenren (Kinki Bengoshikai Rengokai) (ed.) ‘Seihin no Anzensei o Kakuho Suru Shakai Shisutemu o Kangaeru [Considering a Social System to Ensure Product Safety]’, proceedings of the ‘Kinki Bar Association Conference, Second Section’, Biwako Hotel, Shiga, 30 November 2001; and (ii) some further information about some of the cases listed in those tables, added from various issues of the PL Ho Nyusu or PL Ho Joho Kokai Nyusu newsletters, published since 1991 by the Shohisha no Tame no Seizobutsu Sekininho no Seitei o Motomeru Kansai Renrakukai (Kansai Liaison Committee Seeking to Enact a PL Law for Consumers). I am grateful to Mr Mikio Sekine, a lawyer in Osaka responsible for both, for allowing permission to draw on this material.

Acknowledgements

xiii

I also thank him for permission to translate and reproduce the figure at page 2 of issue 9 of the PL Ho Nyusu newsletter (1993), as Figure 4.2 in Chapter 4 of this book. I thank Mr Mitsuo Matsuzawa, representative director of Shoji Homu K.K., for permission to translate and reproduce or slightly adapt Tables 2.1, 2.2, 4.5, 4.6 and 4.8. The first two are from pages 66 and 122 of Masanobu Kato (ed.) Seizobutsu Sekinin Soran [Compendium of Product Liability] (Tokyo: Shoji Homu Kenkyukai, 1994); the latter three are from pages 88, 89 and 126 of Masanobu Kato (ed.) Seizobutsu Sekinin No Genzai [Contemporary Product Liability] (NBL Bessatsu 53) (Tokyo: Shoji Homu Kenkyukai, 1999). I also thank Mr Takushi Ohno in Sydney, on behalf of Mr Nobuo Watari (the editor of the Asahi Shimbun newspaper company in Tokyo), for permission to translate and reproduce as Table 4.7 the table originally in ‘Seizobutsu Sekinin, Imada Kabe [Barriers Still to Product Liability]’, Asahi Shimbun, 12 December 1999, at page 11. Some other material in this book draws on work in publications for which copyright is retained by authors. Small portions of Chapter 4 draw on empirical research reported in Luke Nottage and Yoshitaka Wada, ‘Japan’s New Product Liability ADR Centers: Bureaucratic, Industry, or Consumer Informalism?’ Zeitschrift fuer Japanisches Recht 6: 40 (1998). Most importantly, Appendix B is a slightly edited version of my annotated translation of the first judgment holding for the plaintiff under Japan’s PL Law, Katsurakawa v. Nihon McDonald K.K., which had been appended in Toshimitsu Kitagawa and Luke Nottage, ‘Japan’s First Judgment under Its PL Law of 1994: Echoes of Donaghue v. Stevenson ’, Australian Product Liability Reporter 10: 121–32 (1999). Again, I am grateful to all my coauthors for allowing me to develop such material for this book.

Abbreviations

A 2d AC ACCC ADCIL ADR AIIL ALI ALRC All E.R. APLR ATPR BL BMLR BSE Cal Rptr (2d) CC CCAAC CCP CEO CLC COM CPA Cth DES E coli EEC EC EC Directive

ECJ ECR

Atlantic Reporter Second Series Appeal Cases (UK) Australian Competition and Consumer Commission Automobile Damage Compensation Indemnification Law Alternative Dispute Resolution Automobile Injuries Indemnification Law American Law Institute Australian Law Reform Commission All England Law Reports Australian Product Liability Reporter Australian Trade Practices Reports Better Living (scheme) Butterworths Medico-Legal Reports Bovine Spongiform Encephalopathy (‘mad cow disease’) California Reporter (Second Series) Civil Code Commonwealth Consumer Affairs Advisory Council Code of Civil Procedure Chief Executive Officer Consumer Lifestyle Centre European Commission (official document) Consumer Protection Act 1987 Commonwealth (of Australia) Diethylstilbestrol (drug) Escherichia coli (bacteria) European Economic Community European Community (successor to the EEC, since 1993) Council Directive of 25 July 1985 on the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Concerning Liability for Defective Products (85/374/EEC) European Court of Justice European Court Reports

Abbreviations ECU EPA

xv

European Currency Unit Economic Planning Agency (incorporated into Japan’s Cabinet Office, since 2001) EU European Union EWCA Court of Appeal of England and Wales Decisions Exch Exchequer Reports (1847–1856, England) F 2d Federal Reporter (2nd Series) (USA) FCA Federal Court of Australia FDMA Fire and Disaster Management Agency F Supp 2d Federal Supplement, Second Series (USA) GATT General Agreement on Tariffs and Trade GMO Genetically Modified Organism JAL Japan Airlines LDP Liberal Democrat Party MAF or MAFF Ministry of Agriculture, Forestry and Fisheries Mass L Rptr Massachusetts Law Reporter METI Ministry of External Trade and Industry (successor to MITI, since 2000) MHW Ministry of Health and Welfare (reorganized as the Ministry of Health, Labour and Welfare, MHLW, since 2001) MITI Ministry of International Trade and Industry MOF Ministry of Finance MOJ Ministry of Justice MOT Ministry of Transport (reorganized as the Ministry of Land, Infrastructure and Transport, MLIT, since 2001) MVR Motor Vehicle Reports NBL New Business Law (law journal in Japan) NCAAC National Consumer Affairs Advisory Council (Australia) NCAC National Consumer Affairs Centre (Japan) NE North Eastern Reporter (USA) NSW New South Wales O-157 E coli (bacteria) variant OEM Original Equipment Manufacturing OJ Official Journal (EU) P Pacific Reporter (USA) P 2d Pacific Reporter, Second Series (USA) PC Privy Council PCB Polychlorinated Biphenal PIQR Personal Injuries and Quantum Review PL Product liability PL Law (or Law) Japan’s Product Liability Law (No. 85 of 1994) PLN PL Ho/Joho Kaiko Nyusu (Newsletter) QB Queen’s Bench (High Court of England and Wales) QC Queen’s Counsel Restatement Second Restatement of the Law Second, Torts (1965)

xvi

Abbreviations

Restatement Third or R 3d R&D RAD RN SII SG SCL SMON STEC TPA UCC UK UNIDROIT UNCITRAL US vCJD VSCA WTO

Restatement of the Law Third, Torts: Product Liability (published 1998) Research and development Reasonable alternative design Reporters’ Note Structural Impediments Initiative Safety Goods (mark system) State Compensation Law Subacute Myelo-Optico-Neuropathy Shiga Toxin-producing Escherichia coli (bacteria) Trade Practices Act (Cth) 1974, as amended Uniform Commercial Code United Kingdom The International Institute for the Unification of Private Law United Nations Commission on International Trade Law United States of America (or: United States Reports) variant Creuzfeld-Jakob Disease Supreme Court of Victoria Court of Appeal Decisions World Trade Organization

1

‘Re-orienting’ Japan and its law

World markets remain awash with manufactured products from Japan, despite its ‘lost decade’ of economic stagnation over the 1990s. Indeed, export markets have been Japan’s lifeline preventing outright depression, and some now argue that they provide a model for Japan’s resurgence over the medium term (Katz 2003). Japanese goods also retain a reputation for excellent design and reliability. Yet since mid-2000 a series of scandals has revealed serious quality control problems. They have afflicted jewels in the crown of Japan’s export industries, as well as less competitive sectors focused on domestic markets. This book outlines some perspectives for appraising such developments, and issues of product safety more generally, comparing especially Japan’s Product Liability Law (the ‘PL Law’, No. 85 of 1994). Before setting out the general approach and plan for this study, some conceptual challenges are illustrated by sketching in more detail the recent problems, and the conflicting perspectives offered on them by the media and academic commentary on Japan, its products and consumers, and its legal system.

Summers of living dangerously The spate of product safety problems revealed in Japan from mid-2000 involved both staple foods like dairy products and beef, increasingly supplied from abroad, and familiar consumer durables such as automobiles and television sets for which Japan has developed an international reputation for product quality. Accordingly, they attracted extensive attention in the domestic and foreign media. At 10.50 am on 27 June 2000, for example, health authorities in Osaka learned that a family was showing food poisoning symptoms after consuming low-fat milk produced by Snow Brand, the company with the largest market share among Japan’s dairy food processors at the time. Despite urgings by various authorities, it took more than 53 hours for Snow Brand to go public with a recall. The delays exacerbated the problem, resulting in 14,849 victims (13,420 of whom had a causal relationship established between consuming Snow Brand products and developing the symptoms). Although no deaths have been reported, this makes the accident one of the biggest food poisoning cases in Japan’s history, rivalling the arsenic contamination of milk produced by Morinaga in 1955 and

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‘Re-orienting’ Japan and its law

the Kanemi rice bran oil disaster in 1968 (detailed in Chapter 2). The head of Snow Brand’s Taiki factory in Hokkaido, which had experienced a power outage allowing bacterial infestation of skim milk used in Osaka, was prosecuted for criminal negligence and breach of the Food Sanitation Law. As a result, Snow Brand got off with a 0.5 million yen fine, despite further breaches of this legislation in reusing some milk returned to its Osaka factory. Charges against that factory’s head were also suspended, and a criminal negligence prosecution was not brought against Snow Brand’s president and other officers (Kinkibenren ed. 2001: 2–3). The president soon resigned, however, and the Osaka plant was closed on 31 January 2001.1 A massive compensation scheme proposed in August 2000, offering 10,000 yen per day off work for mental anguish, combined with a sharp drop in sales to wipe out Snow Brand’s profits. It may take years to restore confidence in its brand name – indeed, at one stage it was thinking of changing to another – and a few lawsuits are still pending too.2 These events also prompted a swath of widely publicized recalls or responses involving other food products – ranging from some milk produced by Morinaga, to cheese, noodles and pasta, bread products, sake, drinks, and canned goods – over what the Mainichi Daily News dubbed ‘the summer of eating dangerously’.3 Also in July 2000, after an insider tip-off, the Ministry of Transport made a spot inspection of Mitsubishi Motors. Officials uncovered proof that the company had hidden claims for more than 30 years, and had conducted clandestine recalls of automobiles claimed or found to be defective. The Ministry passed on information for prosecutors to bring charges regarding the former breach of the Road Transportation Vehicles Law (fines of 0.4 million yen against the company, and 0.1 million yen against four company officers), and for the Tokyo District Court to enforce fines regarding the latter (totalling 4 million yen). Although the amounts were small, they confirm reconfiguration in the cosy relationships between the automobile industry and its main regulator, beginning with warnings given to Daihatsu in late 1998, followed by fines amounting to 1.4 million yen against Fuji Heavy Industry in March 2000 (cf. Kinkibenren ed. 2001: 1). Mitsubishi Motors recalled 620,000 vehicles, losing significant market share. No doubt in the shadow of warranties or representations by Mitsubishi when agreeing that month to take a 34 per cent shareholding for US$2.1 million, DaimlerChrysler announced in September 2000 that it would only pay US$1.9 million, and appointed a key executive to the No. 2 position in Mitsubishi after its president resigned.4 Also around that time, Japan’s leading tyre manufacturer, Bridgestone, was forced to recall millions of tyres produced by its Firestone subsidiary in the United States, while protesting that hidden claims resulting from treads coming loose were due instead to defects in Ford Explorer vehicles.5 More bad news struck Japan in the latter half of 2000. On 12 September, Mitsubishi Electric announced that over the previous decade or so, 66 units from two series of its televisions had started emitting smoke after parts overheated, and seven of these had caught fire. It had not complied with a general request to the industry made in 1995 by the Ministry of International Trade and Industry (MITI, renamed the Ministry of External Trade and Industry, or METI, since 2001).

‘Re-orienting’ Japan and its law

3

Belatedly, Mitsubishi Electric recalled or replaced parts in 45,000 sets (Kinkibenren ed. 2001: 4). This too has prompted a spate of recalls by other manufacturers of electrical appliances, more prominently reported through the internet.6 Over 2001, it looked like the worst was over. But towards the end of that summer, another disaster struck. On 10 September, the Ministry of Agriculture, Forestry and Fisheries (MAFF) announced the discovery of Japan’s first animal suspected of ‘mad cow disease’ or BSE (bovine spongiform encephalopathy). Highly infectious and fatal to cattle, a belated admission by the British government in 1996 has led to the belief that BSE is linked to variant CreuzfeldtJakob Disease (vCJD), which is lethal to humans. As in the UK over a decade ago, the Japanese authorities were shown to have been over-confident about the extent of risks involved, bungling their response after the first infected beast was found. Beef consumption more than halved, slowly recovering towards the end of 2002, only to face the discovery of the sixth and seventh cases in January 2003 (Nottage 2003b). To make matters worse, when the government wheeled out the ‘pork barrel’ to compensate for purchases of Japanese beef, major food processors – including a Snow Brand subsidiary – were soon caught mislabelling Australian beef to obtain the handouts. This has prompted further scares about mislabelling of other foodstuffs, in violation of the Agricultural Standards Law.7 How should we assess these events? Has nothing changed since the 1950s and 1960s – is Japan still a ‘producers’ paradise’? Indeed, are there now more defects in Japanese products? Or is there a similar or even reduced proportion, combined with more reporting of those defects? Certainly, some of the automobile and electrical appliance recalls indicate that rising levels of defects may not be the main issue; rather, manufacturers are being forced to own up to and deal with defects or processes dating back many years. A similar debate arises when people discuss reported crime statistics – it is often very difficult to prove whether a rise in crime is due to more crime recently, or just more reporting.8 In any event, are reported problems with defects being adequately addressed in Japan? One avenue is compensation to those who have already suffered loss, for example under a specific ‘product liability’ (PL) remedy in civil litigation. This may also deter producers from manufacturing other defective products (Schwartz 1994), although the theoretical and empirical implications of both compensation and deterrence are complex (Dewees et al. 1996: 188–212). Another way of addressing defects is through effective product safety regulations from public authorities, sometimes in quite close cooperation with the private sector, by setting minimum standards for production, then monitoring for compliance or reports of product hazards, and enforcing recalls or bans (Micklitz 1990). The ‘summers of living dangerously’ in 2000 and 2001 have already prompted extensive debate, with some legislative, bureaucratic and industry responses affecting agriculture, foodstuffs, automobiles, electrical appliances and general consumer goods; but the story is still unfolding.9 These complex and interrelated issues, implicating many areas of law, are the main concerns of this book. Its chief focus is PL law, usually defined nowadays as a sub-category of the law of torts (civil wrongs), providing monetary

4

‘Re-orienting’ Japan and its law

compensation through civil court proceedings against manufacturers (not usually retail sellers) for physical injury or damage to other goods (especially consumer goods) caused by a defect in another good (not usually services, as explained in Chapter 3). A related area, discussed more briefly, is the law of contract, usually concerned with claims against sellers and for the diminished economic value of the defective goods themselves (Kellam 2000). When consumers are involved, both PL and contract law make up important parts of consumer law, a body of law which has steadily grown in scope and organizing principles particularly since the 1960s, in Japan as in other industrialized democracies (Kato 1989; Omura 1998b). Another related area of substantive law, touched upon in this book, is environmental law. This typically deals with a contaminant (such as organic mercury mixed into factory effluent) flowing through the environment as a ‘public good’ (like the seas and fisheries), often entering the human food chain or otherwise directly harming public safety or private property (as with Japan’s infamous disaster in Minamata particularly over the 1950s and 1960s: George 2001; Osiander 2001). Although there are many differences in concerns and approaches compared to PL law (Taschner 2000), there is also considerable overlap in legal issues and underlying concerns (Tonner 2002). Examples include how to prove causation, whether and how to assess if the defendant was negligent (for example in weighing risks of harm against costs of prevention), and especially how to deal with situations where risks are very difficult to assess in the first place (Gresser et al. 1981). Further, as Chapter 2 shows by comparing briefly prominent ‘social problems’ like Minamata disease, resolution of environmental problems (often caused by large producers) is often linked to PL claims for defective products (also against such producers), although a conceptual and practical tension can arise between sustainability of the environment and consumption of – even perfectly safe – goods (Wilhelmsson 1998; see also Tonner 2002). In addition, PL law brings into view consumers as potential ‘stakeholders’ in corporate law and governance (see generally Nottage 2001b), linking up to recent organization theory studies emphasizing deeply embedded structural features in corporate decision-making (e.g. Lee and Ermann 2002). Finally, all these substantive principles of private law – and especially of PL law – depend heavily on the rules of civil procedure and their supporting legal institutions, as explained at the end of Chapter 3, in order to generate effective compensation and deterrence, and other possible effects reviewed in Chapter 4. In addition, PL in private law is closely connected to rules and principles of public law, dealing with relations between citizens and the state. The most prominent connection is with consumer product safety regulation, aspects of which are introduced in the concluding Chapter 5. Typically, this area of law is divided into pre-market controls (such as licensing requirements or mandatory standards imposed by public authorities, and their varying involvement with industry product standard-setting), and post-market controls (such as recalls in the event of proven or highly probable product hazards). Data collection – and dissemination – policies are also relevant, at both stages, as is the increasingly hot topic of export and import controls (Howells 1998: 13–54). More generally,

‘Re-orienting’ Japan and its law

5

public law issues often arise in connection with PL law through administrative law provisions regarding liability of public authorities (e.g. Elben 2001), and official information disclosure (Schultz 2001). Criminal sanctions are another important piece in any country’s mosaic of consumer law (Cartwright 2001; Parry 2002), and a longstanding interest among students of Japanese law (Kondrat 2000; Johnson 2002). One book cannot hope to bring together all these pieces, and this study focuses especially on the past, present and future of Japan’s new PL Law. In doing so, however, it aims to identify some points of entry into many other areas of Japan’s law, and more generally into its evolving system of private and public governance.

The media lens Considering Japan’s recent ‘summers of eating or living dangerously’ raises a further set of complications. Media reports, for example, show quite vividly how conclusions and even the way questions are framed may also be coloured by one’s general perspective on Japan – in general or concerning its products and consumer society, other aspects of its political economy, and its legal system as a whole. The Economist, for instance, has always maintained a liberal economic perspective on contemporary issues, and has therefore been increasingly sceptical about Japan’s claims to have developed a different, more effective capitalist order (cf. e.g. Dore 2000). Its response in 2000 to the events that summer was therefore quite predictable: The Japanese have long been inured to the poor service and shoddy products offered by their many subsidized and protected domestic industries. (The recent poisoning by 15,000 [sic] milk drinkers by Snow Brand, a food firm, was not unusual.) The surprise to those who have survived the summer [of 2000] is that Japan’s super-efficient exporters seem to have lost their way, too. ‘Made in Japan’ used to be a sign of engineering excellence. At the moment, it reads more like a health warning. (‘Made (Badly) in Japan’, The Economist 356: 68) In similar vein, commenting in 1999 on Toshiba’s huge settlement of claims involving defective laptop disk drives in the US, The Economist linked this to Japan’s distinctively weak legal system and consumer consciousness: ‘manufacturers have been spoilt by a legal and regulatory system that puts producers ahead of consumers’. This stereotype no doubt led the magazine to get a key point wrong regarding Japan’s PL Law (translated in Appendix A), asserting that ‘unlike elsewhere, the plaintiff must prove negligence, not mere damage’.10 In fact, as this book shows, a pivotal aspect of this additional civil remedy is that the plaintiff can obtain compensation by establishing that personal injury or damage to other goods arose simply because a good was defective – lacking the safety people are entitled to expect – regardless of whether or not a manufacturer or certain others were negligent (i.e. failed to exercise due care).

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Another well-known English media source, less dogmatic despite its focus on economic affairs, was more careful. Responding to the problems announced by Snow Brand, Mitsubishi Motors and Firestone, the newspaper remarked that: The product recalls signal an erosion of quality control at Japanese companies as the decade-long economic stagnation has left managers with tighter budgets and higher sales targets. It also reflects a shift in attitudes as consumers find widening choice thanks to deregulation and an increase in competition. (‘Recalls Add to Doubts on Quality Control in Japan’, Financial Times, 19 July 2001, p. 4) The former point, a concern echoed in many reports in the Japanese media, is distinct from the view of The Economist that quality control is more likely to fail in goods produced in protected sectors of the economy. The latter point raises another possibility: that deregulation may result in goods produced by a broader range of manufacturers, with a weaker technological base or investment in reputation for safety. Another interpretation is that consumers are becoming more discerning when making purchases. This perspective is also reflected in a report following Japan’s BSE debacle, suggesting that consumers are becoming more vocal and influential in generating long-term policy responses.11 Putting it even more strongly, on 25 September 2000 Time Asia carried a series of articles under the rubric: ‘The People v. Japan Inc: Amid a Wave of Corporate Scandals, the Country’s Long-Abused Consumers Are Starting to Fight Back’. The focus here was less on growing levels of defects, and rather on more active consumerism in uncovering and preventing problems, and even seeking compensation through PL claims, suggesting a shift away from an economy and governance structure favouring producers. Indeed, a few months earlier a major Japanese newspaper had reported: Technology critic Jun Sakurai is delighted at the way people are reacting. ‘It’s a mistake to think that we are seeing an increase in the number of cases where foreign objects have been found in food – it’s only that a long-held problem is starting to surface now. We’re starting to see the effects of the Product Liability Law, which puts us on a par with the United States’, Sakurai said. ‘We’ve finally reached a stage where if something is defective, a production system will be changed, it’ll be improved or exchanged and consumers’ rights are being protected’. (‘Recalling the Summer of Eating Dangerously’, Mainichi Daily News [Online], 27 August 2000)

Japan perspectives Conflicting perspectives on the part of the media should not surprise us. Different companies try to differentiate themselves to appeal to particular types

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of readers, even if ‘press clubs’ in Japan create pressures towards uniformity in newspaper coverage of political affairs.12 Their perspective on foreign lands may reveal more about the history and current state of their home country, especially if their ‘foreign correspondents’ are stationed there only for short periods or lack language and other skills needed to navigate through the depths and interstices of that particular society. Foreign journalists in or writing about Japan, however, have also drawn more or less openly on the writings of academics and other authors writing in Western languages about Japan (e.g. Fallows 1989). Yet here, too, perspectives have fluctuated markedly, particularly when comparing Japan with the US (Ritchie 2001; Sugimoto 2003). When Japan reopened to the world in the Meiji era (1868–1912), the tendency was to emphasize its difference to ‘the West’. During the period of ‘Taisho democracy’ (1912–25), outside commentators were instead impressed by similarities or forces of convergence in industrialization and modernization. As the West was drawn into World War II, the interpretative framework shifted back to stressing Japan’s engrained distinctiveness (e.g. Benedict 1967 [originally 1946]). During the Occupation by Allied Forces under the leadership of the US (1945–52), and through to the mid-1970s, the predominant perception reverted to one of Japan being open towards modernization converging on the model of Western industrialized democracies. As economic growth and political controversy afflicted the US in particular throughout the 1980s, Japan’s relative success prompted the emergence of new theories stressing again its distinctive patterns of governance and economic organization. One group of commentators generally acclaimed these patterns (Vogel 1979; Dore 1987).13 However, from the late 1980s, ‘revisionists’ in the US became increasingly influential in criticizing Japan’s ‘different’ system of state-led capitalism as a barrier to balanced trade (e.g. Fallows 1989), requiring the West to respond in kind with policies less reliant on the power of markets and macro-economic trends (Johnson 1995). As the US economy recovered while Japan plunged into ever-deeper recession over the 1990s, the paradigm shifted back again. From the late 1980s (McKean 1993: 82–5), academic commentators particularly from the US increasingly challenged the notion of the Japanese state as an autonomous leader. They showed instead how it tended to follow business interests, or the preferences of the conservative Liberal Democrat Party (LDP) which dominated Japanese politics from 1955 until 1993.14 Some still find it hard to revise their revisionist views (Fingleton 2001; Norville 1998), insisting that Japan retains a strong state which will see it through to economic revival (Weiss 2000). But many influential commentators now see Japan as undergoing a ‘regime shift’ – encompassing socio-economic cleavages and coalitions, political and economic institutions, and public policy profiles (Pempel 1998) – with roots dating back to the 1980s (see also Katz 1998). Moving away from earlier views of bureaucratic governance of Japan (Pempel 1982), the following concatenation of circumstances was emphasized at the end of the twentieth century: A new electoral system, a reconfigured party system, and a massive dealignment of voters; the weakening of both the vertical and horizontal

8

‘Re-orienting’ Japan and its law linkages connecting Japan’s most powerful keiretsu [corporate groups]; substantial reduction in the administrative tools available to economic bureaucrats; the pacification and emasculation of radical labour and leftist organizations; the economic and, to a lesser extent the political, marginalization of organized agriculture; and a host of policy revisions that left the national budget deeply in the red, the official discount at its lowest for fifty years, the exchange rate of the yen swinging widely, national debt at a higher per cent of GNP than in almost any other industrialized country, and the national treasury facing massive demands for gargantuan payouts for the debacle of bad loans throughout the financial sector, the enhanced threat to underfunded pension schemes, growing interest payments, and the seemingly insatiable demands from electorally-fearful politicians for increased public sector spending for patronage projects. (Pempel 2001: 28)

Public trust in Japan’s bureaucrats, central government politicians, and even local government politicians,15 has declined steadily over the last few decades, fuelled by regular public scandals (McKean and Schneiner 2000) resulting in the LDP’s loss of power in 1993 (Reed 1997). This makes it difficult for political entrepreneurs, like Prime Minister Junichiro Koizumi (George Mulgan 2002), to create and maintain a new party or coalition line favouring further economic liberalization (Otake 2000; Pempel 2001: 41–3). It may also undermine Japan’s growing civil society (Pharr 2001; Pharr and Schwartz eds, forthcoming; cf. e.g. McVeigh 1998), reflected in and supported by the Non-Profit Organizations Law of 1998 (Pekkanen 2000). Nonetheless, greater pluralism – incorporating these and other actors like opposition or local government politicians – is increasingly emphasized.16 So too is the pressure of more market-based governance mechanisms (Freedman ed. 1998), although deregulation sometimes leads to ‘re-regulation’ (S. Vogel 1996) – as in some other countries which had strong regulatory traditions (such as New Zealand: Nottage 1999) – and ‘self-regulation’ centred on trade associations has grown in Japan over the 1990s, sometimes with anti-competitive effects (Schaede 2000). Overall, although many commentators rightly remain careful not to conclude that Japan’s social and economic order will inevitably collapse into the ‘Anglo-Saxon’ model, there is a growing consensus that significant change is now afoot.17 This, in turn, underpins reassessments of the received wisdom about many facets of Japan’s modern history.18

Japanese products and consumers One corollary of viewing Japan as a ‘developmental state’ dominated by bureaucrats (Johnson 1982), or even one sharing more or less power with the business interests and other ‘clients’ of the LDP – the ‘iron triangle’ (Kerbo and McKinstry 1995) – has been to downplay the power of consumers as independent actors in the policy-making arena. To be sure, economic recovery was an urgent priority for Japan’s leaders after the devastation of World War II,

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and developing the market for production of household appliances (especially the ‘three sacred treasures’: television, washing machine and refrigerator) became a key component of this strategy over the 1950s (Low et al. 1999: 81–9). Yet, while the initially dire economic straits may have encouraged incipient consumer activists to cooperate with the government (Maclachlan 2002: 77–8), this was precisely to rein in attempts by suppliers to manipulate prices or compromise food safety, and the tight economic circumstances even over the 1950s would have made them choose their goods as carefully as possible. Nonetheless, Japan’s subsequent ‘income doubling plan’ (Sumiya 2000), followed by growing calls over the 1980s – particularly from the US – for more consumption in relation to savings in order to reduce its ballooning trade deficits (Schoppa 1997: 11–12), led to the patterns of conspicuous consumption and other features still often associated with Japanese consumers. Recently, these features have prompted sharp critiques of wastefulness, and more generally of the ‘emptiness of Japanese affluence’ (McCormack 2001: 78–92). ‘Price destruction’ over the 1990s, however, suggests at least that Japanese consumers are not psychologically or institutionally driven to indiscriminately purchase high-price goods (Schoppa 1997), and appreciate at least some benefits of ongoing deregulation (cf. Vogel 1999). As emphasized by one anthropologist, drawing on experience and research in the advertising industry over the 1980s and 1990s, Japan’s ‘consumers’ are now very diverse. For example, the serious ‘Baby Boomers’, born soon after World War II and reaching their peak in the 1970s and 1980s, now compete with the spendthrift ‘New Breed’ of the 1980s and early 1990s, and the resigned ‘Baby Boomer Juniors’ entering the workforce during the recessionary 1990s (McCreery 2000: 6–7). The emergence of such sub-groups reinforces a well-documented societal shift from traditional to individualistic values through to the 1970s, and especially a subsequent fragmentation of Japan’s ‘value universe’ (Moehwald 2000). One sociologist observes from further survey data that: ‘Paradoxically, the conservatives’ emphasis on economic growth has created an affluent society that has become more demanding on quality of life issues and critical of the LPD’s support for producer interests’ (Lam 1999: 94). Overall, another anthropologist remarks that: Today the oligopolistic character of Japanese capitalism and its interests in the efficiency of production and the ‘rights’ of producers is becoming challenged by the power of consumers, who may not be politicized in any traditional sense, but are extremely well informed, high educated and increasingly internationalized. (Clammer 1997: 65) In addition, Japanese citizens have long been fastidious about certain aspects of cleanliness, especially regarding foodstuffs (Jussaume and Judson 1992) – so much so, that they may be endangering their health by lowering natural resistance (Fujita 1999).

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For their part, from the 1950s Japanese companies began developing the ‘total quality control’ approach to industrial production (Low et al. 1999: 54–7). Although a major objective was simply to minimize interruptions to the production line, the system also depended on accurate feedback about defects after delivery, and the continuous search for product improvements. Such systems may have worked better in tight manufacturing and distribution chains limited to commercial entities, but it would have been odd if such techniques and the overall ethos of improving quality did not benefit consumers too. Indeed, Japanese quality control systems were lauded in the West over the 1980s (e.g. Hutchins and Sasaki 1984). Yet the assessments of Japanese manufacturing capabilities shifted markedly over the 1990s. Although Asian perceptions of Japanese product quality remain high, The Economist now talks of things ‘Made (Badly) in Japan’ and visitors to Japan proclaim ‘the myths of Japanese product quality’, accusing us of ‘cognitive dissonance’ – developing high expectations of Japanese product quality and then blaming ourselves for failures rather than revising expectations (Eberts & Eberts 1995: 55).19 Conscious of such conflicting perspectives, Patricia Maclachlan (2002) has recently published the first monograph in Western languages on consumer advocacy and its impact in Japan. Like other recent scholarship (e.g. Uriu 1996; Noble 1998), she broadens her analysis beyond a comparison of just Japan and the US. As in the UK, significant consumerism in the US is shown to be quite a recent phenomenon, emerging in the 1960s, driven more by charismatic leaders than from the grassroots, and subjected to growing challenges from deregulatory initiatives since the 1980s. However, consumerism in the US recorded some remarkable successes due to a more decentralized policy-making structure. In Britain’s more centralized polity, consumer interests became more systematically integrated into government decision-making, achieving less dramatic victories but more sustained input and broad protection. From this vantage point, Japanese consumer advocates are perceived to have developed even closer organizational links to the central government, yet their voice has not been heard as systematically in policy-making. Nonetheless, Maclachlan emphasizes that they have maintained a more powerful influence over local governments, drawing on the mass media and other forces to mark considerable gains since the 1960s, especially whenever the iron triangle or ‘ruling triad’ (Broadbent 1998) has been fragmented. In 1968, for example, the Consumer Protection Basic Law was enacted as a (then-rare) private member’s bill with multi-party support, after the LDP faced ‘mounting citizen activism at the grassroots level directed at both environmental and consumer issues, and the threat to conservative government rule posed by the rise of progressive local governments’ (Maclachlan 2002: 112). In 1977, again before a significant election, the LDP finally agreed to amendments to the AntiMonopoly Law strengthening restrictions on cartels. In 1983, however, widespread protests were insufficient to prevent deregulation of 11 synthetic food additives and safety checks on imported foodstuffs, although these and 67 others were then required to be identified by name and – for all except five of the

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total – by function (Vogel 1992: 128). With few opponents in this business sector in Japan, regulatory reform initiatives from the early 1980s (Masujima 1999) combined with more powerful deregulatory ideology under the Reagan administration in the US, seemingly creating an early example of domestic pressure (naiatsu: cf. Kusano 1999) joining with foreign pressure (gaiatsu) to encourage policy change in Japan (see generally Schoppa 1997). By 1994, however, accelerating deregulation and trade liberalization helped prompt enactment of Japan’s PL Law, at least offering the chance of indirect control of product safety through more prominent civil remedies arising from defective goods. Enactment also benefited from the LDP’s unprecedented loss of power in the Lower House, and the mobilization of a diverse group of interests at local and national levels – elaborated also in Chapter 2 of this book. Maclachlan (2002: 242–53) concludes by reviewing subsequent changes in the institutional context of Japanese consumer protection policy-making, and the impact of consumer advocacy, which should further open the processes to pluralist pressures from below. These include the ongoing recession, more openings for consumerism in central government politics, and ongoing deregulation (which consumer groups now see as more inevitable, focusing instead on securing other legal protections). Such developments are prompting greater openness in bureaucratic decision-making (boosted also by the ‘public comment’ procedure required for new regulations since 1999, and the Official Information Disclosure Law of 1999),20 underpinning renewed efforts by local government Consumer Lifestyle Centres (CLCs) to provide consumers with resources to decide matters for themselves. Consumer groups have drawn also on readier access to information and further networking opportunities offered by new technologies like the internet.21 Consumer interests have begun placing greater emphasis on lobbying, possibly representing more legislative influence especially at the national level; gaining more leverage at the agenda-setting and policy-formulation stages; and playing more watchdog functions over the bureaucracy and businesses. In short, joining a newer wave of scholarship directed at Japan, Maclachlan shows convincingly how: The story of consumer politics in postwar Japan is replete with examples of how the politically disadvantaged can leverage small but significant concessions from state and economic interests, that is, how diffuse societal interests are incorporated into Japan’s pro-producer polity. Accordingly, [her] study identifies new and innovative ways in which those interests can influence the outcomes of Japan’s policymaking process, paying particular attention to local opportunities for citizen activism. In the process, it depicts a style of public-interest policymaking that, though rooted in corporatist arrangements encompassing state and economic interests, is more vulnerable to pluralist pressures from below than previously thought. (Maclachlan 2002: 6)

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Japanese law As this book will show, however, Maclachlan’s recent fine study tends to underestimate the multifarious effects of consumer law in Japan, particularly PL law. This is not surprising, as she is trained as a social scientist rather than in law. Karel van Wolferen (1989), a journalist now turned professor of political economy who saw ‘the enigma of Japanese power’ as lying in its elusive and irresponsible dispersion among the ruling triad, was almost totally dismissive of Japan’s legal system (Mosher 1998). Moreover, even those with legal training, especially from outside Japan, have long tended to downplay the role of law in Japan. As with many stereotypes, the view that ‘the Japanese do not like law’ (Noda 1976: 106) has some truth. But this depends heavily on the comparative compass (even Americans are dissatisfied with their bloated system of ‘adversarial legalism’: Kagan 2001), the area of law in question, the formative background of the observer, and the time period.22 Here, too, we need to pick our way through perspectives which have fluctuated widely, particularly among foreign commentators, often intersecting with evolving general theories about Japan (Nottage 1995, 1997a). In the heyday of cultural relativism in countries such as the US, the translated work of Tokyo University law professor Takeyoshi Kawashima (1963) attracted growing attention. It contributed to a deep current of ‘legal orientalism’ (Taylor 1997a) in the study of Japanese law. Kawashima explained Japan’s low civil litigation rate, for instance, as reflecting ‘traditional’ Japanese culture, while leaving open the possibility of modernization gradually encouraging greater ‘legal consciousness’. In the late 1970s and early 1980s, John Haley at the University of Washington instead stressed ‘institutional barriers’ such as delays and costs, making it simply irrational – as it would be in the West – to bring a lawsuit (Haley 1978), and further undermined the culturalist thesis by emphasizing higher litigation rates before rather than after World War II.23 Since the 1980s, however, he has stressed some positive aspects of Japan’s supposedly lesser role for litigation through the courts: developing consensus (Haley 1991) and maintaining communitarianism (Haley 1998). By contrast, seminal work by Frank Upham (1987) was more negative about a perceived pattern of e´lite – especially bureaucratic – management of social problems over the 1970s and 1980s, diverting these problems away from the courts.24 Particularly over the 1990s, however, Mark Ramseyer and Minoru Nakazoto (1989, 1999) extended one insight implicit in the work of Haley and others to argue that Japanese law does have significant effects, simply because its actors (as in the West) make economically rational decisions based on (sometimes different) institutional constraints, not because of communitarian or other cultural influences. In some fields, such as traffic accident dispute resolution, Ramseyer and Nakazoto (1989) demonstrated how predictability of court judgments seemed to promote claims (contrary to the culturalist thesis) and significant payouts (contrary to the institutional barriers thesis; cf. also Haley 2002). In the public sphere, Ramseyer has followed through on the ‘public choice’ model of

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Japanese bureaucrats acting (as ‘agents’) in accordance with the preferences of firmly entrenched LDP politicians (the ‘principals’) keen to dispense favours to particular groups of voters, concluding that an independent judiciary would serve no useful purpose in these circumstances (Ramseyer and Rosenbluth 1993). He has found some statistical evidence that judges ruling against well-known LDP positions in certain – more obviously – ‘politically charged’ cases, like the constitutionality of Japan’s ‘self-defence forces’, have indeed suffered career-wise (Ramseyer and Rasmussen 2003). Conversely, Ramseyer (2000) finds more likelihood of successful administrative law litigation against local authorities, where the LDP has had less entrenched power. Ramseyer has shown little interest about the origins of these features (cf. Foote 1995), and especially their stability or otherwise (cf. Tanase 1990), other than to speculate that any remaining inefficient social norms may be crowded out by more efficient legal ones (Ramseyer 1994; cf. e.g. Posner 2000: 169–84). But a broader implication is that if certain institutional constraints change, Japanese law may converge on Western models, driven by the same logic of rational choice. Indeed, two US authors – Kelemen and Sibbitt (2002) – have recently asserted ‘the Americanization of Japanese law’, in the wake of political fragmentation and economic deregulation over the 1990s, pointing to the PL Law as an illustration. Other younger commentators, however, remain more circumspect. Feldman (2000, 2001) stresses the significance of the strategic assertion of rights, even in more constrained court settings, in promoting rights discourse and social change since the mid-1980s; but suggests a few significant differences in Japan (such as the importance of group assertion of rights). West (2002) maintains an economic approach, while trying to allow also for some – more readily quantifiable – cultural influences in the guise of recent ‘social capital’ theory. Legal scholarship within Japan has often changed direction too (Hirowatari 2000). Kawashima’s negative appraisal of law’s contemporary role in Japan gave way, in the 1980s, to some more positive views of its ‘non-Western’ roots (Hoshino 1972). In the early 1990s, Takeshi Uchida combined the theory of ‘relational contracting’ proposed by US contract law professor Ian Macneil, and US legal philosopher Ronald Dworkin’s argument that judges need to decide cases integrating precedents with that society’s underlying moral and political philosophies (Nottage 1997b). Like Haley (1998), Uchida argued that Japanese judges were integrating social expectations into their legal decisions on civil disputes. Over the 1990s, however, other theorists emphasized instead the roles played by the parties themselves (Yamamoto 1996), or ‘micro’-level formal legal adjudication rather than just ‘macro’-level social justifications. The latter tendency links up to a significant strand of formal reasoning within Japan’s very large body of legal academics, despite Japanese law’s overall orientation – as in the US, and unlike still England or Australia – towards ‘substantive reasoning’ based on ‘moral, economic, political, institutional, or other social consideration[s]’ (Atiyah and Summers 1987: 1; Nottage 2002). In the legal literature within Japan, much more so than overseas, these shifting emphases have been related to a growing volume of legislation and then case law

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(Segawa 1999), in areas like tort law through to the 1970s (Rahn 1990: 357–65), followed increasingly by contract law. These and other areas overlapping with consumer law, such as public regulation and competition law (e.g. Haley 2001; Visser ‘t Hooft 2002) have also expanded in breadth and depth over the past three decades. Since the mid-1990s, all this has provided a springboard for both establishing new policies (mostly through legislation), and synthesizing or applying the law while incorporating more formal legal reasoning techniques (mostly by courts and academics). Building on pioneering work by Akio Takeuchi (1975) and Zentaro Kitagawa (1980), a comprehensive and wide-ranging textbook published recently by Atsushi Omura (1998b) is tangible evidence of how consumer law in Japan has come of age, in substantive legislative provisions and case law, as well as bureaucratic and other institutional aspects. Generally, Omura (1998b: 5–7) argues that periods of economic confusion (1945–54) and growing awareness of consumer issues (1955–67) led to an era of ‘denunciation’ (kokuhatsu, 1968–79), spreading notably from the political to the judicial arena. Regulatory reform initiatives then forced consumer law advocates onto the defensive, over the 1980s, but deregulation over the 1990s has highlighted the challenges and opportunities for consumers in policy-making. Although Maclachlan emphasizes the role of local authorities, and the Local Government Law was certainly amended in 1969 to require them to address consumer protection issues, Article 6 of the Consumer Protection Basic Law of 1968 also urged legislative initiatives by the central government (see generally K. Kato 1989; Sumiya 2000: 555–61). On the one hand, the consumer protection element was identified or strengthened in several pre-existing laws, notably the Instalment Sales Law (Kappu Hanbai Ho) of 1961, amended in 1972 to recognize ‘protection’ of ‘the interests of buyers’, to strengthen disclosure regulation, and to introduce a cooling-off period allowing buyers to terminate contracts and return goods. Other helpful amendments were made to the Food Sanitation Law of 1947, the Travel Agency Law of 1952, the Building Lots and Transactions Business Law of 1954, and the Pharmaceutical Affairs Law of 1960. On the other hand, many new laws were enacted to address new consumer issues, beginning with the ‘three safety laws’ in 1973 (Consumer Product Safety Law, Law for the Control of Household Products Containing Harmful Substances, and the Law on Regulating Inspections and Manufacturing of Chemical Substances). These have been followed by legislation on side-effects from pharmaceuticals (in 1979) and the PL Law of 1994, and – reflecting a shift over the 1990s towards transactions and complaints involving services (Taylor 1997b) – a burgeoning amount of legislation to protect consumers’ economic interests (such as the Specified Commercial Transactions Law of 2000, replacing the Door-to-Door Sales Law of 1976; the Housing Quality Promotion Law of 1999, requiring a mandatory ten-year guarantee; the Financial Products Sales Law of 2000, imposing damages for specified non-disclosure of information; and the Consumer Contract Law of 2000, striking down certain unfair terms and allowing termination for misrepresentation or harassment). Although the pace has accelerated since the mid-1990s, consumer legislation has thus accumulated

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steadily over more than three decades, quite comprehensively dealing with the safety of products and services (both prevention of danger and compensation for harm), the protection of consumers’ economic interests, and promotion of fair competition, labelling and standards (Matsumoto 2002: 4–11). Since the mid-1970s, moreover, there has been a sudden rise in consumer disputes decided by the courts, especially in civil proceedings (Omura 1998b: 8–9). These rulings have mostly supplemented pre-existing law, such as the venerable Civil Code of 1898. Courts have focused on the structural weaknesses of consumers when dealing with businesses to free them of onerous contracts (even without duress or fraud in the orthodox sense), or to impose high duties of care regarding product safety. They have also taken regulatory requirements, like disclosure obligations backed by administrative sanctions, and given them some effects in private law. Some judgments have been precursors to legislation, as in amendments to the Instalment Sales Act in 1984 following judgments relating to credit transactions, and many judgments prior to the PL Law of 1994. As pointed out by Omura (1998b: 9–11), this has prompted legal scholars from more and more fields to grapple with the growing set of norms and underlying principles. Administrative and competition lawyers became involved from the 1960s and 1970s, when product safety was a primary concern, followed by a growing number of civil and commercial lawyers, as contract law issues also became prominent. From the mid-1970s, problems involved in small claims and group actions attracted attention from civil procedure scholars and legal sociologists. From the mid-1980s, competition law dimensions gained renewed attention, and the expansion of ‘economic crimes’ brought criminal lawyers into the consumer law arena. Reflecting this expanding set of perspectives and underlying problems, Omura suggests that Japanese consumer law’s perception of consumers themselves has shifted from ‘groups (receiving the benefits of regulation)’, to ‘individuals’, to ‘groups (pro-actively achieving legal outcomes)’; and that views of the issues facing consumers have moved from substantive to procedural law, and from structure to process. Since the late 1990s, these trends have been reinforced by broader shifts in Japan combining ongoing deregulation, and widespread reforms proposed by the Judicial Reform Council in June 2001 to expand resources – on top of improvements to the efficiency of existing institutions (Ota 2001) – for the court system, the legal profession and legal education, and ‘alternative dispute resolution’ (ADR) systems (Rokumoto 2001; Miyazawa 2001; Kitagawa and Nottage 2003). In short, law in general does matter in Japan, and consumer law is now a wellestablished field. Legislative initiatives have emerged not only at the local level, occasionally filtering through into central government laws, as argued by Maclachlan (2002). They also form a large body of norms, interacting continuously with the court system and a broad array of legal academics now interested in consumer issues. These developments should help overcome problems still with gaps and inconsistencies, and in extracting underlying guiding principles, particularly as the type of hot issues and the frameworks for interpreting Japanese society and its law continue to shift both within and outside

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Japan. Such problems also remain apparent in the European Union (EU), where some urge the belated enactment of a Consumer Code or other means to comprehensively proclaim the consumer interest in legal terms, as opposed to a general ‘European Civil Code’ or other restatement of private law which could be overly dominated by liberal nineteenth-century notions.25 Japan’s Consumer Protection Basic Law, and subsequent central government leaders or policy-making bodies,26 did not spell out consumers’ rights to ‘choice, safety, redress and to be heard’ as explicitly as President Kennedy did in the US in 1962. However, Maclachlan’s study supplemented by more recent work on the role of Japanese law generally, and the contours of contemporary consumer law in particular, suggest considerable ‘functional equivalence’ – and even some ideological equivalence – in Japan (cf. Zweigert and Ko¨tz 1998). Further, PL and product safety regulation occupy an important position in this schema. Initial writing particularly from the US was dismissive of the PL Law, unaware of – or insufficiently sensitive to – the growing momentum in Japanese consumer law, and the shifting paradigms for viewing Japanese law and society. Behrens and Raddock (1995) and Green (1996) suggested that few additional lawsuits would be filed due to a cultural aversion to litigation as well as institutional barriers such as delays in court proceedings, limited pre-trial discovery of evidence, fewer lawyers and the absence of a pure contingency fee (where lawyers are only paid a proportion of damages awarded), more limited scope for damages (excluding punitive damages, in particular), and potentially high court filing fees. Bernstein and Fanning (1996: 68) emphasized much more Japan’s ‘traditions of duty and hierarchy’ as emasculating both the role of law and consumer activism, concluding that some PL ADR Centres established by industry associations in the wake of the PL Law would further divert cases away from the courts and reinforce ‘bureaucratic informalism’. Marcuse (1996: 366) asserted that the PL Law ‘merely codifies the previous judicial development of the relevant Civil Code articles, reinforces political constraints on judicial lawmaking, and demonstrates the Diet’s preference for informal governance and dispute resolution’. However, he did not stress traditional culture, and added some brief comparisons with the EU’s PL Directive of 1985 (85/374/EEC) which heavily influenced the PL Law. Melchinger (1997: 895) relied on Bernstein and Fanning to assert ‘the weakness of the consumer movement’ and its limited impact on enactment of the PL Law, and to emphasize how its substantive provisions and institutional constraints within the legal system would be unlikely to lead to more litigation. Accordingly, he concluded that the Law was merely tatemae (a fac¸ade), albeit acknowledging that ‘more litigation’ should not necessarily be taken as the measure of success for legislation. From late 1997, however, writings even from the US became decidedly more positive in appraising the PL Law. Going to the other extreme in summarizing the Law as ‘sending a pro-consumer tsunami [tidal wave] through Japan’s corporate and judicial worlds’, Cohen (1997: 109) argued that the Iron Triangle was ‘unravelling as the system fails to meet the challenges of the global marketplace’, emphasizing the economic and political transformations resulting

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in enactment of the legislation. He also pointed to evidence emerging about the effects on the corporate world (increased settlements, the ADR Centres, new emphasis on product warnings, product safety programmes, more use of PL insurance, and care in inter-firm contracting), the courts (a few quite high-profile cases), the legislature (ongoing pressure for reform of the Code of Civil Procedure’s rules on discovery (see also Mochizuki 1999) and the Official Information Disclosure Law), and the bureaucracy (more government-funded complaint processing and information campaigns). Rothenberg (2000) added further evidence of the impact of the PL Law at various levels, while an article published in Canada by Matsuura (2001) provided an analysis of the important roles played by legal experts in its enactment. Kelemen and Sibbitt (2002: 320) concluded that ‘provisions of the New PL Law and the reactions of producers and consumers parallel central aspects of American products liability law’, illustrating broader convergence of Japanese and US legal style fuelled by economic deregulation and political fragmentation. Easton (2000) had offered a welcome comparison of the rather similar PL system in England, not just that in the US. However, she did not examine in detail the key development in PL law in the US in recent years: publication by the American Law Institute (ALI) of the Restatement of the Law Third, Torts: Product Liability in 1998 (Restatement Third). This influential ‘soft law’ guide, primarily for legal practitioners, restricts claims notably by shifting back from a strict liability standard (requiring merely proof of a ‘defect’ defined broadly in terms of consumer expectations, as under the PL Law and the Directive) to the negligence test (taking due care), when the alleged problem lies in the design, warnings or instructions associated with the product. Some sense of this retrenchment in US law, despite its still comparatively pro-claimant orientation in other substantive principles and especially in the institutional framework encouraging civil litigation generally, also seems to help explain the shift towards a more positive evaluation of the Japanese situation. However, there remain two distinct bodies of scholarship in the legal literature readily available in English. This highlights the problem of varying perspectives in this particular area, as well as in Japanese law itself and Japanese studies generally – in addition to the chore of uncovering good information for extended comparisons.

Approach of this book Focusing especially on the PL Law, this study therefore tries to avoid some of the more extreme views of Japan in the media, and even among academic commentators on its political economy, production and consumption patterns, and legal system. Generally, the book can be read as demonstrating a tendency towards more open pluralism, increasingly less ‘patterned’ (Muramatsu 1993) in favour of bureaucrats, politicians or organized business interests. It therefore resonates with recent studies (re)discovering Japan’s heterogeneity (e.g. Weiner 1997; Eades et al. 2000). It also finds parallels with work reappraising the growing role of civil society in Japan, despite – or perhaps because of – the decline in

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confidence in larger companies (which generated economic growth and substituted for state welfarism over much of the post-war era: Boyer and Yamada 2000), in bureaucrats, and especially in central government politicians (Pharr 2001; Pharr and Schwartz eds, forthcoming). However, it brings the legal system more prominently into this picture, in its manifestations not only in the legislative process, but also the courts, communities of legal academics and legal professionals, consumer and other interest groups, and the media. Overall, Japan appears to exhibit strong parallels with the general model of deliberative democracy perceived and advocated for industrialized democracies by German political philosopher and social theorist, Juergen Habermas (1996), in which majoritarian government (the public) is in continuous dialogue with fundamental rights (the private), and supported by a vibrant civil society and functional legal system. Habermas’ conceptualizations of the fora for generating and applying rights do appear too static (Black 2000; Ladeur 2002), and his normative arguments have always been stronger than his empirical observations (Carlsson 2002). But his engagement with both the empirical and the normative provides a breath of fresh air to those who profess to strictly demarcate the two (cf. also Selznick et al. 2002), and allows from the outset an acclamation of some observed tendencies towards deliberative democracy in Japan. Perhaps this goes too far in the other direction, over-emphasizing the ways in which law plays into a more pluralist conception of contemporary Japan, reflecting training in the law – a normative discipline, for better or worse (Gessner 1995; Riles 2001) – as well as social sciences such as economics. At least, though, the book’s overall perspective has not been over-determined by a specific theoretical agenda.27 The shifting theoretical perspectives on Japan and its legal system, often caught up in express or more often implied normative applications, make such dogmatism particularly risky. Rather, like the work of some contemporaries,28 this particular book’s general view has emerged more by induction and trial-and-error, as new pieces have gradually been added to the PL Law and product safety regulation puzzle, revising tentative conclusions to obtain a better ‘fit’ with normative prescriptions grounded in empirical reality (cf. Dworkin 1986). This has also encouraged eclecticism in methodological approach. The book draws from the insights of economists and certain political scientists to explain disincentives for mobilizing consumer group activity or taking certain cases through the courts. Yet it appreciates the prevalence of heuristics and other challenges to orthodox assumptions about rational choice (Korobkin and Ulen 2000; Sunstein 2000), and therefore the independent and dynamic power of changing preferences (Etzioni 2000) and of evolving ideas (cf. e.g. Schoppa 1997: 30–1; 2002). Related to the latter dimension, it also respects the tendency for legal and especially judicial reasoning to become self-referential or ‘autopoietic’ (Teubner 1993) or ‘path-dependent’ (Stone Sweet 2002). It therefore combines the ‘rules-plus’ orientation of mainstream comparative lawyers – focused on ‘black-letter law’ comprising legislation, case law, and usually narrowly defined ‘legal’ commentary by academics – with more resolutely contextual analyses (Nottage 2003a; cf. e.g. Frankenberg 1986).

‘Re-orienting’ Japan and its law

19

Eclecticism is also related to this book’s comparative approach. Juxtaposing Japanese law not just with US law, but also the law in the EU (especially the UK) and Australia, requires not only an exegesis of ‘rules-plus’ black-letter law within each jurisdiction. It also demands an awareness of the methodological debates within each jurisdiction about how to assess the role of such law in broader context. Engagement with debates at both levels in these different parts of the world is ongoing, and hopefully more profound than can be evidenced in the text and notes to this book. This should offer more toeholds to a variety of interlocutors interested in Japanese law, who are also keen to learn from – and contribute to – general as well as specific discussions in other environments (see also e.g. Ibusuki 2001; Sono 2001). At the least, expanding – as much as possible – the comparative perspective beyond two frequently adopted points of reference, Japan and the US,29 should allow a more nuanced evaluation of where differences and similarities lie, casting new light on the fluctuating yet now rather hackneyed views which have tended to dominate analyses especially from outside Japan. In short, this book begins exploring a ‘middle way’, in its comparisons and methodology, leaving open different interpretations and multiple paths to get ‘inside Japanese law’ (Nottage and Wolff forthcoming). The overarching aim is to encourage reflective and constructive analysis by legal and other professionals, those broadly interested in Japan, and comparative lawyers, rather than quite aggressively developing an inflated theoretical position in the manner often expected within certain academic milieus.

Plan for the book Chapter 2 therefore offers an historical perspective on the ‘still-birth’ of PL in Japan in the mid-1970s, following a suite of large-scale product safety problems like those afflicting Japan in recent years, and its ‘re-birth’ from the late 1980s. It draws on some insights from political science, notably problems of ‘collective action’ in mobilizing disparate social actors like consumers (see also Maclachlan 2002: 16–19), contrasting the situation in more localized disputes such as the infamous mercury poisoning in Minamata. However, the role of the legal system is also spotlighted, not only in terms of specific litigation in civil (and even criminal) courts, but also in generating legal concepts. Because of the universal pervasiveness of ‘legal transplants’ in the development of law (Ewald 1995; Nelken and Feest 2001), moreover, this angle provides another reason to address the interaction between domestic and international circumstances, going beyond broad economic trends such as regulatory reform and trade liberalization from the 1980s as explanations for PL’s re-birth in Japan. The chapter adds further comparative context by sketching the emergence of PL in the US, beginning especially with section 402A of the Restatement Second (promulgated in 1965, and initially intended as a quite narrow doctrinal development), and its rapid expansion until the 1980s, when active consumerism also began to falter. Ironically, despite the more difficult problems created by side-effects from drugs like Thalidomide, it was only in 1985 that lengthy deliberations and lobbying

20

‘Re-orienting’ Japan and its law

resulted in the PL Directive (Stapleton 1994), consistent with comparatively weak integration of consumer interests in EU policy-making (Howells and Weatherill 1995: 79–103) and member states like the UK (Maclachlan 2002: 47–56). For similar reasons, it took Australia until 1992 to add a regime modelled on the EC Directive to its Trade Practices Act. Arrayed along this spectrum, Japan’s PL Law history looks distinctive really only in relation to the US, and even in that country there is no relentlessly straightforward and longstanding progression towards greater consumer protection. Chapter 3 makes a similar point by focusing even more on substantive blackletter law. It compares the PL Law, the central focus of the re-birth in Japan, with the Directive and Part VA of the Trade Practices Act as well as some of the (still few) court decisions interpreting key provisions in these three quite new statutory regimes, and with the case law summarized – and sometimes perhaps ‘pre-stated’ as the way forward for the US – in the Restatement Third. Despite back-pedalling from the strict-liability ‘consumer expectations’ test for defectiveness in design and warning complaints, US law probably still offers most hope of success to those claiming a civil remedy for unsafe products. However, in many respects Japan’s PL Law is more pro-claimant than the EC Directive, although arguably – until very recently – less so than the Australian regime. This could easily become a commonly held perception in Japan, particularly if its courts are forced to interpret authoritatively concepts like the ‘development risks’ defence – excusing manufacturers from liability when the state of scientific or technical knowledge was not such as to enable to them to detect a defect – which were (and remain) highly contested in Europe and Australia. The chapter concludes by agreeing with the conventional wisdom that such matters of substantive law are relatively fine distinctions compared to differences in civil procedure and other institutional features in these different parts of the world. From that viewpoint too, however, the US stands in an extreme position (see also Reimann 2002). Chapter 4 turns to a more sociological approach to gauge the effects of this combination of elements in the wake of enacting the PL Law in Japan, demonstrating similar tendencies to Europe and Australia at various levels of the ‘dispute resolution pyramid’ (Astor and Chinkin 2002: 44–51) and beyond. Only a few dozen cases have been brought under Japan’s new statutory regime (see Appendix C), although many more continue to be brought under the venerable Civil Code (Appendix D). Some high-profile judgments have already been reported, however, like the Nagoya District Court’s decision against McDonald’s Japan (with an annotated translation provided in Appendix B) rendered in 1999, the year before the first ‘summer of eating dangerously’. Such judgments can help maintain pressure on manufacturers to settle claims, shown to have become more common in the mid-1990s. This chapter also pays particular attention to Japan’s industry association based PL ADR Centres (listed in Appendix E). It sketches the process leading to their establishment to question the view that they are dominated by ‘bureaucratic informalism’; instead they appear to be in a tradition of ‘industry informalism’, bolstered by significant ‘legislative formalism’. Considerable usage by consumers, although not for more formal ADR processes,

‘Re-orienting’ Japan and its law

21

suggests the Centres can also play a role for them, in the shadow of litigation or settlement negotiations related to court proceedings. Problems remain with transparency and impartiality in some Centres, but must also be seen in the context of interaction with local government funded Consumer Lifestyle Centres (CLCs). These too have been increasingly used as an independent means for consumers to get information on the PL Law and other useful legislation, product features and defects alleged by others, and strategies to achieve compensation or moral vindication. Viewed together, as well as in the historical context sketched in Chapter 2 and the comparative law picture detailed in Chapter 3, these developments underpin evidence of considerable ratcheting up of product safety among Japanese manufacturers and others in the supply chain, particularly over the mid-1990s. From this perspective, Japan’s ‘summers of living dangerously’ in 2000 and 2001 can be viewed more positively. The willingness to raise publicly problems at the heart of Japan’s corporate and political worlds, and even some subsequent reforms, are better seen as part of an ongoing reinvigoration of PL Law and consumerism more generally. However, Chapter 5 concludes by suggesting that these recent product safety problems create the challenge, as well as the opportunity, to reconsider how best to realize ‘the future of PL Law’ in Japan. Contrary to most commentators, it is argued that this is not simply a matter of ‘more regulation’, leaving PL to atrophy. Rather than more of one implying less of the other, thought needs to be given to productive ‘co-evolution’ of these two sub-areas of law (cf. e.g. Teubner 1992). An international perspective – indeed, a transnational perspective, going beyond the orthodox view of relations between nation-states – is also crucial. The spread of BSE around the globe to Japan, in particular, suggests the need for product safety regulation at various levels, which can interact effectively and legitimately with private PL Law (cf. e.g. Joerges 2001). This book therefore ends by inviting connections to be made with much broader debates about reconceptualizing the public and private spheres in all complex industrialized democracies, and how law does and should interact with science and technology generally.30 There are no simple answers to these two sets of questions, but this book at least hopes to bring them into the purview of the burgeoning English language literature on Japan, through a comparative account sensitive to both the potential of legal conceptualizations and how they are embedded in different contexts. Thus, in the jurisdictions and in the material compared, this book seeks a middle way to ‘re-orient’ Japan and an important part of its legal system. Chapter 2 will most interest historians and political scientists, but it aims to introduce some key legal concepts and events which contributed to the evolution of PL in Japan, compared to three other parts of the world – the EU, Australia and the US. Chapter 3 will appeal more to black-letter lawyers – excited by legislation, reported case law and other legal commentary dealing with the substantive law aspects of PL Law – but it concludes with more details about the procedural law and institutional features which bring those to life. Chapter 4, examining the broader impact of Japan’s legislation, is bread and butter (or

22

‘Re-orienting’ Japan and its law

shirogohan, cooked white rice) for legal sociologists. Hopefully it will also appeal to other social scientists, Japanese studies specialists, legal practitioners who need to understand ‘the law in action’, and even some more orthodox legal scholars. Chapter 5 concludes by at least raising some more theoretical issues, aimed at a broad audience: those trained or interested in law, as well as those who are not. The end result for the book as whole may illustrate the wisdom of George Schultz, the former US Secretary of State, who warned that ‘he who walks in the middle of the road gets hit from both sides’.31 Nonetheless, the contemporary significance of product safety issues in Japan, and beyond, justifies taking such risks in encouraging a broader debate.

2

The still-birth and re-birth of product liability in Japan

Much of the English language commentary on Japan’s PL Law over the 1990s lacked a full historical perspective (e.g. Green 1996; Melchinger 1997), a broad comparative perspective (e.g. Dauvergne 1994), or sufficient attention to both legal and social science dimensions (e.g. Maclachlan 1999, 2002). This chapter begins by sketching the evolution – and sometimes the revolution, or devolution – of PL in the US, the UK and the EU, and Australia (see generally Howells 1993). It introduces the importance of the legal, notably the contrasting types of cases and doctrinal approaches underpinning legislative initiatives in the US, and the UK or the EU, along with the hybrid situations in Australia and Japan. It also shows parallels in the politicization of PL law reforms particularly since the 1960s (in the US), the 1980s (in the EU), and the 1990s (in Australia and Japan), as well as a tendency back to more pro-defendant regimes in the US and (very recently) Australia, contrasting with gradually expanding pro-consumer stances in Japan and (especially now) the EU. This lays some broad comparative foundations for the chapter’s later detailed analysis of the ‘re-birth’ of PL in Japan since the late 1980s, which rebuilt from ‘still-birth’ in the mid-1970s; and for Chapter 3’s more detailed black-letter law comparison of the PL Law with the present regimes in the US, the EU and Australia.

Technicalities, tribulations, and trials in the US The origins of Anglo-American PL law lay primarily in the development of the notion of ‘implied warranties’ attendant upon the sale of goods, particularly that they be of ‘merchantable quality’ (Stapleton 1994: 9–16). By the end of the nineteenth century, this obligation was firmly established, and indeed – though for unclear reasons – as one attracting strict liability, so that a seller could not escape liability by showing due care had been taken in supplying the ‘unmerchantable’ goods. Further, it had been extended to buyers who were consumers, as well as those in business. However, as a perceived corollary of the doctrine of ‘privity of contract’, courts did not allow them to go outside the contractual chain. Consumers, for example, were restricted to claims against retailers who sold them the goods, and manufacturers were not directly liable. Bystanders outside any contractual chain, such as children harmed by

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Still-birth and re-birth of product liability

unmerchantable goods purchased by their parents, were also prevented from suing in tort. In the US state of Washington, however, the court in Mazetti v. Armour & Co. 135 P 633 (1913) allowed a buyer of impure food to claim directly against the manufacturer for its diminished value. This ‘aclassical warranty’ extended from contract law, as Stapleton (1994: 21) calls it, was soon followed by other state courts in comparable cases involving foods and drinks. By contrast, in MacPherson v. Buick Motor Co. 111 NE 1050 (1916), the influential New York Court of Appeals allowed a buyer’s claim under tort law directly against the automobile manufacturer; and refused, in Chysky v. Drake Bros. Co. 139 NE 576 (1923) to allow an aclassical warranty claim. (Similarly, in Donoghue v. Stevenson [1932] AC 562, the House of Lords – the highest Court in the UK – allowed a tort claim against the manufacturer of a bottled drink found to contain decomposed matter.) When it came to Hennington v. Bloomfield Motors Inc. 161 A 2d 69 (1960), the New Jersey Supreme Court preferred to allow a user of a defective automobile to sue both the retailer and the manufacturer under the (aclassical) implied warranty of merchantability. It also refused to uphold the manufacturer’s attempt to disclaim liability, even though classical contract law had long upheld parties’ freedom expressly to do so. By contrast, in Greenman v. Yuba Power Products Inc. 377 P 2d 897 (1963), the influential Californian Supreme Court allowed a tool user simply to claim in tort against the manufacturer despite not giving timely notice, as expected under contract law. In 1965, section 402A of the Restatement of the Law Second, Torts was published by the American Law Institute. The ALI is an influential body composed mainly of judges, lawyers and professors which synthesizes voluminous case law emerging from the various states in the decentralized federal American legal system, and its Restatements are generally highly persuasive – but not binding – on those courts (see generally Hull 1990). As well as the timely Greenman judgment (V. Schwartz 1998: 746–7), the new section 402A followed an earlier argument of its General Reporter, Professor William Prosser (1960), that a direct strict-liability claim in tort was preferable to stretching contract law principles involving warranties. Accordingly, it stated that: (1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate consumer, or to his property, if (a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the consumer without substantial change in the condition in which it is sold. (2) The rule stated in Subsection (1) applies although (a) the seller has exercised all possible care in the preparation and sale of his product, and (b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.

Still-birth and re-birth of product liability

25

As this sketch of some key case law indicates, this development was more than just a ‘restatement’ of the case law. It also reflected a normative preference for US law to evolve in a particular direction, and many courts soon began following section 402A and the Greenman tort-based approach. But it should also be apparent that a major concern was quite technical – to simplify judge-made law, rather than to revolutionize it.1 This narrower conception was supported by the focus of these early cases and commentators on manufacturing defects – first in foodstuffs,2 later in manufactured products – caused by an interruption to an otherwise sound manufacturing and marketing process. As a result, section 402A did not address separately the problems of ‘design defects’ (where an entire production process is problematic) or ‘warning’ and ‘information’ defects (where these, provided with the goods to minimize risks of harm, are inadequate). All defects were left to be judged by the broad community standard of ‘unreasonable danger’. This also betrayed the legacy of contract law concepts in this first milestone in PL as a distinct branch of US law, because the contract law notion of ‘merchantability’ of goods suffering manufacturing defects had also adopted a rather undifferentiated standard. Other aspects of this legacy in section 402A included its focus on goods (not real estate or services) and supply in trade; its ready extension of compensation to cover not only personal injury (the main concern in cases brought by consumers based on tort law) but also property damage (and even damage to commercial property); and no explicit attention to liability towards bystanders (another main consideration in tort cases). Particularly over the late 1960s and the 1970s, however, US courts began expanding the scope of application of section 402A. They ended up allowing claims also by bystanders, against lessors of goods, involving certain transactions involving service aspects, and sometimes for economic loss (reduced value) of the defective goods (Cantu 1993). This expansion was supported by rather belated attempts at sustained policy arguments for imposing strict liability, particularly by applying economic theory and focusing on cases involving personal injury (e.g. Calabresi 1970; cf. Posner 1972). It also reflected judicial sensitivity to the similarly novel phenomenon of more sustained consumer advocacy in the US. As Maclachlan (2001: 44–5) also explains, however, the pro-consumer mood and institutional support shifted after Ronald Reagan was elected president. Over the 1980s, complaints were increasingly loudly voiced specifically at a perceived ‘litigation explosion’ in PL suits going against US firms, and a supposedly related crisis involving escalating insurance premiums (Moore and Viscusi 2001: 2–3, 10–13). Even though evidence of both was quite weak, and the causes anyway seemed to be much broader transformations in US law and society (Friedman 1985; Galanter 1986; Galanter and Palay 1991), calls grew for a rolling back of PL law principles allegedly favouring consumer plaintiffs. Lobbyists associated with business interests called for nation-wide measures at the federal level. So far these attempts have failed, but some got very close. A prominent example is the bill passed by the Republican Congress and Senate in 1994, limiting punitive damage awards for example, which was vetoed by Democrat President Bill

26

Still-birth and re-birth of product liability

Clinton. Increasingly, pro-business groups turned with growing success to state legislatures to restrict PL claims (Zollers et al. 2000), including caps on punitive damages (and, to a lesser extent, non-economic damages), bars on suits against retailers (as opposed to manufacturers), and limits on joint and several liability (the principle allowing a claimant to obtain full damages from one defendant, who then has to turn to any other party jointly responsible for the loss). These reflect general concerns over the 1990s about large judgments in isolated cases and costs associated with mass tort litigation, with new ‘case congregations’ involving claims relating to tobacco (and potentially alcohol or guns) emerging even as those relating to asbestos are largely resolved.3 Meanwhile, James Henderson and Theodore Eisenberg (1990) proclaimed ‘the quiet revolution in products liability’, demonstrating empirically that court decisions even over the 1980s had become more cautious or even unfavourable towards plaintiffs. They attributed this phenomenon to a growing sensitivity among US judges (often elected, after all: see e.g. Atiyah and Summers 1987) towards assertions of crises in litigation and insurance, and an awareness that a broad test for establishing product defectiveness (such as ‘consumer expectations’, emerging from some section 402A jurisprudence) was difficult to justify for a growing proportion of design and warning defect cases. The latter point developed into a key feature of the Restatement of the Law Third, Torts: Product Liability, published in 1998 by the ALI, with Henderson as one of the General Reporters. It clearly distinguishes manufacturing from design or warning defects. Sections 2(b) and 2(c) move back to negligence-type liability in the latter two cases by requiring proof that ‘reasonable risks of harm posed by the product’ could have been reduced or avoided by, respectively ‘the adoption of a reasonable alternative design’ or ‘the provision of reasonable instructions or warnings’. This has been widely perceived as a retrenchment favouring defendants, with several arguing that it did not ‘restate’ US law (e.g. Vandall 1998; see also Conk 2000 on Section 6), although Henderson and Twerski (1998; 2000) insist that courts have approved of this approach and other aspects of the new Restatement which have been subject to criticism (see also Henderson 2002). Thus, just as section 402A of the Restatement Second led – rather fortuitously – to a rise in PL law for consumers, the Restatement Third may precede – more consciously – a fall (Bernstein 1995: 1695). However, the difference is that the standard-setting process is now much more visible, particularly in the ALI (Schwartz 1998); and much more political, partly due to a decline in the authority of the judiciary (Hyland 1998). This creates uncertainty about the future path of PL law in the US, even though its trajectory over the last few decades has been a leveling off or even a downward one from the perspective of consumers.4

Escalating emergence of PL in the EU Generally, the trend has been the other way in Europe, with PL law developing at a much more sedate pace, but a more steady or even now an accelerating one. In the UK, for example, the central government enacted a series of pro-

Still-birth and re-birth of product liability

27

consumer laws from the 1970s, developing contract law warranties and restricting the scope for commercial suppliers to limit their liability for harm caused. In 1961, however, children began to be born with severe deformities caused by a drug used during pregnancy, Thalidomide, which was never marketed in the US. It was also supplied under the National Health Service, a comprehensive medical insurance scheme not found in the US (which relies overwhelmingly on private schemes: Campbell and Ikegami 1998). This meant there was no ready contractual basis for claims, and the question became whether tort suits could be brought for harm to such ‘bystanders’. Key difficulties were that the drug’s disastrous side-effects stemmed from possible design or warning defects, and it was difficult for plaintiffs to establish negligence (foreseeability of risks) required by general tort law developed by the courts. By contrast, as in Grant v. Australian Knitting Mills Ltd [1936] 1 All ER 85, English courts had paralleled their US counterparts in finding ways to lessen the burden of proof on plaintiffs in the occasional cases involving manufacturing defects. A powerful media campaign emerged in the 1960s, bolstered by critiques of the existing tort system by academics such as Terence Ison (1967) and Patrick Atiyah (1970), to follow ideas like those in the Restatement Second and impose strict liability in tort on manufacturers. In 1973 the government established a Royal Commission, an ad hoc response often used in the AngloCommonwealth world to address politically contentious issues. Its ‘Pearson Report’ of 1978 was disappointing to many in not proposing a state-funded nofault compensation scheme covering all personal injuries by accident, like that enacted in 1972 in New Zealand (see generally Campbell 1996). Nonetheless, among more focused schemes, it envisaged a strict-liability regime for liability caused by defective products. However, even this possibility was derailed by industry opposition in the context of Britain’s worsening economic climate over the 1970s, the advent of the neo-liberal Thatcher government in 1979, and its accession in 1973 into the European Economic Community (‘EEC’, Stapleton 1994: 39–46). Thalidomide had also afflicted consumers in other member states, notably Germany, prompting the European Commission (the EEC’s executive branch) to put in 1976 a draft Directive on product liability before the Council of Ministers (the main legislative body, composed of government ministers from each member state: 1976 OJ (C 241) 9). Although the European Parliament (comprising members directly elected in each country) did not have a formal voice in promulgating such a Directive at that time, its left- and right-wing factions got involved in heated discussions about the draft, leading to a compromise position and a revised draft Directive put by the Commission before the Council in 1979 (OJ (C 271) 26.10.1979). Intense discussions continued for the next six years among member state governments, with the Thatcher administration concerned about preserving business interests, other governments unwilling to inaugurate their own statutory regimes given the possibility of a new European standard (and the risk of adversely affecting their own industries by enacting a more protective regime), and limited transparency and participation from consumer

28

Still-birth and re-birth of product liability

groups, academics and other interested parties (Stapleton 1994: 47–9; Stapleton 2002a: 1243–7). Further problems arose from the contested nature of the EC’s constitutional competence to act in this field. The 1958 Treaty of Rome established the EEC with the primary goal of integrating the economies of member states (originally six, joined by the UK and two others in 1973, Greece in 1981, Spain and Portugal in 1986, and Austria, Finland and Sweden in 1995). An implicit benefit was thought to be more choice and lower prices for consumers (Weatherill 1997). The Single European Act, which came into effect in 1987, did not add clear competence to take measures directly to advance consumer protection. However, it added an article (then 100a, renumbered Article 95 by the 1997 Treaty of Amsterdam) allowing the Council to issue directives based on a qualified majority instead of by consensus of member states (Article 100, now 94), and increased the formal powers of Parliament in relation to the Council (and thereby the Commission). This further encouraged directives contributing in fact to consumer protection, as well as various ‘soft law’ initiatives, which were nonetheless formally justified as contributing to development of the common market in Europe. Only from 1 November 1993, when the Maastricht Treaty on European Union came into effect, did Article 129a (now 153(3)) expressly establish the necessary competence, allowing the ECC (renamed the European Community or ‘EC’) to ‘contribute to the attainment of a high level of consumer protection’, including ‘specific action which supports and supplements the policy pursued by the member states to protect the health, safety and economic interests of consumers and to provide adequate information to consumers’ (Howells and Weatherill 1995: 79–104). Between 1990 and 1998, 11 consumer protection measures were adopted, compared to just seven between 1975 and 1989 – which moreover, except for the PL Directive, had been limited to promoting information for consumers (Bourgoignie 1998). Despite the unfavourable constitutional arrangements through the 1980s, reinforcing the interests of business, agreement was eventually reached on ‘the Council Directive of 25 July 1985 on the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Concerning Liability for Defective Products (85/374/EEC)’. Similar to the Parliament’s compromise version of 1979, Stapleton (2002a: 1231) castigates it as ‘one of the high-water marks of Euro-fudge and contextual vagueness’. Faure (2000) argues that its poorly thought out economic rationales – judged by today’s standards – suggest that it was enacted primarily to suit interest groups like certain manufacturers, farmers, and EC bureaucrats themselves. Article 1 of the Directive did proclaim a regime imposing strict liability on a ‘producer’ (defined in Article 3, primarily as a manufacturer) for a ‘product’ (Article 2) containing a ‘defect’ (Article 6), causing physical injury or consequential damage (Article 9), limited to consumer goods (one indication of its origins more in tort than contract law). However, one of Stapleton’s primary criticisms has been the lack of differentiation among types of product defects, especially given the impetus in Europe from more complex design and warning problems arising from drugs.

Still-birth and re-birth of product liability

29

Another is Article 7(e), providing a ‘development risks’ defence allowing manufacturers to avoid liability by proving that ‘the state of scientific and technical knowledge was not such as to enable the defect to be discovered’, unless a member state incorporating the Directive into its domestic law decided not to allow this defence (Article 15). This is most likely to apply to products like drugs, arguably making it quite easy to reintroduce risk-utility balancing and other features of a negligence liability regime (see also Stapleton 1986, 1998; Howells 1993). As mentioned in Chapter 3, the defence has been maintained by all 15 states except Luxembourg, Finland, and Spain (save, strangely, for drugs and food). Another odd result of the complex negotiation process behind the Directive was Article 11’s ‘long stop’ period of repose, extinguishing liability ten years after the producer had put the goods into circulation, even if the victim of an accident was unaware of having suffered harm. This was initially intended as a counterbalance for manufacturers (especially of drugs, with side-effects which might have long latency periods) bearing ‘development risks’ (Harland 1993). Yet the outcome was that manufacturers in those (many) states excusing liability for such risks also got the benefit of this period of repose – the best of both worlds. Another ‘fudged’ aspect of the Directive was the exclusion of liability for primary agricultural produce under Article 2, unless a member state decided otherwise (Article 15), resulting in all members maintaining the exclusion except for Luxembourg, Sweden, Greece and France. Another was the option for member states (taken only by Germany, Portugal and Spain) to impose a cap on personal injury liability caused by identical items (Article 16). Other problems arose from the essence of a directive under European law, which (unlike a ‘regulation’) has no direct effect in a member state but instead requires each to incorporate the measure into its domestic law. One obvious risk is that member states will delay in incorporating the Directive. Only a few met the 1988 deadline, and the Commission brought successful proceedings against France for the lengthiest delay. France only incorporated the Directive in 1998, partly because it had developed strong protection for consumers out of contract law, which extended to suppliers as well as manufacturers and did not allow for a development risks defence.5 When France maintained statutory claims versus suppliers, and other features such as not limiting liability to damages to other consumer goods, it was subjected to further proceedings (case C–52/00 [2002]), and the ECJ upheld the Commission’s claim that the Directive was intended as a ‘maximal’ harmonization measure – not permitting a greater level of protection than that allowed under its specific provisions (Howells 2001). This illustrates a second major risk involved in using a Directive, namely that a national legislature may incorrectly restate the provisions laid down in the Directive. Indeed, the Commission also brought proceedings before the European Court of Justice (ECJ) against the UK for doing so when transposing the development risks defence. The defence was narrowly retained in debates on the Consumer Protection Bill, and the Bill was enacted on the day the 1987 General Election was called, with Mildred (1996: 43) suggesting that the seemingly broader UK

30

Still-birth and re-birth of product liability

version of the defence was ‘presumably . . . the price of completing its progress before the Election’. However, the Commission’s proceedings proved unsuccessful, as explained further in Chapter 3. Nonetheless, Directives like that on PL have contributed to general improvements in EU governance. One example is the formalization and consequent expansion of the role of the Parliament (Joerges and Dehousse eds, 2002). Another contribution is the reassessment of the proper balance between economic and other interests in the EU. On 2 December, the Commission announced to the Parliament and Council a vigorous ‘Consumer Policy Action Plan 1999–2001’ (COM(98)696, Consumer Law Journal 1999: 59), prompting comprehensive reassessments in some member states such as the UK (Howells 2000b). It followed up with, for example, a Communication on ‘widening access to alternative dispute resolution’ (COM(2001)161) and a Recommendation on ‘principles for out-of-court bodies involved in the consensual resolution of consumer disputes’ (OJ L 2001/106, 56). Their aim was to ensure consumers not only had substantive rights, as set out in a growing set of Directives and other legislative instruments, but also realistic means to exercise them, consistently also with the EU’s growing sensitivity to allowing diversity in implementation of European law and policy (Joerges 2002). At the end of 2001, coinciding with a review of its three-year plan, the Commission released draft proposals for developing a new comprehensive policy on consumer protection. These included effective implementation of the revised Product Safety Directive (2001/95/EC), tackling specific safety issues such as chemicals in products, better monitoring of consumers’ experiences with the safety of goods and services; and also further access to justice for consumers, their involvement in policy-making, and encouragement for consistency in communications from consumer associations in different states (Harrison 2002). In June 2002 the Commission proposed to consult widely on a possible Consumer Protection Framework Directive, laying down a general requirement of ‘fair commercial practices’, specific rules dealing for example with effective after-sale complaints handling, non-binding guidelines to assist in interpreting such a Directive, and standards for codes of conduct adopted by businesses (Pope 2002). In these and other ways, for instance in a July 2002 Consultation Paper on the Safety of Services for Consumers (Holland 2002), the Commission is showing a burst of enthusiasm for consumer interests, no doubt trying to bolster its battered reputation in the wake of various corruption scandals (Li 2000). The ECJ is also playing a prominent role. In interpreting Article 95 (formerly 100a) of the EC Treaty, which refers tangentially to protection of public health as well as consumer protection but appears mainly directed at internal market harmonization, it now appears likely that the ECJ will allow measures (such as a revised Tobacco Products Directive, 2001/37/EC) which have protection of public health as their primary concern, as long as they also have some genuine and potential internal market benefits (Doherty 2002). A third contribution of directives like that on PL has been to prompt the evolution of the ‘interpretation principle’ in European law. This requires national

Still-birth and re-birth of product liability

31

courts to construe national laws in the light of directives yet to be implemented, unless plainly contradictory (Marleasing S.A. v. La Comercial de Alimentacion S.A. [1990] ECR I–4135), and has been applied by several French courts (Larroumet and Pillebout 2002). Finally, the recent ECJ ruling against France prompted the Council, under the Presidency of Denmark (which also maintained strict liability of certain suppliers as well as manufacturers), to issue to member states on 6 November 2002 a draft Resolution calling on the Commission to amend the PL Directive, making it clear that liability of suppliers was not a matter covered by the Directive (Freeman 2002a). This raises fundamental questions about the nature and goals of directives nowadays, and the roles of the various European institutions. Such general tendencies to rethink European governance (Cygan 2002) feed back into several developments more specifically directed at the PL Directive. The Commission’s First Report on its application (COM(95)617), published in 1995 pursuant to Article 21, drew on a study carried out by McKenna & Co. (an English law firm), which ‘reflected the view that the directive had produced a negligeable impact, but was part of a culture in which manufacturers and other suppliers were more aware of their safety responsibilities and consumers more aware of their rights (although this varied between the member states)’ (Howells 1996: 103 note 6; see also Goyens ed. 1996, and Chapter 4). The Report found only three reported judgments in all of Europe based on the Directive (Schuster 1998: 197–9), and did not recommend any amendments. However, it noted that certain aspects required continued monitoring, including ‘the exclusion by the majority of Member States of unprocessed agricultural products, whose impact the Commission will evaluate’. Soon after the debacle over BSE unfolded at the EU level from 1996, prompting temporary counter-measures against British exports on the part of the Commission and more extreme ones from member states like France (Joerges 2001), the Commission proposed to amend the Directive to extend it to primary agricultural products (COM(97)478). On 28 September 1998, this was agreed to by the Parliament’s Committee on the Environment, Public Health and Consumer Affairs Committee (A4–0326/98) but it recommended further amendments including removal of limitations on damages, extending the period of repose from 10 to 20 years, eliminating the development risks defence, and reversing the burden of proving causation (Hodges 1999). On a first reading on the report on 5 November, the plenary Parliament narrowly approved many of the Committee’s proposals; but not those regarding development risks, burden of proof, and removing the option of a total cap on liability for one defective product (OJ C 359). The Parliament’s Legal Affairs Committee had objected to going well beyond the scope of the initial proposal by the Commission, which was displeased with the first reading result, and on 17 December the European Council agreed unanimously to the Commission’s initial proposal to amend the Directive only regarding agricultural products (OJ C 49). On its second reading on 23 March 1999, the Parliament backed down, paving the way to an amendment to the Directive (99/34/EC) simply requiring all member states to

32

Still-birth and re-birth of product liability

remove any exclusion for primary agricultural products by 4 December 2000 (Giliker 2000). Spurred into action, in July 1999 the Commission released a Green Paper (COM(99)396 final) foreshadowing a range of other possible reforms to the PL Directive, ranging from possible abolition of the development risks defence, lessening the burden of proof, reassessing caps on damages and the period of repose, extending Directive coverage to mental distress damages and to suppliers, imposing obligations to impose PL insurance, and improving information on settlement of PL disputes (Izquierdo-Peris 1999). This attracted some 100 submissions from government bodies, business interests and consumer groups in the EU and beyond. Its Second Report on the Directive’s Application (COM(2000)893) then concluded there was still insufficient information about its practical application to evaluate properly the options for reform. However, the Commission has followed through on one of its conclusions by commissioning Lovells, an international law firm based in England, to report in 2003 on the extent to which national PL regimes differ from the present Directive, and whether extending it to supplant such regimes would be feasible (Meltzer et al. 2001). Such a move would have major repercussions, because Article 13 of the Directive had generally preserved ‘any rights which an injured person may have according to the laws of contractual or non-contractual liability or a special liability system existing’ when it was issued in 1985, and some of those regimes (like a German compensation scheme for drugs) are very extensive. Lastly, the newly strengthened Product Safety Directive is expected to lead to more PL claims, if only because of further heightened expectations about product safety (Lovells 2001: 61–2). More generally, the PL Directive of 1985 created a model for the rest of the world (Harland 1999), useful for legal principles derived from rather different concerns than in the US, and as an example of political compromise in a system directed originally at narrowly economic concerns but with gradually growing consumer interests. The outcome of recent developments in Europe seem likely to hold lessons for other countries too.

Hybrid development in Australia and Japan PL law evolved at a more measured pace in Australia, which remains heavily influenced by English law, particularly in private law and despite adopting a federal system of government over a century ago (see generally Parkinson 2001). There were certainly fewer ‘mass tort’ problems involving design or warning defects, on the scale of Thalidomide in Europe.6 However, as in the UK, consumer issues emerged more generally onto the policy agenda over the 1960s and early 1970s. This led the federal (Commonwealth) government to enact the Trade Practices Act in 1974, imposing for example certain mandatory warranties in sales by corporations to consumers, and providing a model for state governments to enact similar ‘fair trading’ legislation regulating other transactions which the Commonwealth lacked constitutional competence to

Still-birth and re-birth of product liability

33

address. Drawing further on developments in English law, in 1978 a new Division (2A in Part V) was inserted to impose statutory ‘aclassical warranties’ (especially of merchantability) on manufacturers as well as retail sellers. However, only consumers could sue in respect of ‘consumer goods’ (ordinarily acquired for personal, domestic or household use or consumption); and, most significantly, coverage did not extend to persons injured while using goods with the consent of the consumer purchaser, nor to pure bystanders (Harland 1992: 193–4). In Kilgannon v. Sharpe Bros. Pty. Ltd. (1986) 4 NSWLR 600, this left a plaintiff injured by an exploding soft drink bottle with a claim only in tort. The New South Wales Court of Appeal felt unable to develop Anglo-Australian case law which had sometimes lessened the plaintiff ’s burden of proving negligence in such cases. It rejected the claim, with Hope JA calling for statutory reform. Another impetus for statutory intervention was the EC Directive of 1985, quickly incorporated into English law as Part 1 of the Consumer Protection Act 1987 (Goldring 1999: 3–4). Further, a survey conducted over 1985–6 conducted by the Trade Practices Commission, established to enforce the TPA (and now called the Australian Competition and Consumer Commission or ‘ACCC’), had found that 7 per cent of households had suffered physical injury from goods, and other suggestions of significant amounts of defective products which were not being compensated for (ALRC 1989: 33–34). In a general review of product safety policy in 1987, the National Consumer Affairs Advisory Council (‘NCAAC’, set up by the central government in 1977 with consumer representation) recommended a comprehensive study on any practical difficulties which could arise from introducing a strict-liability regime (Harland 1995: 340). The Commonwealth Attorney-General called for a study by the Australian Law Reform Commission (‘ALRC’), established in 1975 as a source of advice – particularly on larger issues – independent of his Department (equivalent to the Justice Ministry in Japan and other countries). A common starting point was that any reform was to fit within tort law, rather than explicitly engaging with notions derived from contract law (like many US courts and commentators until the 1960s). On the other hand, as in the US, problems involving manufacturing defects provided a prominent backdrop. Nonetheless, problems more particularly associated with design and warning defects soon became a bone of contention, especially the possibility of negligencetype reasoning coming back in to pivotal definitions like ‘defectiveness’ or through a ‘development risks’ defence, should an ostensibly strict liability regime like the EC Directive be introduced. Emphasizing such uncertainties, the ALRC concluded that standards of ‘defectiveness’ or ‘merchantable quality’ – let alone ‘due care’ – should be avoided altogether, and that liability be imposed largely based on causation: whether the harm arose from the way the goods had ‘acted’ (Howells 1993: 281–5). This was an almost unprecedented view, by world standards at the time (and even today), and was criticized particularly by industry as creating its own new uncertainties and generally imposing too much of a liability burden on firms. Further, as one ARLC Commissioner remarked around this time:

34

Still-birth and re-birth of product liability Many Australian businesses, especially in industries particularly sensitive to product liability claims – such as motor vehicles, pharmaceutical and chemical industries – are subsidiaries or close associates of United States businesses. These businesses formed a strong interest group opposed to any extension of the liability of manufacturers and suppliers. A number of these organizations compete for membership. Each of them must convince individual businesses that the cost of membership is justified. If changes in the law appear to bring disadvantages to business, there is a forum in which opposition to change is apparently consistent with the interest of business. (Goldring 1989: 212)

In 1990 the Federal Treasurer asked the Industry Commission, another government advisory body closely associated with business interests, to report on the economic effect of the ALRC proposals. This Commission concluded that they would reduce economic efficiency (Harland 1992: 195). Much debate ensued between pro-consumer and pro-business interests, particularly as various bills were presented to parliament (Boas 1994). In 1992, a new Part VA was enacted for the TPA, hewing very closely to the EC Directive as a largely political compromise for the main interest groups – a ‘lowest common denominator’ (Hammond 1998: 41–2) – justified also as the emerging international standard. Although no exclusion was made for primary agricultural produce, a developments risks defence was provided. Remaining contententious issues, such as a 20-year period of repose for ‘toxic harm’ cases involving long latency periods (Harland 1993), were referred to a Senate Committee for further debate. They were quickly lost from view, following a report in December 1992 (Australian Parliament Senate 1992), and it now seems extremely unlikely that these or other PL principles will be reformed in a proplaintiff direction. For one thing, the federal government is now led by the more conservative Liberal Party. Consumer policy generally is not as prominent, with the NCAAC’s successors taking a low profile.7 More specifically, rises in general liability insurance premiums, coinciding with the shocking collapse of a large insurance group8 and media allegations of excessive tort litigation generally, led politicians in federal and state governments to propose ‘tort reform’ legislation restricting claims for personal injury. Concerns are also voiced about high-profile cases, especially with potential to develop into mass claims, although litigation against tobacco companies has so far been even more unsuccessful than in the US.9 In New South Wales (Australia’s most populous State), with retrospective effect to 20 March 2002, the Civil Liability Act 2002 (NSW) imposes caps on general damages (for non-economic loss), economic loss, damages awarded for gratuitous care (compensating family members for domestic and other assistance to plaintiffs), and lawyers’ fees payable to successful plaintiffs in smaller claims; prohibits awards of punitive damages in negligence cases; and requires lawyers to bring proceedings only if they believe there are reasonable prospects of success. With effect from 6 December 2002, the Civil Liability Amendment (Personal

Still-birth and re-birth of product liability

35

Reponsibility) Act 2002 (NSW) further clarifies or limits negligence liability principles, such as ‘reasonable foreseeability’ in relation to the duty of care, causation and damages, as well as adjusting limitation periods (Clark and Harris 2003). On 2 October 2002, the Federal Government released a Review of the Law of Negligence prepared by a Panel (composed of a semi-retired NSW Court of Appeal judge, a law professor, a professor of medicine and a NSW municipality mayor), pursuant to a joint initiative of federal and state ministers and Terms of Reference stating: The award of damages for personal injury has become unaffordable and unsustainable as the principal source of compensation for those injured through the fault of another. It is desirable to examine a method for the reform of the common law with the objective of limiting liability and quantum of damages arising from personal injury and death. (Review, para. 1.3) The 61 recommendations in the Review, which the federal Assistant Treasurer announced on 15 November were agreeable to all Ministers (APLR 13: 96 (2002)), developed caps on damages and other measures adopted in the NSW legislation, and included many other measures designed to limit claims for negligently caused personal injury. For example, it recommended that a medical practitioner should not be considered negligent if treatment provided accorded with an opinion widely held by a significant number of respected practitioners in the field, unless a court considered such an opinion irrational (paras. 3.5–3.19). The Review also recommended (paras. 6.1–6.40) that claims be barred after the earlier of (i) three years of discoverability of the injury (subject to some court discretion), or (ii) an absolute ‘long-stop period’ of 12 years after the events on which the claims were based (like delivery of negligently produced goods). Further, acknowledging the possibility that ‘greater attention may be paid to [strict-liability regimes like Parts V Division 2A and Part VA of the TPA] by claimants as possible bases for personal injury claims’ (para. 5.36), the Review urged that its recommendations be extended to any product liability claim under those regimes which invokes a claim of negligence (paras. 5.36–5.41).10 It stated that ‘although [these] recommendations may reduce the level of protection currently provided by the TPA (and equivalent legislation in the States and Territories) they do so consistently with the objectives underlying our Terms of Reference’ (para. 5.44) and not ‘unacceptably’ (para. 5.47).11 If these recommendations are implemented, difficult problems of legal interpretation will probably arise as to whether a product liability claim is for negligence (in which case the restrictions will apply, as defendants will want) or only for strict liability, assuming that due care had been taken (in which case they will not apply, as plaintiffs will want). Nonetheless, it seems likely that the very few cases reported under Parts V Division 2A and VA will be further limited, caught by the new

36

Still-birth and re-birth of product liability

regime proposed in the Review. Even if they do not fall within its scope, the Review consolidates tendencies to rein in tort claims generally, encouraging judges to be more cautious in upholding plaintiffs’ claims regarding defective products. For example, it seems likely that a court will analogize the new restrictive approach regarding ‘the state of the art’ in medical circles, to reject claims of ‘defective’ design or warnings in certain goods (such as pharmaceuticals) or to extend the scope of the ‘development risks defence’ for manufacturers, compared in Chapter 3. At the least, the Review’s recommendations make it almost inconceivable that legislators will revive ideas like increasing the period of repose in Part VA from ten to 20 years. On the one hand, therefore, the Australian experience bears interesting parallels with the US, such as the historical significance of manufacturing defects in prompting developments in case law (and even statute law), and recent perceptions of a ‘tort crisis’ and resultant counter-measures. On the other, those counter-measures are much stronger, reflecting the greater centralization of political power in the English constitutional tradition, even in Australia’s federal system. Australian law also differs from that in the US in not developing contract law principles – instead relying on tort law – to develop PL rules. In common with the EU, moreover, the enactment of Part VA in 1992 was a rather belated and intensely political compromise. The Japanese experience is a similarly interesting amalgam of influences. Like England and the UK, design or warning defects with Thalidomide and other medicines were a major impetus for what can be termed the ‘birth’ of PL from the mid-1960s, as explained further below and indicated by the following breakdown of 200 reported judgments resulting from claims for defective products over 1945–94 (see Table 2.1). As in the US, however, more straightforward manufacturing defects also resulted in reported judgments, notably involving foodstuffs (Masuda 2001: 30). Yet, as explained further below, many of these were ‘mass injury’ cases, leading to their own dynamics and judicial innovations favouring plaintiffs (Kitagawa 1989, para. 4.05[4]). Japanese law was also untrammelled by the nineteenth-century doctrine of privity in Anglo-American jurisprudence, which had prevented tort claims circumventing contractual chains. Accordingly there was hardly any attempt to develop contract law principles, along the lines of ‘aclassical warranties’ developed by many US courts, to advance PL law. Of the 200 judgments from Japanese courts until 1994 (Kato 1994b: 114–117), 132 were ‘typical PL cases’ involving a claim by end-users (mostly consumers) against manufacturers (rather then retailers, or the government for lax supervision), and a very large majority of these (marked in Table 2.2 with an asterisk) involved tort law claims, particularly a claim of negligently caused harm under Article 709 of the Civil Code (see Table 2.2). Overall, this represents an extensive body of high-quality case law, extremely useful for further elaboration through expansive academic commentary (e.g. Kato et al. 1994). It may seem miniscule compared to the numbers of PL cases

2 0.13

1 1

1945–59

1 0.2

1

1960–64

Source: Emphasis added, adapted from Kato 1994b: 66.

Automobiles Machinery Medicine Food Household Goods Gas Appliances etc Real property Agricultural goods Other Trans-border Total Average per annum

Products

8 1.6

1 4 1

1

1

1965–69

7 5 3 2 2 34 6.8

2

9 6

1970–74

Table 2.1 200 reported judgments resulting from defective products, 1945–94 1975–79 13 7 10 6 3 5 5 1 1 2 53 10.6 11 5 2 39 7.8

2 2 52 10.4

2 6 5 7 1

1985–89

3 9 7 7 4 7 11

1980–84

3 2 1 1 11 2.2

1 1 2

1990–94

28 (14%) 28 (14%) 25 (12.5%) 24 (12%) 11 (5.5%) 23 (11.5%) 37 (18.5%) 6 (3%) 9 (4.5%) 9 (4.5%) 200 4

Total

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Still-birth and re-birth of product liability

Table 2.2 Legal bases invoked in ‘Typical PL cases’, 1945–94 Pleaded cause of action Director’s Liability to Third Parties (Commercial Code Art. 266–3) Non-Performance of Obligation (CC Art. 415) Seller’s Liability for Latent Defects (CC Art. 570) Contractor’s Liability for Latent Defects (CC Art. 634) Liability for Non-Performance, or Latent Defect Liability, plus Obligor’s Subrogation Right ‘Quality Assurance Liability’ (hinshitsu hosho sekinin) * Juristic Person’s Legal Capacity for Torts (CC Art. 44, Commercial Code Art. 261, etc.) * ‘Strict Liability’ * Negligence (CC Art. 709) * Fire Accident Liability (Fire Accident Law) * Employee Liability (CC Art. 715, SCL Art. l) * Orderer’s Liability (CC Art. 716) * Liability for Structures on Land (CC Art. 717, SCL Art. 2) * Joint tort liability (CC 719) * Operator Liability (ADCIL Art. 3)

Totals

Percentage of 132 ‘Typical PL cases’

1

1%

17 5 2 1

13% 4% 2% 1%

5 7

4% 5%

9 106 2 31 4 17

7% 80% 2% 23% 3% 13%

3 2

2% 2%

Source: Adapted from Kato et al. 1994: 122.12 * Tort based liability.

decided in US courts, but those are generated primarily by circumstances unique to that country (like punitive damages awarded by juries even for negligence, lawyers able to work for pure contingency fees based on damages awarded, no collateral source rule, and limited social welfare: Pollock 1999). The volume of Japanese case law is much more comparable to that which accreted in AngloAustralian law, and continental European jurisdictions which Japan drew on from the nineteenth century for both its Codes and its civil justice system (see generally Kitagawa 1970). However, Table 2.1 shows that much of the growth in PL case law came from the early- to mid-1970s. Until 1969, there had been only 11 reported judgments, providing much less for lawyers to work from at that stage. In addition, many early cases involved manufacturing defects, comparatively simple to deal with even under a negligence-based tort regime, and generally ‘one-off ’ lapses – even if consequences could be disastrous, as shown by some early cases discussed below. Legal issues related to design and manufacturing defects were also raised from the late 1960s; but there was little to go on using the still sparse case law in Japan, and even US law at that time, as these defects were not the main concern of the courts and the Restatement Second. This situation

Still-birth and re-birth of product liability

39

contributed to what this chapter calls the ‘still-birth’ of PL in Japan by the mid-1970s. However, the rest of the chapter also explains this phenomenon by a range of non-legal considerations: problems of collective action in litigating cases (compared for example even to environmental tragedies like mercury poisoning in Minamata), ‘legislative formalism’ (legislative measures to promote product safety, although less extensive than those taken against pollution), considerable ‘industry informalism’ and other responses to address safety concerns, and some ‘bureaucratic informalism’ (although less direct than in environmental dispute resolution: cf. generally Upham 1987). This chapter then focuses on changes in Japan’s political economy, as well as the attraction of the EC Directive of 1985 combined with the ability of legal experts to draw on the earlier period of PL law development, to explain the ‘re-birth’ of PL in Japan from the late 1980s, resulting in enactment of the PL Law in 1994. Initial drafts were proposed which were even more pro-consumer than in Australia, and from a greater variety of sources, but were strongly opposed by pro-business interests. As also in the EU, the end result was very much a compromise, reverting to the Directive as a model. If anything, the PL Law was generally more pro-consumer than the Directive as implemented in member states over much of the 1990s, as Chapter 3 will show. However, although Japan’s consumer law more generally has come of age in the late 1990s and its entire civil justice system is poised for whole-scale reforms (Miyazawa 2001) which should also help consumers in claiming compensation for defective products, as of 2003 the reform initiatives were not as far-reaching as in the EU, especially in relation to PL Law (as opposed to product safety regulation, outlined in Chapter 5). On the other hand, Japan remains on a trajectory much closer to that of the EU than the US, and even now Australia, where there are strong tendencies to restrict consumer access to the tort law system.

The still-birth of PL in Japan in the early 1970s As illustrated by Table 2.1, PL law gained prominence in Japan in the late 1960s. Until then, there had been very few reported cases claiming civil liability for defective products since World War II. Although almost all were decided in favour of the plaintiffs, they did not attract much commentary from lawyers or scholars.13 Over this period, however, there had been a number of other, often fatal accidents, which were well publicised and had sometimes led to litigation, both civil and criminal. These included four PL mass injury cases, which became widely discussed ‘social problems’ (shakai mondai) especially in the early 1970s. These piggy-backed on the even more controversial Big Four environmental pollution cases. Also significant was the uncovering of potentially widespread defects in automobiles. This period saw too the beginnings of intensive legal scholarship, which then carried through to the late 1980s. Legal reform proposals died away, by contrast; but also left much to rebuild from quite rapidly over the 1990s.

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Still-birth and re-birth of product liability

The ‘Big Four’ PL mass injury cases The first of what can be dubbed the Japan’s ‘Big Four’ PL cases14 involved powdered milk produced by Morinaga Milk Co., one of Japan’s largest food processing companies. During the Allied Occupation following World War II, powdered milk was distributed by the United Nations and surplus supplies exported from the US, and dairy products companies and health professionals fostered a boom in baby products. However, sales of milk products declined from 1954 to 1955, putting pressure on the companies to rationalize operations. On March 1955, thousands of school children were poisoned by powdered milk produced by Snow Brand, another industry leader; but the root cause was never established (Shoji and Sugai 1992: 77–85). From June to August 1955, over 12,000 people (mostly new-born babies) were injured after consuming contaminated powdered milk. As of 1988, 693 had died. Arsenic from industry-grade sodium phosphate was traced to Morinaga’s products in August 1955, and manufacturing was suspended at its Tokushima factory. In September, the factory general manager and production manager were prosecuted. An association was quickly formed to negotiate compensation with Morinaga. It claimed medical expenses; compensation for any hereditary disease; and 0.3, 0.7 and 2.5 million yen for each slightly injured, heavily injured and deceased victim, respectively. Negotiations made little progress, though, and a ‘Five-Person Committee’ was formed to write an advisory opinion on compensation issues. Although members included two lawyers, a Senshu University lecturer, a reporter, and a doctor, they were selected by the Ministry of Health and Welfare (MHW); and the Committee was funded by industry sources, including Morinaga. It published an opinion stating at the outset that the opinion did not purport to deal with legal responsibility despite probable expectations on the part of both victims and the general public, because of the pending criminal prosecutions. Instead, the Committee recommended that out of moral responsibility Morinaga should ‘donate’ (zotei) 10,000 yen to each patient and 0.25 million yen to each deceased. By avoiding pronouncements as to civil liability, it offered little or no assistance to victims seeking to negotiate compensation with Morinaga based on the law. Of course, bringing civil suits was still possible. However, when amounts similar to those recommended were eventually accepted by most victims, Morinaga was careful to include a clause whereby they agreed to waive rights to claim. Although such clauses are potentially contrary to public policy under Article 90 of the Civil Code (see generally Nottage 1996: 275–80), at that time authoritative commentators like Professor Ichiro Kato (1956) quickly noted that they made it ‘difficult’ for victims to successfully claim more than the given amount. In April 1956, 54 patients did bring suit in the Okayama District Court, each claiming between 0.15 and 0.5 million yen for pain and suffering (isharyo). The Morinaga managers were held not guilty by the Tokushima District Court in October 1963, however, and the civil suit was withdrawn early the next year. Professor Masanobu Kato (1994: 69–71) argues that this first stage in addressing the Morinaga mass injury dispute reveals not only a lack of appreciation

Still-birth and re-birth of product liability

41

of a distinct concept of ‘product liability’, but also the difficulties in pursuing civil liability under general negligence provisions. He suggests also that these difficulties were related to the mood of those times, in effect allowing foreclosure of the pursuit of civil liability even for a highly publicised ‘social problem’, in a way difficult to imagine given the tone of public opinion in Japan in the early 1990s, and even the early 1970s. Indeed, this was not the end of the Morinaga case. In 1966, the Takamatsu High Court sent the criminal case back to the Tokushima District Court for retrial, and an appeal against this decision was rejected by the Supreme Court in February 1969. In October 1969, moreover, hereditary disease resulting from the arsenic contaminated milk products was identified by a leading Osaka University professor of medicine. The Ministry of Health and Welfare (MHW) quite quickly ordered a re-examination of the issue. Thus, the stage was set for further negotiations and claims. In fact, in April 1973 some victims brought suit again, in the Osaka District Court, against the government as well as Morinaga. Seven months later, Morinaga’s production manager was found guilty in the Tokushima District Court. The civil case then was quickly settled, in December 1973. The ‘Hikari Foundation’ funded by Morinaga began administering rehabilitation and other relief work for victims in April 1973.15 A second mass injury case, which developed over a similar timeframe, had its origins in the MHW’s approval in late 1957 of the manufacturing and sales in Japan of various products containing Thalidomide. It was marketed as a remedy against sleeplessness and colds, without any warnings of possible side effects on pregnant women. Sales by a West German manufacturer began in late 1957, followed by a Japanese manufacturer in January 1958. From 1960, babies started to be born with severe disabilities.16 In late 1961, the year Japan inaugurated a national health insurance system leading to much larger scale consumption of all sorts of drugs, the German manufacturer recalled its products. The Japanese manufacturer presented a report to the Ministry, but only stopped sales in May 1962 and recalled its products that September (Goto 1991: 107–12). There was also no admission that the drugs were the cause of the deformities. Victims appealed to regional Legal Affairs Bureaus, formed a victims’ association in March 1963, and brought a first civil suit in the Nagoya District Court in June. Another was brought in Kyoto in December 1964. By November 1965, when another suit was brought in what became the key Tokyo District Court, civil suits had been brought in eight different district courts against the manufacturer and the Japanese government. Importantly, in a country known for comparatively limited availability of legal aid, at least until the late 1990s (but cf. now Oyori 2000), many district courts quickly granted litigation assistance. Prosecutors had decided not to bring criminal charges, but in July 1969 a prosecution review board in Kyoto decided this was unreasonable and requested reconsideration. Prosecutors reaffirmed their initial decision in August 1970. Nonetheless, these developments, along with important first-instance judgments finding in favour of plaintiffs in the major pollution cases in the early 1970s (Gresser et al. 1981: 55–132, 140) added to lateral pressure on defendants in the

42

Still-birth and re-birth of product liability

Thalodomide civil suits. In November 1971, evidence-taking in oral hearings (koto benron) finally got underway. In October 1974, all parties reached a settlement whereby victims were awarded between 9 and 40 million yen each, depending on severity of injuries, including 3 million yen for pain and suffering for each parent. Two-thirds of settlement costs were borne by the manufacturers, and one-third by the government, which admitted responsibility for Thalodomide having caused the deformities. Two months later, the Ishizue (‘Cornerstone’) Foundation was established to promote and monitor medical treatment, education and employment for the victims.17 A third incident, Japan’s largest drug-related accident, took somewhat longer to get to court and reach a conclusion. From 1953, the MHW had approved the use of chinoform in manufacturing a variety of drugs, used notably to treat diarrhoea. In 1958, a professor of medicine highlighted a severe nervous system disorder, Subacute Myelo-Optico-Neuropathy (SMON). Cases started to increase in 1962 and 1963, and the phenomenon was discussed by medical experts at a conference in 1964. In 1969 and 1970, more researchers began making public their findings; and in September 1970 the MHW ordered the suspension of chinoform products. The increasing incidence of SMON fell off dramatically. In May 1971 a group of victims sued the manufacturers and/or distributors, and the government, in the Tokyo District Court. Eventually, more than 5,000 plaintiffs brought suit before dozens of district courts throughout the country, seeking massive damages. In January 1974, the Supreme Court initiated meetings of trial court judges involved in these cases. This practice was challenged in May 1977 by some of the lawyers in the Tokyo District Court litigation, after contentious court-mediated settlement proposals had started to emerge. By the late 1970s, some of the parties in the Tokyo District Court had settled, and nine other district courts had found in favour of the plaintiffs. Importantly, proof of causation based on epidemiological or other statistical data was accepted in many courts. Although the defendants appealed from first-instance judgments against them, a global settlement favourable to the plaintiffs was concluded in September 1979.18 The fourth mass injury PL case, the Kanemi oil case, vies now with the Snow Brand incident in 2000 for the sad distinction of being the biggest food poisoning case in Japan’s history. In 1968 more than 14,000 people, mostly in western Japan, fell seriously ill from what turned out to be poisoning from polychlorinated biphenal (PCBs). By the end of 1988, the number of victims recognized by the government amounted to 1,860. Of these, 142 had died, whereas there have been few, if any, fatalities attributed to Snow Brand in 2000. Nowadays, those affected by the poisoning by PCBs more than 30 years ago still fear for effects passed on to next generations.19 From June 1968, the first of many patients visited Kyushu University Medical Faculty for treatment. On 10 October 1968, the Asahi Shimbun newspaper had reported the outbreak of a ‘strange disease’ (kibyo) centred in Fukuoka, with people afflicted with acne-like boils, extreme fatigue, and blackened fingernails. It noted that the probably source was a cooking oil refined from rice bran, and

Still-birth and re-birth of product liability

43

the next day disclosed the suspected manufacturer: the Kanemi Warehouse Co., then a smallish manufacturing company capitalized at 50 million yen, with about 400 employees, with its head office in nearby Kitakyushu (Kokura) city. Prefectural health authorities, with the assistance of scientists from Kyushu University’s Agricultural and Engineering Faculties, conducted that month an on-site inspection of Kanemi’s Kitakyushu factory. They examined vats through which PCBs, produced by a large chemical company called Kanegafuchi,20 were heated and piped to deodorize the cooking oil. In the stainless steel piping in the sixth vat, they reported corrosion and pinhole openings (at most 2 by 7 mm). They decided that the PCBs had leaked through these into the oil, and reported this to the local police. The police and local prosecutors began investigations into professional negligence, laying charges against Kanemi’s president and factory manager in March 1970 after obtaining a formal opinion from the Kyushu University scientists. The latter concluded again that there was a high possibility that PCBs had leaked through pinhole openings. They decided that a chemical produced by heated PCBs had combined with moisture to create a substance which had corroded the interior of the piping. A tar-like substance accumulated in the pinholes, eventually allowing PCBs to leak into the oil, with pinholes openings later closing up when piping cooled down. This later became known as the ‘pinhole theory’. Amazingly, when the quantity of PCBs used in the heating process declined abruptly over January and February 1968, Kanemi blithely added about another 280 kilograms.21 Even more ominously, in February and March over 2 million chickens had fallen sick and 400,000 had died, also in western Japan. By midMarch investigations by the Ministry of Agriculture and Forestry (MAF) had traced the cause to an additive in the birds’ feed, ‘dark oil’ produced as a byproduct by Kanemi. By the end of April, all feed had been recalled and harm to the chickens ceased. In May, it was confirmed within MAF that Kanemi’s dark oil was responsible. Yet MAF failed to determine the specific causative agent therein, nor to investigate the process of its manufacture. Further, in line with the strict demarcation of spheres of responsibility which has characterized Japanese bureaucracy and which resurfaced decades later in debates about enacting the PL Law (Kodama 1995), MAF did not even notify MHW that a poisonous product had been manufactured in a factory also manufacturing cooking oil for human consumption. Not surprisingly, Kanemi refused to talk publicly about the dark oil. It made no effort to test the cooking oil for toxicity, and just kept on selling it. Indeed, it later surfaced that even after Kanemi became aware that PCBs had got into the cooking oil, this had just been collected into three large drums, reheated to deodorize it, then mixed with uncontaminated oil and sold as usual.22 The Asahi Shimbun, known as Japan’s most ‘progressive’ nation-wide newspaper,23 played a crucial role in tracing the cooking oil contamination to Kanemi and turning this into a major public issue, eventually exposing these disastrous lapses by the manufacturer and the government. The media had reported the chicken poisoning in a routine manner, without investigating

44

Still-birth and re-birth of product liability

further. In early autumn 1968, however, an Asahi Shimbun reporter’s wife happened to hear of the illness and its possible link to Kanemi oil from a student of the mother of a victim. The latter, a low-ranking employee of Kyushu Electric Co. (still one of Kyushu’s largest), had worked out the link from talking with other afflicted families having the same employer and living in the same apartment blocks. The newspaper’s revelations in October turned the disease into a public issue. Hitherto victims had been isolated from each other, and had considered it a private problem, often an embarrassment. Now they perceived themselves as victims of a broadly recognised affliction, with an identifiable cause. They began negotiating directly with Kanemi executives, forming associations of victims, organizing and filing suits, and appealing for support from the public and mainly leftist political groups. The first association, centred on the Kyushu Electric employees, formed in Fukuoka on 14 October. When direct negotiations proved fruitless, in February 1969 44 plaintiffs (‘Fukuoka group 1’) brought suit in the Fukuoka District Court, against Kanemi, its legal representatives, and Kanegafuchi. Other victims’ associations in Fukuoka Prefecture, especially in Kitakyushu (Kokura), were formed early on too. Litigation brought in November 1970 eventually involved 729 plaintiffs (‘Kokura group 1’). Initially this claimed against the central government, Kitakyushu municipality, Kanemi, and its representatives. A year later, Kanegafuchi was added as defendant. The main attorney involved, concerned that Kanemi alone might lack the resources to pay out compensation claimed or awarded, had happened upon a catalogue in which Kanegafuchi had stated that PCBs ‘had some toxicity, but don’t cause problems in practice’ and ‘were not corrosive of Kanechlor’ (used by Kanemi for its piping). In 1976 a further 344 plaintiffs (‘Kokura group 3’) brought a third large civil suit, also against five defendants. In October 1977, the Fukuoka District Court awarded 680 million yen to the 44 plaintiffs in Fukuoka group 1 (an average of about 15.5 million yen each), holding against Kanemi, its representatives, and Kanegafuchi (‘Kanemi case 1’). It adopted the pinhole theory as to how the PCBs had got into the oil and, noticeably, referred to the theory reversing the burden of proof with respect to negligence.24 In early March 1978, the Court’s Kokura branch awarded 6.06 billion yen to the 729 plaintiffs in Kokura group 1 (8.3 million yen each). It found against Kanemi and Kanegafuchi but not the other three defendants (‘Kanemi case 2’). The Court required a very high standard of care in foodstuff manufacture, of great assistance to plaintiffs in subsequent foodstuff litigation, while applying conventional doctrine recognizing broad scope of discretion for government activities. Both judgments found Kanegafuchi liable for inadequate warnings as to PCB toxicity and corrosive potential. The Kokura group 1 plaintiffs appealed, hoping to raise their damages to the levels of the Fukuoka plaintiffs, and to reverse the finding absolving the government from liability. Kanegafuchi, but not Kanemi, appealed both cases. Kanemi seemingly wanted to get Kanegafuchi to assume most of the liability, but Kanegafuchi was reported to have retorted:

Still-birth and re-birth of product liability

45

we’re careful to tell manufacturers over and over again to be careful using Kanechlor, this is clearly Kanemi’s mistake; it’s like the victim in a traffic accident suing the car manufacturer without claiming responsibility of the driver. (Fujita and Kuze 1994: 653) However, shortly after the judgment in the second case was rendered, in late March 1978, the same Court found the Kanemi factory manager guilty of professional negligence (but the company president innocent), also adopting the pinhole theory. In July, assisted by MHW officials, both Kanegafuchi and Kanemi reached a settlement with the 700-odd recognized victims not yet involved in litigation, represented by a nationwide victims’ support group formed in 1975. In addition to the medical expenses it had assumed much earlier on for most of these and other victims, Kanemi agreed to pay each 0.22 million yen in compensation. Kanegafuchi agreed to pay 1.3 million yen to victims officially recognized now and in the future, plus to ‘compensate in a balanced fashion based on the contents of the final appeals in pending litigation’ (Fujita and Kuze 1994: 654). Reich (1982) interprets this as meaning that if Kanegafuchi lost its appeals, payments would be brought up to the same levels as plaintiffs in those cases; but that if the company won, no adjustment would occur. In March 1982, moreover, the Kokura branch awarded a further 2.5 billion yen to the 344 plaintiffs in the Kokura group 3 (7.23 million yen each), against Kanemi, its president, and Kanegafuchi, but not the government or Kitakyushu (‘Kanemi case 3’). In the course of this trial, however, Kanegafuchi presented a new theory of how PCBs had got into the cooking oil. In all proceedings until then it had argued against the pinhole theory, to no avail, that this was caused by leaking through a flange bolt, or by a Kanemi employee deliberately or negligently mixing PCBs with the oil. But in July 1979 the sister of Kanemi’s president (shacho) and daughter of its chairman (kaicho), a scientist (Y. Kato 1989), submitted a manuscript to an oil industry journal. Published in October, it raised various doubts she had developed from private conversations, her analysis of the facts, and some further investigations she had made. In September 1980, in a Rotary-sponsored lecture, she proposed the ‘construction error theory’. Meanwhile, some of Kanegafuchi’s employees and lawyers had also come in contact with a former Kanemi employee. Also around July 1979, they had interviewed the manager in charge of the deodorization process at the factory, learning in a fragmented fashion of facts rather contrary to the pinhole thesis, which the lawyers brought out more specifically from him in court from mid1980. This ‘construction error theory’ claimed that the PCBs had leaked into the Kanemi cooking oil after an employee had inadvertently punctured the PCB piping in a first vat when welding part of its thermometer unit in January 1968. In the Kanemi case 3 judgment, however, the court did not rule specifically on how the PCBs had got into the oil. Yet it still held Kanegafuchi liable, for failure to warn of PCB toxicity, together with overall negligence in supplying PCBs to the food industry where physical injuries were foreseeable.

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Still-birth and re-birth of product liability

In the appeals from Kanemi cases 1 and 2, the High Court adopted the pinhole theory over Kanegafuchi’s newly asserted construction error theory, although this was probably influenced by an appeal court’s general reluctance to overturn a trial court’s finding of fact. In March 1984, the High Court upheld the claim of Fukuoka group 1 against Kanegafuchi, although damages awarded were reduced to 390 million yen (‘Kanemi case 4’). The claim of Kokura group 1 was also upheld, on the same day (‘Kanemi case 5’), although damages again were somewhat reduced, to 4.7 billion yen against Kanemi’s president and Kanegafuchi combined. Further, the High Court overturned the District Court’s finding that the central government was not liable (while upholding the finding that the municipality was not), awarding 1.4 billion yen. The government appealed the latter decision to the Supreme Court, while Kanegafuchi appealed both. Victims maintained this winning streak in 1981, with the 71 Kokura group 3 plaintiffs winning 0.37 billion yen (5.23 million yen each) against Kanemi, its representative, and Kanegafuchi; plus 0.1 billion yen against the central government (‘Kanemi case 6’). The judgment found inadequate warnings as well as instructions as to how to detect and dispose of PCBs, on the part of Kanegafuchi. However, it clearly adopted the construction error theory. No doubt sensing the potential weakness in these conclusions, Kanegafuchi promptly appealed. In 1986, the High Court found it not liable, after upholding the construction error theory, and also reversed the finding holding the government liable (‘Kanemi case 7’). The Kokura group 3 plaintiffs appealed against both rulings. The Supreme Court thus faced three appeals (Kanemi cases 4, 5, 7), with the most recent judgment in 1986 going against the victims due to the recognition of some new evidence. In 1985 and 1986, however, two more groups of Kokura victims and another group of Fukuoka victims had brought suits, leaving the complex situation as depicted in Table 2.3. Oral proceedings commenced in October 1986 in the Supreme Court, but by March 1987 it had brokered a global settlement between Kanegafuchi and the victims. This was not only for the parties in the appeals before it, but also (unusually) the three groups of victims who had brought first-instance suits in 1985. The victims reportedly admitted that Kanegafuchi bore no legal responsibility and agreed to bring no further claims, in exchange for about 3 million yen each as consolation money (mimaikin) together with 0.3 billion yen towards their legal costs. After offsetting previous payments, this involved Kanegafuchi paying out an additional 2.1 billion yen.25 Victims also agreed that they were obliged to return some 4.78 billion yen paid by Kanegafuchi in compulsory execution of judgments (kyosei shiko) as well as execution of provisional dispositions (karishobun shiko). However, the latter agreed not to take enforcement proceedings to get these funds back, effectively leaving on the victims only a moral obligation to pay. Shortly afterwards, all victims dropped their cases against the government. However, the latter had paid various victims a total of 2.7 billion yen on a provisional basis following the lower-court judgments holding it liable, making them legally obliged to repay. The government requested repayments, but for years this was to no avail. With the ten-year prescription period looming,

5/10/77 [Kanemi Case 1] ¥0.68b against all defendants

Kanegafuchi

16/3/84 [Case 4] Lost, ¥0.39b

District Court Judgment

Appellant

High Court Judgment Result

Plaintiffs and Kanegafuchi 16/3/84 [Case 5] Lost, ¥4.74b

¥6.08b against Kanemi, Kanegafuchi

16/11/70 757 ¥20.026b Kanemi, its president, Kanegafuchi, central gov’t, Kitakyushu city 10/3/78 [Case 2]

Kokura 1

Source: Adapted from Y. Kato 1989: Appendix.

Result

1/2/69 44 ¥0.877b Kanemi, its president, Kanegafuchi

Suit brought Plaintiffs Claim Defendants

Fukuoka Group 1

Plaintiffs and Kanegafuchi 15/5/86 [Case 7]

¥2.489b against Kanemi, its president, Kanegafuchi

8/10/76 363 ¥8.38b Kanemi, its president, Kanegafuchi, central gov’t, Kitakyushu city 29/3/82 [Case 3]

Kokura 2

¥0.3717b against Kanemi, its president, Kanegafuchi, central gov’t

12/10/81 73 ¥1.765b Kanemi, its president, Kanegafuchi, central gov’t, Kitakyushu city 13/2/85 [Case 6]

Kokura 3

Table 2.3 Summary of Kanemi litigation before settlement in Supreme Court

29/7/85 17 ¥0.4543b Kanemi, its president, central gov’t, Kanegafuchi

Kokura 4 29/11/85 75 ¥1.995b Kanemi, its president, central gov’t, Kanegafuchi

Kokura 5 6/1/86 577 ¥11.7656b Kanemi, its president, Kanegafuchi

¥5.13b

1984–86

¥9.6207b

1977–85

1969–86 1906 ¥45.2629b

Fukuoka Group 2 Overall

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Still-birth and re-birth of product liability

however, the government began initiating formal civil conciliation proceedings (cf. Iwai 1991) in 21 courts in 18 prefectures, centred on the Fukuoka District Court and its Kokura branch. By October 1996, the latter had brokered a settlement whereby 487 people would pay back the compensation they had received. However, accumulated interest (which would added an additional 50% to each sum) would not be charged, and six people in financial difficulties would be allowed five- or ten-year grace periods while a seventh could repay in instalments over five years.26 On 21 March 1997, another ten agreed to a proposal allowing choice among repayment within five years (with no interest charged), deferring repayment for ten years, or paying less than 10,000 yen per month subject to a further repayment planned to be worked out later depending on the individual’s financial situation. By 17 November, a total of 803 had agreed to settlement plans. Generally these provided for repayment in one instalment within 5 years. Or, for those in financial difficulties, payment would be deferred for 5 or 10 years, when the matter would be discussed again (saikyogi suru) – with the Ministry of Justice (MOJ) stating that in the case of ten-year deferment, it would discuss the matter with the Ministry of Finance with a view to exempting repayment altogether. With six cases outstanding in the Fukuoka District Court, 19 in its Kokura branch, and one in the jurisdiction of the nearby Nagasaki District Court, the MOJ had hoped to resolve the matter by the end of 1998. The lawyer representing the Unified Plaintiffs’ Association was still arguing that ‘treatment for this disease is still not assured, and the repayment issue is not over as there are people extending repayment time; I want to maintain my support, adopting the position of the patients’. But as put poignantly by that Association’s 73-year-old co-leader: ‘I don’t have the energy to fight on any more’.27 Unpacking myths about Japanese law and society In some respects, the Kanemi case and the other big PL cases may seem to confirm views about the uniqueness of dispute resolution processes in Japan, or at least their comparatively more harmonious nature, as well as other supposedly defining features of Japanese culture and society, such as the involvement of the government in high-profile disputes. Yet, as Reich (1982: 110–18) showed astutely and very early on, precisely in the Kanemi case, on closer comparative analysis many appear ‘common social myths’ about Japan which are of limited explanatory value. First, it cannot be said that victims sought to hide from society due to Japan’s alleged social homogeneity (cf. anyway e.g. Sugimoto 2003, Weiner 1997). Some were deeply embarrassed and did try to hide their symptoms. Yet even some of these also searched for the cause of their injury and suffering. Others actively sought this out, to reverse the tainting due to the strange disease. This urge to find explanations arguably represents a seemingly universal psychological response. Also common, even in the United States, are efforts to hide one’s disease or physical deterioration (see also Reich 1991: 168–74).

Still-birth and re-birth of product liability

49

Secondly, the Kanemi case reveals ambiguous evidence about the muchtouted group consciousness of Japanese society. Existing social ties and especially organizational expertise, related to higher socio-economic status and urbanization, were more important in the quick formation of the first Fukuoka group, for instance. Thirdly, supposed aversion to litigation, due to preference for mediation or negotiation over head-on conflict, is gainsaid not only by the many civil suits and the variable timing of their filing. In February 1969, it was the Fukuoka city victims who filed criminal charges against Kanemi’s president. Contemporaneously, they filed a complaint with the MOJ’s Legal Affairs Bureau in Fukuoka against the government’s researchers, charging the doctors with irresponsible treatment of victims and violation of victims’ rights. Part of the backdrop to this, of course, was the possible exposure to litigation of the government, unable to shelter behind doctrines of state immunity. Thus, government efforts – both negative and positive – to resolve such disputes hold elements of rational strategy, rather than some basic tie to social homogeneity, group consciousness, or orientation towards consensus (discussed below). Further, as the case of the Fukuoka group 1 plaintiffs showed, strong group consciousness may be associated with readiness to litigate. This renders problematic any simple association between group consciousness and aversion to litigation as supposed complementary aspects of some monolithic ‘traditional’ Japanese culture. Again, organizational expertise helps explain this better.28 Two other factors also propelled the Fukuoka plaintiffs towards litigation: The subculture of Japan’s antipollution movement also assisted the move to litigation in the [Kanemi] Yusho case, as in subsequent environmental disputes. Conflict over Minamata disease [from around 1958], the infamous case of mercury poisoning in southwestern Kyushu, set the symbolic stage on which Kanemi Yusho played. At least some Yusho victims, living on the same island of Kyushu, learned models of organisation and litigation from the precedent of Minamata disease. (Reich 1982: 113) In addition, the lawyer who took on the case was an old friend of one victim: ‘the social network of the Fukuoka city victims thus included a lawyer capable and willing to handle the complex court case’. On the one hand, this reveals the importance of process and contingency in socio-legal interaction (cf. generally Dezalay and Garth 2001). On the other hand, it points to the broader problem of comparatively few practising attorneys readily available to represent Japanese parties in litigation, part of the ‘institutional barriers’ thesis developed by Haley (1978) in response to culturalist explanation for low levels of litigation in Japan. Less contingently, but equally as importantly in overcoming a major institutional barrier, activist lawyers (many affiliated with the Japanese Communist Party) also were available for – indeed they themselves often promoted – initiation of litigation involving Kokura group 1.

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Still-birth and re-birth of product liability

We can add here another barrier identified by Haley, chronically evident in the protracted Kanemi dispute: the delays, in particular, in getting obtaining judgments from the courts. Yet the plaintiffs persevered for two, sometimes three, decades. This too, however, arguably has a rational foundation. On the one hand, those very delays can be exploited to advance broader social movements and attempts to change policy (Feldman 2000: 111–12, 2001: 703). On the other hand, individual plaintiffs may realize that they are likely to obtain compensation despite delays and other institutional barriers, if the substantive outcome is or becomes reasonably predictable. As Reich (1982: 114) again realized early on, for instance, the company president’s prompt round of apologies to victims combined with the initiation of settlement negotiations, following a fatal Japan Air Lines (JAL) DC-8 crash in Tokyo due to errors by a pilot with a history of psychosomatic disorders, were related to causation and the identities of victims being clear: ‘the victims did not need to go to court to force the company to accept moral and financial responsibility for the tragedy’. Hirai (1980) had made a similar point about the way comparative certainty of expected result in tort litigation encouraged settlement out of court. Ramseyer (1988) reformulated this elegantly, combining it with Haley’s point about costs and delays associated with pursuing litigation in court, to explain how claimants could still make credible claims leading to settlement ‘in the shadow of the law’ provided this shadow was distinct enough. Ramseyer and Nakazoto (1989) then found compelling evidence that this occurred in traffic accident disputes. This factor seems amenable to adaptation to help explain developments in the Big Four PL cases. In the Kanemi incident, for instance, identification of the PCBs as the causal agent and the two companies involved formed the prerequisite to any action at all. Litigation was prompted by remaining uncertainties, however. One set of issues involved who to classify as a victim and what treatment would be involved, given the novelty of this form of poisoning, especially since the government’s research effort was (at least in part) already or potentially compromised by the latent threat of it being sued. Another uncertainty involved the still quite novel notion that Kanegafuchi, the PCB supplier, could be liable for the now well-established conceptual category of warning defects. These issues were mostly clarified when the first two judgments were rendered in the late 1970s, providing the basis for settlement with other victims. Interestingly, more certainty was provided by the almost contemporaneous successful criminal prosecution.29 Likewise, events started to unfold in the Morinaga case after contamination was traced to its products and a factory closed. The criminal proceedings, however, produced more varied results. When the managers first were found innocent, this perhaps making the plaintiff ’s civil case seem less likely to prevail, it was soon withdrawn. When the criminal case was sent back on appeal for a rehearing and the further issue of hereditary disease was raised, however, renewed uncertainty encouraged further litigation. In the Thalidomide and SMON cases, we also find minimal prerequisites to action in the form of suspension of sales; but enough uncertainties, for example as to which manufacturers’ products had

Still-birth and re-birth of product liability

51

been ingested, and the extent of potential harm, to prompt massive litigation. Settlements were promoted as some of these issues became clearer during court proceedings, despite the lack of extensive discovery procedures but assisted (ironically) by their drawn out nature. Nonetheless, this sketch does not paint the full picture. As well as legal principles and factual evidence revealed in judgments or disclosed in court proceedings, ‘folk’ perceptions of likely outcome may be important. These will probably depend on general shifts in social constructions of the significance of court judgments, influenced for instance by the media (McCann et al. 1998; Garber and Bower 1999). Those very social constructions may force manufacturers to revise upwards their estimates of the ‘costs’ of defending a case in court, namely costs to their reputation, and thus provide a further incentive to settle. But the possibility also emerges that these social constructions may develop normative force, and then come to be seen as more than just (economic) costs or constraints affecting a social actor’s environment. Instead, or as well, they may also begin to shape that actor’s internal preferences or predispositions (Etzioni 2000). Indeed, as Reich points out in the JAL crash dispute resolution and depicts vividly in his description of how the Kanemi case developed, another important factor is forcing usually individuals (even within organizations) to take moral responsibility, often in the form of public apology. Stressing the importance of apology is the fourth ‘common social myth’ about Japan which he examines; but here Reich (1982: 115–16) finds it holds more explanatory value. His comparative research found that American and Italian sufferers of contamination did not demand direct and public negotiations with and apologies from corporate officers. Yet the most poignant example of a quest for public apology and moral reckoning in the Kanemi case was from a victim who felt compelled towards this, to the extent of dropping his lawsuit in favour of a four-year sit-in before Kanemi’s gates, to a significant degree by his firm Christian beliefs (Reich 1991: 238–9). While Christianity goes back centuries in Japan, and has established itself in a few interstices of Japanese society, it is not what most commentators mean when they talk of ‘traditional’ Japanese culture (cf. Wagatsuma and Rosett 1986). More generally, Reich points out that in the Kanemi case the demand for apology did not substitute for formal legal proceedings, but was pursued in parallel. Similarly, in 1995 for instance, litigation about contaminated blood products was only settled when financial compensation was combined with a public apology to the victims. From this, Wada (1997) argues from a social constructivist perspective for dispute resolution which can merge, or oscillate between, formal legal and informal norms. He concludes that this retains universal appeal, rather than being uniquely Japanese, an issue touched on further in Chapter 4. This suggests an alternative or complementary explanation for the patterns of litigation and settlement sketched above for all four mass injury PL cases: the former, most formal normative process had a symbiotic relationship to the latter, less formal one.30 Finally, another common myth about Japan, that it involves a consensus oriented culture, obscures the importance of conflict in Japanese society:

52

Still-birth and re-birth of product liability While the demand for social consensus in Japan may exist in the ideology of the elite, as it does in most countries, conflict occurs at many levels of society. The antipollution movement in Japan, as well as the Kanemi Yusho case, demonstrate the deep roots and the pervasive reach of social conflict in Japan. The Yusho case illustrates: conflict over leadership personalities, political alignment, and strategies to obtain redress; conflict among supporters, especially among Socialist party, Communist party, and independent left groups; and conflict between victims and the companies, between victims and doctors, between victims and government officials. These conflicts are by no means unique to Japan but represent forms of conflict found in other societies as well: conflict among competing individuals within an organization; conflict among competing organizations to gain broader constituencies; and conflict created by less powerful groups to expand the scope of an issue and gain attention for their problems. The point is not simply the trivial observation that conflict exists in Japan, but that conflict has influenced policy in important ways and that conflict often is necessary to change official policy. Social conflict thus provides a means for relatively powerless groups in society to challenge the government-promoted consensus and to present Japanese society with an alternative vision. Environmental policy provides numerous examples of how social conflict in the streets, in the courts, and in public and private offices compelled social organizations to change their policies. In the Yusho case, social conflict was a necessary condition to changing policy on: criteria for certifying victims, criteria for admitting victims to medical centres, negotiations between victims and corporate officials – in sum, policies of redress for victims. (Reich 1982: 117–8)

These last-mentioned aspects of redress, however, involve the substance of redress: problems of care, compensation, and clean-up. All are important.31 Let us turn, though, to what Reich (1982: 118ff.) describes as the other general aspect of chemical disasters: the processes of redress – ‘the problems of non-issue, public issue, and political issue that victims confront in obtaining redress’. In the Kanemi case, for instance, well-organized victims in Fukuoka assisted by media interest helped transform the disease from a non-issue into a very public issue. Leftist party involvement, particularly in Kitakyushu, added a political dimension. The other three mass injury PL cases also turned into highly political issues. Tying this back to Reich’s critique of the myth of social consensus in Japan, politicization resulted in an extra layer of social conflict. The same can be said for the Big Four environmental pollution cases, only more so. Comparing these cases and their resolution with the Big Four PL cases, however, provides some clues not only as to why the latter developed into the awakening of interest in PL generally in the late 1960s, but also as to its eventual still-birth in the late 1970s.

Still-birth and re-birth of product liability

53

Comparing the Big Four pollution cases and their aftermath Despite the scale of injuries in the Big Four PL cases, generally it can be said that they remained less politicized than the environmental pollution disputes (George 2001: 283; see generally Upham 1987; Broadbent 1998). This also may underpin the relatively shorter – albeit still distressingly lengthy – period between a reasonably clearly identifiable cause and substantial resolution of the disputes in the Morinaga, Thalidomide, and SMON cases (respectively, 1955–73, 1961–74, and 1962–79), compared to the Big Four pollution cases (notoriously Minamata, 1958–95).32 In part this can be explained by the fact that environmental disasters were more localized. Even the Kanemi oil contamination afflicted people throughout the country, although victims were concentrated in northern Kyushu. On the one hand, this meant that collective action problems – organizing victims to voice and pursue claims – could be more readily overcome in the big environmental cases, although there too the threshold problem of ‘coming out’ with what had hitherto been hidden away as ‘private’ problems first had to be overcome (Mishima 1992; George 2001). On the other hand, the big pollution cases posed a potentially greater political threat. Demonstrations of local power against a heavily centralized polity, with the ruling LDP’s candidates losing control over many municipalities from the late 1960s through the 1970s, were much more threatening to social order in post-war Japan (Samuels 1987; Krauss 2000: 3). At the same time, a foundation of claims in the anti-pollution movement – the right to a safe environment, a sustainable ecosystem – presented the possibility of adding a new vector to the ‘iron triangle’ of central government bureaucrats, politicians – mainly from the Liberal Democratic Party (LDP) dominant for most of the post-war period – and powerful business interests. Not only would this dilute their power, the extent thereof was unpredictable. Hence, to delay matters, this ‘iron triangle’ used every measure at its disposal: legal, non-legal, and some later found illegal.33 Certainly these strategies contributed to the very late filing of suits in many of the big pollution cases. By then, however, the cases had already developed into a broadly based citizens’ movement (shimin undo). Upham (1987) argues persuasively that social e´lites acted quickly to divert this movement, and to minimize the prospect of judicial law-making in terms of liability and compensation as well as implications for environmental policy-making more generally. Because this included establishing administrative dispute resolution mechanisms, his thesis has often been understood to stress ‘bureaucratic informalism’ (Matsuura 1989) and the pre-eminence of government officials in this process. We should not forget, though, that politicians also considerably strengthened environmental regulations through laws and ordinances (see e.g. Kawashima 1995). This aspect we might therefore call ‘government formalism’, although in practice it does seem to have resulted in much more cooperative relationships – hence in part more informalism – between regulators and industry than found at least in the US (Aoki and Cioffi 2000). Despite all these measures, however,

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environmental issues continued to capture the attention of the general public, academics and lawyers at least until the mid-1980s, after major but finely balanced issues were decided by the higher courts and when the worst categories of pollution had been substantially brought under control.34 By contrast, relatively less politically sensitive PL disputes – even the Big Four mass injury cases – generally proceeded to court more quickly once the cause became reasonably clear. The government’s regulatory response appears to have been more methodical and to have involved less extreme bureaucratic informalism, while industry played a more active role. By 1965, ‘Home Science Centres’ had already been set up in Kobe and Himeji, in the Kansai region. In 1967, the Economic Planning Agency (EPA) initiated a network of part-timers called Consumer Lifestyle Monitors to help build up information and monitor trends relevant to consumers. In 1968, the Consumer Protection Law was enacted. Although primarily exhortatory, like similar legislation for environmental protection (Kawashima 1995: 242–6) it had some symbolic value. The following year, the Local Government Law was amended to formally allow local bodies to carry out the business of ‘consumer protection’ per se. This led to the establishment of Consumer Lifestyle Centres (CLCs) in all the main urban centres by 1970, when a national Centre was established in Tokyo to coordinate and further such activities. CLCs continued to spread rapidly, albeit varying in size and nomenclature. By 1980, 230 had been established under local ordinances (jorei), dealing with 195,000 inquiries yearly, including 144,000 involving products rather than services (Taguchi 1993). Some led to attempted mediation by Centre officials between consumers and suppliers or manufacturers. Yet the proportions for accidents involving consumer products were small: for instance, 268 cases in 1978, 231 in 1979 (Hamada et al. 1986: 86). Thus, although this can be seen as another instance of ‘bureaucratic informalism’, and Chapter 4 will illustrate their heightened significance resulting from PL Law enactment, their role in the early 1970s fades into insignificance compared to the role of bureaucratic informalism in the pollution cases. More important seems have been ‘legislative formalism’, evident in the stream of new product standard and other safety requirements emerged from relevant ministries from the late 1960s (Kato ed. 1994: 1184–1268). In addition, the role of ‘industry informalism’ was more prominent. Of particular note were industry association based voluntary third-party liability insurance schemes. As discussed further in Chapter 4, companies took out insurance after having their products tested, were permitted to display quality symbols on those products, and had claims resulting from alleged defects paid out seemingly on a strict liability basis (Ramseyer 1996: 1831). Examples were the Safety Goods (SG) Mark system and the Better Living (BL) scheme inaugurated for the construction industry in the early 1970s. Although the Ministry of Trade and Industry (MITI) and (to a lesser extent) the Ministry of Construction were involved in setting these up, respectively, bureaucratic involvement seems more muted than in the environmental arena. Similarly, a Drug Side Effects Industries Relief Fund was created in 1978 to pay compensation solely on proof of causation

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for the injury in question, even where the victim cannot prove manufacturer’s negligence. Its establishment was also promoted by the government, but funding comes from manufacturers and importers (Tejima 1993). The prompt government reactions to the big pollution cases, followed by the more methodical and somewhat broader based responses to the big PL cases, help explain the decline in ‘pro-victim’ judicial and scholarly activism in tort law more generally from the late 1970s.35 Around the same time, though, commentators also began to report growing concern from some quarters in the US that PL liability was becoming too extensive (cf. Kato 1994b: 98–9). In part this appears related to Japanese manufacturers also finding themselves increasingly subject to litigation there (e.g. Doi 1976; Kitagawa and Nottage 2003). As well as political differences between the big environmental pollution cases and the mass injury PL cases, though, there were also important legal differences. This may provide a second clue as to why PL did not maintain or develop the same degree of prominence in the late 1970s. In many respects, the big pollution cases raised more complex legal issues (Gresser et al. 1981: 133–228). For instance, harm suffered by the victims usually required tracing a much more complex chain of causation, such as mercury discharged by the Chisso factory ending up in fish eaten by Minamata residents.36 In other words, the effect on the ecosystem had to be brought into the picture. This added the further conceptual difficulty as to whether the environment created a new source of legal entitlements. This raised the possibility of another ‘new right’ (Feldman 2000: 39–52), paralleled by for instance ‘rights to sunshine’ then alleged by homeowners against property developers (Young 1984). While rights to – or even of – the environment take us back in part to the discussion above of potentially greater political implications, they also raise more legal concerns, for instance as to constitutional, administrative law and private law implications (e.g. Harada 1977). Ultimately, they test the limits of judicial competence, and lead to pressure for legislative and regulatory responses. By contrast, PL cases – even the mass injury cases – tended to involve more direct causal chains. Typically, they did not involve questions of a ‘new right’, either. Rather, they involved simply the right to preservation of one’s health against its invasion by another: a classical liberal right, unproblematic for the classical corpus of modern law in Japan (Tanase 1992). In addition, the PL issues raised in the Morinaga case and in the Kanemi case – at least against Kanemi itself – were conceptually quite straightforward, primarily involving manufacturing defects. In addition, although these cases showed how even such defects could have pervasive consequences, manufacturing defects – almost by definition – are ‘one-off ’ events not necessarily tied to poor corporate governance, making it difficult to sustain momentum in addressing such problems. By contrast, the warning defects alleged against Kanegafuchi in the Kanemi case, along with causation and/or ‘development risk’-like defences raised explicitly or implicitly in the big drug cases, presented more difficult legal issues. Nonetheless, the overall less intractable nature of the legal issues raised, as well as the lesser scale of the harms suffered compared to environmental degradation through to the 1960s

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(Broadbent 1998: 10), may also help explain why PL in the late 1970s did not maintain quite the same momentum. The rise and fall of the automobile defects issue Considering both legal and political angles also sheds light on why development faltered despite another potentially major category of PL cases which emerged in the late 1960s, only to meet still-birth in early 1970s. In mid-May 1969, The New York Times ran a small story reporting that foreign automobile manufacturers in the US, including Japanese ones, continued to recall and repair defective automobiles without filing reports as required by legislation enacted in 1966 in the wake of concern generated by exposures on the GM Corvair by Ralph Nader (1965).37 A fortnight later, Japanese newspapers reprinted a translation by the Kyodo newswire. At first, manufacturers in Japan criticized the media, asserting that The Times had written the article to discredit Japanese cars, and that different models in Japan were not defective. Most newspapers did not pursue the story, lacking technical knowledge. However the Asahi Shimbun persevered and again scooped a big story, in early June, this time discovering that manufacturers in Japan had secretly been repairing or replacing defective parts on a large scale when owners brought their vehicles in for repairs or check-ups. As the issue rapidly escalated into popular and political controversy, MITI blamed the Ministry of Transport (MOT), which soon gave up trying to defend the auto industry. Investigations were ordered, leading all 12 manufacturers to report a total of 58 possibly defective models encompassing 2.4 million cars, including 19 models and about half a million cars for Nissan and Toyota (Japan’s two largest producers). Manufacturers promised to remedy all the problems. Within two months MOT reported a recall rate of 91 per cent; by September, 96 per cent. The media then lost interest, assuming the problem basically solved, as in the PCB chicken poisoning prelude to the Kanemi case. Certainly, over the next few years MOT continued to show more concern for automobile safety. Its Deliberative Council on Technology, for instance, published extensive guidelines in August 1972; and in October 1973, MOT prohibited use of motorcycles with adjustable handlebars. Its convivial relationship with industry was restored quite quickly, however, following manufacturers’ general acceptance of responsibility without attempting to transfer blame to MOT.38 Overall, regulatory control was probably ratcheted up; but this was underpinned by some very significant developments around 1970–1, constituting a second stage to this saga. Specifically, in September 1968 a driver found criminally responsible in an accident involving a Honda N-360 applied to the Osaka District Court for a rehearing on the grounds that this model had been announced defective. Although the media had generally been losing interest in the defective automobile issue by then, a member of the Asahi news team had introduced him to a lawyer called Abe; and the latter, to a vehicle specialist called Matsuda. When the retrial petition was made public, Abe received over 20 letters from all over the country, many from people who had also been in accidents involving the

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N-360, and a victims’ association was formed. Inspired by the latter, while helping Abe with expert evidence, Matsuda thought of forming what became the Japan Automobile Users’ Union. With Matsuda as executive director and Abe as legal advisor, the Union got underway in April 1972 with over 1200 members, aiming to counter the information and organizational difficulties suffered by isolated individuals harmed by defective automobiles. The main strategies of the Union and Abe initially centred on publishing a monthly newsletter, and laying or supporting criminal charges with police and prosecutors against executives of Honda, and later Nissan with respect to its Echo model. A major objective was to get them to undertake independent costly testing of possibly defective models. However, the police referred the testing of the N-360 to MOT. But since even MOT did not have the funds to conduct an independent test of its stability at high speeds, it relied on Honda data. Not surprisingly, it concluded in late 1971 that there was no conclusive evidence linking accidents to mechanical malfunction. The Tokyo Prosecutors’ Office did conduct two tests, but limited extra funding meant they had to rely on a Honda company to transport the vehicles to the test site. A dangerous tendency for the N-360 to swing and lean was found; but the prosecutors decided in August 1971 not to prosecute, after judging that no connection could be made to the accidents due to deaths of their drivers and damage to their vehicles. The N-360 victims’ association then began collecting retainer agreements for Abe to bring civil suits. Honda offered to settle, but in the ensuing negotiations it charged him with extortion. In November 1981, he and Matsuda were arrested and prosecuted in the Tokyo District Court. This badly affected the Union’s reputation, especially because media reports focused on prosecutors’ announcements, largely pre-judging guilt (Otake 1982: 85). Prosecutions brought in Japan do achieve a very high conviction rate, however (Johnson 2002). In 1977 the Court found both guilty on all seven charges brought. It criticized Abe and Matsuda sharply for demanding large settlements without certain proof, ‘going beyond the bounds of a proper consumer movement’, and for ‘unreasonable conduct’ for a lawyer. On appeal, however, the Tokyo High Court found them not guilty on the first count relating to the highest amount involved, 80 million yen received from Honda. It declared them to have been convinced of the N-360’s defectiveness based on evidence gathered and tests conducted, and negotiations ‘within the scope permitted by society (shakai tsunen-jo)’, stressing the importance of safety and Honda’s social responsibility to defray doubts about defects. The six lesser guilty verdicts were upheld as going beyond the pale, however, and a further appeal was dismissed (with no reasons given) by the Supreme Court in early 1987.39 One reason for the adverse publicity suffered by the Union back in late 1971, however, was the emergence of the fact that it had received around that time donations from the Association of Former Honda Dealers. This had been formed by disgruntled dealers who had begun to shift to Suzuki, the bitter rival of Honda, after the latter began distributing the newly introduced N-360 directly to sub-dealers. Some suspected that Suzuki was behind the contributions, and the media and consumer groups criticized the Union for accepted tainted money.

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This involvement of small-business people and then possibly a large competitor thus tarnished, or at least complicated, the image of valiant consumers crusading against the giant Honda. The Union nonetheless accepted these contributions because it had got into financial difficulties. The monthly newsletter did not do well. The Union had then invested in expensive testing equipment, and possibly anticipated further investments would be needed following the disappointing experiences involving the police and the Tokyo Prosecutors’ Office. Large donations from Matsuda and Abe were not enough. Drawing on Olson’s (1965) path-breaking study of collective action, Otake (1982: 96–7) argues astutely that the Union was unable to ‘pyramid resources’ as easily as a company can, by selling goods or services in a concrete and tangible exchange, because such ‘political entrepreneurs’ face free rider and other difficulties in continuously providing direct benefits in an individualizing and discriminating way. The newsletter and then litigation assistance attempted to address these difficulties, but the financial basis available was arguably insufficient. Considerable litigation did eventuate, however, in what might be called the third stage in the saga. Ultimately, however, it caused manufacturers little concern (see also Matsuura 2001). In September 1974 a Tokyo District Court branch returned a guilty verdict after finding the N-360 involved not defective. From late 1972 to 1973, nine District Court civil suits (eight in Tokyo and one in Fukuoka) were filed against Honda relating to N-360 accidents, but they brought little success. Various suits related to the Nissan Echo were settled in December 1974, and a civil suit brought against Toyota in the Nagoya District Court in July 1970 settled that December. The 11 reported judgments rendered in civil suits involving claims by users or their families against manufacturers and/or dealers, beginning with one in June 1971, invariably found no liability. A major problem has been that courts require evidence of many accidents involving the same model of vehicle, even though of course this should only be relevant to design as opposed to manufacturing defects (Kato 1994a). The emergence of this problem further justifies the Union’s initial focus on criminal liability, bringing the important advantage of potentially involving the state in costly testing and other evidence-gathering, although the higher burden of proof required may have contributed to eventual decisions not to prosecute and resulted in the pursuit of civil liability becoming more difficult. Nine other reported judgments (including three on appeal) involve cases where bystanders or passengers suffered damage. In only one (in 1975, upheld on appeal in 1978 and then 1979), was the manufacturer held liable. However, in this case (as in seven out of the eight others), the operator of the vehicle was held liable under Article 3 of the Automobile Injuries Indemnification Law (AIIL: see Kato 1963). This imposes liability on operators unless they can prove (i) no negligence in operating the vehicle, (ii) no intention to be injured or negligence on the part of the injured or a third party other than the driver, and (iii) no structural defect or functional disorder in the automobile. In this case, however, while suggesting the automobile to be defective, the operator was held liable by

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requiring replacement of the defective parts. Because the operator invariably has compulsory and often further optional insurance, while a developed system of dispute resolution has developed for resolving auto accident disputes (Tanase 1990) particularly since efforts at standardization by the judiciary in the earlyand mid-sixties (Foote 1995), operators are very likely to be approached first and to have claims against them covered or settled by insurers. They or the insurers may then seek an indemnity from defective auto manufacturers, but this has been rare (Matsumoto 1993: 578). The incentive to do so is low for the insured, since they usually only face the disadvantage of higher future premiums. Their insurers also may be reluctant, particularly if they have other business with the manufacturer in question; but also for other insurers due to problems of proof and pressure from regulators. Some may be tempted to view this result as another example of bureaucratic informalism, or more generally social elites dampening the potential repercussions of another major category of contemporary disputes. But as the AIIL was enacted in 1955 (Law No. 97), and the insurance and dispute resolution mechanisms were already largely in place before events around 1969–71, it seems more an example of a rather unanticipated legal complication. Tensions within this statutory framework were highlighted over the 1990s, such as reinsurance by the government (Ono 2000), but the effect since the 1960s has been to undercut the need for separate strict liability PL legislation to compensate for defective automobiles. Thus, the rise and the fall of the defective automobile issue can be explained by both political and legal aspects. The media and political controversy prompted the emergence of a potentially large pool of victims. However, actual injuries were fewer or at least more difficult to identify and to attribute, and certainly more geographically dispersed, than in the Big Four PL cases. New organizations like the Users’ Union thus faced considerable difficulties, especially as auto manufacturers also enjoyed significant organizational and technological advantages, along with close relations with their regulators and a sense that their industry was key to economic and hence social development in Japan at the time. Some strengthening of regulatory controls along with more vigorous policing and public pressure, nonetheless, would have created incentives for manufacturers to improve their safety activities. Over the same period, on the other hand, the expansion of civil litigation was limited by the emergence of many legal complications, such as the peculiar interaction of the AIIL and proof of defect. Even if the latter hurdle had been more easily cleared, further legal issues included comparative negligence, or how to weigh expected risk of harm versus cost of precaution in design defect cases (relevant even in strict liability PL regimes: cf. e.g. Henderson & Twerski 1999). Legal scholarship and law reform After the Restatement Second was published in the US, a few Japanese academics started to get interested in its discussion of PL.40 PL attracted broader attention

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when Professor Ichiro Kato (1965) included a section on PL in the tort law part of a multi-volume Commentary, widely read by practitioners as well as academics. Yet this, and other academic writings, tended to focus on conceptual basics. Professor Zentaro Kitagawa (1968b) widened the scope somewhat to draw as well from German legal theory, adding also attention to business practices (1968a); but this was still exceptional. When the defective automobile issue surfaced in mid-1969, however, Japan’s leading commercially published law journal quickly organized a special issue (Juristo No. 434); and academics began to focus on the many legal difficulties thrown up by this issue, as well as other possibilities in accidents involving automobiles (e.g. Tsubaki 1969). Attention to actual or potential problems in specific product areas also characterized early work by Professor Akio Morishima (e.g. 1969), then newly arrived at Nagoya University. The still rather conceptual discussion at the Private Law Association’s annual meeting held in October 1972, taking PL as its main symposium theme, contrasts quite vividly with the discussion in its October 1975 meeting. A paper was presented there by Professor Morishima, and Professor Kitagawa was a discussant as well as being involved in organization (Shiho Nos. 35 and 38). A second feature of scholarship which emerged in the early 1970s, and later accelerated, was a distinct broadening of attention beyond developments in the US, reflecting a range of new initiatives abroad. Already in 1968, the European Commission (EC) had begun work into PL rule harmonization for the nine member states that then made up the Community, resulting in a first draft Directive in 1975. In 1970, the Council of Europe, with assistance from Romebased UNIDROIT, began work on what became a 1975 draft treaty for its 18 member states. In 1973, The Hague Conference proposed a draft treaty as a unifying framework governing transborder PL problems. All these initiatives were covered in a special issue of Juristo (No. 597), published in early October 1975, along with discussion of developments in Holland (by Professor Masanobu Kato, also newly arrived at Nagoya University), Germany and Britain, as well as America (by Professor Morishima). Shortly beforehand, Professor Kazuaki Sono (1975) had described how in 1973 the United Nations Commission on International Trade Law (UNCITRAL) began its own study into PL. As in the EC and most other initiatives, the argument centred on both the need to promote consumer protection as transborder trade increased, and the potential for trade to be promoted by having uniform rules. However, this created certain tensions (although Professor Sono suggested a Model Law rather than a treaty might be a worthwhile compromise); and the idea was always for UNCITRAL to dedicate itself to a new task after completing work on a Sales Convention, which in fact was not completed until 1980. The EC Directive was well advanced by then, and its promulgation in 1985 put an end to all other supra-national initiatives. Building on both aspects, in 1973 a group of Japanese scholars formed a PL Research Group. It was headed by Professor Sakae Wagatsuma of the much venerated Tokyo University Law Faculty. He remains the doyen of private law scholarship in post-war Japan (cf. Rahn 1990: 152–4); and at the time headed

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the Legal Deliberative Council (Hosei Shingikai), which advises the MOJ on law reform. Initially, the Research Group brought together six other academics, including Professors Morishima and Eiichi Hoshino, the latter again of Tokyo University and later also to play a key role in the enactment of Japan’s PL Law in 1994. Two more, including Professor Masanobu Kato, later joined the Group. With strong influence over the MOJ, Professor Wagatsuma had expected his Group’s outline to form the basis of a draft Bill. Unfortunately, he died just before its publication. To politics and developments in the legal world discussed above, we must therefore add pure contingency to fully grasp the decline of interest in PL in the latter half of the 1970s. In addition, according to Professor Masanobu Kato (1998), general sentiment then shifted away from consumer protection while businesses became aware of complaints by industry in the US. As in Europe over the 1970s, enthusiasm for PL law reform was dampened by the oil shocks, and consequent economic slowdown and uncertainties. The ‘Big Four’ PL cases also showed how Japanese courts could develop even negligencebased Civil Code tort law to provide some measure of compensation (Yoshimura 1996: 176). On the other hand, momentum probably was also lost because of the still limited accumulation of case law, the nature of the defects and disputes, and the still undeveloped state of overseas reform initiatives discussed above. These factors contribute further legal and political reasons for the decline in interest in PL from the latter half of the 1970s. All this helps explain why a committee of the EPA-sponsored Social Policy Council (Kokumin Seikatsu Shingikai, literally ‘Citizens Living Deliberative Council’) proposed introduction of PL legislation in 1976 and again in 1981, but to practically no avail.41 In the late 1980s, however, the stage had changed significantly. In part able to rebuild from developments in the early 1970s, law reform moved quite quickly back onto the agenda.

Re-birth: The late 1980s and the early 1990s When the Asahi Shimbun reported on 24 January 1987 (p. 23) that the Supreme Court had upheld the six remaining guilty counts against Abe and Matsuda in the Users’ Union case, they added a short article entitled ‘Wall Against Enactment of a PL Law’. It sided with sympathy recorded by a Chuo University Professor for their pioneering attempts to overcome the technological and informational deficits faced by individual consumers. The article recalled the strict liability law proposals of 1975 and 1976, with parallel attempts to lessen proof of defectiveness and causation, along with the like Council proposal in 1981. It concluded, however, by noting that ‘the road to enactment is still a long one, and a wall remains in the way of consumers’. Within two years, however, enactment was again on the agenda; and the PL Law was passed in 1994. One crucial question then becomes: what happened to explain this manifest revival in interest in PL in Japan? On 22 March 1987, moreover, following a front-page report on the Supreme Court brokered settlement between victims and Kanegafuchi in the Kanemi oil

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case, the Asahi Shimbun added another article entitled ‘Victim Compensation System Still Inadequate’ (p. 4). It argued that 300,000 yen per victim was low and criticized the duty on them to repay provisionally executed moneys, The article also pointed out that the 0.13 billion yen paid annually by Kanemi for medical treatment, pursuant to some early settlements, was at risk from the latter’s precarious financial position, and this was causing continuing concern to the victims.42 It suggested that this case showed the limits of private law enforcement through the courts, and concluded that ‘the government along with the chemical and food industries must take measures to avoid recurrences and to compensate patients’. Specifically, the Asahi also pointed out that that a study group established in 1973 by MHW had recommended, along with fundamental reform of food safety legislation, investigation into the possibility of establishing a compensation scheme based on insurance and contributions by industry; but that the latter came to naught as a result of concerns as to equity in contributions from the many small- to medium-sized firms in the industry. As we have seen above, however, in the 1970s the big drug companies eventually contributed to a compensation scheme, while a number of other industries involving smaller companies had been involved in developing optional first-party insurance and dispute resolution schemes. A second interesting question is therefore: why were these precedents not developed in the late 1980s for the chemicals and food industries, respectively, rather than blanket PL legislation? Part of the answer to both questions is that the EPA had been diligently collecting data on product safety problems brought to CLCs and so on, and undertaking broader surveys. They found enough evidence of ongoing safety problems to get a decision to consider introducing broadly based PL legislation out of MITI. The latter still shares some responsibility for consumer issues, as well as its primary concern for industry which has led to much noted convivial ties with business circles (Johnson 1982). Presumably, there was not enough evidence for MITI, and Japanese industry, to be too concerned about agreeing to consider the legislation. This background undoubtedly helps explain the puzzle of why MITI declared as early as January 1989 that it was considering the possibility of legislation (Kato 1994: 1249). This represented a significant step, since the EPA remained a smaller government agency over the 1990s, despite its undoubted consolidation since the 1970s. Although this is more speculative, another explanation may have been an increasingly important factor in the late 1980s: international political economy and trade diplomacy, particularly involving the US and Japan, along with the repercussions this had on domestic policy-making in Japan. As the trade deficit in Japan’s favour burgeoned, the US government concluded that this stemmed to a significant degree from wide-ranging structural problems in Japan, including many deep-rooted policies along with legal rules and standards. Although the Japanese government retorted that there were also structural problems on the US side, such as low savings rates, the ‘Structural Impediments Initiative’ (SII) talks that ensued tended to focus on the need for reform of many of the perceived barriers on the Japanese side, especially deregulation. The talks officially

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commenced in April 1989; but similar discussions would have been underway well before this (cf. Naka 1996). The First Report of a working group, made up of representatives from both countries, was published in May 1991. Noticeably, it included a recommendation that the US government promote law to reform (what were perceived as) excessively pro-plaintiff PL rules, to improve US industry’s competitiveness; but again this argument was being made well before this, for instance in Congress in mid-1990 (Rustad 1992: 20). Japanese companies already doing business in the US, particularly the large ones with lengthy trading histories – and hence experience with PL and product safety issues, as well as reputations to uphold – may have formed unlikely allies with US industry in this respect. No doubt they were less comfortable about pressures on Japan to reform its own PL rules in the opposite direction, namely making them more pro-plaintiff, to take away a perceived comparative advantage of Japanese firms. The more globally active ones may have been less opposed to ‘bringing home’ higher product safety from overseas (cf. generally Vogel 1995), especially the US where many Japanese manufacturers have been learned about PL the hard way (Ross 1998). Better product safety can often represent sunk costs, while differentiating in the domestic market (e.g. by taking out safety features for products in Japan) could actually entail further costs. Even if higher PL standards in Japan would entail more costs, Japan’s internationally competitive firms (see generally Porter et al. 2000) might have been prepared to go along with the idea knowing that domestic competitors might be even harder hit.43 Yet despite such possibilities, concern at least on the part of a substantial proportion of Japanese firms explains why this aspect did not figure prominently in the First SII Report. Nontheless, it seems possible that also making Japanese PL less ‘pro-industry’ was discussed during the first round of SII talks, and no doubt their precursor talks.44 The basic idea was that harmonization of product liability standards was one prerequisite for fair trade between the US and Japan. But Japan’s trade policy and diplomacy, and domestic policy responses, were not just dictated by its major trading partner (cf. Schoppa 1997). Japan was also involved in multilateral GATT negotiations, in the Uruguay Round. These resulted in agreement in 1988 on significant liberalizations of agricultural product imports into Japan (Nottage 1989). Further liberalization was already a definite possibility, as shown by the ultimate successful conclusion of the Round, establishing the current World Trade Organization. Negotiations at this level were also increasingly focusing on regulatory issues (‘non-tariff barriers’). Although the main concern was phytosanitary and other direct product safety standards, rather than private law PL standards, extreme differences in the latter between Japan and the rest of the world also risked challenge. MITI’s declaration in January 1989 that it was considering enactment of PL legislation may have been agreed to with the EPA with rather little analysis, or with US trade negotiators just as tatemae – a facade to defray tension with no intention of following it up at all, aimed at opposing or delaying any real reform. But its decision was to have some unexpected repercussions, and momentum

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continued to develop. First, consumer interests could not be ignored (although they still tend to be by foreign commentators). Consumer groups had gained stature and made some significant contributions to the PL and product safety regulation debate in the early 1970s (e.g. Kato ed. 1994: 1206). They have played a diminishing – but still interesting – role in dispute resolution and litigation against manufacturers, compared to other countries, and numbers have declined; but their still vast membership and increasing involvement in policy making made them a force to be reckoned with in the 1990s.45 They, and consumers more generally, also realized that the writing was increasingly on the wall with respect to ongoing liberalization and deregulation (Morishima 1993: 725). As well as more imports, this meant pressure to diminish or remove ex ante regulatory controls over them, leaving better ex post control the only feasible improvement (Cohen & Martin 1985). The latter in turn meant PL reform, as deregulatory pressures made more difficult the establishment of government or government-supported compensation schemes. Herein lies a crucial difference from Japan of the late 1960s and early 1970s, and Japan of the late 1980s and the early 1990s. A second very important factor, which no doubt also influenced MITI’s initial declaration that it would consider PL legislation, was the EC Directive promulgated in Europe, Japan’s other major trading partner. This had required legislation in member states by the end of 1988. Although only three countries had complied in time, it was certain that others would do so over the next few years. The Directive also provided a model for consideration, and later often legislative reform, in other trading partners (Harland 1999). Yet the Directive’s significance arguably lay less in the substance of its rules than in the lengthy process of debate leading to its enactment; and hence as its ‘precedent’ value as a feasible compromise between industry, consumer, and other interests. The Directive and its offspring had additional political significance in that it became increasingly apparent from evidence in Europe that PL Law reform did not necessarily lead to the extreme ill-effects associated with the ‘tort crisis’ perceived by some in the US. Thus, the Directive model presented a middle way appealing on the one hand to industry along with sympathetic regulators and politicians, in tune with trade liberalization and harmonization (with Europe and other countries, if not with the US); and, on the other, consumers seeking some substantive change in the legal framework as well, perhaps, as the symbolism and publicity this would entail. Even by 1991 and 1992, MITI was sending out ‘mixed signals’ (Maclachlan 2002: 215). Interest in product safety in Japan in the late 1980s also involved more than present and future imports. Along with the lower-key data emerging from EPA monitoring, problems surfacing in mid-1987 with automatic transmission automobiles had attracted much comment, although rather predictably they resulted in hardly any suits (Awaji 1988). As well as the end of litigation involving the User Union and Kanemi cases, six PL judgments were rendered in 1987 involving a range of products, followed by five in 1988 and six in 1989. Many went against plaintiffs, and the numbers hardly represents a dramatic rise in

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litigation, of concern to business and government elites (cf. Dauvergne 1994). Indeed, the distinct downward trend in reported judgments in the late 1980s is partly related to the change in mood in the late 1970s emphasized by Kato (1994b). But rather than elite concern about the possibility of the mood changing again, leading to renewed judicial activism, the significance of the reported judgments periodically handed down in the late 1980s lay more in reinforcing general concerns about product safety at the start of an era of deregulation; and in providing a variety of further concrete examples of possible defective product categories. As well as causing more concern to consumer organizations in Japan, lawyers began to pick up on this. This was particularly noticeable after the newly formed Tokyo Bar Association’s Consumer Protection Committee organized its first symposium, entitled ‘Questioning Japan’s Approach to Consumer Injuries’, at the 32nd Conference for Protection of Human Rights held in Matsue in September 1989. As well as the EC Directive, attention focused on Ralph Nader’s lecture there that stressed the effects of enacting PL law, including incentives to prevent accidents and to improve business ethics. In December, the Committee formed a Defects and Safety Sub-Committee. From early 1990, Association lawyers and soon the Japan Federation of Bar Associations (Nichibenren) became increasingly active in product safety and PL initiatives. Surveys of lawyers and periodic hotlines were initiated to better determine actual and latent product defects (Nakamura 1996). Study groups were sent overseas, increasingly to Europe and countries other than the US; and symposiums organized annually from late 1990 to late 1995. The Association began developing a PL Law outline in 1989, approved in early 1991; and so did the Federation. The number of lawyers in Japan had increased steadily since the 1970s, while those most active in PL issues proved adept at getting their drafts and ideas broadly accepted by their colleagues (Asaoka 1995a). Hitherto bar associations had tended to hold a sort of veto power, and at the final stages before the PL Law enactment, they were indeed able to force reconsideration of proposals largely from pro-industry sources. The more pro-active side of bar association activities from the late 1980s was also important in helping the call for PL Law enactment to gain momentum. Moreover, individual lawyers were involved in establishing in May 1991 a nation-wide group to lobby for enactment of PL legislation and loosely support litigation efforts (Matsuura 2001: 164–7). After achieving enactment, this group deftly turned its attention to official information disclosure legislation, a new hot topic but one related to PL litigation, while continuing its support of the latter.46 Combined with bar association activism and consumer interests, also involved in this lobby and support group, this helped to lessen the problems of sustainably identifying injuries and defective products followed by litigation, which led to the winding down of the likes of the Users’ Union in the early 1970s. A number of academics were also involved in this lobby and support group. Many had been involved in presenting papers at the annual conference of the Private Law Association in September 1990. Others contributing to the debates there included Professors Masanobu Kato and Akio Morishima, who as young

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scholars had joined the Wagatsuma group almost two decades earlier. The conference focused on particular problems in the case law, and in reported accounts of accidents and dispute resolution. It also set the debate in the broader context of international trade policy trends and legislative initiatives abroad, especially the EC Directive (Shihogakkai ed. 1990). In the light of all these fledgling developments, soon after the conference, in December 1990, the EPA-sponsored Consumer Policy Committee (Shohisha Seisaku Bukai) recommended to its Thirteenth Social Policy Council (chaired by Professor Ichiro Kato) that a study be made into enacting new PL legislation. A specific study got underway the following March, headed by Professor Morishima. Other ministries established deliberative councils too. Although these were much less transparent (Maclachlan 2002: 222–5), such councils came under increasing pressure to open up regarding membership and disclosure of proceedings (Noble 2000b). Further, as early as April 1990, the ruling LDP formed a group to look into enactment of PL legislation, following the lead of other political parties which quite quickly – and publicly – proposed drafts with many pro-consumer provisions. Media coverage of PL issues then intensified, reporting on product safety issues and reinforcing a feeling that something ought to be done. In particular, people were reminded that although much environmental protection legislation had been enacted in the early 1970s, proposals for a PL Law in the mid-1970s had been deferred. Increased media coverage can be seen in figures for the Asahi Shimbun. Throughout most of the late 1980s, it had published fewer than ten articles per year. It increased coverage to 34 in 1990, 62 in 1991, 83 in 1992, and to over a hundred each year over 1993–5; dropping back after implementation of the new law. These figures exclude commentary articles and editorials. The latter played a key role, along with pressure through other newspaper reports and commentary, in applying pressure to enact the PL Law on 22 June 1994, especially in the final few months (Nihon Bengoshi Rengokai ed. 1995). Yet the law only just made it through Parliament (the Diet), despite these developments. Indeed, this was partly because of them, for as media coverage grew, scholars and lawyers proposed presumptions of defectiveness and causation going beyond the EC Directive, and the EPA Committee deliberated in a seemingly sympathetic fashion, the attitude turned cold on the part of industry (especially automobile and home electronics manufacturers), its regulators (especially MITI) and the LDP. Industry, in particular, seemed to have feared that the Japanese law would impose stiffer standards than their competitors faced in Europe, bringing their potential exposure closer to US firms (cf. Morishima 1993: 726). At the end of 1992, in what was supposed to be its final report, the Committee thus had to ‘conclude’ that it needed another year to deliberate, requesting comments from affected Ministries. Many were disappointed. Petitions in support of enactment attracted 2.87 million signatures, 237 local assembly resolutions were passed to that effect, and people were encouraged to appeal directly to their Diet members. However, despite this and the other developments sketched above, momentum looked like

Still-birth and re-birth of product liability

67

faltering. Remarkably, however, in July 1993 the LDP lost power in the key House of Representatives, for the first time since 1955. The main cause was further political corruption scandals involving payoffs by big companies like Sagawa Kyubin (in February 1992); and revelations of tax evasion by leading LDP politician, Shin Kanemaru (September 1992). When the latter’s faction was succeeded by Keizo Obuchi (later prime minister), a discontented Ichiro Ozawa set up a ‘study group’ on electoral and political reform (Kohno 1997). These politicians eventually joined opposition parties in obtaining a no-confidence vote against the LDP government led by Kiichi Miyazawa (who later returned as finance minister). The general election resulted in them (as the Renewal Party, Shinshinto) forming a ruling coalition government under the prime ministership of Morifumi Hosokawa from the Japan New Party (Shinto). The Hosokawa administration had committed itself to political reform, and it succeeded in this to a significant degree through electoral law amendments, reform of political contribution rules, and more politician involvement in policy-making and Diet debates (Nakano 1997). It was also committed to being a more ‘pro-consumer’ government, and PL reform was included in the November 1993 interim report of its Economic Deregulation Study Group. Both commitments threatened to undermine bureaucratic power, which had already been declining in the 1980s (Stockwin 1997). The new political environment also combined with a further scandal to force big business onto the defensive, particularly its main industry association at the time, the Japanese Federation of Economic Organizations (Keidanren). In October 1993 it became public that the Tokyo Electric Power Co., a public utility, had also made irregular contributions to the LDP. The company president, Hiraiwa, declared that this would stop; but as he was also then president of Keidanren, the latter first considered and then adopted (in late 1994) the cessation of its role in channelling contributions from member businesses through to the LDP. Not surprisingly, from late 1993 the Keidanren largely drops from view in the PL debate, whereas as late as December 1992 it had strongly opposed PL legislation in favour of ‘voluntary guidelines’. A more cynical factor may have been its growing appreciation that most of its members, especially the world-class exporters, had already developed better safety standards and legal risk management strategies. As Japan’s economic bubble burst and the slowdown began to set in, they might have considered that PL Law reform in Japan might help gain a competitive advantage over their smaller or less sophisticated rivals (cf. Ramseyer 1996: 1828). Amidst these volatile circumstances, but with enactment now seen as highly likely, from end-October to early-December 1993 the MOJ’s Legal Deliberative Council Private Law Committee, headed by Professor Hoshino (1994), began seriously studying the various draft PL Bills and so on. Just after it presented a positive report, in December the EPA’s Social Policy Council adopted its Committee’s last report including quite pro-consumer proposals. A team of coalition politicians was formed to consolidate a draft Bill. After intensive submissions by lawyers’ associations and media pressure, a Bill was approved by Cabinet on 12 April 1994 and immediately laid before the lower House.

68

Still-birth and re-birth of product liability

Hosokawa, however, had just resigned as prime minister, having demonstrated further poor political judgement especially with respect to a welfare tax proposal (Nakano 1997). Hata, from the Renewal Party, formed a new Cabinet, but this administration coasted along for its short nine weeks in power. After further media pressure, in particular, the PL Law passed both Houses and was enacted on 22 June 1994. The very next day, a vote of no confidence led to a new coalition between the Social Democratic Party and (its erstwhile arch-rival!) the LDP. These events did build on the Lockheed scandal dating back to 1976, and especially the Recruit political corruption scandal in 1989 (cf. Reed 1997). The latter had led to the Socialist Party gaining control then of the House of Councillors. Perhaps this created some more possibility for enactment of PL legislation; but this Upper House has less power, and the LDP regained control in 1992 anyway. The remarkable events of 1993–4 therefore seem pivotal. Without them, it is hard to imagine the PL Law passing, at least in the form it took. Momentum probably would have waned, until perhaps events like the ‘summer of eating dangerously’ in 2000 (Nottage 2000a), which has precipitated another upsurge of interest in product safety. Things would have faltered despite the other domestic political developments described above – better organization to overcome collective action difficulties in more varied and less serious clusters of accidents, as well as the new exigencies of international political economy that the Japanese government and its industry faced by the end of the 1980s. Those political dimensions, however, along with the accumulation of case law and renewed efforts of scholars, are key to understanding the process of the rebirth of PL in Japan. The model of the EC Directive as a potential ‘legal transplant’ also played a role, but it needs to be kept in this much broader context.

Conclusions This chapter has set in broad comparative and socio-legal context what can be viewed as two major stages in ratcheting up PL Law in Japan in favour of consumers, first in the late 1960s and early 1970s, and especially over the 1990s. As in some key junctures in the emergence of PL in the US, the UK and the EU, and Australia, it is important to appreciate legal aspects (types of cases brought before courts, innovations by judges and other jurists) as well as the ebb and flow of politics at various levels. Economic deregulation and political fragmentation are central elements (Kelemen and Sibbitt 2002), but they are not the only ones, and the process of enactment goes beyond ‘Americanization’ in other respects too. The first of Japan’s ‘Big Four’ PL cases actually began in 1955, with mass poisoning of Morinaga’s powdered milk products on a scale rivalling the Snow Brand debacle in 2000. Even these early large-scale disputes, especially the Kanemi rice bran oil poisoning, undercut stereotypes stressing the singularity of Japanese culture, society and law. They introduce instead notions of initially emotional victims pursuing their rights in the shadow of the law, navigating barriers in Japan’s civil justice system, and more general collective action

Still-birth and re-birth of product liability

69

problems along with the risky process of politicising legal disputes. Comparing the ‘Big Four’ environmental pollution disputes around this time, some insights from collective action theory can be developed to explain why the mass injury PL cases did not draw such a prompt and extensive government response, even though various counter-measures did help resolve more egregious problems. This chapter also suggests, though, that the relative decline in interest in PL in the late 1970s was related to the nature of the legal issues thrown up by many of the contrasting Big Four PL cases. Likewise, both political and legal aspects are important to understand the rise and fall of the issue of defective automobiles in the early 1970s, never really capturing the public imagination in the way of the big PL cases. Also important was the parallel emergence, then relative stagnation, of legal scholarship and law reform efforts. An interesting puzzle is then presented by the ‘re-birth’ of PL in the late 1980s and early 1990s. Continuity was provided by the accumulation of academic research; case law (including the virtual denouement of the Kanemi case); and periodic reports of defective products (including problems in automobiles). Lawyers as well as consumer interests organized themselves and others more effectively. But key factors included broader changes in the political environment, both domestically, and especially globally in the form of trade liberalization initiatives. An extraordinary change of government in 1993 may have been pivotal. After even more political jockeying than in Australia around the same time, the PL Law ended up being enacted on the model of the EC Directive, as a handy ‘legal transplant’ and global standard as well as a political compromise. Overall, these patterns bear interesting parallels with at least some formative periods in the emergence of PL Law in other industrialized democracies, even in the US, but especially in the EU and Australia. They reflect some significant common pressures towards a more pluralist and ‘horizontal society’ (Friedman 1999). Also evident, however, is the independent impact of legal ideas or transplants (Watson 2001), shaped by the type of cases brought before courts (see also Koetz 1998). These combined with complex social processes which seem more inevitable with the benefit of hindsight than they did at the time,47 and even raw contingencies (like the untimely death of Professor Wagatsuma in 1975 and the 1993–4 changes of government). Nonetheless, enactment of the PL Law did reflect and reinforce the growing voice of consumers over the 1990s. Accordingly, it is hardly surprising to find several important provisions which are more favourable to consumers even than in the Directive (as Chapter 3 will show), and to uncover significant improvements in product safety over the mid1990s (Chapter 4).

3

Comparing the PL Law with other ‘strict liability’ regimes in Europe, Australia and the US

Introduction Having sketched the historical evolution of PL law in broad socio-economic context in the US, the EU, and especially Japan, this chapter turns to a closer ‘black letter law’ comparison of central aspects of this developing area of law. Particular attention is paid to Japan’s PL Law of 1994, and similar ‘strict liability’ statutory regimes in Europe (the 1985 EC Directive) and Australia (Part VA of the TPA). Of course, to varying extents, national legislation implementing the Directive in EU member states adopts different formulations (see e.g. Hodges 1993). This has been further highlighted by some of the Commission’s cases brought before the European Court of Justice (ECJ), as mentioned in Chapter 2 and discussed further below (comparing PL Law Article 6). Member states were also expressly permitted – and certainly took – various combinations of options in implementation, notably the important ‘development risks’ defence discussed below (comparing PL Law Article 4(1)), as shown in Table 3.1. For these reasons, and others,1 the impact of the Directive-inspired legislation may vary considerably in individual member states (see e.g. Goyens 1996a). A sense of this is provided in this chapter by focusing on some significant developments in the UK, as these may still tend to impact on Australian PL law – especially case law, even though the impact of EU law itself in Australian courts has been growing steadily (Vranken 1993). Further, as part of the broader consumer protection initiatives from EU institutions recently, as mentioned in Chapters 1 and 2, many reforms have been proposed for the PL Directive (Hodges 2000b: 126–30). Even if these find some traction, though, the Directive has provided – and should continue to offer – a useful common core of legislative history; rules and principles; and a steady accretion of case law from the ECJ and especially national courts (e.g. Schuster 1998), which seem increasingly willing to draw directly on each others’ jurisprudence. In addition, because of the historical and continuing interest in US PL law in the EU, Japan and Australia, this chapter adds a comparison of the Restatement Third (sometimes abbreviated as ‘R 3d’ in this chapter). As sketched in Chapter 2, this was published in 1998 to summarize – and at times to give some direction to – the voluminous case law percolating up from state courts, along with some more specific legislative

PL Law and other ‘strict liability’ regimes

71

Table 3.1 Implementations of optional provisions in EC Directive 85/374/EEC Unprocessed primary ‘Development agricultural products risks’ defence and game included in art. 7(e) definition of ‘product’, art. 5 5

Limitation of total liability to at least 70 million ECU, art. 16

Original 6 member states Belgium 1 April 1991 Germany 1 January 1990 France 19 May 1998 Italy 24 May 1988 Luxembourg 2 May 1991 The Netherlands 1 November 1990

excluded excluded included excluded included excluded

included included2 included included excluded included

no yes no no no no

States acceding Denmark Ireland United Kingdom

excluded excluded excluded

included included included

no1 no no

State acceding in 1981 Greece 30 July 1988

excluded

included3

yes3

States acceding in 1986 Portugal 11 November 1989 Spain July 1995

excluded excluded

included included4

yes yes

States acceding Austria Finland Sweden

excluded excluded included

included excluded included

no no1,2 no

Date on which Directive implementing legislation came into force

in 1973 10 June 1989 16 December 1991 1 March 1988

in 1995 1 July 1988 1 September 1991 1 January 1994

Source: Adapted from Hodges 2000a: 60. Notes 1 Subject to regulation by another statute 2 Except for medicines 3 But modified 4 Except for medical products, foodstuffs or food products aimed at human consumption. 5 This option will become unavailable and irrelevant when the amending Directive adopted in Spring 1999 (1999/34/EC) comes into force: this should be implemented into national laws but will itself have effect as a matter of EU law.

developments affecting PL in the US. Generally, the chapter begins by analysing the current PL legislation in Japan, comparing the EC Directive, the TPA, and then the Restatement. The major focus is on the Japanese legislation, including original translations of key statutory provisions and some related material (also

72

PL Law and other ‘strict liability’ regimes

reproduced in Appendix A), since commentary and translations in English remain of variable standard. However, extensive comparisons are made to illuminate – and perhaps help guide – interpretation of the PL Law’s provisions.2 Other substantive law principles, such as background tort law (notably the tort of negligence) and contract law influenced remedies in Anglo-AustralianAmerican common law and Japan’s venerable Civil Code of 1896, are only touched upon when necessary. Otherwise, the scope of the enquiry would be unmanageably broad for a book of this nature. More importantly, as shown in Chapter 2, ‘strict liability’ statutory regimes and the Restatement Third have formed the centrepiece of public debates on law reform over the last few decades. In particular, the legal literature has tended to compare Japan’s PL Law with the EC Directive to assert or imply that less protection is provided to consumers (e.g. Marcuse 1996), a conclusion which this chapter will contest. More generally, as Chapter 4 will show, perceptions that Japan’s PL Law does represent a significant step in improving avenues of redress for consumers do appear to have contributed towards ratcheting up claiming behaviour and dispute resolution outcomes, as well as ameliorating companies’ product safety activities. Similar processes appear to have operated in the EU and Australia, although data is less readily available. Such perceptions may be misguided, in that the new statutory regimes may not achieve great progress in changing the basis for liability to strict liability where negligence is theoretically irrelevant. Yet such perceptions remain important in practice (see also Harland 1999: 373), and appear unlikely to dissipate. Strict liability is also found in several recent court judgments, particularly in Japan and England, despite the longstanding and carefully reasoned attempts of some legal scholars to elucidate the doctrinal problems involved (cf. e.g. Stapleton 1986, 1998). Finally, restricting this book’s scope of comparison to the main statutory regimes and the Restatement can be justified, in Japan’s case, because there remains relatively little extended comparative law commentary in Western languages on the PL Law, yet there exist quite detailed expositions of general tort law (see e.g. Baum and Nottage 1998: 105–9). The main focus of this chapter is on substantive PL Law. As with broader tort law developments (e.g. Fleming 1988), and indeed most comparative law (Atiyah and Summers 1987; Nottage 2003a), the broader institutional framework generating legislation and litigated PL cases is equally important (e.g. Kellam 1999). Indeed, it often becomes pivotal when the peculiarities of the US legal system are brought into view (Reimann 2002). Table 3.2 adapts a helpful recent summary of some major discrepancies in the US, especially compared to the Anglo-Commonwealth legal tradition, by extending the comparison to include Japan (see generally e.g. Haley 1998; Oda 1999). Some of these matters, like the burden of proof in civil litigation, are touched upon particularly towards the end of this chapter. Others have been noted in Chapter 2, or will be discussed in Chapter 4 focusing on the impact of Japan’s PL Law, although much writing in the US has already stressed Japan’s differences (e.g. Behrens and Raddock 1995; Green 1996; Melchinger 1997). That emphasis is unsurprising, given the idiosyncrasies of the US highlighted above, especially as

No

Are juries common in private law?

High

Yes

Yes

Adversarial?

Medium

Yes

Unitary (i.e. national) Private Common (i.e. judge-made) Law? Does fact-finder give written reasons? Level of judicial loyalty to precedent, consistency of outcome?

Yes

Yes

No

Sub-national legislative capacity in Private Law

Publicly-funded law reform bodies?

Yes

No

Federal system that explicitly divides legislative competence on basis of subject matter?

Varies

Yes

Yes

Yes

Yes

Yes

No

Written Constitution?

Canada (not Quebec)

UK

Substantive legal differences

Table 3.2 Broader legal system comparisons

No

Yes

Yes

High

Yes

Yes

Yes

Yes

Yes

Australia

No

Yes

Yes

High

Yes

Yes

No

No

Yes [partly: Bill of Rights Act 1990]

New Zealand No No

N/A [Only with respect to EU law] Yes Relatively High

No Yes

No

Yes Yes

Yes No

Medium

No Yes

Yes

No

EU (itself)

USA

No

Yes/No? [Varies, less clearly]

Yes/No? [Varies, less clearly]

[Varies, very unclearly (cf. e.g. MacCormick & Summers eds. 1997)]

Yes

[Yes/No: varies, clearly]

Yes/No [varies, clearly]

Yes/No [varies, clearly]

Yes

EU member states (except Eire & UK)

[No, never used]

[Yes, but more active role expected for judges, German law tradition]

[Yes, but mostly ad hoc]

[Medium]

[Yes]

[Yes]

[No]

[No]

[Yes]

[Japan]

Yes

No

Yes No

Not High

Yes

[Yes]

Yes

Are punitive damages rare in private law?

Are [pure] contingency fee arrangements often used?

Loser pays winner’s costs? Are (many) judges elected?

Level of influence of the Legal Academy on the development of [judge-made] law?

Is the quantum of damages subject to tight judicial control?

[Is burden of proof in civil cases on ‘balance of probabilities’?]

Broad consensus for comprehensive social security/welfare support?

Yes

[Yes]

Yes

High

Yes No

Yes

Yes

Canada (not Quebec)

Yes

[Yes]

Yes

Not High

Yes No

No

Yes

Australia

Yes

[Yes]

Yes

Not High

Yes No

No

Yes

New Zealand

Source: Stapleton, J. 2002a: 1256–7; emphasis and parts in square brackets added.

UK

Substantive legal differences

Table 3.2 Broader legal system comparisons (continued) EU (itself) Yes No

Yes No High (with respect to the AdvocateGeneral) N/A

[N/A]

N/A

USA No Yes

No Yes Very High

No

[Yes]

No

Yes

[Yes/No]

Yes

High?

Yes No

No

Yes

EU member states (except Eire & UK)

[Yes (e.g. Tsukada 2002)]

[No, German law tradition]

[Yes]

[No, in tort] [No, and mostly career judges] [Medium-High, in private law? (e.g. Rahn 1990)]

[No]

[Yes, never awarded]

[Japan]

PL Law and other ‘strict liability’ regimes

75

most of this literature did not compare third countries like the UK which reveal some important similarities with Japan (but see e.g. Easton 2000). Broader aspects of the different legal systems are also important in deciding what sources to refer to in this chapter’s comparison mainly of substantive PL law. Comparative law theory has come a long way since the days when legislation was the main subject of comparison (Zweigert and Ko¨tz 1998). Nonetheless, because legislation is much more important for law reform in both the ‘civil law tradition’ in continental Europe (beginning, at least, with elaborate codes: e.g. Merryman 1985), and the Anglo-Commonwealth tradition (Stapleton 2002a: 1228), this is a very important starting point. By contrast, because PL law in the US has remained a matter of state law, with relatively few inroads even by state legislators into the burgeoning amount of case law generated by (often reformist) state courts since the mid-1960s, an essential reference point in the US becomes the Restatements. As outlined in Chapter 2, these are promulgated by a private body (the American Law Institute), and are only as persuasive as their Reporters – and the increasingly political process to which they are subjected. Further, the latest Restatement Third consists not only of 21 ‘sections’, of similar length to the legislative provisions compared in the EU, Australia, and Japan; but also quite lengthy ‘Comments’ broadly elucidating or justifying the sections, and even lengthier ‘Reporters Notes’ emphasizing supporting case law and some academic commentary. These Comments and Notes are similar, in depth of analysis of the law and particular facts, to the lengthier judgments which have to be elaborated by courts in the Anglo-Commonwealth tradition, especially at appellate levels, as well as the ECJ. They are also quite similar to the judgments rendered by non-elected (typically) career judges in continental European countries and – perhaps to a lesser extent – in Japan (see generally Merryman et al. 1994). For effective comparison with the US, therefore, case law from these other countries must be analysed in more detail. Much doctrinal scholarship, especially in the Anglo-Commonwealth tradition, is directed at – and complements – the less frequent, but denser and more integrated, corpus of judgments elaborated by professional judges, seeking to develop ‘case-law-focused middle theory’ (Stapleton 2002b). Even in Japanese private law – following more the German tradition of doctrinal scholarship, less dominated by strict doctrines of precedent – it therefore becomes important to refer to mainstream academic commentary. Accordingly, in comparing the Restatement Third and a few related legislative initiatives in the US, this chapter analyses quite closely the 1985 EC Directive enacted in the EU, referring also to an amending Directive and current law reform discussions, as well as legislative offshoots in Japan and Australia. For the PL Law, this task is facilitated by a joint commentary on its provisions issued by all major government agencies involved in discussions leading to its enactment (Madden trans. 1996); and a lengthier but similar commentary by the Economic Planning Agency (EPA 1994), the agency which had primary responsibility for coordinating responses because a major objective of the PL Law was consumer protection. In addition, this chapter tries to introduce and integrate a body of

76

PL Law and other ‘strict liability’ regimes

reasoned PL case law now emerging in Japan (e.g. Shimano 1999; Mitsui 2001), Australia (Kellam and Arste 2000), and the EU – especially England (e.g. Schuster 1998; Twigg-Flessner 2002) – even though it will ever only constitute a small fraction of the case law generated by very distinctive legal and social infrastructure in the US (cf. e.g. Henderson and Twerski 2000). The judgments now accumulating in the EU, Australia and Japan may prove quite transplantable – if not directly, in the form of citations in one jurisdiction’s courts of reasoning followed in another’s, then mediated through comparative academic studies like this book. Relatedly, this chapter tries to identify and incorporate some key authoritative commentaries from academic publications, particularly for Europe, Australia and Japan. An attempt is also made to include some quite early commentaries, as these have helped shape debates among other academics and perhaps some courts, and also to illustrate the rather simplistic approach of some comparisons published in the US soon after enactment of Japan’s PL Law (e.g. Marcuse 1996). Relatively little direct attention is paid to those writings’ analysis of Japan’s PL law, as they also tend to be quite incestuous in quoting from a limited body of literature in English. Instead, this chapter tries to add value by going directly to a range of good sources in the various jurisdictions compared. As in any evolving area of law, however, there is a steadily growing volume of commentary on the (typically controversial) history behind the substantive law norms and the statutory provisions (e.g. Masuda 1997), and prior and/or emerging case law (e.g. Kato 1994; Kellam et al. eds 1996; Howells 2000). This may provide further insights into the areas of uncertainty identified in this chapter, in particular, although it can also reinforce diversity in views and reasoning. As a guide to the analysis, already necessarily detailed at times, Table 3.3 presents a comparative overview of the key provisions in the EC Directive, its offshoots in Japan and Australia, and the Restatement Third. Another means to structure the analysis involves introducing early on the tension – and sometimes potential commonalities – between consumer and business interests, and indicating how each regime compares in the balance reached in relation to particular provisions or issues. Overall, substantive PL law in the US probably still offers the most attractive or expansive regime for injured consumers. However, this has been significantly undermined by state legislation since the 1980s, and the retrenchment in case law reflected – or prompted – by the Restatement Third, especially the abandoning of strict liability for most design and warning defects. Australia’s TPA amendments in 1992 were more expansive than the original 1985 EC Directive; but the 1999 Directive extending coverage to primary agricultural produce, further amendments under discussion in EU institutions, and the slow accretion of case law are diminishing this difference. Japan may also eventually adopt the proposals now being debated in Europe; but the PL Law was already more favourable than the original 1985 Directive in many respects, and sometimes Japanese law matches US law or is even more favourable to consumers. This comparative analysis also leads to the broader conclusion that it was premature for US commentators to view enactment of the PL Law as proving the proposition that, in Japan, ‘courts plow the field, and the

arts 3(1) and 7(c), 3(2), [3(3)]1 art. 9 (16(1)) Arts. 7(e), 15(1)(b) art. 7(f)

Arts. 10(1), 10(2); 11 Arts. 13 (other liability systems) [5 and 8(t) (joint liability), 8(2) (comparative negligence), 12 (limitation clauses)]

art. 2(3)

art. 3 art. 4(1)

art. 4(2)

Arts. 5(1), 5(2)

art. 6 (Civil Code)

Manufacturers, etc. Liability Development risks exemption Component manufacturing exemption Limitations of time Other regimes

R 3d 2

n/a } 2 Comment n [} 9 (harm from misrepresentation); } 10 (post-sale failure to warn); } 11 (post-sale failure to recall); } 12–13 (successor liability); } 15 (causation); } 16 (increased harm); } 17 (apportioning responsibility); } 18 (disclaimers)]

Ss. 75AR (other rights), [75AM, 75AN, 75AP] [75 AQ (right of Trade Practices Commission or ACCC to bring suit)]

}5

S. 75AO

S. 75A

n/a (S. 2) S. 4 S. 75AC

} 2 Comment a } 19 } 2 (plus }} [3–4] generally, and }} [5–8] for particular products) Ss. 2 (in trade or commerce), } 20 (sells or distributes), } 14 (another’s 74A(4), 74A(3) [75AJ] product as own) Ss. 75AD, AE, AF, AG } 1, 21 (economic loss) S. 75AK n/a (but implicit in } 2, etc)

TPA

Notes 1 Provisions identified in square brackets contain no express equivalent in the PL Law. 2 Topic references for the Restatement Third are to the major ones only. The Restatement is rather confusingly set out in four chapters, as follows: (1) Liability of Commercial Product Suppliers Based on Product Defects at Time of Sale (}} 1–8), (2) Liability of Commercial Product Suppliers Not Based on Product Defects at Time of Sale (}} 9–11), (3) Liability of Successors and Apparent Manufacturers (}} 12–14), and (4) Provisions of General Applicability (}} 15–21).

Recitals 1, 2, 7, 10, 11, 16 art. 2 art. 6

art. 1 art. 2(1) art. 2(2)

Purpose Product Defect

EC Directive

PL Law

Topic

Table 3.3 PL Law provisions and counterparts in the EC Directive, the TPA, and the Restatement Third

78

PL Law and other ‘strict liability’ regimes

legislature freezes it’, reinforcing ‘political constraints on judicial lawmaking’ (Marcuse 1996: 366, the former citation being a private comment by Professor John Haley). Rather, the legislation has provided a flexible framework for judges to continue promoting the ‘re-birth’ of PL Law in Japan, discussed in Chapter 2, in a quite principled manner which often does – or at least can – advance consumer interests.

Purposes (PL Law Article 1) Article 1 of Japan’s PL Law lays out the purposes of the legislation as follows: By setting forth the liability of manufacturers, etc. for compensatory damages for harm to a person’s life, health or property due to defects in products, this law aims to protect the harmed person, and thereby (motte) to contribute to stability and improvement in consumer lifestyle (shohi seikatsu) and to the sound development of the national economy. Some foreign commentators have criticized this Article, and indeed the PL Law as a whole, as unduly downplaying the goal of consumer protection compared to economic development (Marcuse 1996: 365, 382–3). Certainly, as discussed further below, the first goal expressed is of protecting harmed ‘persons’, which can include sole proprietors suffering personal injuries in the course of their business and companies suffering consequential property damage. Yet such sole proprietors are also protected under the Directive, Australian legislation, and the Restatement. Thus the difference lies in consequential property damage. This is indeed not covered by the Directive and Part VA of the TPA, but it is covered by the Restatement as well as the PL Law, as discussed below (comparing Article 3). In any event, as evidenced by the PL Law claims so far outlined in Chapter 4, consequential property damage is often a much less significant aspect in practice, compared to personal injuries from defective products. Further, the primary goal is protection of such interests, namely to set forth a new remedy in damages. ‘Stability and improvement in consumer living’ is one related or secondary objective, which the legislators hoped would follow (‘thereby’) from this primary goal (see also Hayashida and Ohba 1997: 71). ‘Consumer lifestyle’ (shohi seikatsu) is hard to translate. As well as the everyday life of consumers as individuals, it arguably has the broader connotation of ‘living in contemporary consumer society or the consumer economy’, which might include the perspective of manufacturers and so on operating within that environment. Nonetheless, the focus should remain more on consumers, rather than the latter. That, after all, has been the approach adopted by the local government run Shohi Seikatsu Senta, literally translated as ‘Consumer Lifestyle Centres’ but sometimes simply as ‘Consumer Centres’ (Hamada et al. 1986: 83, 85–7), introduced in Chapter 2 and examined more closely in Chapter 4. The other secondary goal which legislators hoped would follow was the ‘sound development of the national

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economy’ (emphasis added). Legislative history and authoritative commentary show clearly that what was meant here was the fair apportionment of risks stemming from increasingly complex technological processes, by changing the basis of liability and damages to strict liability (EPA 1994: 40–5, 55). In other words, the goal was to encourage product safety and provide compensation by ‘internalizing externalities’ (Calabresi 1970). Some remain concerned that Japanese judges may begin one day to limit damages awarded to businesses for consequential property loss, and that this may lead to curtailment of damages awarded to consumers as well (Matsumoto 1997: 25). However, a judge wanting to avoid this consequence can find much to justify that stance even in Article 1 of the PL Law, as well as other provisions, legislative history and commentary. Another key point, lost on most foreign commentators, is that it is anyway almost unheard of for Japanese judges to subject the ‘purpose’ clause set out in legislation to detailed textual analysis, to bolster and direct judicial reasoning as in Anglo-Commonwealth (and some ECJ) court practice. For example, in one of the most recent judgments under the PL Law (No. 29, Appendix C: the ‘snapper’ case discussed further below), the Tokyo District Court simply cited generically both Articles 1 and 3 in arguing that a primary aim of the legislation was to lessen the burden of proof to better compensate those injured by defective products, by moving from fault or negligence based liability to strict liability. It then went on to propose three broad rationales for this shift (Hanrei Jiho 1805: 22), namely doctrines of: .

. .

‘responsibility for risks’ (‘ensuring product safety depends on manufacturers involved in producing or processing them, and they should compensate for risks which arise as they ought to be in a position to control them’); ‘responsibility for compensation’ (hosho: because manufacturers benefit from such business activities); and ‘responsibility for reliance’ (because users trust in the safety of the goods).

Moreover, the PL Law is not necessarily less consumer protection driven than the EC Directive. The latter’s preamble includes far more than ‘a single reference to economic matters’ (cf. Marcuse 1996: 383). Its first paragraph or recital states that harmonization is needed ‘because the existing divergences may distort competition and affect the movement of goods within the common market’. To similar effect, the third to last recital refers to ‘the correct functioning of the common market’, as well as ‘adequate protection of the consumer’. Further, the second recital argues that the proposed strict liability regime is ‘the sole means of adequately solving the problem, peculiar to our age of increasing technicality, of a fair apportionment of the risks inherent in modern technological production’. The seventh recital then states that ‘a fair apportionment of risk between the injured person and the producer implies that the producer should be able to free himself from liability if he furnishes proof as to the existing of certain exonerating circumstances’, later listed in Article 7 (and discussed further below). The tenth and eleventh recitals talk of limitation periods being in the interests of

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both the injured person and the producer. Thus, throughout the preamble – and indeed the Directive – there is a balancing of interests of consumer protection and of the contribution of manufacturers to economic development. This is also readily apparent from the legislative history of the Directive, sketched in Chapter 2. It is also clear in Australia, although understandably there is no separate statement of purpose only for Part VA of the TPA. Overall, section 2 states that the object of the TPA is ‘to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection’. The Australian Law Reform Commission’s proposals resulting in enactment of Part VA’s strict liability regime drew on what Duggan (1991: 269–70) refers to as more general consumer protection rationales of ‘welfare’ (particularly, ‘the assumption that consumers systematically under-estimate the risk of product-related accidents’) and ‘loss-shifting’ (insurance being more readily available to manufacturers than consumers). In the Restatement Third, there is a surprising dearth of analysis of the purposes behind setting out the key principles and rules in PL Law for the US. There is no discussion in Comment a on the ‘history’ behind section 1, establishing the broad proposition that ‘one engaged in the business of selling or otherwise distributing products who sells or distributes a defective product is subject to liability for harm to persons or property caused by the defect’. This Comment and the corresponding Reporter’s Note focus on developments in US case law, including promulgation of the predecessor section 402A of the Restatement Second in 1965, but do not allude even to the central policy reasons considered to have underpinned the latter and contemporaneous case law: ‘fairness’ in providing adequate compensation to consumers who rely on manufacturers, more appropriate ‘cost or risk spreading’ through commercial suppliers, and deterrence against supply of unsafe products. These considerations also framed the debates resulting in the EC Directive (Taschner 1999), as well as its offshoots in Australia and Japan. They have been expressly or impliedly invoked by courts interpreting these legislative provisions, as in the ‘snapper’ case judgment (mentioned above and discussed further below). To be sure, all three considerations and some related ones are analysed in Comment a to section 2 of the Restatement Third and the relevant Reporters’ Note, as underpinning the ‘rationale’ behind imposing strict liability for manufacturing defects, also discussed further below. However, the instrumental goal of achieving an optimal level of product safety is emphasized to justify ‘risk-utility balancing’, similar to that undertaken for imposing liability for negligence, in respect of design and warning defects. Referring to some academic literature, including their own, the Reporters allege for example that: ‘Users and consumers are relatively helpless with respect to harm caused by hidden manufacturing defects; but they are more often better risk minimizers than are product sellers with respect to generic risks involving the inherent design of products’ (R 3d }2 R.N. Comment a: 41). Yet, buried deep within subsequent Reporters’ Notes, one also uncovers a much more open-ended and undigested list of ‘public policies behind the imposition of strict liability in tort’, derived primarily from reported case law, which are acknowledged

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to have been relevant to deciding basic questions such as what constitutes a ‘product’ attracting PL law rules: (1) the public interest in life and health; (2) the invitations and solicitations of the manufacturer to purchase the product; (3) the justice of imposing the loss on the manufacturer who created the risk and reaped the profit; (4) the superior ability of the commercial enterprise to distribute the risk of injury as a cost of doing business; (5) the disparity in position and bargaining power that forces the consumer to depend entirely on the manufacturer; (6) the difficulty in requiring the injured party to trace back along the channel of trade in order to prove negligence; and (7) whether the product is in the stream of commerce. (R 3d }19 R.N. Comment a: 272) Many of these considerations favour consumer interests, but some do so more than others, and these and other factors may also conflict. The Reporters and the Restatement Third do not address such issues in the context of section 19, and present only a few pages of analysis when discussing the central issue of ‘defectiveness’ set out in section 2. Yet the considerations are discussed at length in the legal literature in the US and elsewhere, for example in the well-known writings analysing tort law and PL from the perspective of ‘law and economics’. Largely ignoring these writings is a surprising omission, as Gary Schwartz (1998) has observed. The Reporters may have hoped that the specific rules enunciated in the Restatement Third, for example on the scope of ‘defect’ and especially ‘products’ (discussed below), will obviate or considerably lessen the need for guidance on applicable policy arguments. Yet their own careful commentary reveals many areas where policy arguments appear unavoidable. By not analysing the law and economics literature, for example, the Reporters may also have wished to minimize further scope for acrimonious debate on their drafts and suggestions in developing the Restatement, knowing that the literature can be complex and highly contentious. Yet some of the key ideas for and against are straightforward, or at least can prompt structured and sensible debate (see e.g. Schwartz 1997). Thus, a final likely reason for the Restatement’s omission of more detailed analysis of the purposes behind PL law nowadays is the more general lack of consensus about them and PL law’s effects in the US, evidenced by the ongoing ‘tort reform’ debates and initiatives particularly since the 1980s, outlined in Chapter 2. In short, the balance – or, more negatively, the political compromise – struck in Japan, Europe, Australia and the US may be relatively more or less consumer protection orientated. But it is expecting too much to determine that precisely, or other policy considerations, solely from even a close reading of Article 1 of the PL Law, the Directive’s preamble, or even some relevant pages in the Restatement

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Third. The particular legislative provisions and the Restatement as a whole must be carefully compared, bearing in mind the complex and fluctuating history generating these bodies of norms.

Definitions (PL Law Article 2) ‘Product’ (Article 2(1)) Article 2(1) of the PL Law defines ‘products’ to which the law applies as, simply, ‘manufactured or processed movables (dosan)’. In turn, Articles 85 and 86 of the Civil Code define movables as all tangible property other than real property. Electricity, as intangible property, is therefore excluded, backed by the rather unconvincing policy argument that the manufacturer is usually also the supplier, with a direct contractual relationship to the consumer (EPA 1994: 58). By the same logic, a number of other movables could have been excluded. This goes against a principle underlying PL legislation such as this law, namely that liability should not be determined solely because of the lack of a legal relationship such as contract or, for that matter, ownership. Article 2 of the Directive also defines products as movables, but specifically includes electricity. Part VA of the TPA applies to ‘goods’, defined in section 4 to include gas and electricity. Section 19(a) of the Restatement Third defines a product as: tangible personal property distributed commercially for use or consumption. Other items, such as real property and electricity are products when the context of their distribution and use is sufficiently analogous to the distribution and use of tangible personal property that it is appropriate to apply the rules stated in this Restatement. The cryptic second sentence, in particular, requires examination of the official Comments, further embellished by the Reporters’ Notes. First, it turns out that ‘a majority of courts have held that electricity becomes a product only when it passes through the customer’s meter and enters the customer’s premises. Until then, the system of high-voltage transmission provides, not a product, but a service; before passing the meter and entering the plaintiff ’s premises, it is said, the electricity has not yet entered the stream of commerce.’3 Another difficult issue illustrated by some US case law is whether information contained in books (e.g. about cooking or travel) or maps (see e.g. Schultz 1999) is a sufficiently tangible product. Section 19 Comment d argues that: Most courts, expressing concern that imposing strict liability for the dissemination of false and defective information would significantly impact on free speech have, appropriately, refused to impose strict products liability in [the former] cases. One area in which some courts have imposed strict products liability involves false information contained in maps and

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navigational charts. In that context the falsity of the factual information is unambiguous and more akin to a classic product defect. However, the better view is that false information in such documents constitutes a misrepresentation that the user may properly rely on. (R 3d }19 Comment d: 269) The general legal principles imposing liability for misrepresentations are also more likely to be turned to in Australian and Japanese law, at least as a practical matter, assisted by the enactment of Japan’s Consumer Contracts Law 2000.4 In contrast, a well-known commentator in the UK notes that: Information provided by an author or printer remains problematic. On a strict view, the Directive would cover an author and printer or software manufacturer who produced incorrect information which was defective and led to injury. Examples might be unsafe cooking instructions or instructions for a chemical experiment or process which contain inadequate precautions. The author’s manuscript would be the defective component and the printer or software manufacturer would be the producer of the finished product. However, the United Kingdom government has taken the view that liability under the CPA is not intended to extend to pure information. It has stated that a printer is not liable for defective printed matter and a design consultant will not be liable for a mistake in design which causes a product to be defective. The position therefore remains unclear. It is clear, however, that where computer software is incorporated into a final product, such as a computer or an aeroplane, or printed instructions or warnings are supplied with the product, the manufacturer of the final product is treated as the producer of the defective software or printed information. (Hodges 2000a: 63–4) Stapleton agrees with the latter point. However, she appears to favour not extending liability to software manufacturers themselves, beginning with the observation that software as ‘mere information’ is not considered a ‘good’ in the UK law covering supply of goods, and pointing out the difficulties in finding something about software (and other intellectual property) that makes it conceptually similar to a product. Nonetheless, Stapleton (1994: 335) concludes that: ‘If the vague and often contradictory policy goals mentioned by reformers [in Europe] relating to deterrence, insurability and so on are all that is available to guide the ECJ in deciding what are ‘products’, the concept seems doomed, as in the US, to extend beyond the notion of goods, but in an unpredictable way’. Wilhelmsson (2000: 374, 377–9) has recently highlighted some broader trends, such as the tendency for private law to overrule principles of free speech in Europe, to urge application of the PL Directive to inaccurate content. He urges a shift towards the more substantive issues concerning how to determine whether this amounts to a defect, defined in Article 6 in terms of the consumer’s

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legitimate safety expectations. Wilhelmsson emphasizes a still high level of trust in the media (and corresponding need for responsible reporting) and their greater ability to check accuracy of information, for example, while conceding that consumers do not expect total accuracy in information which must be supplied quickly. In the Restatement Third, brief discussion of the important issue of applicability to software is relegated to a Reporter’s Note (}19 R.N. Comment d: 278–9). They observe that many academic commentators favour extending PL coverage to software (cf. also Mays 2001) and obiter dicta to that effect in Winter v. G.P. Putnam’s Sons 938 F 2d 1033 (9th Circuit 1991). The Reporters conclude that an analogy might be drawn with the UCC distinction between mass-produced and individually designed software. As Stapleton (1994: 334) had pointed out, however, ‘liability under the Directive is not confined to mass-produced goods and, in any case, non-goods such as [. . .] maps can be mass-produced and cause physical injury’. In Japan, authoritative commentary maintained flatly that all software, as incorporeal property, was not subject to the PL Law (Madden trans. 1996: 307), but its defectiveness could taint the final product into which the software is incorporated and therefore give rise to the liability on the final product manufacturer (MITI 1994a: 67).5 Even in the latter situation, it may be difficult to establish that a software defect is ‘defective’ in the required sense of ‘unsafe’ (cf. Case No. 10 in Appendix C, where a dubious PL Law claim was added on 28 September 1999 regarding accounting software allegedly resulting in over-paying corporate tax). The juridical nature of software has been further complicated by overlapping discussions on enacting legislation to cover software licensing – first in the US, then in the EU, and more recently in Japan – incorporating issues relating to consumer protection. More generally, items such as software illustrate problems like distinguishing ‘products’ from ‘services’. The latter are excluded from coverage either impliedly (as in the PL Law: Madden trans. 1996: 303) or expressly (as in section 19(b) of the Restatement Third). Such categorization issues remain to be resolved under background private law principles, and can get very complex, yet lack convincing rationales for drawing distinctions (see e.g. Stapleton 1994: 323–6). The picture is further complicated by the contemporary tendency to enact a variety of new regimes governing liability for services, as the significance of economic activity in the services sector and related disputes (particularly involving consumers) continues to grow steadily in industrialized democracies.6 Further, unlike the EC Directive and its offshoots in Australia and Japan, Comment d to section 20(c) of the Restatement attempts to illuminate some issues arising from ‘sales-services combinations’. It identifies a tendency for US courts to distinguish between situations in which the product component is consumed or permanently transferred to the customer (e.g. defective hair dye applied by a hairdresser), in which case the supplier (e.g. hairdresser) can be subjected to product liability, and those in which the product is not (e.g. defective scissors) and the supplier is not held liable. However, Comment d adds that ‘in a strong majority of jurisdictions, hospitals are held not to be sellers of products they supply in connection with the

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provision of medical care, regardless of the circumstances’. It is less likely that Japanese courts would carve out such a blanket exception from the scope of the PL Law for particular groups of suppliers like hospitals, especially as medical misadventure suits have rapidly increased in numbers and prominence since the 1990s.7 Returning to the other item mentioned in the cryptic second sentence of the Restatement Third’s Section 19(a) cited above, only in recent years have US courts begun to treat a few categories of sellers of improved real property as ‘product’ sellers. These include builders providing structures incorporating a variety of appliances or manufactured equipment, even when relevant land law may deem these to have become ‘fixtures’ or part of the underlying real property; those providing pre-fabricated buildings; and even dwellings ‘built, even if on-site, on a major scale, as in a large housing project’ (R 3d }19 Comment d: 270–1). Such expansive interpretations are unlikely given the clearer provisions and settled understandings of Japan’s Civil Code, and the more formal reasoning in this area of Australian law (Butt 2001). This therefore remains one potentially important area of potential PL law reform in Australia and especially Japan, where claims regarding defective real property have been a significant category of Civil Code judgments (Chapter 2 Table 2.1). On the other hand, statutory warranties supported by insurance schemes have been introduced quite recently in both countries, and expanding Directive coverage to clarify issues relating to real property has not been a major focus of amendment discussions in the EU.8 In the US, moreover, judicial expansion of the definition of ‘product’ in the attempt to apply ‘strict’ product liability doctrine is now becoming generally less significant in practice, because of a trend identified – or, some would say, promoted – in the Restatement Third to adopt a ‘negligence’ liability standard for design and warning defects (cf. R 3d }19 Comment a: 268; see also Chapter 2 and below). Agricultural products Another area for potential reform in Japan arises because the PL Law in effect excludes from coverage most primary agricultural products, leaving these to other liability regimes such as those established by various provisions in the Civil Code. ‘Manufacturing’ is sometimes used in a very broad sense in Japanese legislation, including any form of ‘producing’. To clarify that ‘manufactured’ is intended to take a narrower definition, while maintaining broad coverage, Article 2(1) adds the notion of ‘processing’. The latter is generally seen as involving the adding of some new attribute to the product. Thus, heating or flavouring (salting, etc) would mean the goods had been ‘processed’; but not, in principle, simply cutting, freezing, chilling or drying them (EPA 1994: 60–1; Madden trans. 1996: 304). Piped water, as in a contaminated municipal supply, may therefore be included if chemicals have been added to try to purify it. Bottled mineral water with no chemical additives, by contrast, may not be subject to the PL Law if found to contain mould (as in some water exported from New Zealand to Japan in the mid-1990s) – unless that defect was due to the bottling process or the

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containers themselves. In addition, one authoritative commentator has repeatedly suggested that some products subjected to bio-technological development may be covered by the PL Law (Masuda 1998: 146, 149; 2002). The latter view seems compelling; but in the absence of court decisions and more debate, all these interpretations are tentative. Ultimately, decisions may be based on more general principles such as consumer protection versus fair allocation of risk or economic development, just discussed (see also Nottage 1995: 12–14). But the requirement that goods be processed, if not necessarily manufactured, means that most primary agricultural produce was expected to be excluded from the Law’s coverage (EPA 1994: 62). However, such relatively settled views on this aspect of PL Law coverage were called in question first by PL Law Case No. 5 (Appendix C), rendered against a restaurateur claiming over 30 million yen (mostly for loss of business reputation) against suppliers of raw sea urchins for allegedly containing harmful bacteria which poisoned 23 restaurant customers. One contention of the defendants was that the urchins did not constitute processed ‘products’, particularly in light of the alleged focus of the PL Law on consumer protection, as opposed to the protection of businesspeople like the plaintiff restaurateur. In its judgment rendered on 2 February 1999, the Sendai District Court ducked this issue, simply noting that the urchins were stored in a cooler, shelled in another room at normal temperature, washed with alum water (myobansui), then placed with plastic pincers onto shelves with a plastic top. The Court made no ruling on this point, arguing (rather confidently) that it was unnecessary, in view of its holding that the plaintiffs had not proven that the harmful bacteria had arisen in the sea urchins by the time they were delivered by the plaintiffs. However, one commentator from the National Consumer Affairs Centre suggests that the sea urchins in this case could have been held expressly to have been ‘products’ (Shimano 1999: 45), in the light of the debates leading to the general consensus that blood products should be covered by the PL Law despite their minimal processing (as discussed below). This view has proved prescient, with the Tokyo District Court expressly deciding on 13 December 2002 that sliced snapper (fish) washed in chilled water and served raw, as well as the fish grilled with salt, constituted a processed product within the scope of Article 2(1). In this case, the Court went on to award against the restaurateur a total of just over 12 million yen, out of 38 million claimed, to eight customers poisoned by a rare substance, from Shiga toxinproducing Escherichia coli bacteria (‘STEC’, shigatera dokuso), which can be absorbed into fish (PL Case No. 29, Appendix C). The Court reasoned that three purposes perceived as underlying the PL Law’s shift to a strict liability regime (mentioned above) required exclusion of produce obtained in their ‘natural state’, like as yet unprocessed agricultural produce; but held that ‘processing’ included, as in the restaurant preparing this raw fish (sashimi), artificially ‘adding a new attribute or value’ even while retaining the intrinsic elements of the item (Hanrei Jiho 1805: 22, emphasis added). It rejected the defendant’s submission that ‘processing’ required the supplier to be able to discover and avoid the risk,

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arguing this amounted to an invitation to determine negligence or otherwise, contrary to the clear intention behind the PL Law of establishing a strict liability regime. The Court also rejected the submission that the defendant joint stock corporation (kabushiki gaisha: see Nottage and Wolff 2000–3) should not be held to have ‘processed’ the fish, because it was effectively a one-person operation and therefore similar to a consumer in economic power, so that imposing liability would be contrary to tort law’s general principle of ‘fair apportionment of losses’. The Court responded that the PL Law made no distinction between the type and scale of businesses which might supply defective products, suggesting that this related to this specific tort legislation’s perceived rationales of ‘responsibility for risks’ and ‘responsibility for hosho’ (mentioned above under ‘Purposes’). It also noted that the Law was limited to those ‘in business’, meaning those undertaking repetitive or continuous dealings (as discussed further below), arguably on the basis that they would be able to set in place means for distributing and avoiding the risk of liability for defects not premised on negligence, as part of their business planning. The Court further argued that it was a widely known fact that the need for systems for distributing such risks has been stressed in the lead up to enactment of the PL Law, and that the expansion of corresponding liability insurance schemes had been aimed for. It then noted that the defendant in this case had taken out insurance advertised by an association (shadan hojin) as ‘Full Response to the PL Era’, covering up to 50 million yen in business losses arising from accidents involving foods (Hanrei Jiho 1805: 23). Presumably this insurance would have covered the 12 million yen awarded by the Court, although this will depend on the terms of the insurance contract (see generally Pearl 2000). That should reinforce the considerable expansion in PL insurance coverage indeed associated with PL Law enactment generally (evidenced in Chapter 4). Initially, Article 2 of the Directive, as originally enacted in 1985, seemed clearer than the PL Law. It specifically excluded ‘primary agricultural products and game’, and defining the former as ‘products of the soil, of stock-farming and of fisheries, excluding products which have undergone initial processing’. Thus, piped water and gas were included (Geddes 1992: 12). Confusingly, however, recital 3 of the preamble stated that strict liability should apply ‘only to movables which have been industrially produced’, and that it should be excluded for agricultural products and game, ‘except where they have undergone a processing of an industrial nature which could cause a defect in the product’. British commentators pointed out that ‘initial’ processing is not necessarily the same as ‘industrial’ processing (Howells 1993: 33–4, 92, citing Lord Denning in 1987, in the House of Lords’ debate on the Bill proposed to incorporate the Directive into UK law). Even taking the latter concept as determinative, both freezing and drying – where this could cause a defect in the product – may bring agricultural products within the scope of the Directive and UK law (Geddes 1992: 13, 17–18). In those two respects, then, the scope of the PL Law, as currently interpreted, may be narrower. Further, Article 15(1)(a) of the 1985 Directive permitted member states to provide, in its legislation implementing the Directive into national law, that

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‘product’ shall extend to primary agricultural products and game anyway. In fact, only Luxembourg (in 1991), Sweden (1994) and belatedly France (1998) allowed this (see Table 3.1 above). After the British government confessed in 1996 that ‘mad cow disease’ (BSE) might be linked to vCJD, fatal to humans, the Commission began seriously investigating the inclusion of agricultural produce, whether processed or not. As outlined in Chapter 2, this resulted in an amending Directive (1999/34/EC), requiring transposition into national law by 4 December 2000, which was implemented for example by the UK Consumer Protection Act 1987 (Product Liability) (Modification) Order 2000 in force from that date. This change is largely symbolic as far as BSE in beef is concerned, because all EU member states finally enforce more strictly a plethora of regulations aimed at preventing BSE’s spread through herds and processing chains. On the other hand, there remain considerable scientific uncertainties as to the initial origins and transmission mechanisms of transmissible spongiform encephalopathies like BSE, within cows and other species such as sheep (Nottage 2003b; Stapleton 2002a: 1234–8). The most serious barrier facing consumers tempted to invoke the amended Directive to seek compensation against farmers or processors remains causation – proving that the contamination was sourced from a particular supplier. Causation is another area which the Commission is now investigating for further reform, as mentioned in Chapter 2 and below, but it seems unlikely to resolve all problems created by such ‘generic pre-manufacture infections’. From the outset, section 4 of the TPA unambiguously and invariably defined ‘goods’ to include animals (including fish), minerals, trees and crops. Section 75AA also defines ‘manufactured’ very broadly for the purposes of Part VA, as meaning ‘grown, extracted, produced, processed and assembled’. Similarly, in the US: ‘Raw materials are products, whether manufactured, such as sheet metal; processed, such as lumber; or gathered and sold or distributed in raw condition, such as unwashed gravel and farm produce’, and ‘when a living animal is sold commercially and causes harm to other property or to persons, the animal constitutes a product’ (R 3d }19 Comment b: 268–9).9 Even ignoring problems of causation, however, the Restatement Third offers only fragmented treatment of what Stapleton (2002a: 1238–43) analyses as ‘generic pre-manufacture infections’ such as BSE. If an epidemic of vCJD arises because the nation’s blood supply has become contaminated with BSE, for example, no redress is provided under the Restatement because section 19(b) excludes ‘human blood and human tissue, even when provided commercially’. Comment c justifies this remarkable exclusion by noting that so-called blood-shield ‘legislation in almost all [US states] limits the liability of sellers of human blood and human tissue to the failure to exercise reasonable care, often by providing that human blood and human tissue are not “products” or that their provision is a “service”. Where legislation has not addressed the problem, courts have concluded that strict liability is inappropriate for harm caused by such product contamination’. Conk (2000: 1092–4) shows that the background to such developments, supported by Comment k even in section

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402A of the Restatement Second, is the evolution of the notion that such products, as well as prescription drugs and medical devices like vaccines, were useful but ‘unavoidably unsafe’ (see also Wagner and Peterson 1998). He goes on to focus his critique mainly on the more lenient standard of defectiveness – arguably even compared to the negligence standard re-introduced into section 2(b) – now incorporated into Section 6(c) of the Restatement Third: A prescription drug or medical device is not reasonably safe due to defective design if the foreseeable risks of harm posed by the drug or medical device are sufficiently great in relation to its foreseeable therapeutic benefits that reasonable health-care providers, knowing of such foreseeable risks and therapeutic benefits, would not prescribe the drug or medical device for any class of patient. The Reporters have retorted that many problems, including contaminated blood products, can still be categorized as involving ‘manufacturing defects’ which still lead to ‘strict liability’ imposed by section 2(a) (Henderson and Twerski 2001). In rebuttal, Conk (2002: 772–3) maintains that blood product problems are design defects, because each batch of blood is made without departure from its intended design. Supporting her thesis that ‘product’ liability is doctrinally unstable and better folded back into general tort law, Stapleton (2002: 1242–4, 1249–52) argues that this ‘classification’ dispute highlights the limits even of the Restatement Third’s attempt to establish conceptual order by differentiating between different categories of defects. She also criticizes an English High Court judge’s recent development of a distinction between ‘standard’ products, and ‘non-standard’ products (like blood contaminated with Hepatitis C), to help establish liability regarding such blood (A. & Others v. National Blood Authority and Another [2001] 3 All ER 289, QB). Such issues are discussed further below, in relation to determining defectiveness and the development risks defence. Already, however, it is important to note that both EU and Japanese law do not impose the Restatement Third’s initial hurdle of excluding blood products and human tissue altogether, nor do they attempt to set expressly a different standard for drug and vaccine manufacturers. All these items are widely considered to fall under Article 2 of the EC Directive (see e.g. Hodges 2000a: 65), and courts in England, France and elsewhere in Europe have recently considered the defectiveness of blood products.10 Of course, blood must have undergone some ‘processing’, but this is usually easy to satisfy – even blood donated for transfusions will have an anticoagulant added. In Japan, as elsewhere, blood supplies infected by Hepatitis C and HIV had resulted in extensive litigation by the 1990s (Feldman 1999). Accordingly, the issue of PL Law applicability in such situations – in the event of future accidents, and indeed potentially as a persuasive consideration in pending litigation – became one of the most hotly debated issues surrounding enactment (Asaoka 1995a). In the end, all agreed that blood products should be covered by the PL Law; but the House of Councillors issued a Supplementary Resolution urging all concerned to decide on their defectiveness in light of peculiar

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circumstances such as need for use in life-threatening situations, with no substitutes available, the provisions of warnings, and distribution subjected to ‘the world’s highest safety standards’ (Madden trans. 1996: 306; Hayashida and Ohba 1997: 75–6). They may also be subject to the development risks defence under Article 4(1), discussed below (Masuda 1998: 150). Overall, therefore, the PL legislation in Australia and (since 1999 amendments regarding primary agricultural produce) the EU appears to have the broadest scope of application, whereas the US regime imposes significant impediments regarding electricity supply, drugs and vaccines, and especially blood products. Japan’s PL Law applies to decidedly fewer ‘products’ compared to Australia and now the EU, but is more expansive compared to the Restatement Third particularly regarding blood products. However, the impact of these ‘gatekeeping’ differences depends crucially on the scope for developing ‘strict liability’ principles in assessing defectiveness, discussed next, and the intricately related ‘development risks’ defence. ‘Defect’ (Article 2(2)) The meaning of this term is of central importance, as it is supposed to substitute for proof of ‘negligence’ in a strict liability regime. Article 2(2) of the PL Law defines ‘defect’ as: the lack of safety a product ought to have, taking into account the nature of the product, its normally foreseeable manner of use, the time it was delivered, and all other circumstances relating to the product. Article 6 of the Directive is somewhat more specific: (1) A product is defective when it does not provide the safety which a person is entitled to expect, taking all the circumstances into account, including: (a) the presentation of the product; (b) the use to which it could reasonably be expected that the product would be put; (c) the time when the product was put into circulation. (2) A product shall not be considered defective for the sole reason that a better product is subsequently put into circulation. One difference which may be significant is that safety is judged as that which ‘a person is entitled to expect’. More than the phrasing in the PL Law, this highlights the question of whose expectations are dominant. Howells argues that they are those of the hypothetical average consumer, noting that recital 6 of the Preamble refers to the expectations of ‘the public at large’. However, manufacturers are also part of the general public. This question is a longstanding bone of contention (Schwartz 1991: 28, 42). Section 75AC of the TPA also defines defectiveness primarily in terms of safety such as ‘persons generally are

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entitled to expect’; but this is interpreted as the standard of ‘the community generally’, which presumably does not mean that of consumers generally (Kellam 1992: 13; cf. Travers 1993: 518–19, suggesting that this involves a ‘sophisticated standard of knowledge’ including those expertly qualified). However, the main argument seems to be that this is in contradistinction to judging safety in terms of subjective considerations, peculiar to the injured party (see also Harland 1995: 205, 208 n.9). In ACCC v. Glendale Chemical Products Pty. Ltd. (1998) ATPR 41–632, decided by the Federal Court of Australia and discussed further below, Justice Emmett referred to the explanatory memorandum to the TPA amendments and said (at 40,970): ‘The level of safety required is that which the community is entitled to expect. It is thus the objective knowledge and expectations of the community which are to be assessed, not the subjective knowledge and expectations of an injured party’. A similar point has been made in court judgments and commentaries on the PL Law. Beyond that, however, the scope of the relevant ‘community’ for determining legitimate safety expectations has not been given extensive treatment. Thus, a party suffering a particularly extensive injury due to some idiosyncrasy might be better off claiming under standard Civil Code negligence, as illustrated by a decision of Japan’s Supreme Court allowing full losses to be claimed by a traffic accident victim with an exceptionally long neck (Judgment of 29 October 1996, 3rd Petty Bench, Hanrei Jiho 1593: 58). By contrast, in PL Law Case No. 12 (Appendix C, the ‘foundation’ case) decided on 22 May 2000, the Tokyo District Court ruled that the cosmetics in question were not defective ‘in themselves’ (in design or manufacture), nor in the warnings given with them, despite referring extensively to the increasingly common (and well-known) allergic reactions to cosmetics generally in the Japanese population especially over the 1990s (Hanrei Jiho 1718: 15). Rather than linking these circumstances directly to an overall determination of ‘the lack of safety the product ought to have’, the Court appears to have folded them into its assessment of more specific factors such as those set out in Article 2(2), analysed further below.11 Nonetheless, as in determining the scope of applicable ‘products’, one’s view of the relevant community for an overall appraisal may depend significantly on the perceived balance between consumer protection and the manufacturers’ or overall economic interests in or behind the legislation (discussed above under ‘purposes’). An interesting question in this connection arose from PL Law Case No. 4, brought by parents of a girl who died in 1996 after eating a school lunch which the Osaka District Court (Sakai Branch) inferred to have been the source of fatal O–157 bacteria (see Appendix C). On 10 September 1999, the Court found the City liable in tort (under the State Compensation Law), and did not specifically mention the PL Law. However, its reasoning that the City and the Education Ministry had issued strong guidance to get all children to eat the lunches, thereby requiring an extremely high level of safety and giving rise to an inference of negligence in the event of food poisoning, might be carried over into the PL Law context. The tenor of the judgment suggests that the expectations of consumers are particularly important in these situations, rather than the

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perspective of suppliers operating in fulfilment of public duties – irrelevant also in determining whether they satisfy the PL Law’s definition of a ‘manufacturer’, as mentioned below. Support for such a view can be found in A. & Others v. National Blood Authority and Another [2001] 3 All ER 289 (QB), where Justice Burton held that ‘there is no necessary reason why a public authority or a non-profit organization should be any different position if the product is unsafe’, noting this accorded with the Advocate-General’s argument in the ‘Danish kidney’ case (para. 42), subsequently adopted in the judgment of the ECJ discussed further below (Case C-203/99, 2001 ECR I-3569). Article 2(2) of the PL Law sets out three specific factors as relevant to determining the ‘lack of safety a product ought to have’. The ‘nature of the product’, firstly, goes beyond issues peculiar to products where some dangerous feature is generally an inherent requisite. Commonly cited examples are guns or knives (say, for a chef), whose raison d’eˆtre is the ability to project deadly bullets or have a sharp edge – although some lawsuits have been brought in the US against gun and bullet manufacturers for defective designs and/or warnings (Robinson 2000). In Cook v. Pasminco Ltd [2000] FCA 677, the Federal Court of Australia also raised the question of a poison. Justice Lindgren suggested that it is the one ‘that does not do its deadly work that is defective rather than one that does’, a fairly uncontroversial point. However, he then carried this example over to argue that polluting factory emissions could not be unsafe under the TPA ‘because of a defect in them’, since it was pleaded that the emissions were ‘noxious and unwholesome’ – which the Judge took to mean being ‘true to their nature’. This is odd reasoning, because factory emissions are not intended to be noxious like some poisons or guns are intended to be deadly. To elucidate the relationship of a product’s ‘nature’ to safety expectations in more usual situations, the commentary by the EPA (1994: 68–9, 172–4) identifies several sub-factors, in fact echoing some US case law elaborating on the ‘consumer expectations’ test (e.g. Seattle-First National Bank v. Taubert 542 P 2d 774, 1975, Supreme Court of Washington). Those mentioned are: (i) the probability and extent of harm arising (e.g. in the context of someone’s peculiar physical attributes); (ii) warning and instructions; and (iii) ‘price vs. effect’ (the notion that the good should have at least the average safety expected of a similar product in a similar price range). The joint government agency commentary adds ‘the product’s utility (with a comparative consideration of any possible risks), . . . [and] the product’s normal duration of use and its useful life’ (Madden trans. 1996: 309). The first of the EPA sub-factors seems somewhat out of place. In the context of the Directive, a similar issue might be addressed more naturally in discussing the abovementioned question of whose ‘expectations’ are relevant. The second and third factors are usually discussed in the context of Article 6(1)(a) of the Directive, ‘presentation’ of the product (Howells 1993: 37–8). Some commentators on the PL Law argue that by not spelling out the latter as a factor to be considered in judging defectiveness, Japanese consumers are comparatively disadvantaged (Matsumoto 1997: 26). To some extent, this is so. Presentation of the product in contemporary consumer societies can raise expectations about the

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product, including safety expectations, by stressing its advantages and promoting consumer confidence in it. This arguably opens the way to greater scope for reasonable disappointment, and hence liability for harm suffered. On the other hand, if presentation includes warnings and instructions, these may become increasingly detailed, allowing the argument that expectations were or should have been diminished. Expectations, and scope for liability, can also be reduced by making it clear that certain designs are standard, compared to others at a higher price range (Howells 1993: 37–8). Section 75AC(2) of the TPA quite neatly illustrates this ambivalence. Paragraphs (a), (b) and (c) refer even more specifically than the Directive to ‘the manner in which, and the purpose for which, the goods have been marketed’, their packaging, and marking, as respectively being relevant to determining safety and hence defectiveness. These all tend to heighten expectations, thus working in favour of those harmed. Paragraphs (d) and (e), however, refer respectively to ‘any instructions for, or warnings with respect to, doing or refraining from doing anything with or in relation to the goods’, and ‘what might reasonably be expected to be done with or in relation to the goods’. These factors may tend to work the other way (Kellam 1992: 14). This is well illustrated by the Federal Court’s judgment in ACCC v. Glendale Chemical Products Pty. Ltd. (1998) ATPR 41–632, in its discussion of defectiveness, which Harland (2001: 36) sees as applying ‘quite a strict test’ because ‘the warning that was given seems to have been in accordance with the practice of the rest of the industry and there had apparently been no previous reports of similar accidents to that which occurred in this case’. The plaintiff Barnes had bought caustic soda at a supermarket to try to unblock a shower outlet in his home. He read the label’s instructions that it should be mixed with water and protective clothing worn; but he followed the advice of a friend at the supermarket and first poured boiling water down the outlet before tipping in the caustic soda, without wearing special clothing. The soda reacted violently with the hot water, sending boiling water back up into his face and causing severe injuries. The trial Court focused on the admission that Glendale was ‘marketing the product for the purpose for which it was in fact used’ by Barnes, namely to clean household drains (cf. section 75AC(2) para. (a)). Accordingly it could then more readily declare that ‘it is not unreasonable to expect that a householder could pour very hot, even boiling water down a drain in order to dislodge a blockage’ (cf. para. (e)). Having previously compared some of warnings circulated by other manufacturers in relation to the use of caustic soda (cf. para. (d)), the Court concluded: The question is whether it could reasonably be expected that a substance marketed for the purposes of cleaning drains could possibly have been used in a way in which it was used by Mr Barnes. In other words, would it be reasonable to expect that a consumer, despite the directions on the label, albeit not in the form of a warning, would use the substance in a different way for much the same purpose. Persons generally are entitled to expect to be warned of a danger or lack of safety in respect of a use to which goods

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In this case, the defendant’s admission in relation to the paragraph (a) factor seems to played an important role in finding defectiveness in the product; but in other cases there may be more argument, making the defendant’s counterarguments on factors (d) and (e) more likely to prevail. By contrast, by not specifying to such an extent the factors to be considered, the PL Law may leave so-minded judges greater scope to give judgments favouring consumer interests. In fact, during the final stages of the debate leading to its enactment, proconsumer interests sharply criticized proposals to spell out detailed factors in defining ‘defect’; instructions and warnings were some of them (e.g. Asaoka 1995a: 23, 28–9). Article 6(1)(b) of the Directive equates to the factor of ‘normally foreseeable manner of use’ in the PL Law, and uses very similar wording to section 75AC(2)(e) of the TPA, ‘what might reasonably be expected to be done with or in relation to them’. If the product has instructions or warnings, however, this may arguably reduce the scope of normally or reasonably expected uses. By not specifically listing the former as a factor to be considered, the PL Law may reduce the possibility of such arguments, again potentially favouring consumer interests. In contrast, for example, the English High Court seemed most impressed by the CPA equivalent of Directive Article 6(1)(b) in ruling against a woman who claimed injury from ‘toxic shock syndrome’, a rare disease which can arise from using tampons. In Worsley v. Tambrand Ltd., Justice Ebsworth concluded that: the reality of this case is that the claimant had lost the relevant [warning] leaflet and, for some inexplicable reason, misremembered its contents as to the onset of the illness. That does not render the box [urging reference to the leaflet inside] defective, and the claim must fail. The defendant had done what a menstruating woman was, in all the circumstances, entitled to expect: . . . (3) they cannot cater for lost leaflets or for those who choose not to replace them, as the claimant could have done after the Tuesday when she discovered its loss. ([2000] PIQR 95, QB) Article 6(1)(c) of the Directive requires consideration of ‘when the goods were put into circulation’. This is similar to the factor of when the product was ‘delivered’, provided by the PL Law, which is even more reminiscent of when the goods were ‘supplied by their manufacturer’ under section 75AC(2)(f) of the

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TPA. Some questions of interpretation of the three differing concepts are mentioned below. More importantly, in focusing on the time of marketing rather than the time of injury or trial, each of the regimes invites a comparison of the ‘state of the art’: judging the defectiveness or otherwise of the product in the light of then available alternatives (Howells 1993: 39–41; EPA 1994: 70–1). Article 6(2) of the Directive reinforces the importance of such a comparison. Although it states that the fact that a better product was subsequently put into circulation should not be the sole reason for finding a product defective, evidence of a change of design could still be led to help prove that an alternative design was feasible when the latter product was put into circulation (Howells 1993: 39). Section 75AC(3) of the TPA is an almost identical provision. It helps lessen the burden on a consumer which can be introduced by bringing in state of the art considerations when attempting to prove that a product was defective. The PL Law contains no equivalent provision; by not including this factor, it may have instead prejudiced consumer interests. However, particularly where a manufacturer is found to have improved features of its product following a complaint or claim, the manufacturers themselves have tended to accept liability (Sekine 1994: 2-3). Japanese courts may remain willing to give weight to such evidence even without a specific provision in the new PL Law. In the ‘car mask’ case (No. 20, Appendix C), the Sendai District Court noted that the defendant manufacturer had replaced metallic with plastic hooks after the accident injuring the (successful) plaintiff ’s eye. Conversely, when no feasible alternative design is evident, either on the part of the manufacturer or proposed by the plaintiff, the latter may still succeed in establishing liability based on evidence presented regarding the other factors and the court’s overall assessment of legitimate product safety expectations (cf. Madden trans. 1996: 309). Section 75AC(4) of the TPA raises another matter, not expressly dealt with in the Directive or the PL Law, which may benefit consumers. It states that an inference that goods have a defect is not to be made only because there was compliance with a ‘Commonwealth mandatory standard’ for them, which ‘was not the safest possible standard having regard to the latest state of scientific or technical knowledge when they were supplied’. To benefit from this provision, it could be argued that the manufacturer has to provide also evidence of the safest possible standard at the time. Even more unusually, and helpfully for consumers if the manufacturer might risk insolvency, section 75AK(1)(b) adds that a manufacturer can substitute the Commonwealth as defendant if it raises the defence that the defect arose only because the goods complied with a ‘Commonwealth mandatory standard’. However, both provisions are expressly limited to a ‘Commonwealth mandatory standard’, defined in section 75AA as one ‘imposed by a law of the Commonwealth’, although that section also confusingly defines ‘mandatory standard’ as one ‘that, under a law of the Commonwealth, a State or a Territory, must be complied with when then goods are supplied by their manufacturer, being a law creating an offence or liability where there is non-compliance’ (emphasis added; cf. Harland 2001: 38). Further, section 75AA adds that a ‘mandatory standard’ excludes one ‘which may be

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complied with by meeting a higher standard’. Most statutory standards – and standards set by an industry association lacking statutory enforcement mechanisms, not addressed specifically in Part VA at all – are such minimum standards, so there is little scope for applying sections 75AC(4) and 75AK(1)(b) (Kellam 1992: 17). There is also limited scope nowadays for application of the defence afforded by Article 7(d) of the Directive, for compliance with ‘mandatory regulations issued by the public authorities’ (emphasis added; Hodges 2000a: 74). Most government safety standards in Japan are minimum standards too. It is generally considered that compliance or otherwise with any governmental standards may be a factor to consider under the PL Law (EPA 1994: 72–3). Indeed, the joint government agency commentary observes that compliance ‘is an important consideration when deciding whether a defect is responsible for an accident involving a regulated product. The establishment in a reasonable manner of the technical standards used by safety regulations will enable better foreseeability of a defect determination as well as product safety for both businesses and consumers’ (Madden trans. 1996: 310). Other commentators insist that compliance with such standards does not necessarily preclude finding the product defective (e.g. Mori 1995: 113, 118). On the other hand, the ultimate finding will depend on other considerations spelt out or implied in Article 2(2), for which there will almost invariably be evidence adduced. In the ‘foundation’ case introduced above (PL Law Case No. 12), the Tokyo District Court criticized the defendant for belatedly amplifying the wording it used for its cosmetics, listing for example situations when they did not ‘go well with’ the customer’s skin, so ‘usage should be ceased’ (‘ohada ni awanai toki wa goshiyo o oyame kudasai’: Hanrei Jiho 1718: 17). However, it held that such improvements did not substantively affect the original wording’s content, which was in accordance with the requirements of the Pharmaceutical Affairs Law, as well as 1987 recommendations of the Japan Cosmetics Industry Federation’s voluntary standards, particularly in light of the extent of harm inherent in these cosmetics. Perhaps as a signal to regulators, particularly in light of the government’s experience in the ‘Big Four’ PL cases discussed in Chapter 2, the joint government agency commentary adds that if: (1) there is a cause and effect relationship between a deficiency in the safety regulations and the occurrence of the defect, and (2) there was ‘intent or negligence’ (illegal exercise or non-exercise of administrative regulatory authority) by ‘a public official who is in a position to wield government powers’, a requisite condition for reparation by the State pursuant to Article 1 of the State Compensation Act, the State will be held liable under the State Compensation Act, regardless of whether the manufacturer etc. is liable under the Product Liability Law. (Madden trans. 1996: 310–11) This may go some way towards the solution added by section 75AK(1)(b) of the TPA. However, it is procedurally messier, requiring an extra proceeding by

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the manufacturer if the injured party does not sue the government under the Compensation Act, and the latter turns on negligence whereas the PL Law applies strict liability. The TPA, the Directive, and the PL Law also refer to other ‘circumstances’, in addition to the specific ones just discussed, as relevant to determining defectiveness in the sense of disappointed safety expectations. In A. & Others v. National Blood Authority and Another [2001] 3 All ER 289 (QB), Justice Burton concluded that ‘avoidability’ of the risk of Hepatitis C infecting blood processed by the National Blood Authority in the UK was not a ‘relevant’ circumstance under Article 6(1) of the Directive, because the drafters must have intended to list the most significant circumstances (para. 63), and especially because otherwise the courts would be forced in effect into evaluating whether the Authority had acted negligently in putting the blood into circulation – contrary to the Directive’s perceived intention of establishing strict liability (paras. 57–62). The judgment was not appealed, and remains a first-instance decision, so it is very unclear whether such a view will persuade other courts in Europe, let alone Australia and Japan. Yet the judgment is carefully reasoned, and other points have already been adopted by another High Court Judge in England (Bogle & Others v. McDonald’s Restaurants Limited [2002] EWHC 490, QB, discussed further below). The reluctance to import arguments overlapping with the issue of manufacturer negligence is also apparent in the ‘snapper’ case (discussed above, regarding the PL Law definition of ‘products’). Accordingly, this remains a distinct possibility for circumstances which Japanese courts may consider so important that they should have been spelt out in the statute. In light of the overall purposes of the legislation or its history, Article 2(2)’s reference to ‘all other circumstances’ should still allow consideration of other less significant factors. The joint government agency commentary refers, for example, to ‘the obviousness of the risk (the user’s degree of knowledge with regard to the method of use of the particular product), the extent of the product’s variability if quality, and force majeure circumstances such as natural calamities’ (Madden trans. 1996: 309). However, these have not yet been clearly established by the emerging case law applying the PL Law. By contrast, in the ‘foundation’ case introduced above (PL Law Case No. 12) in which the Tokyo District Court held that the cosmetics were not defective both in themselves (by design or manufacture) and in relation to warnings, one factor noted was the standards set by the Pharmaceutical Affairs Law, which both parties agreed were applicable and the Court considered not to have been breached. However, the judgment (Hanrei Jiho 1718: 14–16) spent much more time focusing on matters which relate primarily to the specific factors listed in the PL Law, also tracking standard interpretations such as those of the EPA. The Court weighed the links between the use of cosmetics and problems relating to the skin to which they must be applied, exacerbated by more and more cases of all sorts of allergies reported in Japan’s general population (e.g. a tripling in atopic dermatitis between 1994 and 1996), against only four complaints from 62,000 products manufactured since 1989 according to the defendant company (and three complaints to CLCs). Such

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matters go to the ‘nature of the product’ stipulated in Article 2(2), and especially the ‘probability and extent of harm’ mentioned in the EPA commentary. The Court also discussed the fact that cosmetics vary in frequency and intensity of usage, making warnings and instructions – and advertising material – very important. The latter points go to another sub-factor mentioned by the EPA, while the former ‘usage’ consideration can be related to the Article 2(2) factor of ‘normally foreseeable manner of use’ – also potentially connected to growing expectations and information for doctors involved in providing advice to those reporting skin problems, although the judgment only mentions this in passing. The Court also referred to the rapid increase in skin allergies over the 1990s, and reactions from the industry and defendant company, which can be linked to the factor of the ‘time’ at which the product was delivered and the ‘state of the art’. Another example of interpretations generally tracking the factors set out in Article 2(2) of the PL Law, and most commentaries, comes from the government’s submission to the Diet and the House of Councillors’ Supplementary Resolution regarding matters expected to be taken into account in assessing the defectiveness or otherwise of blood products. The commentary jointly issued by the EPA and other government agencies reproduces these, as follows: (a) whether the product is used in life-threatening situations, there is no other medical treatment available, and the product is highly effective; (b) whether there are warning labels to the effect that there is a possibility of viral infection as a result of blood transfusions and/or side effects as a result of immunoreactions; (c) whether, although it is technically impossible to completely eliminate the risk of viral infections and/or side effects as a result of immunoreactions, the blood products are distributed after being subjected to the world’s highest standards of safety measures. (Madden trans. 1996: 306) However, these considerations also remain to be tested in Japanese courts. In cases involving blood or similar products which cannot be settled, they may prefer a harder line in the light of recent judgments in France (Larroumet 2001b), and especially England (A. & Others v. National Blood Authority and Another [2001] 3 All ER 289). The Restatement Third has moved away from the generalized approach adopted by the EC Directive and its offshoots, focused on an overall assessment of legitimate product safety expectations, assisted by consideration of some more specific factors. Instead, as outlined in Chapter 2, one of its most controversial features is section 2’s sharp distinctions among (a) manufacturing defects, (b) design defects, and (c) instructions or warnings defects. ‘Strict liability’ is said to follow, under section 1, only in the first category – ‘when the product departs from its intended design even though all possible care was exercised in the preparation and marketing of the product’ (R 3d section 2(a)). For the other two,

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there is liability only for negligence because there is only a defect when, respectively, ‘the foreseeable risks of harm posed by the products could have been reduced or avoided by the adoption of a reasonable alternative design’ (‘RAD’: section 2(b)) or ‘by the provision of reasonable instructions or warnings’ (section 2(c)), and the omission in each case ‘renders the product not reasonably safe’ (emphasis added). The latter invites consideration of the ‘state of the art’, as industry practice will usually be very relevant to the reasonableness of alternatives or whether their omission results in an unreasonable lack of safety, although plaintiff ’s evidence of a feasible alternative may still be enough even if the alternative ‘was not adopted by any manufacturer, or even considered for commercial use, at the time of sale’ (section 2(a) Comment d: 20). Further, the ‘general rule in cases involving allergic reactions is that warning is required when the harm-causing ingredient is one to which a substantial number of persons are allergic’ (Comment k: 32, emphasis added), a factor also alluded to – rather obliquely – in the ‘foundation’ case (PL Case No. 12) discussed above. (As mentioned above, moreover, section 6 also provides less stringent requirements for prescription drugs: Conk 2000.) ‘Obviousness of risk’, an additional circumstance which some PL Law commentaries consider relevant to determining design defects (e.g. Madden trans. 1996: 309), is proudly proclaimed by the Reporters as no longer an absolute bar to recovery as under some US case law applying the consumer expectations test (Henderson 1998: 29), but it can still be considered in determining design defects (R 3d } 2 Comment g: 28). Comment j adds that defendants are generally not liable ‘for failing to warn or instruct regarding risks and risk avoidance measures that should be obvious to, or generally known by, foreseeable product users’ (see also V. Schwartz 1999). By contrast, in reasoning that the manufacturer was liable for a defective design, Lord Justice Pill in the English Court of Appeal recently stressed that a piece of metal on an end of some elastic on a baby product, which snapped back into the eye of an older brother trying to fit it, was an ‘obvious risk’ or danger. (Justice Wright agreed with him, and Lord Justice Chadwick also held in favour of the plaintiff, in the first substantive case to reach this appellate Court in England: Iman Abouzaid v. Mothercare (U.K.) Ltd. [2000] EWCA 438, 21 December 2000). More positively for consumers under section 2 of the Restatement Third, Comment l clarifies that ‘warnings are not a substitute . . . for the provision of a reasonably safe design’. This inter-relationship, too, was not spelt out for example in the ‘foundation’ case (cf. Hanrei Jiho 1718: 14). More generally, there are numerous problems with the general categorization in this Restatement, as well as its layout designed to emphasize the primary distinctions between types of defects and consequent liability standards (Stapleton 2000). ‘Consumer expectations’ as to safety, which the Reporters concede are clearly or arguably used in several states instead of the RAD approach as the basis for imposing ‘strict liability’ for design defects in a different sense – closer to that of the EC Directive and its offshoots – sneak back into section 2(b) as one factor governing whether the omission of a RAD renders a product not unreasonably safe. The ‘broad range of factors’ relevant to that

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conclusion includes ‘the magnitude and probability of the foreseeable risks of harm, the instructions and warnings accompanying the product, and the nature and strength of consumer expectations regarding the product, including expectations arising from product portrayal’ (Comment f: 23), and consumer expectations ‘may even be ultimately determinative on risk-utility balancing’ relating to safety (Comment g: 28). Rather inconsistently, one of the rationales given in the Restatement Third for limiting the role of consumer expectations in determining liability for design (and warning) defects is that such expectations are ‘typically more difficult to discern than in the case of a manufacturing defect’ (Comment a: 16). In addition, section 7 states that: ‘Under } 2(a), a harm-causing ingredient of [a] food product constitutes a defect if a reasonable consumer would not expect the food product to contain that ingredient’. Indeed, Comment b indicates a broader problem of categorizing problems involving foodstuffs into manufacturing design defects – it may be: unclear whether the ingredient that caused the plaintiff ’s harm is an unanticipated adulteration or is an inherent aspect of the product. For example, is a one-inch chicken bone in a chicken enchilada, or fish bone in fish chowder, a manufacturing defect or, instead, the inherent aspect of the product? The analytical problem stems from the circumstance that food products in many instances do not have specific product designs that may be used as a basis for determining whether the offending product ingredient constitutes a departure from design, and is thus a manufacturing defect. Food recipes vary over time, within the same restaurant or other commercial food-preparation facility, from facility to facility, and from locale to locale. (R 3d } 7 Comment b: 161) The commentary seems to envisage that such issues should be considered as ‘manufacturing defects’ under section 2(a), allowing application of allegedly more ‘well-formed’ consumer expectations reliant upon ‘culturally defined, widely shared standards that food products ought to meet’ (Comment b: 161). From the viewpoint of the EC Directive and its offshoots, one could query first the seeming arbitrariness of this particular categorization (a problem also raised in relation to blood products, as discussed under ‘purposes’ above). The categorization is also crucial for determining liability for defective ‘used products’ under the Restatement: section 8(a) establishes a defect arising ‘from the seller’s failure to exercise reasonable care’, whereas section 8(b) requires a manufacturing defect ‘and the seller’s marketing of the product would cause a reasonable person in the position of the buyer to expect the used product to present no greater risk of defect than if the product were new’. It adds that many factors affect ‘consumer expectations’ in the latter situation, including ‘the age and condition of used products and the commensurate lower prices paid for such products [which] alert reasonable buyers to the possibility of defects and the need to monitor the safety aspects of such products over time according to their age and condition’ (R 3d } 8 Comment b: 167). Generally, issues regarding ‘used products’ are very

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important under US case law, because PL has been extended to all commercial sellers in the distribution chain, in contrast to the EC Directive and its offshoots (as discussed below). The issues are even less important in Japan, where used product markets have been less developed anyway. Unsurprisingly, less guidance is provided by the joint government commentary, for example, in setting out what should be the subject of ‘careful consideration’ in assessing liability for used products, covered by the PL Law if ‘manufactured or processed’ movable property: ‘(1) the manner of use and the state of any alterations or repairs, etc., attributable to the previous user, and (2) any inspections, servicing or repairs, etc., attributable to the seller’ (Madden trans. 1996: 306). No specific mention is made of price, although this is read in generally by this and the EPA commentary as a sub-factor relevant to the ‘nature of the product’ (as mentioned above).12 Secondly, one wonders why the possibility of sufficiently ‘well-formed’ consumer expectations at least for some designs or warnings is totally excluded by such categorization, thus requiring always that the plaintiff prove a RAD or better instructions. That is not an absolute requirement under those statutory regimes, as mentioned above, although it may be relevant and in practice the plaintiff will often try to bring evidence along those lines. In addition, because the Restatement Third tries to downplay the role of ‘consumer expectations’, it provides little discussion of the scope of such expectations. It seems odd to refer to ‘consumer’ expectations, for example, given that businesses can also bring PL law suits in the US (as under Japan’s legislation too, but not that in Australia and the EU, as discussed below). It would also be helpful to know if and how direct evidence might be adduced, e.g. from surveys, as to actual ‘consumer expectations’ regarding safety. This is apparently very rare in US court practice (Wheeler 1998: 82), and not likely in Australia – yet not inconceivable there (cf. Travers 1993: 520; more generally, see e.g. Braithwaite 1995). The extra burden of proving a better alternative inevitably follows for design and warning defects under the Restatement Third, subject to three narrow exceptions. First, as discussed further below (comparing Article 3 of the PL Law), section 3 of the Restatement ‘provides that when circumstantial evidence supports the conclusion that a defect was a contributing cause of the harm and that the defect existed at the time of sale, it is unnecessary to identify the specific nature of the defect and meet the requisites of } 2’. Although section 3 is mainly directed at what are believed to be manufacturing defects, it is conceded to be applicable to possible design defects (Comment b: 112), in which case ‘some courts recognize consumer expectations as an adequate test of design, in apparent conflict with the reasonable alternative design requirement in } 2(b)’ (section 2 Comment b: 17). This further illustrates the instability of section 2. Secondly, proof of a reasonable alternative under the latter can be avoided for design and warning defects pursuant to section 4(a), which states that ‘a product’s noncompliance with an applicable product safety standard or administrative regulation renders the product defective with respect to the risks sought to be reduced by the statute or regulation’. This follows the overwhelming weight of US case law holding that an unexcused omission of a statutory safety requirement

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constitutes negligence in itself (e.g. Martin v. Herzog 126 NE 814, NY 1920), at least in relation to defective products. This unambiguous rule may be more stringent than in Europe, Japan or Australia; but it needs to be considered in the light of the fact that the US creates comparatively few administrative standards, relying instead heavily on voluntary standards (see Howells 2000, and Chapter 5). This fact also affects section 4(b), which states that a product’s compliance with such standards may be considered but ‘does not preclude as a matter of law a finding of product defect’. This general view is consistent with the approach under the Directive and its offshoots, but even less weight may be given to such compliance in the US because of general scepticism towards government (e.g. Bardach and Kagan 1982). However, the following circumstances helpfully illustrate why a compliant product may also be held not defective in the US: (a) ‘the standard or regulation was promulgated recently’, (b) it ‘addresses the very issue of product design or warning presented in the case before the court’ (arguably the situation in the ‘foundation’ case, PL Law Case No. 12), or (c) ‘the court is confident that the deliberative process by which the safety standard was established was full, fair, and thorough and reflected substantial expertise’ (section 4 Comment e: 123; see also e.g. the more positive view of US regulation-making presented by Freeman 1997). Some recent commentators go much further and argue that compliance at least with federal safety standards should always bar PL liability under state law, in the usual situation when such standards do not spell out their intention in that respect (Schwartz 2000).13 Compared to Europe and Australia, there is also very little discussion as to what should happen when the defect arises due solely to compliance with a mandatory government standard – perhaps because these are even rarer in the US (see Chapter 5). Thirdly, proof of a reasonable alternative design under section 2(b) will not be required when the product design is ‘manifestly unreasonable’. This follows some judgments reaching this conclusion because of a product’s ‘low social utility and a high degree of danger’ (R 3d }2 Comment e: 22–3). The Restatement Third argues that sometimes this can be reconceptualized by expanding the concept of what constitutes a RAD; but concedes that the latter may be viewed narrowly – because the original design feature is precisely that on which the user places value, yet the plaintiff complains – thus requiring a direct risk-utility assessment. However, the Restatement chooses rather trivial illustrations (toy guns shooting hard rubber pellets, and novelty items for parties), signalling that little scope is envisaged for avoiding the RAD requirement under this Comment (cf. e.g. Perlman 1998; Shapo 1998; Stewart 1998). In addition, it stresses that socially significant products – ‘widely distributed products such as alcoholic beverages, firearms, and above-ground swimming pools’ – can only be held defective if the particular product contains a manufacturing defect, or a better alternative can be proven for the entire class of goods, even if it ‘poses substantial risks of harm’, because ‘courts generally have concluded that legislatures and administrative agencies can, more appropriately than courts, consider the desirability of commercial distribution of some categories of widely used and consumed, but nevertheless dangerous, products’ (R 3d } 2 Comment d: 20–1).

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Such considerations have also been stressed by Japanese and Australian courts which have held against plaintiffs claiming under general tort law against cigarette manufacturers; but at least they would not face the pressure to detail some better design or warning, reinforced by the Restatement Third, should they proceed under strict liability legislation.14 Again, though, plaintiffs in proceeding under such regimes in Japan, Australia or Europe generally try to point to some such alternative, either introduced by the manufacturer after the litigation or reports of product safety claims, or suggested usually by expert witnesses for the proceedings. For example, in arguing both common law negligence and defective design or warnings under the Consumer Protection Act 1987 (CPA, implementing the EC Directive), the 36 claimants (mostly children) injured by scalding water contained in hot drinks which knocked over in McDonald’s restaurants, mostly between 1996 and 1998, pointed out that a tab on the coffee cup lids changed from ‘tear-off ’ to ‘tear-back’ (Bogle & Others v. McDonald’s Restaurants Limited [2002] EWHC 490, QB). However, little was made of this either by parties or the Court. More attention was paid to the temperature at which the coffee might have been served. In his discussion of negligence, Justice Field ruling that drinks served at between 55–60 degrees Celsius, to avoid the risk of severe scalding, would not have been acceptably hot to customers (reasonably aware of such a risk), because the best flavour is achieved by brewing with water at between 85–95 degrees (as in this case) and people generally like a hot drink to cool to their preferred temperature ([2002] EWHC 490 at para. 32). Also rejecting the CPA claim, Justice Field adopted some general points made by Justice Burton in A. & Others v. National Blood Authority and Another [2001] 3 All ER 289 (QB), including the view that ‘products that are obviously dangerous (such as a knife) are not defective: the consumer has a free choice whether to expose himself to the risk, but that choice must be an informed choice’, and ultimately concluded: Persons generally expect tea or coffee purchased to be consumed on the premises to be hot. Many prefer to consume a hot drink from an unlidded cup rather than through a spout in the lid. Persons generally know that if a hot drink is spilled onto someone, a serious scalding injury can result. They accordingly know that care must be taken to avoid such spills, especially if they are with young children. They expect precautions to be taken to guard against this risk but not to the point that they are denied the basic utility of being able to buy hot drinks to be consumed with the premises from a cup with the lid off. Given that the staff were trained to cap the drinks securely and given the capabilities of the cups and the lids, I am satisfied that the safety of the hot drinks served by McDonald’s was such as persons generally are entitled to expect. ([2002] EWHC 490 at para. 80) Also, in Richardson v. L.R.C. Products Limited [2000] PIQR 95 (QB), the High Court absolved the manufacturer of a condom which failed and caused an

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unwanted pregnancy by asserting – quite baldly – that people did not expect any method of contraception to be totally effective, and also because an expert witness from the US had established that condoms even manufactured to US standards often suffered inexplicable failures. However, in the National Blood Authority case, Justice Burton concluded by finding that blood products infected with Hepatitis C were defective, when delivered between 1998 (when this virus was precisely identified) and 1990 (when a screening test became available). Pivotal agreed facts were that medical professionals had known since the 1970s that some virus was infecting 1–3 per cent of donated blood, but this knowledge was not communicated to patients. Justice Burton found in favour of the 114 plaintiffs, arguing that in such circumstances the public was entitled to expect that blood transfused to them would be free from infection, and that the ‘unavoidability’ or otherwise of avoiding the risk at the time was irrelevant in this determination due to the strict liability focus of the Directive aimed at advancing consumer protection. His references to this making the products ‘non-standard’ is not so helpful, but the carefully reasoned and lengthy judgment – which was not appealed (Howells and Mildred 2002) – may signal a shift away from the quite strict approach of other first-instance courts in England so far. In XYZ & Others v. Schering Health Care Limited & Others (unreported, High Court (QB), 29 July 2002), Justice Mackay decided that the extensive medical evidence presented did not establish that the ‘third generation’ contraceptive pill presented the increased risk level compared to the second generation pill, that the parties had agreed should be determinative. Because of that agreement, the High Court hardly mentioned the broader issues of legal interpretation, meaning that the judgment provides little guidance as to likely further directions on this point, although its approach to how the law should deal with scientific evidence and methodology contributes to a much bigger and possibly even more controversial debate (Freeman 2002b; cf. generally e.g. Edmond and Mercer 1998; King 2002). A US case similar to Bogle arose recently in Martinelli v. Custom Accessories Inc. (14 Mass L Rptr 606, Massachusetts Superior Court, 21 May 2002). The plaintiff had bought a cup of coffee from a drive-up Dunkin’ Donuts outlet, which spilled and scalded her as she turned into her driveway. She claimed negligence and breach of warranty against the outlet, Dunkin’ Donuts Inc. itself, and the cup holder manufacturer and seller. The Court rejected her claim that the coffee was unreasonably hot, as she had not presented any evidence as to how hot the coffee was, remarking that as it usually served hot the mere fact of scalding was insufficient evidence. The Court also rejected the allegation that there should have been a warning that the coffee might burn if spilled, reasoning that there was no duty to warn of obvious dangers or those the plaintiff was aware of. The plaintiff had testified that she was aware she could be scalded, and that the average person in the community knows that hot coffee can burn. (The latter was a similar conclusion to that reached by Justice Field in the Bogle case, where McDonald’s had merely added the words ‘Caution: Hot!’ to its cups from January 1995.) Finally, the Massachusetts Superior Court rejected the argument of defective design, reasoning that a spill-proof cup need not be supplied

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(conceded also in Bogle) and that the plaintiff had brought no evidence that the cup or lid violated some applicable standard or was otherwise somehow unreasonably designed. This summary judgment contrasts with Stella Liebeck’s claim against McDonald’s in another state, in which hot coffee also spilled as she drove off, resulting in an award of $160,000 in compensatory damages in 1994. That case, still unreported in law reports, became notorious due to the extensive media coverage and outrage which ensued, particularly regarding the additional US$2,700,000 in punitive damages awarded by the jury. Far less coverage followed when the trial judge reduced the latter to US$640,000 and when the parties later settled out of court, illustrating a broader pattern of biased (prodefendant) media reporting of PL litigation over the 1990s in the US (McCann et al. 1998). The finding of liability may have been justified because Liebeck adduced sufficient evidence and/or brought it in a more pro-plaintiff jurisdiction, but the contrast with the Martinelli case is also likely to reflect the general shift in PL law illustrated and generally encouraged by the Restatement Third. ‘Manufacturer’ (Article 2(3)) Article 2(3) of the PL Law defines ‘manufacturer etc.’ in three paragraphs. Article 2(3)(1) first defines as a ‘manufacturer’ ‘any person who produces, processes or imports a product as a business’. ‘As a business’ is thought to mean carrying out similar acts repetitively or with intent to do so. If so, there is no need for the goods in question to be produced for immediate commercial gain, so trial products distributed for free and public (koeki) activities of schools or hospitals are widely thought to be covered (EPA 1994: 82). In PL Law Case No. 4 (Appendix C), Sakai City initially contended that the provision of school lunches in its schools ‘aims at the healthy development of children and is undertaken with the consent [nattoku] of their guardians, so the lunches do not constitute processed items provided ‘as a business’, and therefore [sic] do not amount to ‘products’ as defined in the PL Law’ (media reports cited by Hayashida and Ohba 1997: 39–40). As noted above, the Court found the City liable in tort and did not specifically mention the PL Law. However, the argument that it was undertaking a ‘business’ seems untenable anyway, in light of settled commentary on the Law, as does the argument as to the definition of a ‘product’ – really a separate one, presumably that the provision of the lunches was more in the nature of service transaction. Rather similarly, Article 3(1) of the Directive defines ‘producer’ as ‘the manufacturer of a finished product’ or ‘the producer of any raw material’. However the injured party does not have to show that such a producer was in business. Under Article 7(c), the latter can avoid any liability by itself proving that it did not manufacture or distribute the product in the course of its business; and that it did not manufacture the product ‘for sale or any form of distribution for economic purpose’. The former requirement is interpreted in a similar way to the ‘as a business’ requirement in Japan. However, adding a second requirement means that a truly one-off sale for commercial gain would be subject to the

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Directive, but possibly not the PL Law. In relation to the first (‘business’) requirement in Article 7(c), the ECJ has also made it clear in the ‘Danish kidney’ judgment (Case C–203/99, 2001 ECR I–3569) that the Directive covers the situation of a defective product (a donated organ, in that case) manufactured (treated) and used in the course of a specific medical service financed entirely from public funds (a hospital operated by a local authority), and for which the patient is not required to pay. A one-off sale for commercial gain would also attract liability under sections 75AD-AG of the TPA (discussed further below), since this is premised on supply ‘in trade or commerce’, defined in section 2 as ‘within Australia or between Australia and places outside Australia’. Generally, this is expansively interpreted (Kellam 1992: 13). However, the Federal Court in Cook v. Pasminco Ltd. [2000] FCA 677 re-emphasized that ‘in trade or commerce’ did not refer ‘merely to the broad field in which a corporation’s general activities of a trading or commercial nature are carried out’; the events must occur ‘as an aspect or element of activities of transactions’ themselves of that character – not satisfied for the factory emissions. (Justice Lindgren also argued that they had not been ‘supplied’, as section 4(1) envisaged sales, leases, or other bilateral and consensual transactions. He therefore did not feel the need to consider the defendant’s additional arguments that the emissions were not ‘manufactured’, nor ‘goods’, although he thought ‘there was much to be said for them’: see also generally Taschner 2000). Section 74A(4) adds that a corporation will be deemed to have manufactured such goods when they are ‘imported into Australia by a corporation that was not the manufacturer’ and ‘at the time of the importation the manufacturer of the goods does not have a place of business in Australia’. Although provisions of Part VA are expressed to apply only to ‘corporations’, these are defined broadly under section 2, and the legislation also extends to other persons in cases involving e.g. inter-state trade or commerce (sections 6(2)-(4)). Further, if the manufacturer did have a place of business in Australia when the goods were imported, it is likely still to do so when the claim is brought or tried, in which case it will often be more practical for to sue the manufacturer rather than the importer. However, the second requirement is not found in either the PL Law or the Directive, and thus blocks an avenue of recourse open to the injured party.15 Article 2(3)(2) of the PL Law next defines any ‘manufacturer’ (as defined in paragraph 1) to include: any person who presents its name, trade name, trademark or other mark (‘presents its name etc.’) on the product as its manufacturer; or presents its name etc. on the product so as to create the mistaken impression that it is the manufacturer. This is thought to capture even those who do not themselves manufacture, process or import the goods. The first clause captures those who add to the product a statement that it is ‘manufactured by [the person in question]’ or

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‘imported by [that person]’. The second clause captures those who do not state their name, etc. in this way on the product, but somehow – judged objectively – give that impression, e.g. by just stamping their name on the product with no further details (EPA 1994: 82–3). Article 2(3)(3) further includes: Any person, other than those listed in paragraphs 2 and 3, who presents its name etc. on the product and who can be recognized as the manufacturer in fact, considering the manner in which the product is manufactured, processed, imported or sold and other circumstances. In turn, this is interpreted to include those who are not actual manufacturers or importers, but who instead add to the product some statement that it is ‘sold by [that person]’ or ‘distributed by [that person]’, and where the general public can think of that person as the manufacturer or where that person is the sole supplier of the product. The manner in which the product is manufactured or processed might extend to whether the person manufactured or processed other similar products, and include whether it had production or testing facilities for the product or undertook final pre-shipment testing. The manner of importation might include consideration of whether the person divided the product into smaller lots or repackaged it. The manner of sale might include whether the person received manufactured or imported products and supplied them to the domestic market as a sole distributor (EPA 1994: 83–4). Again, all such interpretations have yet to be tested. The distinction between paragraphs 2 and 3 still does not appear clear. The EPA itself, for instance, has suggested that a supplier which contracts another company to manufacture a product it developed, and then distributes it exclusively under its own original brand without stating the manufacturer, may be caught by the second clause of paragraph 2 if it makes some representation suggesting it is the manufacturer. It would instead be caught under paragraph 3 if the supplier were more actively involved in the management decisions of the manufacturer with respect to the product. Similarly, in Original Equipment Manufacturing (OEM), the company affixing its brand name on products manufactured by another may be liable under paragraph 2, or arguably paragraph 3 if it has been more actively involved in the manufacturing process. As the PL Law is intended to establish liability for producing or importing products, however, paragraph 3 is thought not to apply even if there has been some representation of involvement merely in supplying or distributing the product, if common sense suggests that the person responsible is clearly not involved in production or importing at all and that there is a separate manufacturer or importer. Thus, a department store which merely sells others’ branded products in packages marked ‘specially selected by [that store]’ is thought unlikely to fall within these extended definitions (EPA 1994: 85–6). Although the scope of application of each may still be uncertain, these two paragraphs combined certainly broaden the definition of ‘manufacturer’ in the PL Law. Foreign licensors of trademarks may also be captured by either paragraph 2 or 3 (Mori 1995: 116).

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Article 6(1) of the Directive simply includes ‘any person who, by putting his name, trade mark or other distinguishing feature on the product, presents himself as the producer’. It is not clear whether ‘own-branders’ may remove themselves from this definition by prominently displaying that the manufacturer is someone else (Howells 1993: 31). Article 2(3)(3) of the PL Law, being more specific, may make this more difficult. Section 74A(3)(a) of the TPA includes ‘a corporation which holds itself out to the public as the manufacturer’. This arguably goes beyond affixing some identifying mark on the goods themselves. It could include generic advertising by the corporation, for instance. Indeed, section 74A(3)(c) extends coverage to a corporation which causes or allows a third party to promote goods holding out the corporation to the public as their manufacturer. Further, section 74A(3)(b) spells out that corporations are covered when they cause or permit a third party to affix an identifying mark on the goods, coverage which is only implicit in the wording of the PL Law and the Directive. In discussing ‘Glendale as manufacturer’ in ACCC v. Glendale (1998) ATPR 41–632, the trial Court rejected the defendant’s contention that section 74A(3) ‘cannot have effect in circumstances where there is a clear statement to the effect that Glendale did not manufacture the product but that the product was merely packed by it’. It concluded that this was contrary to the clear meaning and intent of the section, supported by policy reasons on the part of the legislator, namely: ‘. . . if a corporation is prepared to lend its name to a product by having its name or its logo affixed to the product, an individual injured by defect in that product need look no further than that corporation’ (at 40,968). This holding was upheld on appeal to the Full Federal Court [1999] ATPR 41,672, as were the trial Court’s findings and reasoning regarding ‘defect’ and the relevant ‘community’ for determining safety expectations (discussed above; see also Kellam and Giblett 2000). Overall, the wording of all three paragraphs in section 75A(3), together with this indication of how Australian courts will interpret the section, suggests that the TPA will provide the greatest coverage (although it again only applies to ‘corporations’, as explained above). Although the PL Law may hold a distributor or supplier liable particularly under Article 2(3)(3), albeit probably in restricted circumstances as discussed above, a person suffering harm in Japan does not enjoy the protection of a provision like Article 3(3) of the Directive or section 75AJ of the TPA. Although the TPA provision is more specific in scope, both deem a supplier to be the producer or importer if the latter is unidentifiable or unknown, and the supplier does not respond to a request from the injured person to identify the supplier’s supplier or the producer or importer. Rather unconvincingly, the EPA (1994: 87) argues that this was not included in the PL Law because it would have inconsistently introduced a more ‘subjective’ element into what should be objective, strict liability tort legislation; and because it has no precedent in other Japanese legislation. On 25 April 2002, the ECJ condemned 1998 amendments to the French Civil Code aimed belatedly at implementing the Directive, for extending strict liability

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to all suppliers, to the same extent as producers (Case No. C–52/00). In a related judgment that day (Case No. C–183/00), the Court also struck down 1984 legislation in Spain, additional to 1994 legislation implementing the Directive, because the former enacted a strict liability regime extending compensation for damages caused by using both services and products (including the blood products giving rise to the reference to the ECJ), from producers to suppliers and facilitators of the transactions. These rulings have clearly – but controversially – established the Directive as a ‘maximal harmonization’ measure, disallowing provisions of national law more favourable to consumers under strict liability regimes applicable to all products, as mentioned in Chapter 2 and explained further below (particularly in comparison with PL Law Article 6). By contrast, section 1 of the Restatement Third (cited above, under ‘Purposes’) imposes liability on anyone ‘engaged in the business of selling or otherwise distributing products’. Comment c argues that this ‘does not cover occasional sales (frequently referred to as “casual sales”) outside the regular course of the seller’s business. Thus, an occasional sale of surplus equipment by a business does not fall within the ambit of this rule’. This may be more exclusionary than in the other regimes compared above. More importantly, US case law is much broader in scope than all three regimes, even the Directive and the TPA, by allowing claims against any supplier in the chain of distribution – not just manufacturers, importers, certain types of own-branders, and some suppliers when the former cannot be identified. Often, it is more convenient for the end-user to claim versus its immediate supplier, not the – usually more geographically distant – wholesaler, importer or manufacturer. That supplier may also want to claim in turn against those further up the distribution chain, to recoup not only direct compensation amounts which it may have paid out to the end-user, but also more general damages for loss of future business from other customers as well. This is what happened in Japan’s ‘sea urchins’ case (PL Law Case No. 5), discussed above, in which the restaurateur claimed for both against its wholesaler and the latter’s importer, under both the PL Law and the Civil Code. But what if the Court had found that poisoning of the sea urchins had arisen when in the hands of the wholesaler? Because of Article 3(3), the restaurateur could only sue the importer. What if the importer were insolvent? The restaurateur, and therefore the customers if the restaurateur also went insolvent or otherwise managed to avoid paying compensation to them, would be left bearing the loss. For such reasons, and because of the possibility of those in the distribution chain limiting their liability by contract (albeit less so under contemporary regimes world-wide, especially in consumer contracts), US case law has long allowed claims against any commercial supplier in the chain. However, a major inroad into this principle has been made since the 1980s: Legislation has been enacted in many [US] jurisdictions that, to some extent, immunizes nonmanufacturing sellers or distributors from strict liability. The legislation is premised on the belief that bringing nonmanufacturing sellers or distributors into products liability litigation generates wasteful legal costs.

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PL Law and other ‘strict liability’ regimes Although liability in most cases is ultimately passed on to the manufacturer who is responsible for creating the product defect, nonmanufacturing sellers or distributors must devote resources to protect their interests. In most situations, therefore, immunizing non-manufacturers from strict liability saves those resources without jeopardizing the plaintiff ’s interests. To assure plaintiffs access to a responsible and solvent product seller or distributor, the statutes generally provide that the nonmanufacturing seller or distributor is immunized from strict liability only if: (1) the manufacturer is subject to the jurisdiction of the court of the plaintiff ’s domicile; and (2) the manufacturer is not, nor is likely to become, insolvent. (R 3d } 1. Comment e)

Comment e also identifies two problems with such statutes. Typically, they impose on the plaintiff the risk of insolvency of the manufacturer between the time the suit is brought and the time judgment is rendered. Secondly, ‘a nonmanufacturing seller or distributor occasionally will be responsible for the introduction of a defect in a product even though it exercised reasonable care in handling or supervising the product in its control’ (referring to Illustration 2 for section 2, giving the example of a customer abusing a bottle in the retailer’s shop, resulting in it exploding and injuring a buyer: Comment c: 19). Comment e argues that liability for such defects should be imposed on such non-manufacturing sellers or distributors. Even with such improvements in the statutes, they provide another example of the roll-back in PL law generally in the US in recent decades. However, states still without any such legislation – and even those with such statutes, depending also on their definitions of ‘non-manufacturing’ – provide consumers with more scope of PL redress than in Europe, Australia, or Japan. Section 20 of the Restatement Third adds definitions of ‘one who sells or otherwise distributes’, the phrase used in section 1 and other provisions. The definitions and Comments generally maintain judicial expansion in scope of application of the Restatement Second, including product ‘giveaways’ as a promotion, leases and bailments (see generally Cantu 1993). However, Comment g excludes those providing services (like advertising) to promote product sales, sales personnel, and auctioneers. Finally, section 14 extends potential liability to the supplier who sells or distributes ‘as its own a product manufactured by another’. This includes supplying another’s products ‘under its own trademark or logo . . . even if the seller discloses that the product was produced by an identified manufacturer specifically for the seller’ (R 3d } 14 Comment c: 228). However, trademark licensors are generally considered not to be liable, unless they ‘participate substantially in the design, manufacture or distribution of the licensee’s products’ (Comment d: 229, emphasis added; cf. also Article 4(2) below). This appears more restrictive than under the PL Law. It is also unclear what the position is regarding original designers and patent licensors (Buss 2000). However, because all commercial suppliers are held to the same standards of liability under the Restatement, finding someone fitting within section 14 may be less important than

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under similar provisions in other countries’ legislation. Others in the production or distribution chain may not be available to claim against. Also, many US states have now enacted legislation treating a non-manufacturing supplier more leniently. If the legislation does not specify their responsibilities, section 14 may still be important (Comment b).

Product liability (PL Law Article 3) This is the key provision in the PL Law, stating that: The manufacturer etc. shall be liable to compensate for damage arising from a defect in a product which it has delivered and manufactured, processed, imported or presented with its name etc in terms of Article 2(3)(2) or 2(3)(3), and which interferes with another’s life, health or property. Provided, however, that the manufacturer shall not be so liable for damage occurring only to the product itself. The requirement that the product be ‘delivered’ is interpreted in accordance with Article 178 of the Civil Code, requiring intentional transfer of possession. Products stolen from the manufacturer’s premises and causing harm to third parties therefore would not be covered (EPA 1994: 71–2, 96–7). In PL Law Case No. 1 (Appendix C), brought on 24 December 1995 by a restaurateur against the manufacturer of packs of pre-made tea and the company which produced its allegedly defectively designed ‘pull-ring’ for opening, the Niigata District Court (Nagaoka City Branch) rejected the claim on the basis that the products were delivered after the PL Law came into force on 1 July 1995. It noted that where multiple manufacturers were claimed against, the time when each manufacturer made delivery had to be specified; and that generally delivery referred to transfer into the control of another under one’s own volition, activating the dangers arising from the alleged defect. The Court rejected the view that the date of delivery was when the purchaser bought the product, and emphasized the production date of 18 May 1995 stamped on the pack in dismissing the claim. (The pull-ring would have been delivered to the pack manufacturer even earlier, of course, thus also time-barring a PL Law claim against the pull-ring manufacturer.)16 The importance of determining the time of delivery is also illustrated by the ‘poisoned sea urchins’ judgment introduced above (PL Law Case No. 5, Appendix C). The Sendai District Court decided that the restaurateur in that case had not proven that harmful bacteria had infected the sea urchins when still under the control of the wholesaler and its importer (let alone when caught and packed in China). It was likely that contamination had occurred after the sea urchins had been received by the restaurateur.17 By contrast, in the ‘botulism from olives’ judgment introduced above (PL Law Case No. 28), the Tokyo District Court inferred that the poison must have got into the jar before it was opened by the restaurateur, from circumstances such as its manner of

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storage and inconceivability of infestation from surroundings, the need for oxygen for the poison to develop, and the rarity of the particular variant being found in Japan. It then held that that the importer from Italy had not presented sufficient evidence to overturn this factual inference, although the evidence had addressed preparation of the olives, lack of reported poisoning from other jars, and patterns of poisoning among customers shown in this particular case. The PL Law does not necessarily spell this out either in Article 2(2) or Article 3, but the joint government agency commentary remarks that: for a manufacturer to be held liable for damages based on a defect, it is necessary that the defective product possesses the defect (i.e. lacks ordinary safety) at the time the product is delivered (i.e., at the time when the product leaves the control of the manufacturer, etc.). A determination that the product lacked ordinary safety at such time is also necessary. (Madden trans. 1996: 311) Article 1 of the Directive establishes that ‘the producer shall be liable for damage caused by a defect in his product’. In judging defectiveness, Article 6(1)(c) refers to ‘the time the product was put into circulation’, Article 7(a) provides an outright defence if the producer can prove that it ‘did not put the product into circulation’, and Article 7(b) another defence if it can prove that ‘having regard to the circumstances, it is probable that the defect which caused the damage did not exist at the time when the product was put into circulation by him or that this defect came into being afterward’. Article 7(a) of the Directive clearly applies to a case of stolen goods. However, British commentary indicates uncertainty as to whether the defence may also extend to trial products (Howells 1993: 41, citing a Department of Trade and Industry report in 1985 arguing that it does). As mentioned above, trial products are likely caught under Article 2(3)(1) of the PL Law if intended to be manufactured in a repetitive process: the only test is whether manufacturing, etc. is ‘as a business’. Directive Article 7(b), implemented by CPA 1987 section 4(1)(d), appears to have been decisive in Richardson v. L.R.C. Products Limited [2000] PIQR 95 (QB), for rejecting a claim that a condom was defective and therefore caused personal injury through the wife becoming pregnant (cf. Twigg-Flessner 2002: 37–8). The English High Court ruled that evidence as to what happened in the condom manufacturer’s factory, and what did and did not happen to the condom after use, made it more likely that cracks later found in the condom were ‘post-fracture damage’. (In addition, as mentioned above in discussing the nature of ‘defects’, Justice Richardson decided that the fracture found in the condom would not establish a defect, because people did not expect any method of contraception to be totally effective, and a US expert witness had established that condoms often suffered inexplicable failures.) Directive Article 7(b) is more succinctly restated in TPA section 75AK(1) as an affirmative defence arising when the defect in the goods ‘did not exist at the

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supply time’. Because the defendant similarly bears the burden of proof on the balance of probabilities, the Supreme Court of New South Wales ruled correctly in holding a ‘retreaded’ tyre manufacturer liable under section 75AD (Cheong v. Wong & Others, 34 MVR 359 (2001)). It agreed with one expert witness who considered that the tyre might either have been faulty at the time of retreading or – equally – damaged through the use to which it was put after being fitted and driven 19,536 kilometres, before the tread separated and caused an accident injuring the plaintiff passenger. (Interestingly, this stalemate, and the lack of indication of an underlying defect which ought to have been seen and responded to in the reasonable conduct of the retreader’s operations, led Justice Grove to uphold its defence on a claim of common law negligence – thus illustrating the continued importance of an independent ‘strict liability’ statutory cause of action.) By contrast, in the situation of such a tie on the evidence, the defendant would probably prevail under the PL Law, which seems to imply that it bears the burden of proving that a defect was present upon delivery. However, such ‘ties’ should be quite rare in court practice in Japan, as elsewhere. Proving specific defects Nonetheless, ‘ties’ may arise particularly where the product in question has been partially or completely destroyed. This, and the more general issue of establishing that the defect was in the product at the time of supply, relates to the degree to which parties must identify a particular problem as giving rise to the alleged defect. A further connected issue is whether and how a legal ‘inference’ of defectiveness can be drawn. Such issues were a major focus of debate leading up to enactment of the PL Law, and continue to be highlighted by court judgments and academic commentary, as in Europe and the US. The joint government agency commentary states enigmatically that the injured party must ‘clearly identify exactly where in the product it is defective’, yet ‘the degree of specificity should take into consideration the specific characteristics of the product [and an] assertion or proof of the existence of a defect should suffice if it is convincing enough in light of the socially accepted idea of a defect’ (Madden trans. 1996: 311). The ‘McDonald’s orange juice’ case decided by the Nagoya District Court on 30 June 1999 (Case No. 17, Appendix C), attracted much attention not only because it was first judgment awarding damages under the PL Law, but also because it favoured plaintiffs on these broader legal issues. The Court found for the consumer who bought meal from a McDonald’s outlet, took it back to her workplace, felt something get caught in her throat as she drank the orange juice, and was taken to hospital for treatment to a cut in her throat – where, unfortunately, the cup containing the rest of the juice was inadvertently thrown away. The Court decided that there had been relevant injury,18 caused by the orange juice (rather than, for example, any dental treatment),19 and therefore concluded briefly that: Mixing into the orange juice extraneous matter, able to create such injury to the throat of people drinking it, can be said to constitute a lack of the safety

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PL Law and other ‘strict liability’ regimes that juice generally has. Accordingly we hold that the orange juice was ‘defective’ under the Product Liability Law. The extraneous matter was not discovered, and in the end it is still unclear what it was. According to the facts found [. . .] above, considering that probably the Plaintiff threw up the extraneous matter when she vomited the contents of her stomach, and that the orange juice was thrown away without having been examined, it is too severe to require the Plaintiff to determine the extraneous matter with any further specificity. Whatever it was, if extraneous matter is mixed into juice able to cause injury to people drinking the juice, it is clear that the latter lacks the safety that juice usually has. Because of the clarity of the fact itself that there was extraneous matter in the orange juice sufficient to cause injury to the throat of the drinker (i.e. that it had a ‘defect’), the point that the form of the extraneous matter is unclear, does not affect our abovementioned holding.

The plaintiff ’s lawyer has written that he felt that the result was ‘not unrelated’ to the senior judge, out of the three usual for more complex District Court cases, being one of the very few who has taken the still comparatively restricted opportunity to join the judiciary after having practised as a lawyer (Hirazuka 1999: 3), instead of upon completing the government-funded legal training programme for all those who pass the very difficult national bar examination. On more doctrinal grounds, however, commentators generally thought the judgment was justified, and the plaintiff ’s lawyer has reported that the case was settled on appeal for three times the amount awarded by the District Court.20 Its judgment therefore stands as an illustration of the considerable flexibility open to Japanese courts nowadays, in setting the standard for the burden of proof in civil proceedings more generally. Drawing particularly on German legal principles, several courts and commentators agree generally that more than a ‘preponderance of evidence’ is required, and instead proof ‘beyond a reasonable doubt’ or proof ‘with a high degree of probability’ (e.g. Hattori & Henderson 1985: }7.05[13][b]). However, various techniques for avoiding or lowering this standard are increasingly recognized (e.g. Takahashi 1997: 388–405). Further, much debate on such issues arose specifically in relation to product liability over the 1990s. This was fuelled partly by debate in the early 1990s over whether or not to provide for certain legal presumptions in the PL Law (Masuda 1999: 29). No such provisions were ultimately enacted, but they were mentioned in deliberations or resolutions by both Houses of Parliament and in prior Deliberative Council sessions. Further discussion was prompted by judgments finding under the Civil Code against manufacturers of television sets, for instance (Yamaguchi 1999: 69). In a judgment rendered by the Osaka District Court on 29 March 1994 against Matsushita, maker of National and Panasonic brands (Case No. 128, Appendix D, translated in McAlinn and Port 2002), a cleaner testified that she saw smoke coming from the back of the television set, leading the Court to infer it caused a fire and must have been negligently manufactured.21 In a judgment against Sharp by the same Court on 18 September 1997 (Case

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No. 40), family members heard a loud noise emanate from the set and the screen went blank, but they then switched it off and went to bed. In that case as well, other evidence that the television was the cause of consequential damage was accepted by the Court. Nonetheless, the pattern is not uniform. Similar reasoning was deployed by the Tokyo District Court in its judgment of 31 August 1999, recognizing liability for a Sanyo freezer catching fire (Case No. 83). These cases build directly on a series of judgments in which negligence has been presumed, in practice similar to the doctrine of res ipsa loquitur (‘the thing speaks for itself ’) in Anglo-American law, even though Japanese courts did not clearly proclaim such as doctrine as an abstract principle. One major category of cases has involved accidents occurring soon after repair or maintenance, but another involves allegedly defective products. Commentators have emphasized that reversing the burden – onto the defendant, to disprove negligence – depends on the events allegedly allowing the presumption remaining within the exclusive control of the defendant, making very relevant for example the length of time passing between the events and the accident, and such principles are expected to be carried over by Japanese courts when drawing factual inferences of defectiveness too (Nottage and Kato 1999–2000: para. 86–100). Such considerations may also help justify some recent cases, which indicate that patterns are still emerging. In a judgment of 26 December 1997 (Case No. 42, upheld on appeals), the Tokyo District Court rejected one of Japan’s largest claims ever by private individuals, for 2 billion yen in consequential damages (including valuable paintings destroyed) caused by an allegedly defective Mitsubishi television catching fire. It acknowledged that the cause of the house burning down was either the television set or a ‘table top’, and that generally the chance of the former catching fire was more likely. Overall, however, the Court was not satisfied that the cause of the damage had been sufficiently traced to this particular television set, as opposed to the table top, given difficulties with the eye witness evidence of the defendant’s wife, evidence as to the circuit breakers in the house, and electrical cords. Nonetheless, in cases under the Civil Code and the PL Law, Japanese courts generally appear to be moving away from the notion that the defect need be specified quite precisely, at least where the products in question have been destroyed (Masuda 1999: 29–30). This also appears to be the trend recently in continental Europe. Indeed, Lenze (2002: 40) notes several judgments that ‘seem to suggest that it is sufficient for the plaintiff simply to prove that the product failed’, from France (e.g. judgments involving a new tyre bursting, decided in 2000; and a fireplace window exploding, decided in 2001) and Spain (e.g. an airbag which failed to inflate, 2001; burning car, 2000; garden chair, 1999). However, he contrasts two judgments of the Austrian Supreme Court, awarding damages caused by a bottle of sparkling water exploding in a car’s boot (4 Ob 87/97s, 8 April 1997) or by a bottle of fruit juice retrieved by a 7-year-old from her parent’s car (10 Ob 19/01v, 30 October 2001) without requiring the plaintiff to prove the precise cause of the blast, with a recent judgment rejecting a claim for damages caused by an aerosol spray which exploded when left in direct sunlight in a car (9 July 2002). The

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Supreme Court held that the plaintiff had not proven the requisite lack of safety, reportedly on the following basis: As the aerosol can carried a warning stating that the can was ‘under pressure’ and that it ‘must not be exposed to temperatures over 50 degrees Celcius’, a typical consumer could not expect that the can would endure higher temperatures. The expert evidence had shown that it was highly probable that the can burst at a temperature over 50 degrees Celcius. The claimant had managed to establish only a distant probability that the can exploded at a temperature lower than that, and, under the general rules of Austrian civil procedure, the standard of proof required was a high, not a distant, possibility. (Lenze 2002: 41) Noting that some English courts also seem to have taken a stricter approach recently, as in the ‘condom’ case introduced above, Lenze attempts to reconcile the cases and principles in Austrian law – and indeed pursuant to the Directive – in the following generally persuasive manner: A bottle of sparkling water should, prima facie, not explode and neither should a bottle of fruit juice, unless they are handled in a peculiar manner. The same goes for a new tyre and a fireplace window. An aerosol can, however, which carries a clearly visible warning that it should not be exposed to temperatures higher than 50 degrees Celcius (and thus should not be left in a car on a hot summer day) might very well explode if it is so exposed. The claimant [in the most recent Supreme Court case] would probably have succeeded had he been able to prove either that the metal plating was ‘faulty’ such that the can could very well have exploded at lower temperatures, or that the car was not exposed to direct sunlight or other heat source and that it was therefore likely that the can exploded at a lower temperature. In other words, the first option would have been to show the (most likely) cause of the defect, while the second would have been to illustrate such peculiar conduct of the product that it was for the producer to investigate the reason for the producer’s failure. At that point the burden would have been on the producer to show that the product was perfectly alright when it left his premises [EC Directive Art. 7(b)], or that the defect was one he could not have discovered when the product was supplied [Art. 7(e)]. In doing so, exploring the precise cause of the defect will often be the only possibility for the producer to escape liability. On the other hand, where a ‘typical consumer’ must reckon with the product failing – as was the case with the condom and the aerosol can – it is for him to show that the product would not have failed had it been made properly. In that case, proving the cause of the defect may often be the only possibility for the consumer to succeed in establishing liability. (Lenze 2002: 41–2)

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However, this approach turns on an overall assessment of what a ‘typical consumer’ can expect. Lenze remarks that the ECJ’s view of a ‘reasonably well informed and reasonably observant and circumspect’ person (Case C–220/98) should be extended from the context of misleading advertising; but this has proven controversial, as mentioned above (in discussing Article 2(2)). More specifically, it is difficult to apply Lenze’s suggested dichotomy in cases like the ‘breast implants’ judgment, rendered by the London Central County Court on 19 April 2000. In Foster v. Biosil 59 BMLR 178, relying in part on Justice Richardson’s reasoning in the ‘condoms’ case, Recorder Cherie Booth QC ruled that the plaintiff had not established ‘on the balance of probabilities that there was a defect in the product, not merely that the product failed in circumstances which were unsafe and contrary to what persons generally might expect’. Although she noted that the expert witnesses agreed that a breast implant, which ruptured soon after being inserted, failed either ‘due to a defect, or [because] the surgeon, during insertion, damaged it’, and that there was ‘no direct evidence of faulty implant because it is not available now for testing’, the part-time Judge (incidentally, the wife of British Prime Minister Tony Blair) held that on a balance of probabilities the plaintiff could not prove that either the manufacturer or the surgeon caused the subsequent leakage. This seems a very tough decision, also directing attention towards the supply process – the focus of traditional negligence law – instead of the nature of the goods and safety expectations – the key shift aimed at by a strict liability regime (see also TwiggFlessner 2002) – yet it would be difficult to argue that breast implants are more like aerosol cans than bottles. Nonetheless, that sort of assessment may become necessary and easier as case law is now evolving in Europe, and could assist Japanese courts as they continue to refine Civil Code principles for PL Law cases. Australia has not elaborated much helpful case law on this point, under the TPA amendments or indeed the background law of negligence (cf. e.g. Kilgannon v. Sharpe Bros. Pty. Ltd. (1986) 4 NSWLR 600, CA). As mentioned in Chapter 2, much debate followed the ALRC’s proposal simply to do away with the notion of defect altogether, leaving more of a causation requirement – that the goods failed to act as expected. The mostly political compromise involved in reinstating the notion in the TPA amendments, without including a reversed burden for proving defects, was not seen as a major practical problem by some influential commentators. Harland (1992: 197) suggested that reversing the burden of proof would only be decisive in those relatively rare situations when there was a ‘tie’ in the evidence, given that civil litigation only involved proof upon the balance of probabilities. Recent cases outside Australia indicate that this may be a significant problem, especially in jurisdictions where the starting point (at least) has been to require a higher standard of proof. Considerably more guidance is provided by US law. As mentioned above, one of the Restatement Third’s major objectives is to scale back a strict liability approach to determining design and warning defects. Particularly under section 2(b), the requirement that the plaintiff prove a ‘reasonable alternative design’ means that

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an alleged design defect will have to be established with considerable specificity. However, section 3 offers a potentially major exception. It states that: It may be inferred that the harm sustained by the plaintiff was caused by a product defect existing at the time of sale or distribution, without proof of a specific defect, when the incident that harmed the plaintiff: (a) was of a kind that ordinarily occurs as a result of product defect; and (b) was not, in the particular case, solely the result of causes other than that product defect existing at the time of sale or distribution. (R 3d } 3, emphasis added) Comments a and b observe that this derives from res ipsa locquitur doctrine, and that it usually will apply to cases where the product is no longer available and a manufacturing defect is possible, but that it may also be alleged for a design defect. However, it remains to be seen whether Courts will expansively interpret this section and the commentary’s notion of failing in a ‘manifestly intended function’ (cf. e.g. Perlman 1998: 101), especially for likely design defects. That should partly depend on whether and how they (re-)define manufacturing as opposed to design or warning defects, in cases such as allegedly defective condoms or blood products (cf. e.g. A. & Others v. National Blood Authority and Another [2001] 3 All ER 289 (QB), and the general discussion above regarding PL Law Article 2(2)). In any event, Comment d emphasizes several restrictions on the scope of application for section 3. Firstly, the plaintiff has the burden of proving that the harmful incident cannot be attributed solely to causes other than original defect, including the conduct of others. Secondly: Evidence may permit the inference that a defect in the product at the time of the harm-causing incident caused the product to malfunction, but not the inference that the defect existed at the time of sale or distribution. Such factors as the age of the product, possible alteration by repairers or others, and misuse by the plaintiff or third parties may have introduced the defect that causes harm. (R 3d }3 Comment d: 114) Both aspects therefore make it quite possible for US courts to reach decisions like that of the London Central County Court in the ‘breast implants’ case. They would also reinforce the 1999 ruling of the District Court in Washington DC in favour of a McDonald’s outlet which supplied allegedly defective lemonade, although the Judge did not refer to the Restatement. Scope of damages More obvious differences lie in the scope of damages covered by the PL Law. Uncontroversially, claims both for consequential or ‘expanded damages’ and for lost income are covered, subject only to the requirement of causality implicit in

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Article 3 (EPA 1994: 103, discussed below). Article 248 of the Code of Civil Procedure, amended in 1996 and in force since 1998 (see generally Taniguchi 1997), may now assist injured parties in cases in which it is clear that damage has arisen, but it is difficult to determine the amount of compensation with specificity. For instance, where an entire house has been burnt down, it will be relatively easy to prove not only that the house had been in existence, but also (at an abstract level) that there were household effects within the house. Even if the latter can be proven, it may be difficult to prove the existence of all furniture, clothes, books, and other items which should form the basis for calculating property damages. Even if their existence can be proved, it may be hard to prove their value at the time of purchase and their replacement value when the fire occurred, after having been used for months or years. For such cases, Article 248 provides that ‘where it is recognized that damages have occurred, if it is extremely difficult to prove the amount thereof from the nature of the damage, the court may determine a proper amount on the basis of the general tenor of the oral argument and the result of the examination of the evidence’. Accordingly, in the example just given, the court may award a reasonable aggregate amount of damages, taking into account the injured party’s living standards and other circumstances. Further, in the ‘botulism from olives’ case introduced above (PL Case No. 28, Appendix C), the Tokyo District Court applied Article 248 to estimate 2.7 million yen against the importer for diminished ‘business reputation’ for the plaintiff ’s restaurant for a year after media reports following it being briefly closed down by health authorities (Hanrei Jiho 1805: 193). The only express exclusion in article 3 of the PL Law is for damage solely to the defective product itself. By negative implication, damages for mental injury which do not involve interference with one’s own life, health or property are thought generally not be covered by this legislation (Madden trans. 1996: 315). However, Japanese law may allow more exceptions for example than English law (cf. Woollard 1998). Such a claim is presently pending under the PL Law (Case No. 21). But such situations are expected to be rare (EPA 1994: 98). More common will be situations in which the plaintiff suffers personal injury or other loss covered by insurance or compensation schemes, leaving a monetary claim solely for pain and suffering (isharyo) caused by the defendant’s defective product. This is clearly allowable under PL Law Article 6 (discussed below), and can often arise in practice because of Japan’s still extensive national health service and workers’ compensation schemes (Drennan 1998; Campbell and Ikegami 1998), although these have come under increasing pressure during the 1990s due to Japan’s ‘lost decade’ of economic stagnation and its rapidly ageing population. It was in fact the situation resulting in the ‘McDonald’s orange juice’ judgment introduced above (PL Law Case No. 10, Appendix C; see annotated translation in Appendix B). In addition to 50,000 out of 100,000 yen claimed against McDonald’s Japan as lawyers’ costs, the Nagoya District Court awarded 50,000 out of 300,000 yen claimed for pain and suffering resulting from consuming orange juice held to have contained some extraneous object which cut the plaintiff ’s throat, necessitating a hospital visit and a few days off work.

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Where the damage is solely to the defective product itself, the injured person must invoke the general tort and/or contract law provisions under the Civil Code. The principal cause of action in action is Article 709, phrased as liability upon proof of negligence, as illustrated in Table 2.2 in Chapter 2. Concurrent actions in tort and contract are not excluded in principle, unlike French law (Nicholas 1992: 173) or the English law tradition until recently (at least in some categories: see generally Cane 1996: 112–15). In contract, Article 570 provides for strict liability for latent defects (kashi tanpo sekinin); but only in the case of specific goods (tokutei butsu), and excluding claims for any consequential damages. For generic or fungible goods (shurui butsu), Article 415 provides full contractual remedies, although in theory the seller can avoid liability by proving lack of fault (EPA 1994: 95–6, 102–4; Kitagawa 1990: Part II, }2.14[5]). However, where the product is destroyed or damaged and personal injury or consequential damage ensues, the injured party can invoke Article 3 of the PL Law to claim for all losses. With its strict liability regime, this may be particularly useful where the damaged product was a generic good. The result is a major difference from the PL regimes in Europe, Australia and the US. As mentioned below, they would apply only to the claims for consequential injury or damage to certain other property (for example against the manufacturer of the defective product), leaving the plaintiff to other legal remedies regarding the losses to the defective product itself (for example in general tort law against the manufacturer, or in contract law against the retailer). This expansion in scope of application for the PL Law was a major debating point, but it was held to be necessary to reduce burdens on those harmed (Madden trans. 1996: 318). An important issue therefore becomes how to define what constitutes the relevant defective ‘product’, containing the defect, as opposed to any other product(s) or ‘property’ also damaged as a consequence. There is surprisingly little commentary on this point under the PL Law. In discussing a defence offered to manufacturers of certain ‘components’ or ‘raw material’ under Article 4(1), discussed below, the EPA (1994: 115) only mentions that it is not determinative whether the manufacturer delivered these with the intention of being used as such; it is still caught if actually so used in another product. But guidance is lacking on what constitutes a component, separate from ‘another product’. One well-known commentator, a plaintiff ’s lawyer, argues for example that brakes in an automobile are a component (Sekine 1994). Thus, if they can be shown to have a defect resulting in the automobile crashing and injuring a pedestrian, the plaintiff can sue the automobile manufacturer for any compensation payable to the pedestrian, and/or the brake manufacturer for such compensation and the damage to the automobile itself (as a separate product or ‘property’). Likewise, a large refrigerator unit built into restaurant premises may also be a component product, provided the unit was a ‘movable’ when delivered (Madden trans. 1996: 307), allowing a claim against the manufacturer of the unit if held to be defective, extending to compensation for any consequential damages to the premises (as other ‘property’). Analysing similar problems arising from tort law in England, including the CPA implementing the EC Directive, Tettenborn (2000: 341–2) makes the

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general point that three alternatives are conceptually possible. One is to view any complex product as ‘simply a congeries of all its separate parts’, in which case the law’s separate treatment of damages involving the ‘same property’ would be totally emasculated, and a plaintiff would always be able recover for all damage suffered except for that to the offending part. A second alternative, viewing a complex product as ‘necessarily an indivisible whole’, goes too far the other extreme, always barring recovery in a surprising manner. He argues for a third view, ‘something in between’, concluding for example that a complex product should be regarded as a whole ‘if (a) the component is attached to the product with some degree of permanence; (b) the product cannot be used without it; and (c) the component has no raison d’e´tre other than being attached to the product’. He also suggests that criterion (a) should also be sufficient in itself, and that (b) and (c) should be sufficient if (a) does not apply. Tettenborn also argues that attached components should count as ‘same property’ if attached by the manufacturer or even – although contrary to some recent US case law and the wording in the CPA (not necessarily required by the Directive) – by a previous owner (Tettenborn 2000: 344–7). However, such arguments may not be readily transferable to help determine a borderline case under the PL Law, because they turn in part on a broader doctrinal issues such as the extent to which contract and tort law generally are and should be clearly distinguished. Even English and US law differ on this, as reflected in a less expansive approach to allowing claims for ‘pure economic loss’ in the tort of negligence (see generally Stapleton 2002b). Under Article 9 of the Directive, damage includes only: (a) damage caused by death or personal injuries; (b) damage to, or destruction of, any item of property other than the defective product itself, with a lower threshold of 500 ECU, provided that the item of property: (i) is of a type ordinarily intended for private use or consumption, and (ii) was used by the insured person mainly for his own private use or consumption. A proviso adds that this ‘shall be without prejudice to national provisions relating to non-material damage’. The effect of this is ambiguous, and a source of much potential disharmony within European jurisdictions (Schwartz 1991: 45–6). More straightforwardly, where the product causes damage to itself as well as other harm, only the former can be claimed under Article 1. Another important restriction in the Directive’s scope is that consequential damage is really only for ‘private’ as opposed to ‘business’ property (Howells 1993: 46–7). The 1998 French legislation designed to implement the Directive does not distinguish between private and professional use of the defective product, but this is one of many grounds contested by the Commission in proceedings brought before the ECJ on 17 February 2000. Like the Restatement Third, too, Japan’s PL Law does not exclude claims for harm to ‘business’ property, for reasons mentioned in Chapter 2 and discussed further below. There have already been

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several reported claims brought under the PL Law by businesspeople particularly for lost profits stemming from a defective product or for harm to other goods arguably intended for or used more in business, as in the ‘snapper’ case or the ‘software’ case mentioned above, although so far more cases have involved ‘private’ damages claims (Appendix C; see also Chapter 4). Moreover, the PL Law contains no threshold requirement as in Article 9(b) of the Directive. That was aimed at avoiding ‘litigation in an excessive number of cases’, but has been difficult both to interpret and to justify (Howells 1993: 47). Neither France nor Greece included the 500 ECU threshold in legislation implementing the EC Directive, leading to proceedings brought by the Commission which were upheld by the ECJ in two judgments rendered on 25 April 2002 (Case Nos. C–52/00 and C–154/00). The PL Law also does not provide for a limit (of no less than 70 million ECU or national equivalent) on ‘a producer’s total liability for damage resulting from a death or personal injury and caused by identical items with the same defect’, which can be set by any member state under Article 16(1) of the Directive. Many EU states, especially among the original 11, did adopt this sort of ceiling (see Table 3.3 above). One question raised by commentators such as Howells (1993: 45–6) about the limitation is whether plaintiffs claiming under such a ceiling should be compensated on a ‘first-come first-served’ basis or not. This, and other criticisms such as arbitrary injustice to those injured, are also made by the EPA (1995: 105–6, 382) in explaining why no ceiling was enacted in Japanese law. The TPA divides into four categories the type of damage for which a corporation is liable: (i) personal injuries to the plaintiff (section 75AD); (ii) personal injuries to the plaintiff and personal injuries to another which cause loss to the plaintiff, where the loss does not come about because of ‘business’ relationship (including professional and employment relationships: section 75AE); (iii) consequential loss to other goods ‘ordinarily acquired for personal, domestic or household use’ which the plaintiff has ‘so used or intended so to use’ (section 75AF); (iv) consequential loss to ‘land, buildings or fixtures, ordinarily acquired for private use’ which the plaintiff has ‘so used or intended so to use’ (section 75AG). The second indicates that certain ‘secondary’ personal injuries can be claimed. In Stegenda v. J. Corp. Pty. Ltd. (1999) ATPR 41–695, District Court Judge Dean held that section 75AE was intended to benefit dependants of an injured person. In Cheong v. Wong & Others 34 MVR 359 (2001), Justice Grove rejected an attempt by the defendant driver (Wong) held liable to the injured plaintiff (Cheong) for negligence in not slowing down promptly after a problem arose in a tyre retreaded by another defendant (Vulcap), to apply strictly the words of section 75AE to seek a contribution or indemnity from Vulcap as joint tortfeasor.

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Such matters are only implicit in the wording of Article 3 of the PL Law or Article 9(a) of the Directive, which may also make it difficult to prove sufficient causal relationship to the original defect. The third and fourth categories of damages under the TPA adopt a similar but not identical definition of ‘personal goods’, and specifically state that consequential loss to certain real property may be claimed. (Consequential damage to real property is also covered by the unqualified term ‘property’ in both Article 9(b) of the Directive and Article 3 of the PL Law.) However, their scope is wider than the Directive in including such property which the plaintiff has ‘intended to use’, as well as that actually used. Again, the major difference from the PL Law is that the latter allows claims for consequential loss to all other property, including ‘business’ property, subject to proving a causal relationship. Section 1 of the Restatement Third simply imposes liability on commercial suppliers for defective products causing ‘harm to persons or property’. Section 21 defines this to include: economic loss if caused by harm to: (a) the plaintiff ’s person; or (b) the person of another when harm to the other interferes with an interest of the plaintiff protected by tort law; or (c) the plaintiff ’s property other than the defective product. (R 3d } 21) Regarding (c), Comment e states that the test for a complex product is whether it can be deemed to be an ‘integrated whole’. This formulation and supporting case law leave considerable confusion, compared for example to the conclusions and arguments of Tettenborn (2000) introduced above. Also there appears to be rather arbitrary development for ‘the case of asbestos contamination in buildings, [where] most courts have taken the position that the contamination constitutes harm to the building as other property’, due to ‘the serious health threat caused’. More importantly for present purposes, these Restatement provisions make no distinction between ‘private’ and ‘business’ losses. Indeed, there is no discussion of this important point, from a comparative perspective, even in Comments and Reporters’ Notes to both sections. The extension of PL law to commercial users is simply taken for granted in the US, probably reflecting its deep roots in contract (warranty) law discussed in Chapter 2. Yet it seems odd for such ‘path dependence’ (see generally Sweet Stone 2002) to persist over so many decades, and multiple Restatements. Some commentators, particularly in the US, have criticized the PL Law’s extension of coverage to ‘business’ losses, asserting that it reflects Japan’s continued ‘pro-business’ bias and correspondingly weak consumer protection regime. Yet they do not bring such charges against US PL law, which does precisely the same. The PL Law’s extension of coverage may have been partly a drafting error in the confusing final stages leading to enactment, as indicated in Chapter 2. It could

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also reflect a strong strand of ‘formal reasoning’ in Japanese law, despite an overall orientation towards ‘substantive reasoning’ – as in the US, and unlike the AngloCommonwealth law tradition (Nottage 1996, 1997c, 2002). The ‘formal reasoning’ here would be that ‘property’ has not generally been broken down into ‘private’ and ‘business’ property, with compensable harm limited accordingly, in other areas of private law. This might also underpin the extension of coverage in the 1998 legislation enacted by France, which has an even stronger orientation towards formal reasoning, particularly in private law (see generally Nicholas 1992). A more substantive reason for extending the PL Law’s coverage might have been a concern to protect smaller businesses against manufacturers, on the assumption that the latter might generally be larger entities with greater bargaining power in commercial dealings or more ability to spread losses. However, this consideration may even have underpinned some US case law. Such concern for small businesses is also consistent with recent developments in Australian law. In particularly, the TPA was amended in 1998 to provide ‘business consumers’ with new rights to contest ‘unconscionability’ when supplied with goods or services worth up to A$1 million (Steinwall 1998). On the other hand, this has not led to any calls for extending the scope of application of Part VA, and those would be particularly unlikely to succeed given the broader ‘tort reform’ developments in Australia outlined in Chapter 2. Another substantive reason to allow an extension of PL Law coverage to business losses, in Japan as in the US, could be that it can create more deterrence against the supply of unsafe goods. A related assumption could be that consumers might benefit from this, in particular, because any increased costs involved for suppliers trying to minimize risks may not be passed on fully through higher product prices. Such reasoning and assumptions should be empirically tested, as indicated in Chapter 4; but it should be emphasized already that Japanese policy-makers have not been openly elaborating on such matters, and in particular that the PL Law’s extension of coverage to ‘business’ losses is shared with US PL law.

Exemptions (PL Law Article 4) Article 4 of the PL Law sets out two defences or ‘exemptions’ from liability under Article 3. Although similar to those provided in the Directive and especially the TPA, their scope is not identical. Development risks (Article 4(1)) Under Article 4(1), the first very controversial exemption arises if the ‘manufacturer etc’ proves that: The state of the scientific or technical knowledge (chiken), at the time the manufacturer etc delivered the product, was such that it was not possible to detect (ninshiki suru) that the product had a defect.

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The EPA presents two arguments for allowing this ‘development risks’ exemption. First, even if that had not been spelled out, manufacturers would likely raise similar issues anyway under the guise of ‘non-foreseeability’ – presumably under Articles 2(2) and 3 – so plaintiffs and courts would end up addressing these anyway. For instance, it cited contemporaneous US case law suggesting that actual or imputed knowledge is ‘implicit’ in the notion of strict liability (EPA 1994: 108–9, 112). Secondly, the exemption is needed to maintain the pace of research and development, and technological advances. The EPA admits that advancement of technology and science is a premise of the PL Law, which is why the exemption refers to ‘scientific and technical’ knowledge (EPA 1994: 108–10). The joint government agency commentary adds that hindering such progress ‘might in turn harm the material interests of consumers’, and that a further reason for adopting the development risks defence is that many other countries have done so (Madden trans. 1996: 320). The EPA (1994: 110–11) also remarks that compensation for certain drug-related injuries is also available under a state-run scheme anyway, and that it expects a continued role to be played by social security or worker compensation schemes for other injuries (discussed below, under Article 6). Scientific or technical ‘knowledge’ is expected to be interpreted consistently with relevant case law and other Japanese legislation where it has been used already. Examples include laws regulating drugs, worker safety, and chemical products (EPA 1994: 109–14). This may resolve some problems of interpretation. In accordance also with general civil law principles, the relevant knowledge is not that held (or otherwise) by the particular manufacturer, purely ‘subjectively’ (EPA 1994: 109). The joint commentary explains that the defence should not turn on ‘the size of operation or the technical level of any individual defendant’ (Madden trans. 1996: 321). However, other issues remain, particularly the extent to which other holders of information should be included in determining more ‘objectively’ the relevant knowledge. For instance, by analogy with interpretations of the legislation regulating chemical products, where the knowledge of deliberative councils is added to that of the Minister (EPA 1994: 113), it is arguable that knowledge held by industry associations or even loosely affiliated research institutions should be added to that of a particular manufacturer. By analogy to interpretations of labour safety legislation, unpublished research might be taken into account (cf. EPA 1994: 110–13). The joint commentary states that ‘knowledge’ in PL Law Article 4(1) means ‘all the knowledge established to such a degree as to potentially influence the decision [sic – detection?] of the existence of a defect’ (Madden trans. 1996: 320, emphasis added). This combination of an absolute with a qualification is also reflected in the argument by Professor Masanobu Kato (1994c: 32) that the objective standard is ‘the world’s highest, useable in society (shakaiteki riyo kano)’. Overall, another contemporaneous commentator has asserted that the development risks defence in Japan ‘will most likely be strictly construed by the courts, so that a manufacturer will still be subject to one of the highest standards of care in the world’ (Mori 1995: 118).

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That view finds some support in the first reported judgment in Japan interpreting the Article 4(1) defence. In the ‘snapper’ case (No. 29, Appendix C), the Tokyo District Court also emphasized the purposes behind the PL Law in arguing that ‘the scope of the defence’s application should be interpreted restrictively’. It noted that industrial capacity could be undermined if manufacturers scaled back R&D because they could not foresee harms arising from defects and scope of liability, impeding ‘the sound development of the national economy’; but stressed that ‘it is clear that the significance of introducing a PL system aimed at redress for injured parties would be lost if the development risks defence was readily permitted’. The Court also reasoned that it was inappropriate to seek the standards for ‘scientific and technological knowledge’ in the tortfeasor’s own standards, because the legislation aimed to reduce the uncertainties involved in assessing its ‘negligence’. It therefore defined the knowledge as ‘all knowledge established enough to decide whether the relevant product was defective, building on the results of all disciplines related to science and technology’, objectively existing in society as a whole; and that the applicable standard was ‘the world’s highest standard obtainable (nyushu kano) when the product was delivered’. Applying this to the facts, the Court first pointed to information available from several books – which the plaintiff had earlier argued were available from health authorities (hokensho) and for sale – and indeed noted that the defendant restaurateur had sought out relevant literature from medical institutions after the health authorities had reported that the fish it had served was infected by STEC (shigatera dokuso). The Court also noted that these books had remarked that infection had been reported in snapper mostly in more southerly waters (like Okinawa prefecture), in other fish in the defendant’s Chiba prefecture, and more generally in all sorts of fish. It found in effect that the defendant should have made the connections between these facts, ruling that the development risks defence was unavailable because the defendant could not therefore prove that the risk of infected snapper eventuating in Chiba was ‘completely unforeseeable’ (Hanrei Jiho 1805: 24). The Court did not go on to address some rather different points raised by the defendant. The latter had submitted not only that it was impossible or extremely difficult in practice to distinguish infection in fish other than those species which are typically susceptible; but that it was impossible to detect inspection from a surface examination of the fish. The defendant then contended that foreseeing STEC infection was difficult, and that there was currently no means of effectively guarding against it (Hanrei Jiho 1805: 18). Such arguments could have been developed into the notion that there were no actual or feasible means of removing the risk of infection – sending each fish to be tested by authorities before preparing it for restaurant consumption being too expensive, for example, or indeed likely to destroy the inherent features of the product (freshness being essential to good sashimi dishes). This might have been related back to the test proposed by Kato (1994c: 32), in that such circumstances could indicate that admittedly ‘obtainable’ knowledge was not ‘usable’ (riyo kano). On the other hand, the Court’s stress on the strict liability and consumer protection

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underpinnings of the PL Law suggest that such arguments would also have been given short shrift. On similar grounds (e.g. Howells 1993), commentators in Europe have also been critical about allowing the option of a development risks defence in the EC Directive, and then the expansive interpretation of the defence urged by some (e.g. Hodges 1998). Article 7(b) provides a defence if the defendant shows that ‘having regard to the circumstances, it is probable that the defect which caused the damage did not exist at the time when the product was put into circulation by him or that this defect came into being afterwards’. Article 15(1)(b) allows an individual member state to disallow the development risks defence; but only Luxembourg, Finland and Norway did so fully (see Table 3.1). Problems have also arisen when states have incorporated the defence into domestic law. In the UK especially, seemingly due to a last-minute political compromise (Chapter 2), CPA section 4 asks only whether knowledge was such as ‘a producer of products of the same description as the product in question might be expected to have discovered the defect’. This arguably meant that the defendant manufacturer need only prove that those in that industry did not have sufficient knowledge. The European Commission favoured a test based simply on discoverability, anywhere, and brought proceedings against the UK government under Article 169 of the Treaty of Rome (Vranken 1996: 232; Goldberg 1999: 225–30). However, on 29 May 1997 the ECJ ruled primarily that the Commission had not discharged its burden of proof, reasoning that the wording of the UK legislation was not necessarily inconsistent with the Directive, or at least that English courts might yet be able to reach that conclusion. The ECJ did state that Article 7(e) is not specifically directed at the practices and safety standards in use in the industrial sector in question but, ‘unreservedly, at the state of scientific and technical knowledge, including the most advanced level of such knowledge’. Yet, it asserted that ‘it is implicit in the wording of Article 7(e) that the relevant scientific and technical knowledge must have been accessible at the time when the product in question was put into circulation’ (Case No. C-300/95, para. 26). The lack of explanation for this qualification, perhaps reflecting the earlier opinion of the Advocate-General (designed to assist the Court) that the Directive aims at the ‘fair apportionment of risks’, has attracted compelling critical analysis. So has its uncertain scope: ‘Accessible’ may mean (1) anything recorded on a searchable database; (2) only information in the same language as spoken by the producer; or (3) only that of the type in question is in the habit of searching. No guidance is given as to the definition, notwithstanding the overwhelming acceptance on all sides that knowledge must be published to be discoverable. (Howells and Mildred 1998a: 1008–9) These authors, jointly and in individual writings (e.g. Howells 1993; Howells and Mildred 1998b), are sceptical about expanding the scope of the development risks defence – and of its very existence, in a strict liability regime – by bringing in

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factors overlapping with those relevant to assessing the reasonableness or negligence of a manufacturer’s conduct. They would prefer to allow some such considerations into an assessment of defectiveness, albeit still focusing on the condition of the product rather than the manufacturer’s conduct (cf. Stapleton 1986; Newdick 1987). Yet, they do not want to make liability ‘so strict that claimants will win whenever they can show that they had no legitimate expectation that the harmful characteristic might damage them or even when the judge holds that they should have been permitted to accept those risks’ (Howells and Mildred 2002: 105). Some support for such a middle way is provided by the first detailed judgment of an English court concerning the development risks defence. (In Abouzaid v. Mothercare [2000] EWCA 438, 21 December 2000, Lord Justice Pill really only suggested briefly that records of no comparable accidents at the time of supply was not intended to come within ‘scientific’ or even ‘technical knowledge’, as this was meant to indicate advances throwing ‘additional light, for example, on the propensities of metals’.) In the case involving blood infected by Hepatitis C (A. v. National Blood Authority [2001] 3 All ER 289), the High Court emphasized the Directive’s purpose of compensating for injuries, and argued that the development risks defence’s objective of not allowing the strict liability regime to stifle innovation was limited to unknowable risks. In rejecting the defence, Justice Burton held that it was irrelevant that the virus could not be detected in particular blood products without destroying them, once it was known that some proportion of all blood was contaminated (1–3 per cent, in this case). Restricting exceptions to strict liability in this way seems to work quite well in such cases (involving ‘non-standard’ products, according to the Judge’s terminology), where the concept of ‘defect’ can be used to address the general problem and that of ‘risk’ for its materialization in the particular product. However, difficulties arise in a ‘standard’ product ‘where the occurrence is not an all or nothing event depending on whether the particular product has the characteristics which differentiate it from the norm’; here: much may depend on the way in which the defect is characterized. If the defect in a pharmaceutical product is the capacity to cause a certain outcome, the defence will be lost as soon as that capacity is known. A more likely approach to defect in the case of a standard product is the adverse comparison between that product and an alternative [since it is trite that all active products will produce a variety of outcomes including undesired outcomes and that will affect legitimate expectation (sic) of patients]. What is left unanswered by the judgment is the question whether the conduct of the producer, particularly in relation to efforts to discover the relative safety of the product by such a comparison, is to be taken into account when assessing the discoverability of the defect. (Howells and Mildred 2002: 103) Yet these authors note that the Court’s general approach was to exclude consideration of the manufacturer’s conduct. Another issue left open in this case,

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where it was agreed that the (general) danger (of some proportion of blood being contaminated) was known to the industry, but not to the public, was where a danger arose which not even the industry knew about. Howells and Mildred (2002: 105) suggest that this might prevent liability from arising, but on the basis that there was not a sufficient defect, depending on all the other circumstances. In assessing what was known (or ought to have been known) under that approach, it may also become relevant to address the question of ‘accessibility’ of relevant information, which Justice Burton suggested was relevant in determining the scope of the development risks defence. His reasoning followed the ECJ on this point too, and appears consistent with the Tokyo District Court in the ‘snapper’ case (No. 29, Appendix C). However, Justice Burton’s judgment seems to imply that material which is unpublished (at all, or for the public) may not be accessible, and does not address (as the ‘snapper case’ seems to) the question of whether discoverability of a ‘state of knowledge’ includes ‘the conjunction of different strands of thought’ (Howells and Mildred 2002: 103). Although English and ECJ case law therefore remains in quite an uncertain state, German law also seems to be seeking to restrict the scope of application for the development risks defence, for example by not extending it to the situation of an exploding bottle (which can usually be termed a manufacturing defect). A strict test also seemed likely for the defence provided by s 75AK of the TPA, which applies to product where ‘the state of scientific or technical knowledge at the time when they were supplied by their actual manufacturer was not such as to enable that defect to be discovered’. Although this conclusion was reached before the ECJ judgment just mentioned, Kellam (1992: 18) argued that ‘manufacturers must satisfy themselves [and prove] that there have been no advances – both theoretical and in practice – anywhere in the world (even in other industries) which impact on the safety of goods’, when they supply them. Further, in ACCC v. Glendale (1998) ATPR 41–632, after suggesting that ‘section 75AK also has some bearing on the construction to be given to section 75AC’, the Federal Court argued that ‘goods can have a defect even if a supplier was not aware of it, so long as scientific or technical knowledge would enable the defect to be discovered’. Although the ensuing discussion of warnings used by other manufacturers appears directed to the issue of defectiveness per se under section 75AC, it can also be seen as hostile towards the section 75AK defence, suggesting that technical knowledge allowed discoverability in a broader sense. However, in Graham Barclay Oysters Pty. Ltd. v. Ryan 117 ALR 18 (2000), the Full Federal Court allowed the defence to growers of poisoned oysters (as ‘manufacturers’ under section 74A) in a situation very similar to the Hepatitis C case in the UK. The only test for contamination still gave ‘false negatives’. Further, results from a test applied to the sample could not be extrapolated to the whole batch, so even if negatives were reliable, one would have to test – and destroy – each oyster. As testing and supply were mutually exclusive, the defect was held not to be capable of discovery before supply. Nonetheless, imagining the more usual situation where a reliable sample test is available, Justice Lee was of the opinion that destruction of the sample for the testing ‘would not make

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discovery of the defect by destruction of the sample mutually exclusive with the supply of defective goods under section 75AD’. In other words, the defence would not be applicable if the risk nonetheless materialized (cf. Harland 2001: 40). On the other hand, Justice Lindgren remarked that: If the problem of the ‘false negative’ had not existed and if it had been appropriate to test by sample, an interesting question would have arisen as to whether the expression ‘such as to enable that defect to be discovered’ in section 75AK(1)(c) was to be construed as importing a modifying notion of reasonableness or practicability. Let it be assumed that extrapolation from sample to bulk was valid, but that the testing of the sample had to take place at a laboratory a considerable distance from the grower’s establishment, the cost of the testing was great and the results could not be known for some days. A question would have arisen whether it could be truly said in these circumstances that the state of scientific or technical knowledge enabled the defect to be discovered. The outcome in more usual circumstances like these has therefore been left uncertain in Australia. It may be that the holding on the particular facts in the oysters case will encourage a more pro-manufacturer approach more generally, than signalled by the few English judgments so far. Noting that the Australian Law Reform Commission had urged a stringent test (ALRC 1989: 50), not extending the defence to known risks but economic disadvantage in overcoming them, Giblett and Kearney (2002) conclude that the Australian courts ‘may well adopt’ Justice Burton’s ‘very strict’ approach to strict liability.22 In any event, even in the Ryan circumstances, the growers were held liable under TPA Part V Division 2A, which does not provide a development risks defence like that in section 75AK, and this was upheld on appeal to the High Court of Australia (194 ALR 337, 2002). The position in US law is much clearer, under the Restatement Third, but at the cost of favouring suppliers. For all the controversy surrounding sections 2(b) and 2(c), they make it very clear that the plaintiff first has to show ‘foreseeable risks of harm’. Comment m states baldly, with no corresponding Reporters’ Notes, that in claims for ‘inadequate design, instruction, or warning, plaintiff should bear the burden of establishing that the risk in question was known or should have been known to the relevant manufacturing community’ (R 3d }2 Comment m: 34). Because foreseeability logically assumes that risks are discoverable, no development risks liability appears to be allowed in the sense of the EC Directive and its offshoots. Anyway, the relevant holders of the information seem to be the industry in question, not the world at large. The Restatement Third also refers to the concept of ‘the state of the art’, related to but conceptually distinct from the development risks notion (Taschner 1999). Comment d notes that this has been ‘variously defined to mean that the product design conforms to industry custom, that it reflects the safest and most advanced technology developed and in commercial use, or that it reflects technology at the

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cutting edge of scientific knowledge’ (see also R 3d }2 R.N. Comment d: 81–4). It regrets this confusion, substituting the requirement that the plaintiff also establish a reasonable alternative design, with industry practice indicating – but not necessarily dictating – what might be a practicable alternative or what constitutes ‘reasonable safety’ under section 2(b). In other words, questions related to the supplier’s conduct in the context of its industry or society, which can creep in as the development risks defence is expansively interpreted under the EC Directive or its offshoots, are dealt with purely in terms of determining whether there is a ‘defect’ in the first place. Because factors overlapping with those from the general law of negligence figure so prominently in the Restatement, especially in section 2, the situation outside the US seems much more attractive for plaintiffs. Component manufacturing (Article 4(2)) In Japan, Europe and Australia, defective components can also be a source of liability. Under Article 4(2) of the PL Law, however, a ‘manufacturer etc’ of a component, etc. is exempted if it proves that: where a product is used as a component or raw material (genzairyo) of another product, the defect has arisen solely (moppara) because of having followed the other product’s manufacturer’s instructions (shiji) regarding design (settei), and the manufacturer etc is not negligent with respect to the defect. ‘Raw material (genzairyo)’ cannot cover any raw material; the term must be used here in a narrow sense, namely something which has been already manufactured or processed to a degree. Otherwise, it would arguably fall outside the definition of ‘product’, discussed above. Most importantly, it would be inconsistent with the idea of being produced pursuant to instructions as to ‘design’. Again, there is little authoritative commentary as to what differentiates a component or raw material from the product associated with it. However, taking one example given above when discussing the related issue of the scope of Article 3, if brakes are viewed as a product distinct from the automobile and are found to be defective, their manufacturer can invoke the ‘component manufacturing’ defence – leaving a claim only against the car manufacturer, but not for any damage to the car itself – provided it satisfies the two main operative conditions of Article 4(2). By contrast, taking the other example, the defective refrigerator unit manufacturer cannot raise the defence at all, to try to avoid consequential damages to premises into which it has been incorporated. Article 4(2) only applies if it is used in another ‘product’ and, since the latter excludes buildings, a building component manufacturer – even ‘to specification’ – cannot invoke the defence (EPA 1994: 116–17). In situations like the defective brakes scenario, the first main requirement is that the component manufacturer must prove that the defect has arisen ‘solely (moppara)’ due to following instructions. The translation of this term is

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‘substantially’, in the English translation of the PL Law appended to the commentary by the EPA (1994: 141). That is linguistically incorrect, and inconsistent with its own commentary on this point (EPA 1994: 116). The point is crucial, because it determines whether the defence is applicable when the damage arises partly because of following design instructions (resulting in a design defect in the component), and partly because of a different defect in the component (e.g. a manufacturing defect). If the component manufacturer must establish that the defect is due ‘solely’ to following instructions, it will still be liable. Secondly, the component manufacturer must prove that it was not ‘negligent’ with regard to the defect. Thus, even if it followed instructions, the component manufacturer can still be held liable in the light of foreseeability of harm and ability to avoid it. Its personal circumstances, such as its levels of technology and the nature of its contractual or business relationship with the final product manufacturer, are thought to be relevant in this determination (EPA 1994: 116–17). Some notions of negligence are therefore reintroduced into a strict liability scheme (Mori 1995: 118), more openly than under Articles 2(2) and 4(1). However, no reported PL Law claims appear to have raised the component manufacturing defence (Appendix C). It may be quite difficult to establish in practice, due the considerable leeway regarding design and re-engineering given – and expected – of parts manufacturers in at least some areas of the Japanese economy, such as the automobile industry even today (Sabel 1996; Kashiwagi 2001). Article 7(f) of the Directive provides a similar but not identical defence, where: ‘the defect is attributable to the design of the product in which the component has been fitted, or to instructions given by the manufacturer of the product’. The distinction implicitly drawn between ‘raw materials’ and ‘components’ under the PL Law raised the question whether a sufficiently processed agricultural or mineral product, in terms of the original Directive discussed above, could be a ‘component’ covered by Article 7(f) if it is only just sufficiently processed and more in the nature, arguably, of a raw material. More importantly following the amending Directive of 1999, Article 7(f) provides some guidance as to what differentiates a component from its associated product, by referring to the former being ‘fitted’ into the latter, and Article 2 refers to products ‘incorporated’ into another. But this may still not be enough. Like Tettenborn (2000), Geddes (1992: 115) suggests that it may help to ask whether the latter product ‘would be “defective” (in the sense of failing to achieve its required function) without the alleged function’. Thus, brakes in a car would be a component, but a refrigerator in a yacht would not. Yet he admits that there are still difficult cases, and that the proper distinction will need to await refinement by the courts. At least it is clear, from Article 2, that this defence extends to any such component produced to specification, even if incorporated into an immovable. The Directive does not spell out, however, the extent to which the component producer seeking this exemption must prove it is working ‘to specification’. Commentators are left to speculate that instructions must have been very clear,

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and have left ‘no room to exercise [its] own judgment in such a manner as would have permitted him to avoid making a defective component’ (Howells 1993: 43). By contrast, Geddes (1992: 33) has suggested that the defect must be the ‘inevitable’ result of compliance with specifications. The Directive also gives no guidance on the question of whether a component manufacturer can still be liable in producing a defective component which is inherently dangerous (Howells 1993: 43). Article 4(2) of the PL Law invites consideration of such issues, and generally may favour the injured party more than Article 7(f) of the Directive. Nonetheless, Article 7(f) does distinguish between two excuses: for following instructions, and for defects due to design of the finished products. In itself, the latter is seemingly unavailable under the PL Law – there must be some instructions followed – unless a causation argument can be made under Article 3. Reference to ‘instructions given by the manufacturer’ under Article 7(f) of the Directive, however, are not spelt out as being those given to the component manufacturer as opposed to the consumer of the finished product. Presumably only the former are relevant, and ‘if a component was rendered dangerous by the instructions of the end producer, the component manufacturer would have the defence that the defect was attributable to the design of the end product, the instructions being an implicit element within the concept of design’ (Howells 1993: 43). Article 4(2) of the PL Law suggests that only instructions to the component manufacturer are relevant since they are qualified as ‘relating to design’, presumably of the components ordered; but by not extending an exemption to a component manufacturer for design of the end product, such a manufacturer would be left to argue causation under Article 3. Section 75AK(d) provides a similar defence upon proof that if goods were comprised in other goods (‘finished goods’), the defect in the (former) ‘action goods’ was attributable to ‘(i) the design of the finished goods; (ii) the markings on or accompanying the finished goods; or (iii) the instructions or warnings given by the manufacturer of the finished goods’. Similar issues may arise as to the scope of such ‘action goods’, defined simply as ‘being comprised’ in ‘finished’ goods (Harland 1995: 209). As in the Directive, there is a defence for defects due to the design of the finished goods. Paragraph (iii) highlights the component manufacturer’s defence for (inadequate) instructions or warnings given by the end producer to consumers, causing the defect. Paragraph (ii) presumably envisages the same situation, but where the end producer affixes some other ‘markings’. On the other hand, paragraph (iii) does not expressly provide a defence where the component has simply been manufactured in accordance with instructions by the end producer to the component manufacturer. Section 5 of the Restatement Third reaches generally similar results. A component supplier is liable for harm caused by a final product ‘into which the component is integrated’ if (a) it is ‘defective in itself ’ (e.g. a manufacturing defect under section 2(a)), or (b) the supplier ‘substantially participates in the integration of the component into the design of the product’, and this integration causes the final product to be defective, resulting in harm. The Reporter’s Note to Comment e suggests that ‘substantial participation’ corresponds to the degree of ‘control’

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over the design of the integrated product, referred to by some US courts. Both concepts should overlap significantly with the standard of the component manufacturer’s ‘negligence’, referred to in Article 4(2) of the PL Law. However, Comment b regarding scenario (a) also argues that: when a sophisticated buyer integrates a component into another product, the component seller owes no duty to warn either the immediate buyer or ultimate consumer of dangers arising because the component is unsuited for the special purpose to which the buyer puts it. . . . Courts have not yet confronted the question of whether, in combination, factors such as the component purchaser’s lack of expertise and ignorance of the risks of integrating the component into the purchaser’s product, and the component supplier’s knowledge of both the relevant risks and the purchaser’s ignorance thereof, give rise to a duty on the part of the component supplier to warn of risks attending integration . . . (R 3d } 5 Comment b: 132) Comment c adds baldly that ‘a basic raw material such as sand, gravel, or kerosene cannot be defectively designed’, and that ‘raw-materials suppliers are not subject to liability for harm caused by defective design of the end-product’. By contrast, Fischer (2002: 1152) has concluded recently that: ‘By looking at custom, expertise and practicality, courts can identify instances where component suppliers should be liable because they are best able either to discover or to protect against the finished product’s harm’. It seems more likely that Japanese courts will adopt that more nuanced approach, at least in mass torts situations like the Kanemi litigation (detailed in Chapter 2), resulting in several judgments going against the PCB supplier even under the Civil Code.

Limitations of time (PL Law Article 5) Article 5(1) of the PL Law can be translated as follows: The right to claim compensatory damages shall be extinguished by prescription (jiko) if not exercised by the harmed person or the latter’s legal representative within 3 years of the time such person or representative knew of the harm and the person liable for the damage. The same shall apply after 10 years has elapsed from the time of delivery by the manufacturer etc. The starting point for the three-year limitation period is expected to follow the similar provision for tort claims in Article 724 of the Civil Code, as interpreted by the Japanese courts. As well as the damage and the tortfeasor, the harmed person or representative will first need to know, as far as he or she is able, that the act or omission in question grounds a reasonable claim for damages in tort. The period is thought to be capable of suspension or interruption in various situations,

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pursuant to Civil Code Article 147, as interpreted by case law (EPA 1994: 119–20).23 Although ‘the same’ effect is said to apply after ten years has elapsed from time of delivery, this period is treated similar to that in a ‘period of repose’ (joseki kikan), setting a rigid maximum period within the claim must be made and not allowing for any form of suspension that might extend that period (EPA 1994: 121–2). The analogous Article 724 of the Civil Code provides for such a period lasting 20 years. However, this was considered inappropriate for the PL Law given recent technological developments, the average periods manufactured products last for and are actually used for, and the period for keeping test documentation and so on, as well as provisions in legislation overseas (EPA 1994: 121). Article 10(1) of the Directive sets a somewhat different three-year period, in that it runs specifically from ‘the day on which the plaintiff became aware, or should reasonably have become aware, of the damage, the defect and the identity of the producer (emphasis added). Article 10(2) preserves the laws of member states regulating suspension or interruption of this period. Section 75AO(1) of the TPA is almost identical to Article 10(1). In Cheong v. Wong & Others 34 MVR 359 (2001), the Supreme Court of New South Wales added around four years to the date that the defendant tyre retreader alleged was that upon which the plaintiff should have been aware of its identity, because business was conducted within a complex of corporate identities and there had been delays in disclosure requests. Such considerations, as well as the Australian law as to suspension or interruption may differ in significant respects from the likely mishmash of local European laws. Additionally, Article 11 of the Directive sets an absolute time bar, for bringing suit, of ten years ‘from the date on which the producer put into circulation the actual product which caused the damage’. (It makes no express provision for any discretionary extension by the Courts. The UK may therefore find itself in breach of EU law as a result of the decision of the English Court of Appeal in SmithklineBeecham plc & Another v. Horne Roberts [2001] EWCA Civ 2006. English legislation was interpreted to allow continuance of a claim brought against the defendant after ten years, mainly because it had been commenced before that period but against the wrong defendant.) Section 75AO(1) of the TPA is almost identical to Article 11 of the Directive. All but the last reason advanced in support of the PL Law’s time bar, just mentioned, have met strong criticism in the context of the Directive (Howells 1993: 44). Article 5(2) of the PL Law attempts to lessen the potential disadvantage of a ten-year absolute time bar to certain harmed parties, by providing that: Where the harm is caused by a substance which becomes harmful to human health when it accumulates in the human body, or where the harm shows symptoms after a certain latency period, the period set forth in the second sentence of Article 5(1) shall be calculated from the time such harm arises. The former category reflects reported case law where injuries became apparent after more than ten years, such as some of the ‘Big Four’ PL cases

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discussed in Chapter 2, as well as cases of injuries from asbestos which became apparent after over ten years in the US (EPA 1994: 122–3). It can also apply to injuries from smoking cigarettes, still a contentious topic in Japan – as elsewhere (Yoshida 1998). Despite the very lax regulatory response to tobacco-related health problems on the part of the Japanese government (Levin 1997), claims against tobacco companies as well as asbestos manufacturers or importers were and are still expected (Leflar 1996: 751–3; Feldman 2001). The second category in Article 5(2) includes viruses such as HIV, which can develop into terrible diseases like AIDS after a lengthy period (EPA 1994: 123). As mentioned above, this particular problem was vigorously debated through to the final stages of enactment of the PL Law in mid-1994. Haemophiliacs and others had brought suits from 1989 after contracting HIV from blood products, and major settlements were reached only in March 1996, amidst even greater publicity following leaks which also cast in bad light the Ministry of Health and Welfare itself (Wada 1997: 45–6). The provision that the ten-year period should be calculated ‘from the time such harm arises’, in such cases, seems odd at first, in that ‘such harm’ is arguably the initial harm (Marcuse 1996: 393–4) – the first cigarette or the HIVinfected blood transfusion. In fact, this is a term used in other Japanese legislation, where it has been interpreted to mean harm which has reached the stage of becoming apparent or tangible. In air pollution legislation, for instance, each illness that emerges forms a separate injury subject to the law. This approach is expected to be taken in interpreting the PL Law. In cases of initially light injuries developing into unexpectedly heavy injuries, it may also be possible to take the later development as determinative (EPA 1994: 123–5). However, this relies more heavily on case law and academic interpretation. Neither the Directive nor the TPA attempts to address these problems in this way at all. As mentioned in Chapter 2, the Australian Senate’s Standing Committee on Legal and Constitutional Affairs had recommended in a report published in December 1992, just four months after Part VA had been added to the TPA, that the ten-year bar be amended to allow a court to extend the period if shown that, on or before the date it was supplied, the manufacturer knew or ought to have known that the product was defective. In June 1994, the government responded that this appeared to go too far and that, since the Committee had been intending to assist victims specifically of ‘toxic harm’, a detailed exception for such cases should be introduced with the definition to be worked out upon further advice by the Office of Parliamentary Counsel. Thus, the way was opened to widen protection for injured parties along the lines of Japan’s PL Law; but nothing has been done, and amendment seems unlikely in Australia’s present ‘tort reform’ climate (introduced in Chapter 2). The Restatement Third does not address limitation periods at all, so such matters are hived off to general tort or warranty law in the US, including any state legislation that also might impose shorter periods for PL claims. However, it does deal with the liability of successor corporations or other business entities. This is a related issue because, particularly if long limitation periods are imposed on firms,

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others may become unwilling to take over their operations (cf. Stapleton 1994: 289). Section 12 clarifies that the situations in which such firms assume the liability of predecessors who supplied defective products: there must be an agreement, fraudulent conveyance, consolidation or merger, or continuation of the business. Such matters are mostly covered by corporate law in Europe, Japan and Australia.

Application of civil code (PL Law Article 6) Article 6 of the PL Law provides simply that: ‘Unless otherwise provided for in this Law, the Civil Code (Law No. 89, 1896) applies to the liability of the manufacturer etc for compensatory damages due to a defect in a product.’ Many matters are not covered at all in the PL Law, and thus left to the Civil Code provisions, as interpreted over almost a century by Japanese courts. A straightforward application of Article 6 relates to the means for calculating damages. As in the English law tradition, very clear rules have been developed under the Civil Code for calculating property and income losses.24 To a lesser extent, general damages for ‘pain and suffering’ (isharyo) are also fairly predictable, although these depend on a court’s overall assessment of the severity and duration of personal injury, etc. Plaintiffs – and their lawyers – not infrequently seem to ask for more than the going rate, but this may be more to reinforce their moral claims often implicated by bringing tort litigation in Japan (cf. generally Tanase 1992). Nonetheless, the amounts awarded to compensate for pain and suffering tend to be low in Japan. As mentioned above, the Nagoya District Court awarded only 50,000 out of 300,000 yen claimed as isharyo in the ‘McDonald’s orange juice’ judgment (PL Law Case No. 10, Appendix C). However, the plaintiff had only suffered a minor cut to her throat which quickly healed, and a few days off work. By contrast, a typical plaintiff suffering food poisoning and several months off work in the ‘snapper’ case (No. 29) was awarded one – out of three – million yen for pain and suffering. Nonetheless, the blue-ribbon Judicial Reform Council’s Final Report, submitted on 12 June 2001 to the Prime Minister (Miyazawa 2001), stated that: in light of the criticism that, viewed overall, the amount of damages is too low, it is desirable that necessary institutional studies be made and that damage determinations continue to be made in line with the circumstances of each individual case without being bound by the so-called ‘market rate’ of past cases. (Chap. II Part 1.7(4)(a), as translated at ) Quite low amounts have also been characteristic of awards in England and Germany, at least until very recently.25 As mentioned in Chapter 2, moreover, Australia’s recent ‘tort reform’ initiatives also impose a monetary cap on such ‘general damages’, as did many US states from the 1980s to try to rein in

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awards given by juries which were perceived to have been too generous. The US is also unique in allowing punitive damages to be awarded in PL cases – sometimes very large, arguably unpredictable (Garber 1998), and certainly widely publicized amounts awarded by juries – even though judges nowadays often retain some control over quantum, and many states have also legislated to restrict such claims anyway. Because Japanese law views private law as directed to compensation rather than punishment, punitive damages are unavailable under the Civil Code. Indeed, as in Germany, punitive damages have recently been held contrary to public policy when contained in a US judgment sought to be enforced under Japan’s Code of Civil Procedure (see e.g. Braslow 1999; Jung 1999). Comparative negligence One more significant principle in Japanese law is comparative negligence (kashitsu sosai), governed by Article 722(2) of the Civil Code. It is interpreted broadly to cover lack of care by the injured party (EPA 1994: 127). Comparative negligence has been frequently applied in product liability cases reported under the Civil Code, but not yet in those applying the PL Law. Section 17(a) of the Restatement Third provides for reduced damages ‘if the conduct of the plaintiff combines with the product defect to cause the harm and the plaintiff ’s conduct fails to conform to generally applicable rules establishing appropriate standards of care’. The Comments indicate quite large variations in approaches among different US state courts, and the potential for overlap with determinations of defectiveness itself or causation, especially regarding product misuse or alteration. The Directive expressly provides for reducing or disallowing liability of the producer when the damage is caused ‘both by a defect in the product and by the fault of the injured person or any person for whom the person is responsible’ (Article 8(2), emphasis added). Except for this last emphasized phrase, section 75AN of the TPA is in similar terms. In ACCC v. Glendale Chemical Products Pty. Ltd. (1998) ATPR 41–632, the Federal Court found that Barnes was not contributorily negligent at all. It noted (at 40,974) that: The essence of the contention on behalf of Glendale is that Mr. Barnes, being an adult who had no deficiency in comprehension of English, read the label twice, had plenty of time to consider his proposed course of action and seek a second opinion. Nevertheless, he chose to follow the suggestion made to him by Mr. Phillips and in doing so, chose to ignore the warning about the use of safety glasses. When Mr. Barnes read the label on the container of the product in the store he read the warning that it was corrosive and he read the direction to avoid contact with eyes and skin. He also read the notation ‘Always wear rubber gloves and safety glasses when handling caustic soda’. He read it again at home shortly prior to the use of the product. Mr. Barnes said that he did not wear rubber gloves and safety glasses because he was not mixing the product. The explanation he gave as

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to why he did not wear rubber gloves and safety glasses, because as far as he was concerned he was not mixing it and he did not think he was going to get splashed with the substance. On the other hand he conceded that he was ‘handling caustic soda’. Further, he knew what safety glasses were and that, although he did not have a pair of safety glasses he could quite easily have made searches at the Woolworths store or at the hardware store on the way home and got some safety glasses. Nonetheless, after finding that the defect under section 75AC was the failure to warn against the use of the caustic soda in a confined space, Justice Emmett concluded that: a reasonable consumer could be excused for assuming that the reason for the instruction concerning safety glasses was to prevent injury consequent upon contact between gloved hands or eyes or dust from the product rising and floating into the eyes. Even if Mr. Barnes had been wearing safety glasses, he could be excused for having taken them off in order to peer down the drain to see the result of his efforts. The direction did not say that safety glasses should be worn even after the handling of the product was complete by being put into the drain. That is to say, the failure to wear safety glasses did not cause the loss suffered by Mr. Barnes. The loss occurred because of the consequences of putting the product in the drain. The suggested usage of the product cannot be construed as a warning by the supplier that that is the only way in which it should be used. I do not consider that use in the way in which it was used was unreasonable. I do not consider that it was an act which, in a relevant sense, resulted in the loss or damage. Nor do I consider that the failure to wear safety glasses in the act of examining the drain to see whether the treatment was effective was an omission which would attract the operation of section 75AN. An argument of comparative negligence was also roundly rejected by the English Court of Appeal in Iman Abouzaid v. Mothercare (U.K.) Ltd. [2000] EWCA 438, 21 December 2000). Multiple parties and causation Secondly, the PL Law does not address the problems which can arise when multiple parties are involved in cases of defective goods, such as joint liability (Article 719 of the Civil Code), rights of recourse, and employer liability (EPA 1994: 197–8). Articles 5 and 8(1) of the Directive expressly provide some guidance on the first two, but without prejudice to provisions of member states’ national law. Section 75AM of the TPA provides uniformly for joint and several liability where two or more corporations are liable for the same loss. Again, in the US, there remains considerable variation in the case law – and some legislation, e.g. in California in 1986 (Pollock 1999: 324–6). The only guidance provided by the

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Restatement Third is in Comment c to section 15, suggesting for example that ‘the rules of joint and several liability are incompatible with a market-share approach to causation’ (R 3d } 15 Comment c: 233). This raises the general issue of causation, a third important matter not dealt with very much under the legislative regime in Japan – or that in Australia, or the EU. Under Article 3 of the PL Law, ‘damage arising from a defect in a product’ must be established, and this is widely interpreted as placing the burden of proving the causal relationship on the person harmed. That is also implicit in paragraph (c) of section 75AD–AG of the TPA. Article 4 of the Directive expressly states this requirement. But complex arguments as to epidemiological causation and statistical probability, for instance, will need to be worked out under the background private law in these parts of the world. One of the most controversial recent developments in England has been the ruling of its highest Court in Fairchild v. Glenhaven Funeral Services [2002] All ER 303. The House of Lords overturned the judgment of the Court of Appeal, which had denied liability in a claim for injury from mesothelioma due to inhaling asbestos dust, primarily following the general principle under English tort law that defendants should only be liable for those damages that they can be shown to have caused. Mesothelioma is unlike other asbestos-related diseases as it can be initiated by a single fibre of asbestos, and is not then aggravated by further exposure. There is also no way to identify, even on the balance or probabilities, the precise source of the fibre initiating the cancer when a plaintiff is exposed to multiple sources of asbestos, as were the workers in this case. The House of Lords decided that, exceptionally, justice required displacement of the conventional test of causation – ‘but for’ the action of a particular defendant, would the harm have occurred? – and that an employer should be liable if it had increased the risk of an injury to an employee, even if impossible to prove that the employer had materially contributed to the injury. Lord Hoffman was also persuaded by a Californian case, Rutherford v. Owens-Illinois Inc. [1997] Cal Rptr (2d) 16, where the US Court was satisfied by proof that exposure was a substantial factor contributing to the plaintiff ’s risk of developing asbestos-related cancer. However, he and other Law Lords indicated that their own case was decided on peculiar facts, so it is unclear whether this approach will be extended to other products, generating in England a ‘more unpredictable litigation environment’ (Bingham 2002: 31). A major question becomes whether a broader ‘market-share liability’ approach may develop. So far, this has been limited to judgments in certain US jurisdictions, arising especially from injuries caused by the drug diethylstilbestrol (DES), where the plaintiffs were unable to identify which among a number of manufacturers produced the particular product that caused a particular plaintiff ’s harm. Like other issues of causation, section 15 of the Restatement Third leaves this particular issue to state courts.26 It simply notes the variation between US states, and that courts deciding whether or not to impose liability in proportion to each producer’s market share in such circumstances have considered these factors:

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(1) the generic nature of the product; (2) the long latency period of the harm; (3) the inability of plaintiffs to discover which defendant’s product caused plaintiff ’s harm, even after exhaustive discovery; (4) the clarity of the causal connection between the defective product and the harm suffered by the plaintiffs; (5) the absence of other medical or environmental factors that could have caused or materially contributed to the harm; and (6) the availability of sufficient ‘market share’ data to support a reasonable apportionment of liability. (R 3d } 15 Comment c: 233)

Japanese law has not developed the unique market share liability approach found in a few US jurisdictions, and it is unclear how it would now deal with the mesothelioma situation. However, interpreting the Civil Code to develop the theory of ‘adequate causal connection’ (soto inga kankei), initially in light of German legal theory (Kitagawa 1970), has been flexible enough to allow for considerable openness to finding sufficient causation anyway based on epidemiological evidence. The first occasion in which this was applied to determine a causal relationship in Japanese law was in the mass environmental pollution cases involving itai-itai disease from cadmium poisoning and Yokkaichi asthma (Gresser et al. 1981). It also became an issue in PL litigation such as the SMON cases (discussed in Chapter 2), and notably a claim against a cooperative for supplying drinking water infected by typhoid bacillus (Yokohama District Court, 19 March 1981, Hanta 448: 67). Four requirements are generally required to establish epidemiological causation: (i) the factor must have been present a certain time before the outbreak of the disease; (ii) it must have been present to such an extreme degree as to heighten the chance of contracting disease from the outbreak; (iii) features of the contagion (in the light of reported epidemiological studies) must be explicable based on rise and fall of the factor’s distribution, without contradiction (i.e. the extent of the outbreak declines if the factor is removed, groups not subjected to the factor do not suffer the disease to the same extent, and so on); and (iv) the mechanism by which the factor becomes the cause of the disease must be explicable biologically, again without contradiction. After such causation for a factor has been proven, if it can be shown that the cause of the disease afflicting a particular litigant is the same factor, then the necessary relationship between the factor and the resultant disease will be upheld. Regarding such individual injury, a factual presumption of the necessary relationship will be made for unusual ailments, where the individual and concentrated outbreaks of the disease have the same symptoms (Nottage and Kato 1999–2000: 86–150). However, recent judgments in the US, England, and Germany appear to be adopting a harder line against using epidemiological and other statistical evidence to prove causal relationships in tort law claims.27

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Limitation clauses Fourthly, the PL Law does not address exemption or limitation clauses. Under general civil law principles, these bind only those with whom the manufacturer deals directly. Even if displayed in packaging or instructions, raising at least the possibility of some effect on end users, it is thought that they will often be struck down as contrary to public order and good morals (kojo ryozoku: Article 90 of the Civil Code), at least when attempting to exclude liability for personal injuries (EPA 1994: 128–9). This view may prove overly optimistic in the case of consequential property damage, especially when the plaintiff is an experienced businessperson or firm, given the overall quite restrained application of this ‘general clause’ by courts in post-war reported case law. Even in some such situations, however, exemption or limitation clauses may be struck down, at least in part (Nottage 1996: 278). On the other hand, in contracts with consumers, Article 8 of the Consumer Contracts Law 2000 reinforces case law developments by voiding exclusions for tort liability ‘under the Civil Code’, as well as limitations on liability for grossly negligent or intentional harm. Article 10 also emphasizes that clauses restricting consumer rights otherwise applicable under the Code, or ‘other legislation not dealing with public order’, are void if onesidedly contrary to the requirement of good faith under Article 1(2) of the Civil Code (EPA 2000). Japanese courts may be encouraged to extend the consumer protection principles underlying these rules when ruling on the validity of exclusion or limitation clauses in product liability cases. As mentioned above, a claim can be brought under PL Law Article 3 regarding the product itself, as long as there has also been some consequential property damage or personal injury. Accordingly, one reason a blanket prohibition on exemption clauses derogating from the PL Law has not been incorporated is that this would prevent manufacturers and others from restricting liability regarding damage to the product itself. That has traditionally been allowed, and would likely be upheld even in a contract between a manufacturer and a consumer. On the other hand, such direct contractual relationships are likely to be rare. In more complex distribution chains, manufacturers may attempt to force suppliers to accept exclusion clauses and require them to add other clauses in their contracts with downstream suppliers or end-users. However, this will be constrained by limits on the bargaining power of such manufacturers, either as a practical business matter or because of competition law. Japan’s Fair Trade Commission has made it known that it is alert to the latter implications, and this agency’s general clout has been steadily increasing.28 Another constraint comes from the likes of Civil Code Article 90 and the Consumer Contracts Law 2000, particularly when the end-user is a consumer, and the flow-on effects up the distribution chain. Since Article 9 of the Directive does not allow claims for damage to the product itself, it can no doubt more readily prohibit exemption clauses derogating from that legislative scheme (Article 12).29 Hence too, the more detailed prohibition in the TPA (section 75AP). Likewise, section 18 of the Restatement Third states that:

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Disclaimers and limitations of remedies by product sellers or other distributors, waivers by product purchasers, and other similar contractual exculpations, oral or written, do not bar or reduce otherwise valid products liability claims against sellers or other distributors of new products for harm to persons. However, this is intended to address problems of sellers contracting ‘unfairly’ (see generally Nottage 1996), and therefore to leave open whether ‘consumers, especially when represented by informed and economically powerful consumer groups or intermediaries, with full information and sufficient bargaining power, may contract to accept curtailment of liability in exchange for concomitant benefits, or whether such consumers might be allowed to agree to substitute alternative dispute resolution mechanisms in place of traditional adjudication’ (R 3d }18 Comment d: 265). Likewise, Comment c adds a cross-reference to section 21 Comment f, which explains that the Restatement also leaves to ‘developing case law’ (not reviewed in the Reporters’ Notes) the effect of clauses limiting liability for consequential losses to ‘other property’. Other regimes Perhaps most importantly, beyond such matters – finding virtually no mention in the PL Law at all – the PL Law is also not seen as preventing claims for product liability under tort or contract law provisions in the Civil Code, despite the new ‘defect liability’ regime established by Article 3. They can therefore be brought in parallel with claims under the PL Law. In other words, whichever claim sets the higher standard will apply. It is expected that a very high standard of care, bordering on strict liability as developed by Japanese courts in some situations under those earlier Code provisions (Kitagawa 1989), will continue to prevail. In fact, this result may not follow unambiguously from the wording of Article 6. If the plaintiff ’s only argument is that negligent manufacturing of a product has caused harm, it might be thought that this amounts simply to a claim for harm arising from a ‘defect’ in the product. That would be something ‘otherwise provided for in this Law’ (namely Article 3), meaning the argument would have to be precluded. An even stronger argument along these lines could be made if the claim under the Civil Code expressly relies on case law thereunder where ‘strict liability’ was alleged (cf. Table 2.2 in Chapter 2). However, it seems that no courts have openly agreed that this standard is applicable under the Civil Code (Kato et al. 1994a: 124–6), and few cases are likely to ‘compete’ with a claim under the PL Law. This is also not generally the way commentators in Japan currently interpret Article 6 (Madden trans. 1996: 325; Morikawa and Obo 1994; Yamaguchi 1994). Article 13 of the EC Directive appears more straightforwardly to preserve, alongside those provided under its scheme, any contractual, non-contractual or ‘special liability system’ rights existing when it was formally notified to member states. In France and other EU states, this Article was generally interpreted as

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preserving its general PL regime for all products under the Civil Code, seen as highly favourable to consumers because for example it did not permit a development risks type defence. However, in one of a trilogy of judgments rendered on 25 April 2002 (Case No. C-52/00; cf. also Nos. C-183/00 and C-154/00) insisting that the EC Directive was a ‘maximal harmonization’ initiative, allowing only for derogation where expressly permitted by provisions in the Directive, the ECJ has established that: the Directive must not be read as referring to general product liability systems in force in Member States but rather to liability systems of a different type, like the fault based liability or the latent defects warranty. Further, the Court explained that the ‘special liability systems’ from which an injured person may derive rights must be construed as liability regimes applicable to specific types of products. (Pillebout and Larroumet 2002: 26) As mentioned in Chapter 2, these rulings have raised fundamental questions about the nature and goals of Directives nowadays, and the roles of the various European institutions. More specifically, they seem likely to significantly advance discussions already underway regarding further amendments to the original PL Directive. Section 75AR of the TPA states very clearly that Part VA ‘is not intended to exclude or limit the concurrent operation of any law, whether written or unwritten, in force in a State or Territory’ of Australia, nor ‘to limit, restrict or otherwise affect any right or remedy a person would have had if this Part had not been enacted’. The latter preserves, in particular, rights like those under Part V Division 2 (section 74D) for damage from goods in breach of the statutory warranty of merchantable quality. As mentioned in Chapter 2, merchantable quality can include adequate safety, and damage can extend to consequential damages and personal injuries under normal private law principles. (Incidentally, consistently with section 75AP, exemption clauses are prohibited except in limited situations: sections 75K and 75L.) On the other hand, workers’ compensation scheme rights displace the product liability rights in Part VA of the TPA (section 75AI). This eliminates the complication of multiple or alternative schemes; but means that a significant proportion of accidents from products, at the workplace, will be covered by different legislation. In Japan, the PL Law does not address at all the question of applicability of regimes other than the Civil Code. It therefore must be taken to permit any remedies provided by them, including significant workers’ compensation and drug side-effects schemes (Matsumoto 1993; Tejima 1993: 732–5; Drennan 1998). It would also preserve any rights to payouts from health insurance schemes, especially the still extensive national scheme in Japan (Campbell and Ikegami 1998). Such payouts are a major reason for the limited damages claimed even in many litigated PL cases, such as the ‘McDonald’s orange juice’ case introduced above (PL Law Case No. 17, Appendix C).

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Expansive employee and social security schemes also still characterize Australia and many EU member states. By contrast, the US lacks a national health scheme, and the many working adults without health insurance are therefore prompted to bring PL claims to cover medical treatment and lost earnings caused by personal injury. Those who do have health insurance may pursue a PL claim to recover all losses from the plaintiff, although the insurer may have a lien for the cost of the care it provided. Similarly, a worker can claim full damages from a defective product supplier even if workers’ compensation insurance pays for medical expenses, although the insurer can seek reimbursement from any judgment or settlement amount (Pollock 1999: 325). This ‘collateral sources’ rule encouraging PL claims makes some sense in the US, where such sources are comparatively rare; but does not apply in countries like Japan. The Australian Federal Government’s Review of the Law of Negligence (2002) recommended that damages should be offset by ‘collateral benefits’ other than health care, social security, statutory and charitable benefits. The Restatement Third does not deal with this issue, leaving it to state law. However, Comment n to section 2 argues that cases should not be submitted to juries (as fact-finders) on ‘duplicative’ theories of recovery based on identical ‘factual predicates’ (e.g. a section 2(a) manufacturing defect claim, and an implied warranty of merchantability claim, based on supply of a product departing from specifications regardless of anyone’s fault). It then leaves to state law the question of when the plaintiff must elect to proceed with just one claim. Further, although conceding that it should be permissible to claim for both a (strict liability) manufacturing defect under section 2(a) and for negligence, Comment n argues that rejecting section 2(a) liability yet upholding liability for negligent quality control would be inconsistent. Thus, while still permitting plaintiffs to choose whichever general liability regime they think is more favourable – in contrast to the EU in some situations, as explained by the ECJ recently – this Restatement strives to limit some possibilities of recovery. In Europe or Japan, where there are no juries as such and professional judges mostly decide facts, there is much less need for such caution.

Procedural law and the overall civil justice system In addition to the scope of any other regimes covering losses caused by defective products, especially regimes provided or subsidized by the state, another very important set of parameters impacting on the extent and nature of claiming under substantive PL law involve rules of procedure and broader aspects of a jurisdiction’s civil justice system (Schwartz 1991: 63–70; Kellam 1999; Reimann 2002). Japan has been no exception in considering procedural matters alongside reform initiatives involving substantive PL law. As mentioned in Chapter 2, against the backdrop of various well-publicized ‘mass tort’ suits, a Research Group on Product Liability was formed in 1973, led by the eminent Professor Sakae Wagatsuma of Tokyo University Law Faculty.

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Drawing on recent developments overseas, including Europe (Morishima 1975), the group released in August 1975 a draft outline product liability law, proposing strict liability legislation (seizobutsu sekininho yoko shian, translated in Kitagawa 1989: para. 4.11). Articles 12–14 provided for a system of ‘compensation measures’ for designated manufacturers, such as PL insurance, imposed and run by the government. The proposed scheme bears interesting parallels with New Zealand’s state-run accident compensation scheme for all personal injuries, which came into effect in 1974 (Campbell 1996). However, that remains highly exceptional and increasingly criticized even within New Zealand, especially as welfare statism has retrenched around the world. Japan’s welfare state has come under particular pressure since the economic slowdown over the 1990s, making a scheme like that envisaged by the 1975 Draft Law even more inconceivable. However, indicating perhaps even greater controversy, a Postscript to the Draft added the following remarks: To achieve the aim of this law, it is desirable that the existing system be improved or newly created in terms also of civil justice remedial procedures, in accordance with the special features of injuries from defective products. In particular the introduction of systems along the following lines should be considered: (1) A system to force the other party or a third party to submit into Court means of evidence; (2) A system to provide relief for minor injuries; (3) A system that aims for relief through a particular person representing the interests of multiple injured persons, such as class actions; (4) A system for a defendant to bring into litigation a third party. ( Juristo 597: 16) It is wrong to deduce from this – presumably, paragraph (2) – that ‘the provisions of the 1975 Draft Law [sic] incorporated ADR mechanisms . . . [and] left the ADR mechanisms under the control and supervision of the courts’ (cf. Marcuse 1996: 397 n. 256). Nonetheless, the Postcript did invite such matters to remain on the policy agenda, along with other matters of considerable practical significance for PL claimants everywhere, particularly the scope of ‘discovery’ of evidence from defendants (paragraph (1)) and class actions (paragraph (3). Indeed, when the Draft was debated in October 1975 at the annual conference of the Private Law Association (shiho gakkai), one of the five presentations focused on a range of procedural issues (Takeshita 1976). They also formed a subcurrent in the four other papers, as well as the ensuing discussions. Procedural issues also continued to be studied by later researchers (Takeuchi 1990), although even the draft proposals on substantive PL law matters did not result in legislation until almost two decades later, for the various reasons detailed in Chapter 2. Other provisions of the Draft Law were very pro-consumer, including reversals in the burden of proof for establishing defects and causation, as

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proposed by some – also ultimately in vain – in the EU at the time. Such provisions, as the more general interest in procedural issues by its authors and other private law scholars in the 1970s, were driven by concerns for consumer protection and access to justice (Matsumoto 1997: 21). When serious debate on introducing product liability legislation resurfaced at the end of the 1980s, pro-consumer interests focused on procedural issues for a further reason. To counter concern mainly by business interests, they stressed that any ‘litigation explosion’ in the US was due to peculiarities of the latter’s civil justice system rather than substantive PL rules (Asaoka 1995a). After the PL Law was put in place, however, attention moved back to procedural matters important also in the Japanese context. Class actions, discovery and expert evidence One reason why such matters were not addressed in the PL Law was that they were being debated anyway in the context of proposed reforms of Japan’s civil procedure rules generally, particularly among judges and practising lawyers from the early 1990s. Comprehensive amendments to the Code of Civil Procedure were enacted in 1996, with effect from 1998 (Taniguchi 1997). Article 30 now provides for a somewhat more expansive ‘appointed party’ system, apparently drawing on English law, whereby ‘non-parties with common interests can select as their appointed plaintiff or defendant someone who is already party to the suit’. Articles 268–9 add some flexibility for judges managing large-scale litigation (Kojima 1998: 711–12). The latter may assist plaintiffs in situations like the ‘Big Four’ PL cases introduced in Chapter 2; but a notable feature of that litigation – and more generally in Japan – is the adroitness of Japanese lawyers anyway in collaborating to bring cases involving very large numbers of plaintiffs. Already, some PL Law claims and judgments have involved quite a few plaintiffs, although not as many as several reported judgments in England and Australia already applying the PL legislation derived from the EC Directive.30 Albeit from a small base, Australia has seen a remarkable increase in multiparty claims since the late 1990s, including PL claims. ‘Representative actions’ derived from the English law tradition were facilitated by a more expansive view of requisite ‘common issues’ adopted by the High Court of Australia. However, under that system, only named persons are bound by the judgment. In 1992, the Federal Court Act was amended to allow a representative action for at least seven members with a ‘substantial common issue’, also interpreted expansively by the High Court (Wong v. Silkfield Pty. Ltd. (1999) 165 ALR 373), which binds all members of the class created by the initial members unless they opt out before a date fixed by the court. This procedure is modelled on the US ‘class action’ system. However, it is actually more expansive in that there is no requirement for ‘certification’ by the court before proceeding (Kellam and Clark 2001). In the US, that includes for example an assessment of the lawyers’ ability, generally and to represent all members of the class. On the other hand, Australian lawyers still need to be careful, in the light of Justice Lindgren’s

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decision to award the defendant’s legal costs against the plaintiffs’ lawyers personally (Cook v. Pasminco (No. 2) 179 ALR 462), after dismissing as doomed to failure a PL claim for factory emissions which had been brought under the TPA (and hence the federal representative action procedure). Kellam and Clark (2001: para 15.83) also observes that the Federal Court is now becoming more active in requiring plaintiffs to restrict the scope of their claims and plead more specifically (see also Pengilley 2000). Developments are also likely to be constrained, even if just due to a more general mood, by Australia’s current ‘tort reform’ initiatives directed primarily at substantive law. In the US, federal class actions began to escalate in the 1970s and 1980s, including product liability claims involving very large numbers (e.g. for injuries caused by asbestos), even though such claims were not really envisaged when the class action procedure was established. Since the mid-1990s, however, there has been a notable retrenchment in this area of procedural law too. For PL claims, Courts of Appeals and the Supreme Court have re-emphasized the need for sufficient commonality in issues. Concern has also been expressed about pressure put on defendants to settle, and unfairness then to stronger plaintiffs (Harbour et al. 2001). Somewhat ironically, in view of such counter-reactions, Japan’s Judicial Reform Council Final Report on 12 June 2001 urged investigation into measures like class actions in specific areas of law, where their purposes and underlying rights or interests made this appropriate (Chap. II. Part 1. 7(4)(b)). Because the US model is alien to the shared German civil procedure law tradition, too, it seems likely that Japan will be cautious in developing a class action system, preferring to see what happens to recent complex changes in English law and at reform discussions also at the EU level (Hodges 2001). Japan’s amended Code of Civil Procedure did expand more prominently the scope of the parties’ discovery obligations, adding a general clause whereby requested documents had to be disclosed unless the other side could establish a specified exception, as well as formalizing a practice amounting to ‘interrogatories’ whereby lawyers can directly obtain answers to written questions before hearings (Mochizuki 1999). The implications for PL litigation were quickly commented upon (e.g. Tejima 1997). However, reflecting again continental European principles and case law developed under Japan’s original Code, the Supreme Court has reversed lower court judgments to hold that certain private documents created for internal decision-making purposes need not be disclosed (Second Petty Bench, 12 November 1999). The case dealt with a bank’s internal memo (ringisho) regarding a loan, in a ‘lender liability’ suit; and it is unclear whether the reasoning will be extended to prevent discovery of internal company records relating to claims and accidents, as under some case law applying the old Code. Anyway, it is inconceivable that Japan’s scope of pre-trial discovery could ever expand into the unique system found in the US. That includes the extensive use of ‘depositions’, for example, whereby sworn witnesses are questioned by opposing lawyers in the absence of the judge (and jury) and transcripts of evidence may be introduced at evidence at trial if the witnesses become

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unavailable (Pollock 1999: 320–1). This often contributes to pre-trial settlements. The remarkably expansive system of pre-trial discovery in the US makes more palatable the Restatement Third’s shift towards negligence liability for design and warning defects, although the system is left to state law (cf. R 3d }2 Comment f: 24). Conversely, judges in Japan and other countries may be more readily persuaded to apply strict(er) liability, and to more readily draw factual presumptions or innovate regarding the standard of proof applied in PL cases. Even more important in practice may be the availability of independent testing facilities, and the rules or practicalities concerning expert witness evidence. Such matters were also widely discussed before and when the PL Law was enacted (Maclachlan 1999). Although there will always be scope for improvement regarding testing facilities (see e.g. Kinkibenren ed. 2001), already we find plaintiffs making good use for example of CLC testing facilities, even in reported judgments (e.g. the ‘car mask’ case, No. 20, Appendix C). The Judicial Reform Council’s Report also urged improvements in the system for court appointed experts; the introduction of a new system of ‘expert commissioners’ (senmon iin) to assist judges in complex disputes (like medical misadventure cases); and encouraging greater specialization in the legal profession, e.g. through measures to promote larger law firms and continuing legal education (Chap. II. Part 1. 2). By contrast, over the 1990s the US Supreme Court has curbed the use of experts in civil litigation (see e.g. Foster and Huber 1997; Edmond 2002). In Daubert v. Merrell Dow Pharm., Inc. 509 US 579, it held that when testimony concerning science is offered in support of a party’s claim, the trial judge must ensure under Rule 702 of the Federal Rules of Evidence that any such testimony is ‘not only relevant, but reliable’. Factors for determining accessibility were said to include (1) whether a theory or technique can be or has been tested; (2) whether it has been subjected to peer review and publication; (3) whether a technique has a high known or potential rate of error and whether there are standards controlling its operation; and (4) whether the theory or technique enjoys general acceptance within a relevant scientific community. In Kumho Tire Co., Ltd. v. Carmichael, 526 US 137, the Supreme Court extended this analysis to testimony based on ‘technical’ and ‘other specialized’ knowledge. Official information A related issue is availability of information from government agencies, for both plaintiffs and defendants. Sometimes this can be crucial, especially in situations where the allegedly defective product (like a television set or refrigerator) is destroyed in a fire which also engulfs the surrounding premises, resulting in firefighting and other authorities becoming involved (cf. e.g. Cases Nos. 40 and 42, Appendix D). Another important item of information is the number of claims regarding a defective product reported to government authorities (see e.g. the ‘foundation’ case, No. 12, Appendix C). More generally, potentially having to reveal information should encourage more care in regulating industry – already, as shown in Chapter 2, Japanese citizens have not been afraid to sue central as

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well as local government authorities – impacting also on the PL standards expected in determining ‘defectiveness’. A key development in Japan has been enactment of the Official Information Disclosure Law 1999, also after lengthy and cautious deliberation. Although contemporaneous commentary from the US again was sceptical about these new rules (e.g. Boling 1998), which helpfully extend to central government officials certain disclosure requirements that had gradually been imposed on most local authorities throughout Japan (Repeta 1999), Japanese commentators generally welcomed the new Law (e.g. Kadomatsu 1999). It generated an unexpectedly high amount of requests for information after it came into force in 2001, and needs to be seen in the context of greater transparency in regulation fostered also by the Administrative Procedures Act 1993 and a 1999 Cabinet Ordinance requiring all government agencies to seek public comments before introducing regulations (Uga 2002). Growing expectations of transparency have also fuelled a significant rise in ‘taxpayer suits’ (Marshall 2002). Specifically in relation to PL, debates about the Law also encouraged some pro-consumer groups to maintain considerable cohesion and momentum after the excitement of PL Law enactment had passed – unlike the Nagoya group described by Madge (1999), for example, which lost its sense of purpose and eventually disintegrated. Although a rather belated tendency even compared to some EU jurisdictions, greater transparency for Japan’s bureaucracy also impacts on the operations and appraisal of alternative dispute resolution mechanisms relevant to PL claims. At the final stages of enacting the PL Law in Japan, committees of both the lower House of Representatives (15 June 1999, para. 4) and the House of Councillors (22 June 1994, para. 3) resolved that the government should, inter alia, take ‘appropriate measures’ to strengthen or organize the out-of-court dispute resolution system in order to promote smoother compensation for and prevention of injury from defective products (EPA 1994: 143–4). As detailed in Chapter 4, efforts have been made to mobilize government-funded CLCs, which assist with all sorts of consumer-related issues. Also, from September 1994, industry associations began to establish product-specific ADR Centres to deal only with PL matters. Some US commentators also see the latter in particular as uniquely Japanese and as nefarious to consumer interests (e.g. Bernstein and Fanning 1996). However, there are some interesting – if not exact – parallels overseas (such as the Banking Ombudsman schemes in Anglo-Commonwealth countries), and the operations of at least some of the Centres seem to be playing a valuable role also in consumer redress (Nottage and Wada 1998). Already, even Japan’s private Centres operate in the shadow – or light – of government authorities, not limited to those tied specifically to their industry (which may suffer ‘regulatory capture’ feared everywhere). Moreover, their operations should become increasingly transparent following the major civil justice initiatives recommended by the Judicial Reform Council Final Report, being pursued by the Office for Promotion of Justice System Reform established within the Cabinet in December 2001. Improving the legal framework for ADR, with corresponding educational effects, is a major plank in the reform agenda, in

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conjunction with dramatic amelioration of formal court processes (including some just mentioned above), a significant expansion in the numbers and scope of activities of Japan’s legal professionals, and reforms to legal education. In short, broader aspects impacting on claims under substantive PL law rules in Japan – and all countries – remain in a state of considerable flux. However, this flux also characterizes the EU, especially England (e.g. Hodges 2000b), and a common trend is generally towards ratcheting up access to justice, both in court and in its shadow. In contrast, ‘tort reform’ and related debates in the US and now Australia may reinforce a more cautious approach, albeit within a tradition of uniquely liberal access to court processes in the US – and, correspondingly, still considerable scepticism about ADR (cf. Landrum 2000). Japan should not be faulted for not dealing with such broader issues in its PL legislation; nor are they dealt with in comparable bodies of norms in the EU, Australia and Japan. (Quite unusually, for recent PL legislative regimes,31 section 75AQ of the TPA does allow the Australian Competition and Consumer Commission to commence a liability action on behalf of one or more persons identified in a written application. So far, however, the only action taken has been in ACCC v. Glendale Chemical Products Pty. Ltd. (1998) ATPR 41–632, and the successful appeal by the Commission.) A more productive approach appears therefore to turn to evidence of the impact of the PL Law, influenced by such broader developments as well as the legislative provisions and emerging case law, at a variety of levels reviewed next in Chapter 4.

Conclusions This chapter has presented a quite detailed black-letter law analysis focusing on Japan’s PL Law, compared to other prominent PL regimes in the EU, Australia and the US. Even the variations in statutory provisions, and a comparison of the wording of the sections comprised in the Restatement Third, offer considerable scope to think through a principled structure and approach to contemporary PL issues. This is greatly helped by quite readily available and authoritative commentaries, including the Comments and related Reporters’ Notes in the Restatement, especially writings which themselves adopt a comparative approach. This chapter has also drawn on a now quite fulsome body of case law collectively applying the EC Directive or offshoot legislation in Japan and Australia, even though there remain quite few reported – and even unreported – judgments in individual countries or from the ECJ. This combination of sources also led into some examination of broader issues in background tort law, civil procedure, the civil justice system overall, and differing views and mechanisms relating to welfare statism. One set of general conclusions emerges because the ‘strict liability’ EC Directive and its offshoot appear to be developing a quite coherent set of principles, applied by courts in different countries in a generally reasoned manner – sometimes with quite similar results, and with growing openness to developments abroad (Harland 2001). All this is occurring despite ongoing tensions regarding how to determine design or warning defects, or to apply a

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development risks defence, without simply returning to a negligence based regime. There are also problems in identifying – let alone reconciling – the underlying purposes and assumptions behind establishing PL law as a separate sub-field within tort law (Stapleton 1994; Hammond 1998); but courts appear to be doing quite well in applying the statutory regimes (see also e.g. Malkin 1998). Perhaps the interpretive case law and commentary so far is not quite ‘middle level theory’ (Stapleton 2002b) – maybe it is still ‘low-middle theory’ – but good progress appears to be being achieved. Certainly it seems increasingly like ‘throwing the baby out with the bathwater’ to fold this growing body of knowledge back into more general tort law, as Professor Jane Stapleton’s writings tend to advocate. For all its inconsistencies, and strange history (sketched in Chapter 2), PL law offers a helpful entre´e into that wider world of tort law. The latter itself remains riven by fundamental controversies, evidenced by current efforts in the US to ‘restate’ the rest of tort law (e.g. Goldberg 2001, White 2003). Tort law is also shaped by the types and timing of litigated cases in different countries, dramatically illustrated by New Zealand, where vestiges of tort law have developed since the 1970s with hardly any common law relating to personal injuries. Specific legislation has increasingly underpinned the emergence of subfields within private law and often related institutions, e.g. for consumer protection, and there is also a tendency for specialization within PL law regimes themselves (Reimann 2002: 116). Improvements to PL law can still be suggested, especially when rethinking its potential interaction with public safety regulation, as sketched in Chapter 5. Yet it is salutory even for jurists to appreciate that ‘the boundaries of product liability will always be unstable, because it is an ad hoc solution to a permanent and escalating problem’ (Howells 1996: 127). Those with less specialized legal training may have better or different intuitions about the complexities arising from losses caused by defective products, expecting even less from the applicable substantive law. In any event, they appear to have reacted significantly to the PL Law enacted in Japan, as Chapter 4 will show; and it is hard to imagine such effects coming from reforms to more diffuse tort law, however better doctrinally. Assuming the continued vitality of PL law as a sub-field of law, a second set of conclusions relates more to the present and future of Japan’s law in a fairly broad comparative perspective. For the foreseeable future, it seems probable that developments in the EU will be of most relevance to Japan, despite for example the entreaties by Reporters for the Restatement Third to turn to that model (Henderson and Twerski 1999). It is not just that the EC Directive – especially its vocabulary of concepts, despite internal tensions and more clearly signposted ‘options’ for incorporation – has become the world standard for legislation, especially in some regions even outside the EU (such as the Asia Pacific: Harland 1999), putting American law ‘in almost a maverick position’ (Reimann 2002: 111). Case law developments in different countries now offer scope to put more flesh on those legislative bones, or even reset some of them, assisted by commentators who are also increasingly prepared to peer across national or even regional borders. The EC Directive continues to provide a more accessible

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‘grammar’, at least on the surface, than the morass of PL Law from the US states, despite the recent Restatement – indeed, perhaps because of that initiative, due to the controversy which it engendered throughout the 1990s. More fundamentally, the EU now seems quite firmly set on an expansive path in reforming PL law, access to justice more generally, and perceptions of the role for law itself. For the PL Directive, following extension in coverage to primary agricultural products, the following remain on the agenda: reversing the burden of proof, removing the development risks defence, extending both time limitation periods, increasing the 70 million ECU cap on liability, providing claims for psychological injury, and providing some form of representative action (Hodges 2000b: 126–7). In Japan, although reform of PL law itself has been displaced from view in recent years, the Judicial Reform Council initiatives should result in significant improvements in access to justice, reinvigorating much of the large volume of legislation enacted over the 1990s. By contrast, the US trend evidenced by the Restatement Third, some other areas of private law (e.g. Mooney 1995), and civil litigation more generally, has been to curb liability exposure. Australia too may be moving in this direction. In short, although US legal models generally may be increasingly popular for some European jurists (Mattei 1994), the Japanese instinct has been to look primarily towards Europe, at least in private law matters. It seems likely that this will continue, even though this now increasingly means the law of the EU rather than German or French law, and some developments there may be filtered through from the US. In terms of substantive norms in PL law, therefore, it seems premature and improbable to pronounce ‘the Americanization of Japanese law’ (Kelemen and Sibbitt 2002). That conclusion is more sustainable if Japan’s PL Law was not intended to reinforce a putative pro-business orientation – or, at least, did not end up with provisions which were unfavourable to consumers. This chapter has tried to show ways in which the statutory provisions, as widely interpreted by commentators and increasingly now by Japanese courts, are not systematically biased towards consumer plaintiffs. Overall, it could even be said that Japanese law is more favourable than the original EC Directive regime, as implemented by almost all EU member states. This picture is changing, with the 1999 amending Directive and more extensive reforms being deliberated; but Japan may follow such initiatives too, albeit with the usual considerable time lag. TPA Part VA in Australia, the most pro-consumer variant when legislated in 1992, will lose that relative position if no reforms are forthcoming – as seems likely, in the recent ‘tort reform’ climate designed to rein in liability exposure. The US has also been battening down the hatches, but its PL law still generally presents more attractions to consumer plaintiffs, especially in conjunction with the broader parameters fixed in its civil justice system. If this comparative perspective holds true and Japanese law is not particularly beholden to business or other e´lite interests, it should make more believable the assessments of the historical development of Japan’s PL Law presented in Chapter 2, and the impact of the PL Law described next in Chapter 4.

4

The PL Law in action

Introduction Chapter 3 compared the provisions, main commentary, and emerging case law in the ‘strict liability’ regimes in Japan, the EU, Australia and the US. Generally, however, there are still few reported – and even unreported – judgments outside the US, and other effects have not been large. In 1995 for example, coinciding with the European Commission’s first review of the EC Directive, conference presentations and national reports organized through the Consumer Law Centre at a Belgian university generally concluded that hardly any judgments had been reported applying the Directive; instead, manufacturers referred disputes to ADR and insurers were often called upon. Nonetheless, manufacturers did appear to be taking more precautions in safety features of goods potentially covered by the Directive, and to be conducting more recalls, although this impact ‘was not readily quantifiable and also has to be related to the adoption and implementation of the General Product Safety Directive (92/59/EEC)’ (Goyens 1996: 238). Westphalen (1996: 83, 85) maintained that ‘the German law has not been “Americanized” . . . The absence of negligence as a prerequisite to the manufacturer’s liability has had no impact on the case law’, although judgments under Article 823 of the Civil Code were ‘developing rapidly to the benefit of the consumer’. In Italy, which had implemented the Directive in 1988, there was only one reported judgment, from 1993 (Alpa and Stoppa 1996: 79). Mildred (1996: 49) could find ‘no report of any case pursued to judgment or subject to any interlocutory ruling where liability under the [Consumer Protection Act 1987] has been pleaded’, while briefly noting nine claims where the Act seems to have been relied upon, and more anecdotal evidence of some others.1 Availability and costs of insurance had not been significantly affected. One assessment of the overall ‘impact of the Directive on European industry’, based on ‘discussions with many colleagues in industry, publications and a survey of 88 German companies’, nonetheless concluded that: Product quality has improved generally. This is mainly a consequence of increased competition in the Single Market and of new methods of quality management, but may also be due in part to product liability. Nearly all

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companies examined their insurance contracts. As the insurance industry provided cover, difficulties did not arise, but some companies felt it necessary to increase their coverage. Some companies took a new look at the instructions accompanying their products. Clear information about uses and misuses of a product can influence the safety expectations of the consumer, which are relevant for a decision on the defectiveness of a product. Documentation is another area in which many companies have been active. The producer can avoid liability by proving that the product was not defective when it left the factory. Controls during the manufacturing process and especially exit controls have become even more important. Results of controls have to be kept during the lifetime of the product, which may require extensive documentation. Some producers have shifted part of the risk to their suppliers by special contractual arrangements. Companies react more quickly when instances of damages by their products occur. Recalls and public warnings are more frequent. Recalls and product warnings are more frequent. (Kretschmer 1996: 211–12) Similar observations have been made regarding Europe or the UK (Stapleton 1999) and Australia (Harland 2001), although there remains an almost total dearth of sustained empirical research into such effects. Nor have there been attempts to systematically collate and analyse case filings, to determine effects of the new legislative regimes on manufacturers and others. Moreover, only since the late 1990s has a critical mass of reported and unreported judgments begun to emerge in these parts of the world.2 There is surprising little comprehensive and reliable data even for the US, despite – or perhaps even because of – concerns during the 1980s about a tort (and PL) litigation explosion. It is clear that vastly more suits are filed and decided in the US, compared to all other countries. For example, Schwartz (1991) reported estimates of only 200 PL suits annually in the UK – even that seems high – compared to 70,000 suits in the US. One product generated a thousand claims in the US, but only eight in Canada (see generally Morritt 2000). There were only 25 PL suits in the Netherlands reported over a 50-year period. In short, any PL ‘crisis is . . . primarily a US phenomenon’ (Dewees et al. 1996: 188). Various analysts have tried to measure the extent of this phenomenon. Viscusi (1991: 17, 96–7) emphasized that PL suits filed in federal district courts alone increased from 2,393 to 13,409 per annum between 1975 and 1989, an average growth rate of 33 per cent. Average and median jury awards rose over 4 per cent every year from 1971 to 1988. The 1980s also witnessed a dramatic escalation in general liability insurance premiums. A significant factor appears to be the expansion in PL exposure, although other considerations more specific to insurance markets may be relevant, and liability insurance premiums have settled back down over the 1990s.3 Reports of manufacturers refusing to develop new products due to uneconomical insurance premiums or PL litigation exposure led to several studies on the effects of the PL or insurance ‘crises’ on

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product innovation and safety. One set of econometric and industry case studies generally agreed that: ‘for industries with relatively low liability costs the liability system appeared, if anything, to enhance innovation. But in industries such as general aviation, in which liability costs rose sharply during the early 1980s and became a significant share of total costs, liability does seem to have dampened innovation’. Further: the documented direct linkages between liability and safety thus far are weak. In most of the sectors examined, other factors – primarily regulation and bad publicity – seem in the aggregate to provide much more important incentives to providers to improve the safety of products and services. Liability may, however, play an indirect role in amplifying the safetyenhancing effects of both reputational concerns and regulation; in the first instance, by promoting dissemination of safety-related information, and in the second, by helping regulators identify potentially unsafe products and encouraging them to take remedial action. (Huber and Litan 1991: 15–16) By contrast, Priest (1988) observed that aggregate data on deaths or injuries from accidents did not drop off sharply from the 1970s, when products were arguably becoming safer, thus challenging the view that expanding PL exposure was affecting product safety as well as accident rates. However, his data sets do not seem to support such conclusions, as they ‘fail to segregate accidents involving defective products from accidents involving non-defective products, [so] any effect that the expansion of product liability may have had on the production of defective products could easily be lost among the vastly greater number of accidents involving non-defective products’ (Dewees et al. 1996: 203). Further evidence for the safety-enhancing effects of more PL exposure comes from industry surveys. Around a third of 232 US firms responding to a 1986 survey cited PL as enhancing or supplementing existing safety instructions, and as the impetus for safety-enhancing product design improvements. The study also reported few detrimental effects. These conclusions generated powerful criticism for overstating benefits from PL exposure by failing to consider reputational damage as a powerful deterrent against supplying defective products, and for understating economic effects by focusing on middle management and firms with lower liability cost risks. A second survey was therefore conducted in 1987, of CEOs of 2000 large manufacturers and 2000 smaller ones. Although response rates were low (around 14 per cent in each category), suggesting a serious sample bias, this study found significantly more ‘adverse impacts’ (notably on innovation), although similar levels of safety improvements (see Table 4.1). The story of these two surveys indicates the care that needs to be taken in approaching data particularly from the US. Those favouring ‘tort reform’ to rein in PL in that country (e.g. Huber 1988), as indeed has occurred over the 1990s (Zollers et al. 2000), tend to welcome empirical evidence – and add anecdotes – suggesting that US firms’ innovation or international competitiveness has been

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Table 4.1 Impact of PL Law on US firm behaviour, 1987 Adverse impact

Closed production plants

Firms reporting impact 9%

Laid off workers Discontinued product lines

16% 47%

Decided against introducing new products Discontinued product research

39% 25%

Beneficial impact

Firms reporting impact

Improved safety of products Redesigned product lines Improved product usage and warnings Decided against acquiring/merging Lost market share

35% 33% 47% 22% 22%

Source: Originally from McGuire 1988: 20; adapted from Dewees et al. 1996: 199.

adversely affected, while downplaying more positive effects on the supply of safe products. They may also exaggerate the rates or amounts claimed, focusing for example on extravagant jury awards (even if later reduced by judges, or settled on appeal: McCann et al. 1998). Ironically, legal advisers defending suppliers may prefer to highlight certain cases or trends indicating a more restrictive attitude emerging from decided PL cases, whereas the large body of trial attorneys (representing plaintiffs, mostly on pure contingency fees) have strong monetary incentives to collate case law or data on filings or settlements indicating greater PL exposure. The picture is complicated by the ways the media reports PL cases. Garber and Bower (1999), for example, confirm newspapers’ strong bias towards reporting automotive PL verdicts not only when plaintiffs prevail, but also when jury awards are larger than usual. However, other significant factors included whether (a) the newspaper was published in the same city as the court and (b) the vehicle had been recalled in relation to the defect litigated, as well as (c) punitive damages and (d) the accident caused fatalities. A recent study has confirmed that news reports announcing an event that leads to a lawsuit filing, as well as the filing itself, is strongly correlated with extensive capital market losses (indeed, greater than expected damage payments), although ‘reputational effects’ (defined in this way) are less extensive than for government sanctions such as recalls, and the losses extend to the sued company’s competitors only for automobiles and not pharmaceuticals (Prince and Rubin 2002). Such evidence and analysis of the evolving impact of PL in the US, at various levels, remains surprisingly sparse. This chapter therefore focuses much more on developments within Japan, compared to other parts of the book. Nonetheless, its working hypothesis is influenced by comparative observations like those introduced above. In particular, enactment of a stricter PL regime in Japan is expected to produce noticeable but small effects on litigation patterns, and more significant impact on broader patterns of behaviour regarding safety issues among manufacturers and others. To this end, the chapter first tries to assemble quite comprehensive data

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on PL suits filed since the early 1990s (Appendix D), not just those decided by Japanese courts; unreported as well as reported judgments; and evidence of outof-court settlements. It also separates out PL Law suits (Appendix C), to see if different patterns emerge compared to claims notably under the Civil Code. It assumes some familiarity with the substantive law analysis detailed in Chapter 3, but develops some of the latter’s introduction to the broader procedural or institutional parameters to civil dispute resolution in Japan. This chapter also looks further down the ‘dispute resolution pyramid’ (Astor and Chinkin 2002: 44–51), by examining the operations of product-specific PL ADR Centres established in the wake of PL enactment. Finally, it seeks out reliable evidence of other reactions from consumers and manufacturers, focusing on empirical studies mostly available only in Japanese, to complement media reports and other material now becoming available in English (e.g. Rothenberg 2000). Concentrating on Japan also allows us to revisit some general theories about the role of law in Japanese society, introduced in Chapter 1 and partly tested in Chapter 2, when examining the longer-term historical evolution of PL. Generally, evidence of the impact of PL over the 1990s presented in this chapter undermines broad assertions about a ‘culture’ of subordinating individual entitlements to social superiors, including government agencies and large manufacturers, generating predictions that the PL Law would have little effect (e.g. Bernstein and Fanning 1996). Culture may be relevant in some instances, as with quite emotional initial responses to harms suffered or subsequent behaviour by manufacturers. Yet those responses can fuel disputes, in everyday situations, as much as dampen them. Alternatively, in extreme cases where fear of exposing physical deformity does work against airing grievances in public, such cultural dimensions are often found outside Japan (Reich 1991). The latter factor is emphasized in a recent synthesis by Haley (2002: 127–8), arguing that a range of studies in Japanese law now permit an appreciation of ‘the variety and the dynamics of institutional and cultural factors that, through interaction and change, produce lower rates of litigation and other patterns of litigation’. However, other factors mentioned stress ‘institutional capacity’ (or lack thereof), including ‘limited access to information’ and ‘concern about preservation of ongoing relationships’. He is also struck by the results of an empirical study of 591 litigants in 16 district courts reported in 2000 by the Judicial Reform Council: most respondents hesitated to sue because they perceived lawsuits would take too long (72 per cent) or be too expensive (67 per cent), while 67 per cent gave no thought as to whether resorting to court might create a bad appearance. Such arguments indicate some retreat from attempts to link patterns in Japanese law to a (rather ill-defined) ‘communitarian’ orientation (Haley 1998), and back towards an acknowledgement that self-interest often underlies these patterns (Haley 1991: 164–6; and especially Haley 1978). Indeed, as one of several propositions now viewed as forming a consensus view on the role of adjudication and legal rules in Japan, Haley (2002: 127), concludes that ‘Japanese prefer to resolve disputes in a manner that they perceive will maximize their interests or that they will believe will best realize their personal, self-regarding goals’.

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As well as re-emphasizing claimants’ sensitivity to ‘institutional barriers’ rather than subordination to broader cultural imperatives, Haley (2002: 132) also concedes that ‘litigants negotiate and settlement frequently-litigated disputes in the ‘shadow’ of the law, thereby ensuring lower transaction costs and a more efficient system of adjudication’. He points out that Rokumoto (1978) first demonstrated this empirically; but that the argument of predictability of substantive outcome as a disincentive to pursuing cases through to judgment was persuasively presented to English readers by Ramseyer and Nakazoto (1988, 1989). Following more the work of Foote (1995), Haley suggests that ‘embedded values and the structure of Japan’s career judiciary’ promote such consistency in adjudicating ‘nearly all areas of law’. As a further proposition now attracting broad consensus, Haley (2002: 133) adds that ‘Japanese judges themselves influence the frequency of lawsuits as a means of dispute resolution in several ways, including efforts to reduce delay as well as to ensure consistency and access to information’. Other recent studies also adopt hybrid approaches to understand patterns in civil dispute resolution. West (2002) found that thousands of disputes by neighbours against noisy venues for karaoke singing preferred to bring complaints before local government authorities for free attempted mediation, primarily because suing in court was too expensive. Those who had used the mediation service, set up – not for karaoke disputes – after major industrial pollution cases reached a head in the early 1970s, agreed that they would sue if such higher institutional barriers were eliminated. West then examined what determined whether neighbours complained or tried to settle privately. Despite his predilection for explaining civil dispute resolution through economic analysis premised on self-interest (e.g. West 1999), he conceded that his interviews indicated that some social norms were relevant, such as the degree to which karaoke operators were integrated into local communities. He also found indications of norms disfavouring noise production, but not complaining per se, and noted instances where formal complaints to authorities could promote informal negotiations towards settlement by reinforcing norms (see also Wada 1997). The most novel part of this analysis of the choice between complaint and settlement, moreover, was West’s attempt also to quantify certain arguably ‘cultural’ influences by correlating indicia of ‘social capital’ with numbers of formal complaints. He confirmed significant relationships for club membership and participation in voluntary activities (more social density, correlated with fewer disputes), and more foreigners (more heterogeneity, more disputes). Somewhat surprisingly, however, the positive correlation between population density and disputes was not statistically significant. In sum, a strong and compelling tendency in recent studies of civil dispute resolution in Japan is to eschew grand culturalist explanations in favour of attention to still arguably cultural factors in sectoral, temporal and comparative perspectives, sensitive also to the interrelationships of these more structural elements with more formal legal processes, including both structural barriers and substantive legal rules. The evidence assembled in this chapter is guided by – and hopefully reinforces – such attempts at a more eclectic ‘middle way’ in

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theoretical approach. However, the evidence should also serve simply to demonstrate the impact of the PL Law, and to generate more immediately practical implications for a range of readers outside Japan, especially exporters and their legal advisers. Overall, this chapter also suggests a ‘middle way’ in assessing the contemporary influence of PL in Japan at multiple levels. It counters some views that this area of law is insignificant or cannot develop without widespread changes, revealing pervasive and perverse stereotyping (particularly from some US commentators) or particular interests (for example by consumer activists and jurists supporting them in Japan, who will always be difficult to satisfy). Rather, as in Europe and Australia, enactment of a new strict(er) liability regime has helped consolidate a growing interest in PL and product safety more generally since the 1990s. Albeit from a low base, litigation has increased. In suits filed under the PL Law since late 1995, plaintiffs appear to have achieved favourable out-of-court settlements. Within a much shorter timeframe than in Europe and Australia, courts in Japan have also rendered significant judgments in favour of plaintiffs. These are compatible with some earlier judgments in PL cases under the Civil Code. Recent judgments in such cases, however, often favour defendants. This complication may affect the prospects for favourable settlements in the future, and the potential for more litigation. The impact of the PL Law and renewed interest in product safety is also apparent in the establishment and operations of industry association-based PL ADR Centres. Very few disputes are taken to the most formal procedures offered. Mediation occurs informally, however, and information provided can help favourable negotiated settlements directly between manufacturers and consumers. At the least, consumers can combine and compare any information obtained with that available from other sources, including advisory services provided by the government. These also benefit from access to technical and other information provided by the PL ADR Centres, as do manufacturers in trying to improve their product safety activities. There is also other evidence of heightened awareness and engagement with PL problems. Yet all this does not point to a litigation explosion or ‘crisis’, as allegedly occurred in the US during the 1970s and 1980s, nor even a claims explosion. Instead, the patterns appear similar to what has occurred in Europe and Australia, although comparable empirical evidence there is not readily available. Further, the picture in Japan continues to evolve. Shifts are likely from emerging trends in judgments under both the PL Law and the Civil Code; the outcome of civil justice system reforms recommended in 2001; and complacency or cutting of corners by manufacturers in relation to product safety activities after intensification of Japan’s economic downturn in the late 1990s. As with more theoretical debates about the roles of adjudication and legal rules in contemporary Japan, some complexity cannot be avoided. This chapter nonetheless offers an analytical framework to help take stock of significant developments since the early 1990s and to help assess future evidence at various levels, hopefully even encouraging better accumulation of comparable data from outside Japan.

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Suits under the PL Law since 1995 Appendix C lists a total of 29 suits filed in courts around Japan claiming liability under the PL Law, since it came into force on 1 July 1995 through to late 2001. They derive from many sources, mostly reinforcing each other; but details on later cases remain patchy, and the courts continue to surprise commentators by rendering judgments applying the PL Law in cases which others had not been aware were pending. Overall, an average of almost five cases filed per annum over this period of about six years, and just over one judgment per annum, may not seem very much. However, cases continue to be brought under the Civil Code (discussed below), and the limited numbers of suits under the newer strict liability regime is similar to patterns under the EC Directive and the TPA in Australia. More interesting are the large numbers of smaller claims, despite the institutional barriers to civil litigation still often emphasized by commentators outside Japan (Goodman 2001); apparent declines in time needed to resolve disputes, possibly influenced by emerging certainty in interpreting the legislation at least in some categories of cases; and some evidence of a fall-off in suits filed after a peak in 1998. Rise and fall in PL Law suits filed The first claim filed under the PL Law, involving a tea pack with an allegedly defective plastic opener (No. 1, Appendix C), was brought on Christmas Eve of 1995, almost six months after the new legislation had come into effect. As the first reported filing, it immediately attracted considerable media attention. It continued to be referred to throughout 1996, with some commentators expressing concern that this isolated example showed that the PL Law was having little effect. Such concern was heightened when it took almost another year before the next few filings were reported. These involved a snow-melting machine (No. 2) and cut bacon (No. 3), both bringing PL Law claims in late November 1996. In the first half of 1997, however, there were four more filings in rapid succession, involving school lunch poisoning in Sakai City (No. 4), the aftermath of widespread infection by O-157 bacteria over the previous summer; poisoning from sea urchins (No. 5); synthetic detergent (No. 6); and a lift for automobiles in a parking building (No. 7). At least ten other filings were then reported throughout 1998, involving an ear care product (No. 8); an air conditioner (No. 9); McDonald’s orange juice (No. 10); computer software (No. 11); cosmetics (No. 12); surgical thread (No. 13); Chinese or herbal medicine (No. 14); sweets made from konnyaku, a root vegetable (No. 15, discussed in Chapter Five); an airbag in a Porsche vehicle (No. 16); and a hot water boiler/ dispenser (No. 17). The McDonald’s case attracted particular attention because hardly anyone knew that this proceeding was afoot, before it resulted in the first judgment clearly establishing liability under the PL Law (on 30 June 1999, translated in Appendix B). Over 1999, only five more claims were made invoking the PL Law, involving a child’s shoe (No. 18); carbon monoxide poisoning from an automobile (No. 19);

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a metal hook for a ‘car mask’ (windscreen cover: No. 20); an intriguing claim solely for pain and suffering (isharyo), brought by the captain of a boat whose defective engines resulted in a maritime accident (No. 21); and a glass plate for school lunches (No. 22). Restaurant customers brought a series of claims over 1999 and 2000 for botulism from olives (No. 28), again resulting in a judgment upholding liability. Two other PL Law suits in 2000 involved an electric wheelchair (No. 23), and further litigation regarding glass plates (No. 24). In 2001, despite the ‘summer of eating dangerously’ the year before, again only four suits are widely known to have been brought: for extraneous matter in canned juice (No. 25) and a cup of noodles (No. 26), the bacteria poisoning from Snow Brand milk which resulted in over 13,000 injuries (No. 27), and snapper (fish) poisoned by different bacteria (No. 29). This rise in claims under the PL Law, then apparent fall since 1999, raises some interesting questions discussed further below. Geography Those interested in some immediate practical implications, particularly for foreign companies, should note that six of these 28 suits clearly were brought against importers: those involving sea urchins and olives (Nos. 5 and 28), health care products (Nos. 13 and 14), a Porsche automobile (No. 16), and one of the glass plates (No. 22). The latter also involved a claim against their US manufacturer, illustrating that the PL Law’s specification of rights against ‘importers’ does not impliedly limit claims to domestic ‘manufacturers’ (as mentioned in Chapter 3). Further, the claim involving extraneous matter contained in orange juice (No. 10) was brought against McDonald’s Japan Co., the Japanese arm of the US multinational. More generally, most litigation has been concentrated in the courts of major metropolitan districts; but claims have also been brought before courts in rural areas of Japan, areas that tend to have a reputation for conservatism.4 The fact that these suits were filed in these areas, typically the place of injury for plaintiffs living there, undercuts the view that there is resilience in traditional culture, whereby hierarchy and harmony are promoted over the assertion of rights. Other patterns reviewed below also suggest that institutional barriers to litigation are being more readily overcome than some might have expected. All this leads to a sense that at least some Japanese litigants are strategically manipulating structural constraints, including those still imposed by social hierarchy, as well as the opportunities provided by the legal system. Many claims for ‘minor’ and ‘personal’ damages An important feature is the number of minor claims being pursued. Although the average claim for Cases Nos. 1–25 and 27 is almost 33 million yen, the median claim is for just under 15 million yen. Reflecting this skewed distribution, as shown by the first row of Table 4.2, 12 out of 27 cases (44.5 per cent) involve quite small claims (mostly well under 10 million yen).

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Table 4.2 ‘Personal’ vs. ‘business’, ‘minor’ vs. ‘major’ damages claimed under the PL Law

1. Minor claims 2. Major claims

A. ‘Personal’ damages

B. ‘Business’ damages

Nos. 3, 6, 8, 10, 12, 18, 21, 25, 27, 28 Nos. 4, 7, 13–17, 19, 20, 22–24

Nos. 1 and 9 Nos. 2, 5, 11

A second notable feature is that almost all of these ‘minor’ claims, namely ten out of 12 cases, involve claims for what can loosely be termed ‘personal’ damages (personal injury and related losses, including lost earnings, and/or consequential damages to ‘consumer’ property), as opposed to ‘business’ damages (consequential losses to property used for business purposes, or lost profits). The prevalence of these small claims undermines any objection that strategic assertions of rights under the PL Law may be expected for businesses, but not for individuals, who are somehow more in the shadow of ‘traditional’ culture valorizing harmony. The relatively limited claims for business damages overall – five totalling 100.8 million yen, compared to 21 totalling 756.5 million yen for ‘personal’ damages – should also defray one concern expressed soon after the PL Law enactment. Professor Tsuneo Matsumoto (1997: 25) had alleged that by allowing ‘business’ damages to be claimed, because Article 3 merely provides for ‘damage’, as defined broadly under the Civil Code, Japanese courts would begin establishing legal principles to restrict large claims within that category, which might then be applied also to ‘personal’ damages. Courts have indeed already rejected two of the five ‘business damages’ claims, in the unreported judgments in the ‘tea pack’ case (No. 1) and the ‘sea urchins’ case (No. 5). However, these have been followed by the reported judgment in the ‘school lunches’ case (No. 4), in which the Court would likely have upheld the ‘personal damages’ claim expressly under the PL Law if more time had remained after finding liability under the Civil Code (Ota 1999: 4); and those finding PL Law liability in the McDonald’s case (No. 10), ‘car mask’ case (No. 20), and ‘botulism from olives’ case (No. 28). Only the careful judgment in the ‘foundation’ case (No. 12), also reported, has rejected a claim for ‘personal damages’. Overall, the limited amounts claimed under the ‘business damages’ category so far also counter the broader contention that the PL Law was deliberately designed to favour business more than private consumers, compared to the EC Directive regime allowing claims only for consequential ‘personal’ losses. As discussed towards the end of Chapter 2, this difference seems to have arisen primarily from complications in drafting the PL Law during the final stages leading to its enactment. The high proportion of minor claims, in particular, may be prompted first by the ability of those harmed by tortious acts, and thereby obliged to engage counsel and instigate proceedings to protect their interests, to claim also a reasonable amount for the plaintiff ’s lawyer’s fees in the event of success. This represents an important and longstanding exception to the ‘American rule’, generally adopted in Japan, which does not permit the successful party to claim its lawyers’ costs (cf. Goodman 2001: 792). Moreover, if the tort or PL Law

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plaintiff conversely loses its claim, the winning defendant is not normally entitled to its reasonable lawyers’ fees in defending the action. The defendant must bring further proceedings, in tort as well, namely for improper suit (futo teiso). Japanese courts are reluctant to uphold such claims, unless the plaintiff ’s original claim was manifestly unreasonable or an abuse of process. This lopsided situation contrasts with the ‘English rule’ in most Anglo-Commonwealth jurisdictions, where successful defendants are awarded their reasonable lawyers’ costs – just as successful plaintiffs are. It also therefore adds an incentive for plaintiffs in Japan to bring PL suits, even for small amounts. Not surprisingly, while generally welcoming the Judicial Reform Council’s efforts to dramatically improve both formal court processes and ADR, pro-plaintiff lawyers have voiced strong concern about the suggestion that Japan should investigate moving to the general rule that the losing party should pay the winner’s lawyers’ fees (Sekine 2001). Of course, such plaintiffs still face other barriers in engaging a lawyer to bring their case to court. One often mentioned is the minimum up-front retainer fee set by Bar Association rules (Yamanouchi and Cohen 1990). Yet that has been recently reduced. As shown for example in Table 4.3, the (very large) First Tokyo Bar Association reduced the fee with effect from 1 October 1995, with only partly offsetting increases in the fee charged if successful in court. Hence, a plaintiff filing a PL Law-based claim through an Association member after late 1995, for instance for 400,000 yen (as in the McDonald’s case, No. 10), should only have paid a minimum of 32,000 yen up-front to retain a lawyer (compared to 60,000 yen under the old rules) and 64,000 yen if successful (compared to another 60,000 yen). This reduced front-loading may encourage litigation through a lawyer in the first place. In addition, the overall minimum fees have dropped particularly for small claims. In the example given, these should have totalled 96,000 yen (compared to 120,000 yen). To be sure, a court in Japan may not award the full amount paid and claimed, often holding a lower amount of lawyers’ fees to be ‘reasonable’ in particular circumstances (as indeed in the McDonald’s judgment, translated in Appendix B). Yet this is the rule in many other jurisdictions where costs may be awarded to successful plaintiffs, in principle. Anyway, it has long been known that Bar Association minimum fee rules are often not followed consistently. This helps explain why average incomes are not particularly high for Japanese lawyers, despite the difficulty of passing the Table 4.3 Amendments to minimum lawyers’ fees Amount

Up to Yen 0.5m Yen 0.5–1m Yen 1–3m

Retainer fee

Success fee

Old

New

Old

New

15% 12% 10%

Flat 8%

15% 12% 10%

Flat 16%

Source: Adapted from Henderson 1997: 52–3.

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national Bar Examination (Ramseyer and Nakazoto 1999: 13–14). The temptation to keep fees down seems likely to have been maintained since amendments like those in 1995. Competition among lawyers has increased owing to the steady increases over the 1990s in the annual numbers permitted to pass the Bar Examination, and this competition has been compounded by Japan’s protracted economic recession. The Japanese government’s commitment in 2001 to further ratchet up the numbers over this decade is already prompting prominent mergers and tie-ups among Tokyo law firms specializing in international and business law transactions (Nagashima and Zaloom 2002). However, equally profound effects can be expected for the many, much smaller firms which rely more heavily on bringing claims involving private individuals. Japanese Bar Associations also continue to press for the expansion of legal aid provided by the government for civil as well as criminal proceedings (Miyazawa 2001). To avoid criticism that this is primarily for the pecuniary benefit mostly of lawyers, but also out of a strong sense of social responsibility, the Bar Associations continue to provide monetary and in-kind support for individuals seeking access to the courts. For example, in a PL claim appealed to the Osaka High Court, for one million yen in pain and suffering (isharyo) alleged after a golf club’s head snapped off and flew 90 meters down a driving range (Case No. 90 in Appendix D), 0.3 million yen was provided towards lawyers’ fees by the ‘Sunflower Fund’ set up by the Okayama Bar Association (Mizuta 2000: 4).5 Perhaps most importantly, groups of plaintiffs’ lawyers which banded together to push for a PL Law, strategically bringing test cases from the early 1990s (Matsuura 2001: 167), continue diligently to file claims. A major network is based in Tokyo; another is the ‘Kansai Liaison Committee’ formed in 1991 as part of the ‘All-Japan Liaison Committee to Demand Enactment of a PL Law for Consumers’ (Maclachlan 2002: 217). Time to resolve claims Another factor often overlooked by those emphasizing the structural parameters constraining civil litigation, for major as well as minor claims, is the relatively high interest rate on damages awarded. The combination of Civil Code Article 419 with Article 404 allows a successful plaintiff to claim a fixed 5 per cent interest rate on top of the damages awarded by the Court, running from time of injury until time of judgment. This rate has never been amended since enactment of the Code over a century ago. It is very high nowadays compared to market interest rates, which remain close to zero. Rather than encouraging plaintiffs to bring suit, however, this factor is probably more relevant in encouraging defendants to settle filed claims quickly, especially as they come to appreciate that a plaintiff may likely succeed. Generally, along with high costs, delays in reaching resolution of cases brought before Japanese courts have often been singled out as a major ‘institutional barrier’ to litigation. Recent research suggests that on average delays are not necessarily remarkable, at least in terms of the time taken between filing and

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judgment in contested cases compared to some US jurisdictions (Ramseyer and Nakazoto 1999: 140–1). In Japan, moreover, ‘time required for the disposition of civil cases at the first instance was reduced from an average of 17.3 months in 1973 to 9.3 months by 1997, and on first appeal from an average of 18.3 months in 1975 to 9.8 months by 1997’, with reductions also at the Supreme Court level particularly over the 1960s (Haley 2002: 134). Tanase (2001) emphasizes that Japan’s escalating civil litigation rates since the mid-1970s have been dominated by (non-contested) debt collection cases. However, Haley points out that such abbreviated proceedings do not explain the reduced times to dispose of appeals, and suggests a correlation with increased case management by judges as well as steadily increasing lawyer numbers. In addition, amendments to the Code of Civil Procedure, in effect from 1998, were aimed at reducing delays through earlier identification of the legal issues, for example (Taniguchi 1997; Sato 2000). Such changes to the ‘software’ of Japanese civil justice may not generate much further improvement to its ‘hardware’ – such as the numbers and qualities of judges, lawyers and other resources for the court system (Ota 2001). Yet the latter is precisely the main thrust behind the Judicial Reform Council’s Final Report of 12 June 2001. Still, it also recommends further measures to encourage greater ‘case management’ and prior ‘discovery’ of evidence, seeking to halve the time taken to resolve civil cases overall, which had declined only to an average of 20.5 months by 1999 for contested cases at the District Court level. In cases filed under the PL Law, moreover, some interesting patterns have already been emerging. First, a clear distinction can be drawn between time to judgment and time to settlement. In six cases which have clearly involved reported settlements, this has required about 39 months (No. 2, an early and complicated claim involving snow melting machines), 19 months (No. 3, cut bacon), 18 months (No. 6, detergent), 13 months (No. 7, car lift), four months (No. 8, ear care), and nine months (No. 17, hot boiler): an average of 17 months and a median of 15.5 months. Not surprisingly, the first-instance judgments have taken considerably longer. For five judgments on which data is available, the average is 27 months and the median is 24 months: 45 months for No. 1 (the first and difficult ‘tea pack’ case), 32 for No. 4 (the school lunches case), 24 for No. 5 (sea urchins), 13 for No. 10 (McDonald’s orange juice), 22 for No. 12 (cosmetics).6 In addition, several cases have been appealed (e.g. Cases Nos. 1, 10, and 29). Generally, there is considerable scope for this in Japanese civil litigation, as appeals from District to High Courts generally allow review of factual evidence as well as questions of law (Goodman 2001: 795). Statistics regarding time to settlement or judgment will become more reliable as the sample of resolved cases increases. Nonetheless, the patterns so far suggest that if settlements can be reached at all, they should occur by 2003 for the 11 outstanding cases filed through to 2000, and may also occur by then for the three filings reported for 2001. Even judgments should be rendered soon in many of these cases soon, maintaining the visibility of the PL Law through to at least 2005. A second noticeable feature may be a declining trend in time taken to resolve the cases brought so far. This pattern is apparent in both categories, but perhaps

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especially in cases resulting in a judgment. For the latter, one explanation may be the nature of the cases. The tea pack case (No. 1) took the longest (44 months), for a variety of possibly exceptional circumstances. It was the first filing to be widely reported, and was litigated in a more rural part of Japan. It also raised a more difficult legal issue, namely a design defect involving the plastic opener, rather than for instance a one-off manufacturing defect. The first phase of litigation, including expert opinions, apparently had been particularly protracted: around three years. In the next case filed resulting in judgment, involving the poisoning of school lunches by O-157 bacteria (No. 4), an elapse of 32 months is also not too surprising. Even longer was required in many earlier mass-injury litigation, like those introduced in Chapter 2, which brought complications such as collective action challenges and criminal prosecutions. Also, the actions of various government actors were closely scrutinized in these particular proceedings. As a result, the Court was confident that Civil Code liability for negligence had been established, and did not take additional time to examine the further cause of action under the PL Law. The latter nonetheless appears to have influenced the former and primary finding, which did not insist on precise specification of which ingredients in the school lunches were the culprit (Ota 1999: 4), and such possible interaction between the two regimes may have slowed proceedings. Somewhat more surprising is the lengthy period of 23 months taken by the Sendai District Court to reject the plaintiff ’s suit in the case involving raw sea urchins (No. 5). However, as mentioned in Chapter 3, the Court examined the facts carefully in ruling that the plaintiffs had not proven that the harmful bacteria had arisen in the sea urchins by the time they were delivered by the defendants; and another issue was whether the urchins were sufficiently ‘processed’ to fall within the scope of the PL Law. By contrast, the judgment in the McDonald’s orange juice case (No. 10) was reached very quickly, after only 13 months. This was in spite of the supplier vigorously contending that no damage was suffered as alleged, and that causation was not proved due in part to the ‘extraneous matter’ never having been found nor precisely determined. It has been noted that the Presiding Judge was one of the very few to have been drawn from the ranks of practising lawyers (Hirazuka 1999). Nonetheless, the judgment appears to have been a precursor to growing alacrity in judging PL Law suits. These have included the ‘botulism from olives’ case (No. 28) and the ‘snapper’ case (No. 29), despite multiple plaintiffs; and even the design or warnings defects cases involving ‘car mask’ hooks (No. 20) and cosmetics (No. 12, taking 22 months). Factors like the CCP amendments may also underpin what seems to be a downward trend in time taken to reach settlement. The snow melting machine case (No. 2) took 39 months to settle, those involving cut bacon and detergent (Nos. 3 and 6) took 18–19 months, the car lift case (No. 7) took 13 months, but the ear care case (No. 8) took only four months to settle. (Two other cases, Nos. 9 and 13, took only 5–6 months before being withdrawn by consent; but the latter was due to a settlement in a medical misadventure claim against the hospital.) However, other considerations may influence the pace of settlements as well.

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Results of claims filed One major factor encouraging settlement is growing certainty of outcome. In turn, this will be influenced by the general trend in outcomes of cases reported under the PL Law. First, it appears that plaintiffs on the whole have done quite well out of negotiated outcomes. The bare fact that a settlement is reported (as in Cases Nos. 2, 6, 7, perhaps 9) implies that some compensation was paid, although this may be very minor. Similarly, the plaintiff in the case alleging poisoning from packed cut bacon (No. 3), a prize from a pachinko (game) parlour, obtained some ‘consolation money’ (mimaikin) as a result of court-encouraged conciliation. (This term typically implies that no liability is admitted, but many settlements of proceedings include a formal statement to that effect as well.) The surgical thread case (No. 13) was dropped by consent, following a large settlement with the hospital. More clearly, plaintiffs appear to have done well in the ear care product case (No. 8: 250,000 yen out of 610,000 yen claimed) and the hot water boiler case (No. 15: eight out of some 25 million yen). The plaintiff ’s lawyer from Kagoshima, in the remote south-west of Japan, reports that the latter settlement amount was based on a similar case he learned about from a Tokyo lawyer who had presented a report to the ‘National Colloquium on Compensation for Harm from Defective Products’ held on 8 May 1999 (Owaki 2000: 3). Secondly, most judgments have been rendered in favour of plaintiffs so far. The timing of these results, by category of cases, is also significant. For defective foodstuffs, which can usually be conceptualized as involving manufacturing defects, the plaintiff ’s quick success in the McDonald’s orange juice case (No. 2: 100,000 out of 400,000 yen, awarded on 30 June 1999) followed the ruling against the manufacturer in the tea pack case (No. 1, on 8 September 1999). However, the latter was promptly followed by the judgment holding Sakai City liable in the school lunches case (No. 4, 45 out of 77 million, on 10 September 1999), albeit focusing on the Civil Code cause of action. Subsequently, the Tokyo District Court has robustly upheld PL Law liability in the botulism from olives case (No. 28, over 8 million yen, 28 February 2001) and the snapper case (No. 29, 12 out of 28 million yen, 13 December 2002). This pattern suggests that Japanese courts are translating into the PL Law arena the high standards developed even in cases of defective foodstuffs litigated under the Civil Code, illustrated by some of the mass-injury suits discussed in Chapter 2, but also more generally (Nottage and Kato 1999–2000: para. 85–920 Figure 3). The picture remains more ambivalent for other products, involving alleged design defects, as there have only been two judgments: one from the Tokyo District Court rejecting the claim regarding cosmetics (No. 12, decided on 22 May 2000), followed by one from the Sendai District Court upholding liability for ‘car mask’ hooks (No. 20, decided on 28 April 2001). Overall, these remain very small samples. Patterns will need to be monitored as more information becomes public on PL cases reported in the law reports and other sources. Nonetheless, if plaintiffs achieve decidedly favourable results quite consistently, at least in some areas, the model of the ‘rational litigant’ in Japan

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would anticipate even more settlement of cases filed. Indeed, there should be a drop-off in cases filed in the first place.7 This helps explain the lack of suits reported in the wake of Japan’s ‘summer of eating dangerously’ in 2000 (Nottage 2000a). The rash of product recalls, prompted by a wave of media publicity after the Snow Brand milk debacle, may have reduced the potential for injuries. Yet Snow Brand’s tardiness and obfuscation illustrate the potential for defective foodstuffs to remain in circulation. It seems likely that any consequent injuries have been settled quite favourably for claimants, in the shadow of evolving PL principles, as well as the urgent need for Japan’s food companies to maintain or regain a reputation for adhering to minimum safety standards. Exceptions will include litigation with a ‘public interest’ element, where dynamics in civil litigation are generally rather different, as shown by the ‘Big Four’ PL cases and the automobile defects saga introduced in Chapter 2. A contemporary example is the suit brought in 2001 by an Osaka lawyer active in the Kansai Liaison Committee, on behalf of six individuals injured by the defective Snow Brand milk products (No. 27). The total claim of 6.6 million yen includes a claim for ‘punitive damages’, despite the rejection of this category of damages under Japanese civil law mentioned in Chapter 3, as contrary to its fundamental principle of compensating for harm rather than punishing for it. Although there may be some hope of persuading the Osaka District Court to take this opportunity to increase amounts claimed as compensation for harm and suffering (isharyo), and thereby ‘educate’ or influence other courts and legal professionals, the main purpose behind claiming for punitive damages is to attract broader public attention to a perceived social problem (cf. Tanaka 2000). This case is therefore unlikely to settle, at least until there has been a first-instance judgment, and delays may actually appeal to the plaintiffs and their lawyer. More generally, Chapter 3 has shown how reported and unreported judgments in PL Law cases have begun to flesh out the provisions of the legislation and a large volume of quite reliable commentary, and indicated the potential for this to be advanced by comparative studies of similar regimes and developments in Europe and Australia. However, the often conflicting solutions proposed by the Restatement Third in the US may muddy the waters, and many uncertainties about key legal issues remain in the PL case law now being developed in Japan. This is particularly so given the dispersion of cases among different courts, and the lack so far even of High Court rulings. In addition, Japanese courts are less constrained by rulings of higher courts than AngloCommonwealth and even US courts (Yanagida et al. 1994: 49–50; Atiyah and Summers 1987: 267–97). A further complication is the possible interaction – more or less openly – with PL principles particularly under the Civil Code, reviewed below. The relationship between PL Law as a whole and product safety regulation may also need to be revisited, as mentioned in Chapter 5. Finally, even with changes underway or readily foreseeable in Japan’s broader civil justice system, the volume of PL litigation will always be similar to that in Europe or Australia, in contrast to the avalanche of cases brought before US courts due to its more pervasive idiosyncrasies. This creates less incentive for

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Japanese judges to work together to standardize rules delineating both liability and damage amounts, as occurred in the 1960s in response to escalating disputes arising from traffic accidents (Foote 1995). The factual matrices in PL cases also are less susceptible to precise categorization; and it is not just disappointed plaintiffs’ lawyers who decry some judges’ lack of technical knowledge – and, especially, their openness to assessing competing arguments relating to such matters.8 The Judicial Reform Council’s Final Report of 12 June 2001 recommended various measures to improve courts’ ability to deal with specialized disputes, and also cautioned against a tendency to stabilize certain payouts for damages (such as isharyo) at low levels. Combined with repeated calls to make courts a less daunting part of everyday life in Japan, this suggests that a significant tendency is to individualize justice rather than homogenize it, in contrast for example to Australia since the late 1990s (Gleeson 1997). In short, while predictability of outcome should not be overlooked in analysing and predicting PL trends in Japan, at least in some categories of cases, it will jostle with a myriad of other considerations.

All PL suits over the 1990s Appendix D records a total of 159 suits involving a PL claim, mostly under the Civil Code, but including the 29 PL Law claims listed in Appendix C. The total also includes 17 appeals. The main sources are two tables of cases reproduced in conference proceedings of the Kinki Bar Association (Kinkibenren ed. 2001), derived originally from the Japanese Federation of Bar Associations (Nichibenren) as part of an ongoing nation-wide initiative to keep track of and publicize PL suits. Its first table listed cases (reproduced as Nos. 1–91) by judgment or settlement date, between 1 July 1995 (when the PL Law came into effect) and February 2000. Additional details of some claims are added from PL Ho/Joho Kokai Nyusu (‘PLN’) newsletters, issued several times each year by the Kansai Liaison Committee. The second table listed cases filed since 1989 which were ‘pending’ as of February 2000. Appendix D renumbers these (Nos. 92–127); and updates them for results and for cases through to mid2001 using PLN newsletters. Appendix D also includes additional cases (Nos. 128–159) mostly filed since 1990, mentioned from PLN newsletters (but not listed in the Kinkibenren tables), including other PL Law suits through to 2001 (reproduced from sources listed in Appendix C). Details of some of the additional cases from PLN newsletters are skimpy, and a few (Nos. 132 and 139) were filed in the late 1980s. Some cases were also settled before formal filing (e.g. Nos. 9 and 138), although the involvement of lawyers should justify including them as PL ‘suits’. For example, in Case No. 45 involving konnyaku jelly, a sweet made from a root vegetable, the lawyer mentions that a very satisfactory settlement was reached for 50 million yen, in the shadow of court proceedings (Sato 1997). Overall, it can be safely concluded that at least 150 PL claims have been filed from 1990 through to 2001, or an average of at least 12 filings per annum over

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this 12 year period. There have also been at least 44 judgments since 1995 (an average of 6.3 per annum), and 62 settlements since 1994 (7.8 per annum). This compares with an average of 7.8 reported judgments per annum over 1985–89, followed by just 2.2 judgments per annum over 1990–94, identified by Kato (1994a: 66; see Table 2.1 in Chapter 2), although Appendix D also includes unreported judgments – quite numerous in Japan. Figure 4.1 suggests a sharp rise to 19 filings in 1994 (the year the PL Law was enacted), although the data set for early years is less complete because it draws only on PLN newsletter reports. Clearer rises then follow in settlements, especially in 1996, and the 16 judgments in 1999. In other words, it appears that litigation activity has been significantly ratcheted up, particularly over the mid- and late-1990s. The drop-off in 2000, and especially 2001, no doubt reflects the less comprehensive data sources for those years too. Again, however, a drop-off may be driven in part by emerging perceptions of likely outcome. More PL insurance may be relevant too. Geographical dispersion is considerably less than that emerging in claims under the PL Law, discussed above. Excluding these claims, PL suits under the

-

Figure 4.1 PL suits filed, settled or decided, 1990–2001.

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Civil Code have congregated more on courts in Japan’s major urban conurbations: Tokyo (40 filings), Osaka (21), and Nagoya (18). Partly this simply reflects the fact that this data in Appendix D includes appeals, and many superior courts are located in those three metropolises. It will also be due to strong pro-consumer groups, including lawyers, particularly in Osaka (editing the PLN newsletters) and Tokyo (which also has the heaviest concentration of lawyers generally). Interest in PL has been quite strong in Nagoya too (Madge 1999). Lawyers in these three areas also got organized from the early 1990s to promote PL Law reform, setting up hotlines to learn about accidents involving defective products, and then bringing test cases – initially under the Civil Code. They first concentrated on automobiles and household appliances like television sets, clearly significant items, where establishing manufacturer liability had generally proven difficult (Matsuura 2001). It is less clear how many cases potentially affected foreign parties. As mentioned above, this has been quite noticeable in PL Law claims. Leaving these aside from Appendix D, at least 14 out of the remaining 128 claims quite clearly involved an importer (e.g. widely publicized Case No. 145, by a dentist asserting ‘sick house syndrome’); Japanese operations of overseas manufacturers of health products (Nos. 36 and 133), tobacco (No. 113), or automobiles (Nos. 11, 13, 37, 48, 95, 107, 112, and 146); or overseas parties themselves (Nos. 97 and 120). Other cases may have involved imported products, even if not claims directly against importers themselves. In contrast to filings under the PL Law, most cases invoking the Code seem to involve major claims, especially serious personal injuries. There are few obvious mass-injury cases, but several at least had potential to develop into them (e.g. Cases Nos. 6 and 97); and there were also many ‘public interest’ suits, for instance concerning blood products (Nos. 21, 22 and 101) or tobacco (Nos. 3, 70 and 113). Lawyer activists also worked hard over the 1990s to pursue claims about defects in automobiles, although (as mentioned in Chapter 1) it was an insider tip-off to regulators in 2000 which led to discovery that Mitsubishi Motors had covered up claims and repairs for decades, resulting in extensive recalls by many automobile manufacturers.9 The proportion of ‘minor claims’ seems lower in non-PL Law cases, although the data is less complete, and some exceptions already present themselves (e.g. Nos. 4, 61, and 65: the latter being one of the relatively low proportion of claims involving ‘business damages’). This suggests that bringing minor claims under the PL Law is not caused by sudden new litigiousness or rights-consciousness among individual Japanese compared to the early 1990s. A more important factor, therefore, may be the diminishing structural barriers to litigating small claims, such as amendments to Bar Association minimum fee rules (see Table 4.3). Further, as mentioned above, steadily declining market interest rates throughout the 1990s may encourage faster settlement of claims, although it is unclear how important this influence has been. The date of filing is not readily available in cases not involving PL Law claims, only the year (and sometimes not even that), so it is difficult to compare the average time to settlement. Generally,

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however, it seems longer than for the PL Law claim filings. Average time to firstinstance judgment over the 1990s also seems slower, but may be speeding up. This reinforces the possibility that civil procedure law reform since 1998 has had some effect in this area, in turn potentially affecting a decision whether or not to bring PL suits under the Civil Code, as well as the PL Law. However, the results reached in claims under the Civil Code appear to present a very different pattern to those emerging for PL Law cases. On the one hand, there does appear to be a similar trend in out-of-court settlements reached. These generally seem quite favourable to plaintiffs, although this is difficult to quantify as outcomes are not always reported and original claim amounts are even less accessible. Lawyers have also noted this tendency (e.g. Nakamura 1996). Settlements seem to have peaked in 1996, but were also reached in significant numbers in 1998 and 1999. On the other hand, judgments reached in cases applying the Civil Code present a variable contrast. At an initial stage, just before PL Law enactment, a plaintiff scored a major victory in a judgment against Matsushita, involving a Panasonic brand television (No. 128). Around the same time, a Matsushita subsidiary also lost a case brought by activist lawyers, after settlement negotiations mediated by the Housewives’ Federation (Shufuren, No. 135). The former judgment attracted the most publicity (Matsuura 2001: 168–71). The Osaka District Court held that the plaintiff ’s house had burned down due to the television set catching fire, and then effectively reversed the burden of proof to require Matsushita to prove that it had not been negligent in manufacturing the set. In the shadow of this ruling, two similar claims filed in the same Court were settled later that year (Nos. 129 and 130). Similar reasoning was adopted by the Court in a case involving a Sharp television set, decided generally in the plaintiff ’s favour in 1997 (No. 40), with an even better result achieved in 1998 following an appeal to the Osaka High Court (No. 58). Since then, however, plaintiffs have failed in other courts in cases involving goods allegedly catching fire, such as a television produced by Mitsubishi (No. 42, upheld in two appeals) and another by Sanyo (No. 49), a word processor (No. 79), and a refrigerator (No. 74). Still, significant damages were then awarded against Sanyo regarding one of its freezers (No. 83), after the Tokyo District Court was prepared to infer that it was the cause of the fire, and a settlement was reached regarding another Sanyo in 1999 too (No. 78). More consistently, plaintiffs continue to have problems in adequately proving causation and defectiveness in the many claims regarding automobiles. Overall, results from judgments presented in Appendix D suggest a more difficult road for plaintiffs relying on the Civil Code, since the late 1990s, compared to those invoking the PL Law. Despite the possibly more restrictive approach of Japanese courts recently, the judgments applying the PL Law since 1999 appear to be following earlier trends in the Civil Code PL cases. For example, the willingness of the Nagoya District Court to find adequate proof of causation, namely that the plaintiff ’s injury was caused by something in the McDonald’s orange juice (No. 80), parallels the robust approach of the Osaka District Court in the earlier television cases

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(Nos. 128 and 58). The question therefore arises whether more recent judgments going against plaintiffs in Civil Code cases will spill over into a similar retrenchment in future PL Law cases, including those currently or potentially subject to appeals. The possible interrelationships between cases involving PL Law and Civil Code liability (e.g. Mizuta 2000) heighten the uncertain state in both categories with respect to the legal principles and their application to specific circumstances. Such greater uncertainty of outcome may lead to more litigation and fewer out-of-court settlements over the 2000s. Once again, however, much will depend on what might happen to other structural parameters, such as costs and delays related to bringing (or threatening) litigation.

Industry association-based PL ADR Centres A further dimension to the growing importance of PL in Japan, resulting from or reflecting enactment of the PL Law, comes from the establishment and operations of private-sector PL ADR Centres. These formally commenced operations in mid-1995, and their roles and functions became clear over the next few years (Ito 1999). Appendix E presents an overview of key organizational features of these Centres. They are often referred to as ‘product specific’ PL ADR Centres, which is usually an accurate description. However, as indicated by Column A in Appendix E, sometimes there is some actual or potential overlap in scope of products dealt with by various Centres. Examples include the Housing Products PL Centre (No. 1), the Construction Materials Centre (No. 12), and the Interiors PL Centre (No. 16). Nonetheless, in practice it appears that the respective products involved have proved sufficiently distinct. Potential problems as to which Centre should deal with borderline products have been further minimized due to the limited activities of the latter two Centres, restricted to providing information or advice in response to queries. Similarly, there is an overlap arising from the Japan Automobile Importers’ Association Consumer Advice Room (No. 14) dealing with cases involving ‘imported vehicles’, and the Automobile PL Advice Centre (No. 3) dealing with ‘vehicles used in Japan’. But the former does not provide for the most formal procedure, has only one fulltime staff member (seven others are part-time), and apparently deals with comparatively few cases. Many cases, especially the difficult ones, are therefore referred to the more firmly established Automobile PL Advice Centre, or tend to be brought there directly. Likewise, the Japan Paint Industry Association Advice Room (No. 15) refers technical questions to the larger Chemical Products PL Advice Centre. A more complex overlap arises between the Daily Necessities PL Centre (No. 7), and the Products for Consumer Living PL Centre (No. 5, Deguchi 1998). In its promotional material, the former just mentions that it deals with cases involving ‘all daily necessities (all varieties of products used in everyday life)’. In practice, while cases most frequently involve metallic house ware (such as pots), furniture, clothing and so on, this Centre deals with a broad variety of other goods. Yet many of these are also dealt with by the Products for Consumer Living

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PL Centre, which covers the following goods: products for children or for the elderly, furniture and the like, sports and leisure goods, bicycles, items for smokers, and so on. The promotional material then goes on, however, to state that products marked with the ‘SG’ label shall in principle be dealt with under the latter’s compensation scheme. The SG system is voluntary insurance scheme inaugurated in the early 1970s, as part of the ‘industry informalism’ in response to Japan’s ‘Big Four’ PL cases and other concerns about product safety, introduced in Chapter 2. As of October 2002, the system covered 127 types of products, ranging from baby strollers to bicycles. The Product Safety Association continues to set standards for categories of products. Manufacturers (including foreign manufacturers) can apply to get their own products certified as meeting those standards (affixing an ‘SG’ label). They can then pay a small premium for insurance, which can be built into the product price to consumers, which provides compensation for any injuries proved to have resulted from a defect in the certified goods. Determination of the latter issue continues to be carried out under processes set up in the 1970s. Ramseyer (1996) asserts rosily that this voluntary system involved raising the standard for payouts from negligence-based to strict liability, in exchange for caps on payouts. Yet he concedes that he could not examine any records of why payouts were or were not made. In fact, it seems that the standard adopted was not changed, and that the manufacturer’s negligence was still assessed. Further, there has been at least implied criticism about a success rate of less than 50 per cent in claims brought, as well as their low numbers (Takeuchi 1990: 107–9). Others have criticized the system as not being well-publicized or known to consumers (e.g. Hamada et al. 1985). This could become important because the system, in principle, requires claims to be lodged within 60 days of the product accident. The Product Safety Association also investigates circumstances surrounding the accident, and commissions product tests. This may help reduce the evidentiary burden on consumer complainants, but is open to abuse if the Association’s payout determination is not available to scrutiny. Indeed, the Association itself was a co-defendant in a PL suit involving a baby bed fatality, filed in 1986 and not settled until 1994, the year the PL Law was enacted (Appendix D, Case No. 139). Thus, despite a gradual increase in product categories covered by the system, it still struggles to find recognition and legitimacy among consumers and the general population. It remains to be seen how they will assess an amendment in 1999 to the Consumer Product Safety Law, establishing the scheme, which replaces government certification of products with a system of third-party certification and self-declaration.10 This may save costs to businesses, and even bring down prices to products then covered by the scheme, but consumers may become even more wary of using the scheme instead of claiming through other processes. Anyway, for the very many categories of goods not covered by the SG system, or for individual products within those categories whose manufacturers did not have them certified, it may still make more sense to bring an inquiry to the new Products for Consumer Living PL Centre instead of the Daily Necessities PL

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Centre. The former has been set up under the auspices of the Product Safety Association, and hence can be expected to draw on the expertise in similar products developed in the context of the SG system. Indeed, several cases reported for the Products for Consumer Living PL Centre involve products within SG categories, such as bicycles (presumably, however, not involving SG-certified ones in those particular cases). Nonetheless, in part because the average person in Japan probably does not know much about such voluntary insurance schemes, he or she may find it difficult to know whether to turn to this Centre or to the Daily Necessities PL Centre. This problem remains even though the staff at both Centres appear aware of this problem, and keep in contact with each other. Because of this overlap, it seems more accurate to consider them as ‘industry association-based PL Centres’. Indeed, as shown in Column B in Appendix E, almost all have been set up within or by one major industry association (which may take various legal forms). Only the Automobile PL Advice Centre (No. 3) has been formed with a separate legal personality, endowed by the Japan Automobile Industry Association. Other main Centres generally have been established as separate units within the sole or main industry association concerned, albeit sometimes housed in the same building. They also have full-time executives, many of whom come from other jobs with such associations (and occasionally having worked prior to that in a related government agency). Exceptions are some smaller Centres. By not offering full services, including attempts to actively resolve disputes, these have tended not to attract many cases (only 107 in the first four years of operation or so, for No. 14 for instance). For these reasons, only the first 11 or so listed are commonly referred to when discussing Japan’s private PL ADR Centres; Nos. 12–14 (therefore marked with an asterisk in Appendix E) attract limited attention. The Centres are all based in Tokyo (Column D), in various parts of the metropolis, some more convenient than others. There has been some talk of setting up regional branches, to make the Centres more accessible to people in outlying regions. Some Centres (but not all) quite often send personnel to visit accident sites around Japan, which uses up limited time and funding. To make the Centres more accessible, however, all the main ones have set up ‘free-dial’ numbers (Column C). The Automobile PL Advice Centre was the first to establish an internet website, and five others now have one too (Column L). Online information provided varies considerably, with the Electrical Appliances PL Centre currently providing the most comprehensive and regularly updated information. Column I in Appendix E shows the number of cases dealt with by the main Centres through to end March 1997, beginning from each one’s inauguration of full services (Column J), which usually occurred when the PL Law came into effect. The average has been about 1,000–2,000 cases per annum. Data available for the ensuing two to three years generally indicated a stable trend, but there have been some significant differences among the Centres in recent years. The Automobile PL Advice Centre saw a sharp jump in overall enquiries, ranging

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from 1,665 in fiscal 1995 (including only 749 complaint-related enquiries) to 1,843 in 1999 (but with 1,514 of those complaint-related), in 2000 (2,966 overall, 2,742 complaint-related) and 2001 (2,897, 2,667). Likewise, the Electrical Appliances PL Centre recorded a jump in total enquiries from 1,147 in fiscal 1999 to 1,555 in 2000 (with only 348 ‘general enquiries’ about the Centre or PL), close to the 1,796 enquiries in fiscal 1995 (the first year in operation and of PL Law implementation, comprising mainly 1,050 ‘general enquiries’).11 These considerable increases coincide, of course, with the widespread recalls and related problems regarding automobiles and television sets which were widely publicized from mid-2000, as introduced in Chapter 1. The vast majority of enquiries have been dealt with by various forms of ‘advice’ offered by all Centres (sodan, Column F), at least through to 1997, apparently within 60–90 days on average. Very few involve a more formal ‘intermediation’ by Centre executives (assen: Column G), who try to reconcile the arguments made by both parties. Even fewer involve the most formal process, sometimes not even offered (for instance by the Cosmetics Centre, No. 11). This is ‘mediation’ by a group of lawyers, scientists and so on, appointed from a separate panel or committee, variously termed chotei or saitei (Column H). The distinction between these terms remains unclear, but both involve a process initiated and concluded ultimately upon agreement by the two parties. This may explain the limited use made of formal mediation. However, some argue that if a consumer seeks to initiate this process but the manufacturer baulks, or if the manufacturer refuses to agree to a proposal brokered by the mediation panel, and agreed to by the consumer claimant, the manufacturer may be subjected to considerable pressure by the Centre or industry association. In any event, these and other patterns are discussed below. An appraisal thereof, however, first depends on an accurate understanding of how and why these Centres came to be established. Establishment Behind the role played by industry associations in setting up and operating the Centres, several commentators have emphasized the heavy hand of Japanese regulators, particularly MITI. They argue that this represents another example of ‘bureaucratic informalism’ – government policy and institutions aimed at diverting disputes away from the courts, to control the pace and direction of social change (e.g. Bernstein and Fanning 1996). If this is so, then scepticism is justified as to the potential for the Centres to offer much to individual consumers facing problems involving potentially defective or unsafe products. However, a closer examination of the process by which the Centres got underway suggests a more complex picture. Certainly, most of them have ended up following some minimum standards suggested by an official Circular (tsutatsu) issued by MITI in late October 1994 (MITI 1994b: 84–97). This urged that each Centre be organized sufficiently independently from the relevant association(s). Centres were encouraged not to limit themselves to cases raising purely issues under the PL Law or other PL rules,

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but also product safety and quality matters more generally. Direct negotiation between parties, leading to agreement between them resolving any disputes, was to be the prime objective. Centre executives were also to act as intermediaries when required, but it was left optional whether or not to provide for more formal mediation by a separate panel. MITI also suggested that negotiation and intermediation be offered free of charge, while any formal mediation process should involve minimal fees. Expenses in testing unsafe products should be borne by the party wanting the test, but the amount required should be clarified before deciding to undertake the test. Details of disputes resolved were to be disclosed in anonymous form, partly to help prevent the reoccurrence of accidents. Further, many of these principles suggested in the Circular were mentioned in a report of the Industrial Structure Council in November 1993. MITI’s interest in setting up ADR mechanisms, in parallel with any changes in substantive legal rules, can also be traced back to a more focused report released in March 1993 by a research project sponsored by the Product Safety Association (MITI 1994b: 187–93). Another factor behind MITI’s interest probably was a particular concern in helping small- to medium-sized firms in relation to product safety risks (also more broadly apparent in the excuse from strict liability allowed to certain component manufacturers in Art 4(2) of the PL Law, discussed in Chapter 3). However, as shown by Appendix E and the brief discussion above, not all industries followed the standards set down in MITI’s Circular. The Housing Products Centre (No. 1), for instance, was set up two months before it was gazetted, in September 1994, although full operations did not commence until after the PL Law came into effect. Of course, before setting up this Centre the construction industry may well have checked with the Construction Ministry, and the latter might then have contacted MITI. However, rivalry among central government agencies in Japan is notorious. More generally, rather than straightforward ‘bureaucratic informalism’, timing and considerable variety in the Centres suggest that their establishment involved a considerable dose of ‘industry informalism’. Indeed, in the case of the Housing Products Centre, along with the Toys PL Centre (No. 13) and the Products for Consumer Living Centre (No. 5), the associations could build on almost 20 years of administering voluntary insurance schemes: respectively, the ‘BL’ (Better Living) and ‘ST’ (Safety Toys) schemes, modelled on the ‘SG’ scheme but without its statutory backing (Ramseyer 1996: 1835–6). Moreover, it should be noted that some of the Centres were in industries which were under the jurisdiction of ministries other than MITI, such as the Construction Ministry (Nos. 1, 12) or the Ministry of Health and Welfare (No. 8). Perhaps more importantly, the EPA, as the government agency primarily responsible for consumer policy, had been considering in parallel the establishment of ADR mechanisms to help resolve claims involving product safety. This was mentioned in the report of the Social Policy Council (Kokumin Seikatsu Shingikai) in December 1993. A study group was commissioned under independent auspices and gave its report in March 1994 (NIRA 1994). The main interest was in how to make more effective use of hundreds of ‘Consumer Lifestyle Centres’ (CLCs)

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established by local governments since the early 1970s, also partly to offer advice and to arrange testing for complaints from consumers about unsatisfactory products. Another focus lay in reactivating Complaints Resolution Committees established by almost all prefectures and major cities specifically to resolve disputes, but hardly ever used because of the notion that they should only deal with cases of manifest public, not private, concern. Following these reports, the EPA could also see the scope for considerable synergy between such government ADR mechanisms and industry association PL ADR Centres, funded by the private sector and able to bring much specific product expertise to particular disputes or queries. From the outset, however, it was apparent that the latter would have to demonstrate minimum standards of impartiality. Consumer interests and the media also made these points, when they periodically got wind of the various reports and suggestions.12 It should also be recalled from Chapter 2 that 1993–1994 was stamped by the historic defeat of the LDP, which led politicians of all stripes to show more attention to consumers’ concerns. In fact, the establishment of PL ADR mechanisms was specifically encouraged in resolutions passed by both Houses in the Diet in June 1994, when they approved enactment of the PL Law itself (EPA 1994: 143–5). Thus, ‘legislative formalism’ was added to a mixture of ‘industry informalism’ and more fragmented bureaucratic informalism. Although Japanese industry and its main regulators may have hoped to establish self-serving PL ADR Centres, insensitive to consumer interests, these circumstances made this unlikely. Conscious also of the limited amount of litigation under or prompted by the 1985 EC Directive, many in Japan were concerned that substantive law changes incorporated in the PL Law would not be enough to help consumers, particularly with small claims. Many of the factors which may be underpinning the minor PL Law claims brought before the courts nowadays, sketched above, have only gained in salience since the late 1990s. Various proposals back in the 1970s did call for more radical innovations to assist litigants in bringing in small claims, such as class actions, but these raised difficulties with the basic principles of Japanese civil procedure. By 1994, as mentioned towards the end of Chapter 3, the CCP was already being examined for a whole-scale overhaul. One compromise reached was to leave such procedural law matters out of the PL legislation, and instead to encourage the establishment and strengthening of ADR mechanisms, including industry association PL Centres maintaining certain standards. This background opened the way for consumers actively to use these Centres to achieve their own strategic objectives, just as they now appear to be using the courts in PL litigation. Since it occurs in less formal settings, this development can be termed ‘consumer informalism’. Assessing current activities A rich and extensive body of data is now emerging from the activities of these Centres. Even covering the general state of play in the main ones by 1997, assembling quantitative data, was a major undertaking for one commentator (Ito

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1999). Acquiring additional qualitative data is even more time-consuming (e.g. Nottage and Wada 1998). Nonetheless, assisted by a sense of the history behind the establishment of the PL ADR Centres, studies so far identify the following key features and conceptual framework for analysing and evaluating their activities. Three noteworthy and seemingly quite stable features stand out from aggregate data, reproduced below, made public by various major Centres for 1996 and 1997. First, there have been many inquiries from businesses. Secondly, very few are actually cases involving accidents caused by allegedly defective products, which would give rise to PL Law claims, namely for personal injury and consequential property damage. Thirdly, there has been very little formal mediation (chotei or saitei) and little formal intermediation (assen) by the Centres. Sceptics could argue that these features prove that the Centres are of limited significance, at least for consumers, and especially for those greatly harmed by defective products. However, the regular newsletters and other material published by some Centres, along with some third-party commentary (e.g. Nichibenren ed. 1995) and interviews at various Centres conducted personally mostly in 1996 (Nottage and Wada 1998), indicate that there is more to such aggregate data than meets the eye. Details of cases brought and the ways they are resolved suggest that at least some Centres do contribute usefully to ‘consumer informalism’. They provide another option in the repertoire open to consumers wishing to find out and do something about defective products. Similarly, the various sources of legal and practical guidance offered to those involved in traffic accidents can help to empower them to resolve their disputes ‘in the shadow of the law’ (Ramseyer and Nakazoto, 1989; Tanase 1990); but with less risk of the exclusion of moral vindication and other ‘non-rational’ motivations (Tanase 1992; Etzioni 2000) which follows more readily from modern-day court processes (Ziegert 2002; cf. Wada 1997). At the same time, as discussed later in this chapter, the PL ADR Centres also underpin efforts by manufacturers to improve product safety, in particular cases as well as more generally, and reinforce the complaint resolution and advisory services provided by government agencies. Fewer cases brought directly by consumers Table 4.4 provides an indication of the relatively low proportion of cases brought before the PL Centres by consumers per se. One clear exception was the Automobile PL Advice Centre. This is related to its industry association consisting of large automobile manufacturers, which have strong technical and legal departments, and therefore can deal in-house with PL and product safety issues. Further, by fiscal 2001 the proportion of its cases from consumers had increased to 82.4 per cent. The Electrical Appliances PL Centre has also seen a steady increase in cases from consumers, reaching 60.4 per cent in fiscal 2000. At the other extreme was the Chemical Products PL Centre, with a very high proportion of cases coming from businesses. Although there are some very large

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Table 4.4 Sources of PL ADR Centre cases PL Centre (4/96–3/97)

Medical products Automobiles

Electrical Products for consumer living Gas and petroleum appliances Daily necessities Chemical products

Cases from businesses

6% 9%

31% 34% 39% 40% 69.3%

Cases from government agencies

Cases from consumers or consumer organizations

18% 10% (7% from CLCs, 3% from government agencies per se) 19% 19% 26% 22% 15%

38% 69%

40% 22% 29% 31% 11%

Source: Adapted from Ito 1999: 83–4, 95, 101, 105, 113, 117, 120.

chemical manufacturers, there are also many smaller ones, which have approached the Centre for outside advice. Companies in this sector also may have been particularly worried about PL, perhaps justifiably in view of some of the litigation recorded (see e.g. Appendix D, Nos. 27, 32 and 36). The same may hold for the Gas and Petroleum Appliances PL Centre (e.g. Nos. 5, 116 and 137). The Centres for Daily Necessities, and Products for Consumer Living, attract cases involving a broad array of goods, as mentioned above. However, almost all are predominantly those of small manufacturers or importers. The many inquiries from businesses therefore also reinforce the greater attention paid to PL and safety measures more generally in the wake of the PL Law, which can indirectly benefit consumers, as described at the end of this chapter. Sceptics should not jump to the conclusion that this proves that the Centres are there primarily to serve businesses. Even for those Centres dealing with cases still recorded primarily as from businesses, closer examination of the content of the queries suggests that they can be driven by a consumer complaint. That is, the consumer contacts the manufacturer, which contacts the Centre. There is a risk that in such cases the Centre provides truly decisive information only to the manufacturer. However, this problem is lessened if consumers can find out readily about the Centres to get advice directly, or if they can get good advice from other sources. Hence the importance of government bodies like CLCs, which have been used increasingly since 1995 as a latent or actual source of independent information, as described further below. Seen in this broader perspective, the extensive ‘use’ of PL Centres by government agencies should also be welcomed by consumers. Sometimes, moreover, closer examination of the contents of inquiries recorded as coming from government, at least addressed to some Centres, indicates that these are prompted by specific consumer complaints. That is, consumers approach

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institutions like the CLCs and use them primarily to help resolve their problem, and the CLCs draw on a PL Centre’s expertise when it assists them in doing so. In addition, of course, many consumers do bring cases directly to PL Centres. Fewer cases openly involving PL claims These patterns regarding the origin of cases, as recorded by the Centres, are also reflected in the types of cases. Table 4.5 shows that the great majority of cases (83 per cent) involved general inquiries about the PL Law, product safety more generally, the activities and roles of the PL Centre in question, and so on. Very few involved consultations regarding accidents allegedly caused by defective products, resulting in personal injury or consequential loss clearly covered by the PL Law. On the other hand, as indicated above for the PL Centres for automobiles and electrical appliances, in recent years there has tended to be a decline in the absolute numbers and proportions of ‘general enquiries’, and corresponding increases in ‘product accident’ and ‘product quality’ cases. Moreover, an analysis of the recorded descriptions of some of the cases suggests that there is more to these figures than meets the eye. Occasionally, cases are categorized as involving a ‘product quality’ claim when they may present an arguable case under the PL Law, especially in light of recent judgments and claims analysed in Chapter 3. Much more significantly, quality claims can indicate a safety problem with the goods in question. The Centre or manufacturer can then check the goods thoroughly, possibly averting accidents from developing. In addition, the Centres sometimes help bring a claim or settlement involving

Table 4.5 Types of cases reported, by PL ADR Centre PL Centre (4/96–3/97)

Electrical appliances Automobile Gas & petroleum appliances Products for consumer living Chemical products Daily necessities Total (percentage) Source: Ito 1999: 88.

Product accidents Breakdown

Product quality & functions

General Total questions about PL Law system

Death

Personal Physical injury damage

1 4 0

4 109 13

9 99 25

14 212 38

71 1,011 111

1,922 1,299 2,016

2,007 2,522 2,165

0

26

10

36

35

1,548

1,619

17 119 1,364 (12.4%)

1,285 1,000 9,070 (83%)

1,436 1,176 10,925 (100%)

0 0 5 (0%)

73 39 264 (2.4%)

61 18 222 (2%)

134 57 491 (4.4%)

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providers of services relating to the goods (repair, installation). Thus, the Centres can serve useful roles in promoting product safety activities among manufacturers, and in resolving consumer complaints involving defective goods in a broader sense. Very few cases of formal mediation Corresponding to the bulk of cases involving general inquiries, as shown in Column A of Table 4.6, most cases were disposed of by general explanations directly from Centre personnel. A significant number of these involved accidents, sometimes the more clearcut cases. Somewhat more accident cases were resolved by direct negotiations being initiated or resumed between the injured party and the manufacturer (Column B). Although not apparent from aggregate reported data, quite a few of these cases actually involve Centre staff in more than just introducing the parties to each other. ‘Informal intermediation’ therefore occurs, although the extent of this varies among the Centres, depending on their resources, personalities and ideals of Centre staff, and the industry concerned. On the other hand, very little ‘formal intermediation’ (assen) was initiated, involving Centre staff in trying to reconcile competing assertions to generate agreement between the parties on resolving their dispute (Column C). There were even fewer instances of formal mediation by members selected from an independent panel (Column D). The Electrical Appliances PL Centre was therefore quite unusual in fiscal 2001. It accepted 32 new ‘accident’ cases (clearly covered by the PL Law) and 83 cases categorized as involving just ‘quality’, and resolved 15 of the former by ‘formal intermediation’ (assen, described as involving its staff getting an expert opinion by their usual lawyers, or using them directly, to resolve the dispute between the complainant and the manufacturer).13 Some critics may see the overall lack of usage for the two more formal procedures as proof that the Centres are not functioning as true ‘dispute resolution’ mechanisms. Even if ‘informal intermediation’ is added to the picture, there are concerns that consumers will obtain poor outcomes or that outcomes will not be publicized, thus preventing ongoing refinement of PL principles. However, a number of lawyers and scholars who have analysed the disputes resolved through the Centres, in one form or another, have been struck by the rather favourable results achieved (e.g. Nichibenren ed 1995; Hayashida 1997). In addition, in many Centres it has been common for manufacturers to agree to bear the cost of testing, despite the MITI Circular implying that the consumer should bear these expenses. Of course, this may be helped by the relatively low numbers of major disputes handled so far. Nonetheless, manufacturers seem to be motivated by a combination of factors, which should sustain this tendency. Centre staff want to be seen as ‘doing their job’, and they can put some pressure on manufacturers if they are ‘old hands’ in the industry or can invoke industry norms or publicity. Manufacturers usually want to find out the real cause of any alleged defect, to avoid future problems specifically in relation to that product, and more generally in their manufacturing or distribution processes. PL law

Source: Ito 1999: 89.

(percentage)

9,983

Total

782

2 97 110

8,992

Death Personal injury Property damage

Explanation from centre (A)

General questions on PL

Cases involving product quality/ functions

Cases involving product accidents

Types of cases

Table 4.6 Resolution of PL ADR Centre cases

(8.2%)

915

94

577

1 144 99

Agreement from direct negotiations (B)

(0%)

4

0

1

0 0 3

Agreement from assen (C)

(0%)

0

0

1

0 0 0

Agreement from chotei (D)

How resolved (4/96–3/97)

(1.1%)

130

8

56

2 41 23

Being processed (or facts ascertained)

(100%)

11,033

9,094

1,417

5 282 235

Total

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principles also provide a minimum standard in negotiations, although some suggest that consumers are actually being given the benefit of the doubt on contentious legal points. People are now generally more aware of these principles, and consumers can more realistically threaten to go to court if they do not find satisfaction through the Centres. In fact, the first case filed under the PL Law (Case No. 1, Appendix C) had initially been brought to the (smaller) Carbonated Beverages PL Centre. Similarly, the ‘sick building syndrome’ claim under the Civil Code (Case No. 145, Appendix D) was settled for seven million yen after coming via the Housing Products PL Centre. Practical and theoretical implications Both practical and theoretical implications can be drawn from this analysis. Foreign companies or individuals, troubled by an allegedly defective product manufactured in Japan, may be able to make good use of these Centres. They should at least be able to get basic information, such as who the manufacturer(s) might be, whether there have been similar problems with the product, what legal and especially technical issues arise in such cases, what testing facilities might be available, and so on. Even if the Centre then indicates that its main function is to promote direct negotiations between the parties, one should be aware that some staff at least may be more pro-active in managing that process. Still, it will probably prove very difficult to get manufacturers as well as consumers to agree to a more formal process of assen or chotei, particularly due to these being largely untried so far. Conversely, foreign companies exporting to Japan and their legal advisers should be aware that the Centres deal with a considerable volume of cases, a significant proportion of which involve imported goods (for instance, in the Daily Necessities PL Centre). It may be worthwhile for some foreign companies to join the relevant industry association, and take full advantage of services provided by the Centres (as well as for other business purposes). At the least, they should check whether their major trading partners importing goods into Japan belong to these associations, and make sure they consider using the Centres especially if a major problem arises. More theoretically, the emergence and operations of these PL ADR Centres appears to represent a robust combination of quite fragmented bureaucratic informalism, considerable industry informalism, some legislative formalism, and robust consumer informalism. This mixture may be part of a transformed sociolegal landscape in Japan since the 1990s, or it may be a continuation or amplification of trends dating back at least to the early 1970s. At least in this area, it is simplistic and misleading to consider Japan as governed only by bureaucratic informalism, perhaps in cahoots with industry informalism. The increasing significance of consumer activism noted by Maclachlan (2002) since the late 1990s is apparent in this area too, despite ongoing challenges. One problem which has drawn growing attention in Japan is whether material submitted to the PL ADR Centres can or should be used in subsequent

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court proceedings. Somewhat ironically, the expanded discovery obligations under the 1996 CCP amendments may work against claimants in this respect. In the first case filed under the PL Law (the ‘tea pack’ case: No. 1, Appendix C), the plaintiff restaurateur first complained to the Carbonated Beverages Centre. Dissatisfied with the outcome, he brought suit in the Niigata District Court, only to find his written statements to the Centre being used against him by the defendant manufacturers. Eventually, for reasons outlined in Chapter 3, the Nagaoka Branch of the Niigata District Court rejected the plaintiff ’s claim. Consumers may respond by being more careful in disclosing information to PL Centres, especially those assessed as less favourable to them, for instance by conducting more oral inquiries and discussions. More importantly, for appraising the contemporary roles of the Centres, the Beverages Centre was closed down in July 1999. One reason reported was that the single person running the Centre, still working part-time for the industry association concerned, had retired. But its demise may also be due to adverse publicity resulting from this case. Tellingly, in a survey of 13 Centres released earlier in 1999 by consumer organizations and lawyers (also involved in monitoring Centres around the time of their establishment), the Beverages Centre was the only one to be given the worst ‘score’ across all six categories, as Table 4.7 shows. These scores largely accord with the impressions gained by personal visits to most of the Centres conducted in 1996 and 1999, along with analysis of reports and data issued by the Centres or other organizations. Consumers and government agencies will and can draw on such assessments in deciding if and how to deal with individual Centres. The sharp rise in cases brought before the automobile and electrical appliance centres in recent years, especially by consumers, make it seem increasingly implausible to see them merely as opaque forums designed just to serve the interests of manufacturers and tightly linked social elites. Certainly, the PL ADR Centres should not be considered something uniquely Japanese. Factors affecting their establishment and ongoing operations are to be found in similar contexts elsewhere. Industry-specific ADR mechanisms are increasingly common around the world. A good example is the Banking Ombudsman system developed in Anglo-Commonwealth countries. Others from Europe include the Consumer Complaints Boards in the Netherlands, funded by trade associations and the Justice Ministry; and the Lisbon Arbitration Centre for Consumer Conflicts, supported by the consumer and business associations as well as the municipality. Belatedly, there is also growing interest in extending ADR to PL even in the US. An intriguing development is that country’s ‘Better Business Bureau Autoline’ scheme for automobile defects, although the unique attractions of the civil justice system in the US make it unsurprising that this particular scheme seems to be little used.14 Nonetheless, broader based comparisons help identify areas in which improvements could be made in Japan (Nottage and Wada 1998: 68–70). First, there could be more – and/or better publicized – formal independence in financial and personnel resources required to operate the PL ADR Centres.

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Table 4.7 Overall appraisals of PL ADR Centres Centre

Disclosure Equal Fairness Protreatment (Koseisei) consumer (Koheisei)

Independence Accessibility

Medicines Chemicals Gas/Petroleum appliances Home electrical appliances Automobiles Products for consumer living Carbonated beverages Daily necessities Cosmetics Toys Pleasure boats Building components Disaster prevention appliances

C B B

C C B

C C B

C D B

C D B

B C B

C

B

B

C

C

C

B B

B A

C C

C B

C A

B C

D

D

D

D

D

D

C C C C B A

B D C C C C

B D D C C B

B D C C C C

A D D C C C

C C C C B B

Source: Asahi Shimbun, 12 December 1999, 11, (‘Seizobutsu Sekinin, Imada Kabe [Barriers Still to Product Liability]’, emphasis added).

Appointing a retired judge to head a Centre, for instance, would send a strong message. Further, although lawyers and professors are prominently included in the list of mediators for the most formal procedure available in most Centres, more information should be available as to their backgrounds. This could encourage more consumers to invoke the procedure, and should be facilitated by relaxation in 1999 of the Bar Association rules on ‘advertising’ by lawyers (Miyazawa 2001). Secondly, more importantly for encouraging greater use of more formal procedures in more complex cases, Centres could be encouraged to add a ‘one-sided arbitration’ procedure, whereby the decision is binding on the company (under its contract of membership in the relevant industry association) but not on a consumer. This is a key feature of most Banking Ombudsman schemes around the world, for example. There is also an important precedent in Japan’s Traffic Accident Dispute Resolution Centre, a non-profit body financed by investment profits by insurance companies and extensively used (Tanase 1990). Thirdly, more uniform, detailed and accessible information should be provided by all the PL ADR Centres, including reliable surveys of user satisfaction.15 Relatedly, efforts should be made to link up – or better refer inquiries to – the various Centres, thus also permitting more ‘face-to-face’ interactions with users

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in the (not infrequent) cases where moral or emotional issues seem equally or more important compared to technical or legal ones. Many similar suggestions have been made by commentators in the Japanese media, legal circles (e.g. Matsumoto 1996b), and government agencies (e.g. EPA 1998); but some could be better linked to contemporary developments overseas. They can also be expected to be reinforced by the Cabinet’s current commitment to beefing up ADR generally in Japan, still under-utilized, in conjunction with improved access to the courts (Miyazawa 2001). Even within the Industrial Structure Council, at the first meeting of its Consumer Economy Committee held on 17 October 2002, the publicly available minutes recorded criticism that cases were not proceeding to formal chotei or saitei at PL ADR Centres because manufacturers were not willing to come to the table. It noted a proposal now for financial institutions to at least have to begin such a process, ‘in principle’, and the view that this model should be investigated by a Consumer Policy Subcommittee as a means of activating ADR in PL Centres too. Some material on those Centres was included in the Subcommittee’s first meeting on 22 October. Although the minutes do not record any discussion specifically in this regard, due to a packed agenda including a comprehensive review of Japan’s current environment for ADR, the Subcommittee noted rule changes in effect from 6 June 2002 for the Japan Door-to-Door Sales Association, requiring member companies (only) to follow a dispute resolution proposal by an association dispute resolution panel. Particularly as the Industrial Structure Council Subcommittee chair is Hitotsubashi University Law Professor Tsuneo Matsumoto, a well-known advocate for consumer interests who has written encouragingly about ADR for PL in general (Matsumoto 1996b) as well as extending the Banking Ombudsman ‘one-sided arbitration’ model to Japanese financial institutions (Matsumoto 1996a), it seems likely that pressure will mount even within METI (MITI’s successor) to encourage associations to bolster more formal procedures in PL ADR Centres. Industry associations will be further prompted by deep concerns among prominent Japanese business leaders about the loss of public trust following Japan’s ‘summers of living dangerously’, sketched in Chapter 1. On 15 October 2002, for example, the Japan Business Federation (Nippon Keidanren) issued a new ‘Charter of Corporate Conduct’, beginning with the exhortation to respect all laws and global standards, and specifically to gain consumer trust by ‘developing and providing socially useful goods and services giving ample consideration to their safety’. Other industry bodies are busy developing Codes of Conduct, but with the Social Policy Council (Kokumin Seikatsu Shingikai, formerly under the aegis of the EPA) close to establishing standards for such Codes.16 In short, the role of Japan’s industry-association based PL ADR Centres must be – and is being – monitored, bearing in mind how they are operating in practice, as well as their more formal institutional features. A final assessment must also consider their early and evolving history, and the even broader context of PL dispute resolution and product safety in Japan nowadays.

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Other responses from consumers and manufacturers Reflecting the growing interest in product safety in Japan, especially in connection with enactment of the PL Law in 1994, many empirical studies conducted over the 1990s demonstrated the considerable impact of the Law on consumers and manufacturers. Although the samples and methodologies vary, this data correlates well with the litigation trends and PL ADR Centre patterns analysed above. Consumer awareness An annual survey of households in Tokyo in 1996, for example, showed that 69 per cent knew of the PL Law and its contents, compared to 39 per cent the previous year. Similarly, even a nation-wide survey showed that households that had not heard of the PL Law had dropped from 32 per cent in 1995 to 16 per cent in 1996 (Mori 1996). March 1997 survey results for 1002 Tokyo residents confirmed that 15 per cent did not know the PL Law at all, with 35 per cent just knowing of it by name, but ‘generally understood its basic gist, though not its detailed contents’ and 5 per cent ‘even knew the legislation’s detailed contents’.17 Between July and December 1995, the number of product complaints brought to CLCs increased to 1,596 cases, about 2.5 times more than in the same period in 1994. Of these, 1,014 complaints involved consequential damages, and 155 involved products actually put into circulation after July 1 1995 (Shizui 1996: 18). Further, for the year from July 1995 to June 1996, CLCs dealt with 5,283 complaints about product accidents (1.8 per cent of their total workload). Of these, 2,285 (43.3 per cent) involved consequential damages, about 2.4 per cent more cases than for the previous year. The National Consumer Affairs Centre of Japan (‘NCAC’: Kokumin Seikatsu Senta, formerly translated as the ‘Japan Consumer Information Centre’) is based in Tokyo to coordinate CLC activities, but it also deals with some cases directly. It received 482 product accident cases (6.7 per cent of its workload, and an increase of about 20 per cent) over that same period. About two-thirds (323 cases) involved consequential damages, representing an increase of 50 per cent over the previous year. Combined figures for all Centres show that complaints involving product accidents have since dropped back a little, from 5,765 cases in the first year to 4,204 in the sixth after the PL Law came into force (July 2000–June 2001); but those involving consequential damages remain similar (2,608 in the first year, 2,571 in the sixth). General inquiries to the Centres also rose to 651 instances in the year before PL Law enactment and peaked at 1,025 the year after, dropping back to between 103 and 272 over the next five years.18 As almost all complaints and even presumably most of the general inquiries about PL come from consumers, these patterns suggest a considerable ratcheting up of consumer awareness around the time the PL was enacted. Subsequent levelling off in these Centres’ activities might reflect fading interest on the part of consumers; but it is more likely, in light for example of the evidence presented

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Table 4.8 Consumers’ reactions to harm from defective products Where turned to first

Percentage

Product retailer Product manufacturer CLCs Local government officer Industry association PL Centre NCAC Lawyers Other Don’t know No response

47.1 19.8 22.1 1.0 0.2 1.7 1.8 0.4 5.5 0.5

Source: EPA 1997: 25; reproduced in Kato ed. 1999: 126.

below, that manufacturers’ efforts to improve product safety have borne fruit. The data from the Centres are a major indicator of consumer attitudes. In another EPA-sponsored survey, conducted in Tokyo at the end of 1996, consumers responded as shown in Table 4.8 about to whom they would turn first if they suffered harm caused by a defective product. Almost a quarter of respondents turned first to these Centres to address problems involving defective products. A key advantage of the Centres is their ready accessibility, resulting in steady increases in total annual complaints dealt with, to almost half a million in 2001 (with a noticeable shift over the 1990s towards problems involving services, rather than goods). There are now almost 500 Centres spread around the country, although the overwhelming majority of cases are dealt with over the telephone. Their services, including product testing (at larger Centres or through the NCAC), are publicly funded and therefore free to consumers. Their staff, including part-timers, receive general training in consumer issues and counselling, including legal issues. Yet they are more like general medical practitioners, without detailed specialist knowledge or able to undertake ‘surgery’, and the CLCs resemble ‘village health centres’ (Omura 1998: 308). Surveys of staff in 1983 and 1988 indicate that a major function was to make firms take more seriously or ‘sincerely’ the complaints raised by the consumers, often in the shadow of pressure that might be exerted through regulatory authorities for the relevant industry. In doing so, however, staff also perceived more cases in which consumers were partly responsible for the problem, than cases where only firms were to blame. Omura (1998b: 309–13) questions this attitude, and also observes that the active involvement of Centre staff in resolving consumer complaints is not bound by legal norms. He also points out that high levels of user satisfaction reported in 1977–8 surveys probably under-estimate harder cases, where legal norms may be more important to resolve complaints against firms which refuse to succumb to cajoling by Centres.

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There is also a risk that even legal principles developed and applied by the Centres – especially thanks to their PIONET computer network since the late 1980s – may differ from those more widely accepted by courts or even academics, and it has been suggested that interpretations are sometimes significantly different. Some are concerned that these interpretations may not adequately protect consumers, but others believe the Centres’ interpretations sometimes overly favour consumers, perhaps even influencing the path taken in some court decisions. Anyway, all sorts of information held by the Centres have also become more readily available in recent years. Many larger ones have inaugurated websites, and the NCAC has been re-established as an independent administrative entity (dokuritsu gyosei hojin) and subjected to new official information disclosure requirements. Another factor which should prompt the injection of widely accepted legal norms into Centre activities is more activation of prefectural or metropolitan Consumer Complaints Resolution Committees, hitherto infrequently used. As mentioned above, a reason has been the perception that these should only deal with matters of considerable public interest. The definition of this should be expanded, as moves are afoot also to improve various structural impediments to using such Committees. Reforms in the Nagoya area in the mid-1990s, coinciding with enactment of the PL Law, did not increase the number of cases (Matsuura 2001: 179–80). However, changes in 2001 to Tokyo’s Committee have been followed by fewer delays in mediating significantly more disputes, albeit from a low base. Although most cases before such Committees will involve services rather than goods, reflecting shifts in the underlying consumer economy and complaints brought before the Centres, resolution of disputes at the Committee level should incorporate more legal analysis and provide guidance for CLCs. Officials seeking to help consumers in resolving complaints against firms nowadays will have to rely more on legal principles, as stricter rules on ‘administrative guidance’ and transparency in government constrain their ability to indirectly pressure firms to respond to complaints. An important issue is whether central and local governments will reallocate sufficient resources to support any such shift in focus in Centre and Committee activities, and other ways of further assisting in consumer complaints processing, such as product testing.19 Already, even if just extending their modus operandi developed over the 1970s and 1980s, interacting also with PL ADR Centres, the Centres appear to have played a significant role in promoting and reflecting more consumer demands for product safety since the mid-1990s. Manufacturers’ reactions Given these various ways in which consumers can direct claims against manufacturers, evidence that the latter did adjust behaviour significantly in response to the heightened interest in PL over the 1990s should scarcely be surprising. Already in February 1993, when the form and timing of enactment was still quite unclear, 241 respondents to a survey mailed by the Kansai Liaison Committee to 986 companies listed on the Osaka Stock Exchange revealed that

192

The PL Law in action

businesses expected the impact from a PL Law to be felt in the ways shown in figure 4.2 opposite. The largest proportions of respondents (around one half) expected pressure to improve product safety and quality, with corresponding cost increases (although Japan’s subsequent recession and ‘price destruction’ phenomenon no doubt swamped any such increases). Around a third expected an outburst of claiming and more litigation, but only 18 per cent expected a rash of high damages awards: predictions which have proved accurate too. Significant proportions (around one-fifth) expected that enacting a PL Law would bring Japan more into line with international standards (reinforcing the point made in Chapter 2 about the ‘external’ pressures for change). However, few expected high damages awards, and consequent discouragement of innovation and an insurance crisis, as perceived by some in the US particularly over the 1980s. Such responses and other results from the survey suggest that many Japanese firms, especially medium-sized and larger ones, were developing well-informed views on this evolving area law. No doubt many were preparing to meet the challenge of enactment of new legislation. One of the most comprehensive snapshots of its immediate impact on firms throughout the country comes from a large-scale survey of Japanese corporate legal departments more generally, conducted in September-October 1995 (‘the 1995 survey’) – soon after the PL Law came into effect on 1 July 1995 – and reinforced by some results from the next five-yearly survey completed in 2000 (‘the 2000 survey’). Since 1965, such surveys have been undertaken jointly by the Keieihoyukai (Business Management-Related Law Association), an association of legal department staff or executives doing law-related work within corporations; and the Shoji Homu Kenkyukai (Japanese Association of Business Law, Inc.), a forprofit incorporated body promoting business law more generally, funded by corporate memberships and revenue from seminars and publications. For the 1995 survey, questionnaires were sent to 3,487 corporations and were completed by 992 (an improved 28.4 per cent response rate).20 Only 49 respondents were very small corporations, with capital of 500 million yen or less; but 499 were small or middle sized corporations, with capital of between 500 million and 10 billion yen: a total of 548 or 55.9 per cent. Larger corporations made up 433 respondents (44.1 per cent): 365 with capital of between 10 and 100 billion yen, and 68 very large corporations with more than 100 billion yen. The sizeable proportion of small to medium-sized corporations, and their absolute numbers, mean that results from such surveys give a reliable indication of the role of legal departments and their staff across a broad range of Japanese corporations.21 The largest individual category of respondents in the 1995 survey consisted of manufacturers of machinery, electronic goods, vehicles, etc. (240 or 24.2 per cent), but respondents within the generic category of services amounted to 195 or 19.7 per cent (excluding financial services: another 66 or 6.7 per cent), while traders made up 137 or 13.8 per cent of total respondents (Keieihoyukai et al. eds 1996: 40–7). Generally, the responses from the 1995 and 2000 surveys indicate some significant improvements in the functions and roles of corporate legal departments,

Source: PLN 9: 2. No answer

No change

Emergence of insurance crisis

Harm will to develop products

High damages explosion

More evidentiary burden on firms in suits

Harm small/medium enterprise management

Classified liability scope and simplified safety mg’t

Aligning international conditions for competition

Securing firms’ international reputation

Other

Claims explosion

More suits

Higher product prices and costs

Improved product safety and quality

Percentage of firms

Figure 4.2 Proportions of Osaka listed firms expecting various effects from PL Law enactment, 1992.

194

The PL Law in action

accelerating over the latter half of the 1990s as Japan’s corporate sector has faced increasing legal risks, epitomized by the banking crisis of 1998 (Kitagawa and Nottage 2003). Several questions posed illustrate this tendency specifically for PL and other consumer-related issues (Keieihoyukai et al. eds 1996: 62–4). First, asked to select the three most important categories of disputes, domestically and internationally, respondents to the 1995 survey reported as shown in Table 4.9, largely unchanged in 2000. Asked what new issues legal departments had addressed over the previous five years, 71 per cent responded ‘PL’, related to an expanded interest in consumer issues.22 The level of response varied according to the broad sector in which respondent firms operated. This is understandable given the scope of application of the PL Law. The proportion putting PL in their ‘top three disputes’ category was particularly high for manufacturers (84.1 per cent), usually caught by Article 2(3) Paragraph 1 of the PL Law; and traders (81.0 per cent), who may be importers or certain ‘own-branders’ deemed manufacturers under Paragraphs 2 or 3, or who may be sued by consumers under other law (primarily in tort under Article 709 of the Civil Code) and thus want to seek indemnification from manufacturers. Overall, the proportion was particularly high for larger companies (80.2 per cent for corporations with capital between Yen 10 billion to 100 billion). Similarly, while overall 71.7 per cent of corporations had established some sort of intra-firm structure to deal with PL issues, 79.9 per cent of manufacturers and 87.9 per cent of traders had done so, whereas only 53.8 per cent of financial services providers and 38.1 per cent of other services providers had established a structure. The interest in PL issues amongst the latter is surprisingly high. As

Table 4.9 Most important disputes for Japanese corporations in 1995 ‘Top 3’ disputes

Domestic

‘Business contracting’ Pollution and environment Consumer related Intellectual property Corporate law Labour Antitrust International trade and investment Tax (Insolvencies) Other No response

71.8% 9.8% 29.1% 35.2% 10.0% 21.7% 10.6% 1.4% 4.4%

(68.1%) (5%) (32.5%) (36.3%) (5.9%) (19.4%) (8.3%) (0.7%) (2.4%) (50%) 8.1% (5.8%) 10.8% (2.5%)

Source: Adapted from Keieihoyukai et al. eds 1996: 56; Keieihoyukai et al. eds 2001: 70–1; 2000 survey data in parentheses.

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shown in Chapter 3, the PL Law only applies to movable products, not services. However, litigation is already testing the boundaries of this distinction (e.g. PL Cases Nos. 11 and 29, regarding software and activities of restaurants). In practice, moreover, service providers can be affected by the Law because it is often unclear whether a defect in the product was the cause of an accident (e.g. a gas heater), or a concomitant service (e.g. installation thereof: see Nottage and Wada 1998: 60–1). Also, financial services providers can act as general business advisers to Japanese firms, and therefore need to keep abreast of important legal developments relevant to their clients, and those specializing in insurance were keenly interested in PL issues as a rare growth area in their business. In any event, service providers would have been alert to the possibility of PL Law enactment prompting expectations of more exacting standards in transactions covered by the Civil Code or other liability regimes. Nonetheless, considerably greater interest in PL was to be expected from manufacturers and traders of goods. Indeed, while overall 32.7 per cent of corporations had established a specialist unit or team to address PL issues, 44.8 per cent of manufacturers had done so. Of the latter, 22 per cent had units made up of between 10 and 15 staff. But 18 per cent of these reported no staff assigned full-time to the unit, while those that did mostly only assigned between 1–3 full-time staff. Further, only 45.3 per cent responded to a question asking how many were legal staff, and the majority of these respondents answered that there were only one or two of them. The strategy preferred by manufacturers therefore seems to be to create a structure that brings together (or can quickly bring together) a range of personnel dealing with legal, management, technology, quality assurance, and so on, This is understandable, and indeed urged by experts around the world (e.g. Goodden 2000). The most common type of defects giving rise to uncertainties which can result in persistent and major claims – design defects – tend to call for quite broad-based balancing tests. Although the PL Law (and similar legislation in the EU, Australia, and elsewhere) is now being amplified by a steady accumulation of case law, as Chapter 3 also illustrated, the best practical solution for Japanese manufacturers remains to combine legal, commercial and technological expertise to try profitably to produce safer products (Kitagawa 1995). By contrast, 11.2 per cent of traders reported dealing with PL issues ‘mainly through the legal department’, compared to just 5.6 per cent of corporations overall who did so; and 47.2 per cent of the former reported that the ‘legal department dealt with PL issues in collaboration with other departments’, compared to 33.4 per cent of corporations overall. This reflects the more limited and more ‘legal’ aspects of PL legislation applicable to traders, especially negotiations with suppliers as to indemnification if defects give rise to claims, and perhaps adding warnings or the like (even though the ultimate responsibility for warning defects lies with ‘manufacturers’ under the PL Law). Finally, further sectoral differences are apparent from questions inquiring specifically into the impact of the new PL Law per se. When asked how legal departments dealt with PL issues before the Law came into effect, 34.6 per cent overall reported that they dealt with PL related claims or suits, compared to

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The PL Law in action

44.2 per cent for manufacturers and 39.7 per cent for traders. However, when asked how they dealt with PL issues after enactment, the proportion overall actually fell, to 25.6 per cent. This should not be interpreted that the PL Law has been ineffective. On the contrary, other results from this survey indicate that manufacturers have become much more conscious of PL issues and accordingly have adopted counter-measures to improve product safety. This is in addition to the abovementioned establishment of specialist units to deal with PL issues, which was undoubtedly driven primarily by the widespread debate since the early 1990s leading to PL Law enactment, reviewed in Chapter 2. Specifically, whereas 53.6 per cent of respondents undertook instruction in PL issues beforehand, 68.9 per cent did so afterwards (even 55 per cent of financial services providers did so). Further, while beforehand only 28.5 per cent of respondents overall undertook investigations into risk analysis/counter-measures (quality assurance, warning labelling, etc.) for their own products, this rose to 37.4 per cent after the PL Law came into effect (again with a higher proportion, 40.6 per cent, for manufacturers). And while 35.1 per cent entered into or maintained PL insurance cover beforehand, 39.1 per cent did so afterwards (42.7 per cent for manufacturers). Considering that the 1995 survey was enacted only a few months after the PL Law came into effect in July 1995, and allowing for the high likelihood of more counter-measures being taken already prior to and upon enactment in June 1994, the 1995 survey indicated that the PL Law helped ratchet up concern for product safety among Japanese corporations. That conclusion is reinforced by the continued importance of PL related issues in the work of corporate legal departments reported in the 2000 survey (Keieihoyukai et al. eds 2001), and a range of other contemporary and later empirical studies. In June 1996, for example, a survey was conducted of consumer complaints officers in 360 companies and organizations in the food, chemical, petroleum and electric machinery industries – more likely to be directly exposed to potential PL Law liability. One hundred and fifty-four of 217 respondents (71 per cent) said that they had received ‘more’ complaints than in 1994, before the PL Law came into effect, with 84 saying the number of consumer complaints filed with them had increased more than 30 per cent. This trend seems to be accelerating, since only 45 per cent of respondents in a 1995 survey had reported more complaints. In addition, the number of companies facing consumer compensation claims for defective products increased from 24 out of 217 in 1995 to 76 in 1996, with 27 per cent of these having PL insurance and either having paid out compensation or reportedly planning to do so. Twenty-three per cent of respondents considered that consumers’ understanding of the PL law had improved. But a similar proportion thought that there was more misunderstanding, some adding that consumers were claiming under the PL Law for all sorts of alleged problems.23 All this appears to have had a noticeable impact on manufacturers. In another survey conducted in late 1996 by the EPA (1999), 70.5 per cent of consumer advisers in CLCs considered that manufacturers’ attitudes had changed since enactment of the PL Law; only 3.7 per cent thought there had been no change

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(the remainder being unsure or not responding to this question). Specifically, these advisers mentioned manufacturers’ improvements in instructions and warnings, extreme sensitivity to product safety, and disposing of cases in the light of the PL Law. Other information shows efforts to improve product safety at the level of the individual firm; establishment of new committees and guidelines on improving labelling and instructions, often instituted by industry associations; more monitoring of accidents by associations; and, albeit to a much lesser extent, issuance of new guidelines on recalls and customer ‘after care’ (Ito 1996). In a survey of 1,320 listed and unlisted companies surveyed in July 1995, about 80 per cent had set up new posts to respond to PL issues. Around 75 per cent of these had taken out PL insurance, reviewed instruction booklets, etc., and/or generally improved product quality management.24 One of the most detailed studies of manufacturers’ PL and safety measures following PL Law enactment, albeit with a relatively small sample, was conducted by Professor Itaru Fukaya (1999) and his class over September– October 1996. They sent a random mail survey to 500 listed companies in Japan, receiving 115 valid responses. Most companies had capital of 10–51 million yen (37 per cent), 50–100 million yen (20 per cent), and 100–500 million yen (23.4 per cent). Respondents were mainly from the primary sector, food products, textiles, chemical, medical, lacquer-ware/wood products, machinery, electrical appliances, and transport industries. Above average response rates, suggesting more interest in product safety, were recorded for sectors dealing in textiles, wood products, medical supplies, gas and petroleum products, ceramics; below average rates were in rubber, publishing or printing, pulp and paper, steel, non-steel metal industries, and machinery sectors. Examination of responses by sector also revealed distinctly more extensive measures having been adopted by companies dealing in medical products, foodstuffs, and electrical appliances. Larger companies also tended to adopt more extensive measures; but there were a number of exceptions, making it more risky to generalize about correlations. Many of the respondent companies had initiated new measures from the early 1990s, particularly in 1994 and 1995. New positions dealing with PL issues had been established in 25 per cent of companies in 1994, and 43 per cent in 1995. PL education programmes had been initiated, respectively, in 18 per cent and 53 per cent, albeit not necessarily very comprehensively (only 22 per cent provided such education to all employees). Instruction booklets provided with products had been amended in 1994 by 7 per cent of respondent companies, but by 56 per cent in 1995 and a further 7.8 per cent in 1996. These amendments focused on how to assemble (28 per cent) and use (74 per cent) the products, or related to warnings (87 per cent); this is understandable given that the new legislation and almost all commentaries highlighted potential liability for inadequate information supplied with a company’s products. By 1996, 68 per cent of companies were in industries that had industry safety standards, and 70 per cent had their own specific standards. Fourteen per cent in total noted that one set or the other had been established after enactment of the PL Law; and 44 per cent; that these had been made stricter (although 9 per cent did not respond, and 33 per cent thought

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there was no relation between the Law and the standards). Only a total of 12 per cent considered that they stopped producing goods (1–4 cases per annum) owing to the risk of accidents, while 43 per cent reported no cases of this (and 46 per cent said that this whole issue was unrelated to enactment of the PL Law). However, 42 per cent said the number of suspended product lines per annum was unclear, probably implying that a significant proportion of products are being at least redesigned in the light of risks of accidents. Almost 90 per cent of companies had taken out private PL insurance, or joined various industry-based insurance schemes. In addition to these ‘preventative’ strategies, by 1996, 64 per cent of companies had specific ‘consumer advice’ or ‘complaints’ sections. Mirroring one pattern in cases before the PL ADR Centres, these company sections mainly dealt with problems relating to the goods themselves (76 per cent) and how to use them (52 per cent). However, many had dealt more obviously with PL Law matters: consequential property damage (16 per cent), minor physical harm not involving medical services (14 per cent), minor physical harm involving medical services (11 per cent), and major physical harm (5 per cent: multiple responses were possible for this question). Survey respondents reported that 58 per cent of claims involved less than 1,000,000 yen; but 39 per cent did not respond, which may suggest that the quantum also may have been difficult to determine, and possibly quite large. A manual setting out how to resolve disputes was available in 60 per cent of companies (51 per cent dealing specifically with product ‘accidents’), and 50 per cent referred claims to a specific lawyer when a ‘dispute’ arose (presumably going beyond ‘accidents’). In summary, this survey found clear evidence of widespread attempts by manufacturers to improve their product safety and complaint handling procedures, initiated mainly over 1994–6. Some responses implied that there was still room for improvement in a few areas, for instance in explaining PL issues generally and procedures to uncover causes for accidents reported. Developments in Japan’s PL insurance market also deserve closer investigation. Nonetheless, this survey correlates well to other observed trends in consumers’ reactions, mentioned above, and in other responses by manufacturers. Linking these two sides of the equation, the Cabinet Office reports a March 1998 survey finding that 61 corporations (14.6 per cent) felt that consumer consciousness had ‘changed greatly’ following the PL Law; and 238 corporations, (57.1 per cent) that it had ‘changed somewhat’.25 There are likely to have been further changes in the wake of Japan’s ‘summers of living dangerously’ in 2000 and 2001. The rash of defective products reported may indicate that the PL Law’s influence has peaked, at least in some industries, in encouraging safe manufacturing processes and especially in promptly recalling goods found to be problematic. On the other hand, much quicker and more transparent voluntary recalls appear to have become the norm since 2002. In the absence of much reported PL litigation related to such events, nor yet any major strengthening of formal regulatory sanctions, firms are probably reacting mostly to – or anticipating – another round of ‘consciousness-raising’ on the part of consumers.26

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Conclusions Chapter 2 showed how, as in Europe and Australia, pro-consumer activists did not obtain in the PL Law a wholesale reorientation of substantive and procedural law principles impacting on liability for defective products. Nonetheless, Chapter 3 illustrated how the Law did present some rules or interpretations which obviously – or potentially – favoured plaintiffs, at least when compared to other recent strict liability legislative regimes, and how some Japanese courts have already made rulings in that direction. This chapter confirmed that PL litigation generally appears to have picked up momentum since the mid-1990s, especially for PL Law claims. The increase has not been ‘dramatic’, as some thought possible (Shichi 1996), but it appears to have been significant. This undermines over-generalized ‘culturalist’ views about the restricted role for law in contemporary Japanese society, and illustrates the utility of a more eclectic model, sensitive also to evolving institutional parameters and predicted substantive law outcomes. Specifically, from a broad comparative perspective there have been quite a few, well-reasoned judgments. More importantly, as in Europe and Australia, there appears to have been a significant ratcheting up in numbers of filings and pro-plaintiff settlements. Such developments can feed into dispute resolution even further down the dispute resolution pyramid, notably in Japan’s industryassociation based PL ADR Centres, an unusual – but not unparalleled – phenomenon in global perspective. On the one hand, the Centres cannot ignore what goes on the courts, even as interpreted through their associations, various government authorities, and interest groups like bar associations. On the other hand, information and services provided to claimants at the Centre may only be a stepping-stone towards more formal dispute resolution processes, although a more likely result is (equally or more cost-effective) resolution through direct negotiations with manufacturers or even suppliers. The Centres also provide an important conduit for more general information and advice for manufacturers not embroiled in disputes, but keen to upgrade product safety activities. A range of empirical studies suggests considerable ratcheting up of these activities too. This has occurred in the shadow of growing interest in product safety issues on the part of consumers over the 1990s, evidenced by some learning about the PL Law itself and information sought from other entities like CLCs. These patterns are basically what one would expect from the comparative experience in Europe, and later Australia, as far as the sparser data there can show (cf. Maclachlan 1999: 249–50). In some important respects, they also parallel some developments in the US. However, just as with the shift in substantive law through the PL Law itself, its practical effects at various levels indicate more ‘Europeanization’ or globalization than ‘Americanization’ (cf. Kelemen and Sibbitt 2002: 318–20). The prominent practical difference in the US remains the dramatic growth in PL litigation since the 1970s, fuelled no doubt by the more expansive substantive liability regime heralded by the Restatement Second of 1965, although US law and society also experienced much broader transformations

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from around this time (Friedman 1985; Galanter and Palay 1991). This ‘tort crisis’ has been linked to the ‘insurance crisis’ of the 1980s, although other industry-specific explanations continue to be offered for the latter, and both crises seem to have subsided over the 1990s, in part as ‘tort reform’ statutes have kicked in to cap damages and so on. Nonetheless, despite the significant increase in PL litigation and at least fears that it was radically harming US business, studies have tended to find that manufacturers’ efforts to improve product safety have been driven by reputational concerns and the regulatory framework, in conjunction with private liability exposure (Moore and Viscusi 2001). Intriguingly, the Japanese experience suggests that even a small increase in PL exposure through law reform – or at least perceptions thereof – may be enough to change quite significantly the behaviour of manufacturers, as well as consumers, lawyers, at least some government actors, and perhaps even judges. The ‘expressive’ functions of legislative enactments, in transforming people’s preferences (Geisinger 2002), may be stronger than in the US and even some other countries. In the Anglo-Commonwealth legal tradition, for example, a legislative enactment is often taken by courts to set the new boundaries for their activities. In Japan, in mostly exhortatory legislation like Basic Laws as well as those focused on delineating enforceable rights, there may be a more general expectation that judges are permitted to continue developing the area of law.27 As judges continue to develop the PL Law, this may further reinforce a significant shift towards preferring safety over other goals, among manufacturers as well as consumers. In particular, this shift can help explain why Japanese consumers – and even their lawyers – now seem more prepared to even consider lodging quite small claims in the first place (cf. generally Etzioni 2000). Subsequent decisions to pursue claims in and out of court may be more subject to cost-benefit assessments, except for those inevitable few – proud, rich, public-spirited, or whatever – who refuse to even think in that way as they maintain their chosen course of action. In other words, Japanese do indeed seem to be less ‘reluctant’ litigants (Goodman 2001), but precisely where and how ‘rationality’ comes into play deserves updating (cf. Ramseyer and Nakazoto 1989). Much more comparative and empirical research is needed on these points. If there is anything to the notion of quite strong expressive functions of law in Japan, at various levels, then it may already help explain some recent events, and likely or desirable developments over this decade. On the one hand, the Judicial Reform Council’s recommendations to expand access to Japan’s courts, reducing delays and increasing their expertise, and to better integrate ADR, should promote more PL claims. On the other hand, growing predictability of judgments in some types of cases (defective foodstuffs, for example) may create a disincentive to pursuing them through formal procedures. This may not undermine claiming behaviour, if those injured (mostly consumers) remain well aware of likely outcomes; but they may not, and the overall visibility of PL may also suffer, allowing the emergence of less favourable outcomes. The latter may be bolstered if a trend emerges of judgments less favourable to plaintiffs in other areas (e.g. design defects under the PL Law, or even in Civil Code cases). To maintain

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at least some minimal ‘expressive’ function of PL more generally, not just as guides to actual or potential claimants in particular cases, it is probably important to maintain some critical mass of widely reported judgments – or even settlements – in many categories of cases. To that end, too, more specific efforts need to be made to encourage usage and accountability of PL ADR Centres, in conjunction with the provision of information and certain other dispute resolution services through the likes of CLCs. In parallel, renewed efforts deserve to be made to monitor and directly affect the product safety activities of manufacturers. Japan’s ‘summers of living dangerously’ in 2000 and 2001 suggest that at least some industry sectors have become complacent, or even back-pedalled, since the financial crisis of 1997 intensified the economic slowdown. Renewed media scrutiny of problems involving defective products, boycotts from consumers, adverse share market effects in an era of capital crunch, and government sanctions may help highlight again the reputational effects flowing from product safety measures. However, hints from developments abroad suggest that these may be further heightened by civil dispute resolution processes allowing for credible claims, and also with interactions with a variety of government actors. Maintaining momentum in integrating PL into the fabric of everyday life in Japan, through the broader expressive functions of law, may therefore turn on reconceptualizing and reinvigorating a tripartite dialogue between civil dispute resolution processes influenced by substantive and procedural law rules, market forces, and the broader regulatory environment. These notions deserve further attention in the next chapter, concluding with some perspectives on the future of PL in Japan.

5

The future of PL in Japan Reformulation, reform and re-regulation

This book began by introducing Japan’s ‘summers of living dangerously’ in 2000 and 2001. Belated recalls of Snow Brand milk, which poisoned over 13,000 people, were followed by revelations of product quality problems afflicting televisions and automobiles – consumer goods on which Japan has built a worldwide reputation – and then an outbreak of ‘mad cow disease’. Chapter 1 suggested that a key issue is how to appraise such events, and the responses by firms, regulators and others. Has nothing changed in Japan since 1969, when millions of automobiles were recalled as well, as described in Chapter 2? Or since 1955, when thousands of infants were poisoned from unknown causes by milk supplied by Snow Brand, and then over 12,000 (including hundreds of deaths) by Morinaga milk found to contain arsenic? Or, from that same era, when the interests of big business and powerful government actors also prevented prompt and effective reactions to mercury poisoning of fisheries and villagers in Minamata? In 2000, at least, the poisoning does not appear to have resulted in any deaths, and the cause was confirmed much more quickly. Government authorities did respond, although not as quickly or effectively as most would have liked, highlighting problems with the Food Sanitation Law – poor implementation of mandated inspections, and the need for new duties on firms to report accidents to the public as well as regulators (Hiraizumi 2002). Compensation was quickly paid to those injured, yet some quite high-profile litigation has been brought too (Tanaka 2001). The financial implications, and loss of trust in Snow Brand’s products, almost brought about the demise of one Japan’s most famous brand names. Even more significantly, concerns spread to products supplied by other food companies, resulting in a spate of recalls. They came under further pressure after mad cow disease was discovered in Japan’s dairy herd in 2001, and some firms were found to have mislabelled beef to benefit from a government bailout – including a Snow Brand subsidiary, which was pressured into liquidation. An amendment to the Japanese Agricultural Standards Law resulted in MAFF publicizing the names of 30 companies found to have deliberately faked labels. So sensitive have companies become about consumer concerns about labelling, and recalls, that in February 2003 one firm recalled 4,000 cans of oranges with an expiry date misprinted as ‘September 20005’.1 MAFF’s poor handling of measures to prevent mad cow disease from 1996, and to deal with it after its

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outbreak in 2001, resulted in moves by Cabinet to establish an independent food safety agency and revise Japan’s fundamental legislation on food production policy (Nottage 2003b). Similar ratcheting up of expectations regarding product safety can be perceived in other sectors, such as consumer durables, at multiple levels. These may come off a low base, and show the need for ongoing vigilance as well as the possibility of further improvements. Nonetheless, adding also a broader comparative perspective, Japan’s contemporary ‘mad cow’ era does seem very different from its ‘Minamata’ era half a century ago. Chapter 1 suggested that developing such a perspective first involves going beyond often breathless media reports, which naturally tend to focus on isolated events for particular readerships, sometimes drawing loosely on certain theoretical paradigms. Even academic writing on Japan has fluctuated between negative and positive appraisals, or between views of Japan as uniquely different or fundamentally the same. Sometimes this reveals more about the commentator’s own country than about Japan. Similar tendencies complicate assessments of Japan’s products and consumers, its legal system generally, consumer law, and PL law – potentially a significant influence on product safety, and the main focus of this book. One way forward involves adopting a broad comparative perspective, so that different and varying preconceptions may better reveal themselves – and perhaps offset each other – and so major differences versus similarities may be better calibrated. For similar reasons, and because of the fundamental lesson of comparative law theory that the ‘law in books’ must be examined against the ‘law in action’, such an analysis should compare black-letter law’s interaction with its historical and socio-economic context. Chapter 2 therefore began with a comparative overview of the development of PL law – as a discrete area of law – in the US, the EU, and Australia. Its emergence in the Restatement Second was really quite a small doctrinal innovation, which took on a life of its own during the 1970s and 1980s, reflecting much broader transformations in US law and society. The 1990s brought a reaction against this expansion of PL. The EU, followed by Australia, was left with more doctrinal material to work with, but enactment of their strict liability PL regimes in 1985 and 1992 came at the price of political compromise. The EU now appears set on an expansionary path for PL law, but more because of broader changes in its expectations for the civil justice system, reflecting fundamental rethinking of broader governance structures in Europe. By contrast, paralleling the US trajectory since the 1990s, Australia’s recent ‘insurance crisis’ and broader ‘tort reforms’ may stifle or even unwind the slow development of strict liability PL. From this broader historical and comparative perspective, enactment of Japan’s strict liability PL Law in 1994, modelled on the EC Directive, becomes a fairly familiar and even predictable development. ‘Still-birth’ in legislative initiatives, in the mid-1970s, partly reflected the nature of cases involving defective products brought before Japanese courts from the late 1960s, and the limited doctrinal resources to deal with them. However, politics and economics inevitably came into the picture. At a micro level, for example, collective action problems also hindered the consolidation of PL suits for defects in automobiles.

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At a macro level, as in Europe at this time, concerns about oil shocks and economic slowdown defused enthusiasm for imposing strict liability on manufacturers. Nonetheless, a range of measures were taken to meet the heightened expectations of consumers about product safety fuelled by the other ‘big four’ PL cases – and Japanese citizens generally in the tumultuous times of the late 1960s, illustrated also by environmental pollution litigation like the Minamata case. These reactions included significant compensation through the court system, overall; but also product quality measures taken by the (better) industries themselves, national and municipal legislators, and their bureaucrats. Momentum for a more extensive strict liability PL regime might have been better maintained, both through academic associations and specific law reform institutions, had it not been for the untimely demise of the doyen of private law scholarship in Japan. Still, that early investment in doctrinal innovation helped set the stage for the ‘re-birth’ of PL in Japan from the late 1980s. Again, this paralleled developments in Europe and Australia, with their enactments providing an attractive model in terms of legal rules and political compromise between consumers and manufacturers, the two main domestic interest groups. From the early 1990s, moreover, Japan’s political pluralism also became less ‘patterned’ (Muramatsu 1993), with the LDP’s unprecedented loss of political power in 1993, encouraging some reinvigorated media reporting (notably through television), and growing calls from consumer groups to become involved in policy-making. Bar associations supported the latter by taking a more pro-active approach, directly uncovering a range of product defect problems to bring strategic suits – not restricted to ‘mass injury’ situations – as well as proposing draft legislation. The international political economy had also changed. The expansionary trajectory of trade liberalization was illustrated by expanded access for beef and other products into the Japanese market from the late 1980s. The Uruguay Round of GATT negotiations got underway, resulting in agreement in 1994 to establish the WTO. These developments meant more scope for foreign imports into Japan, and calls for greater transparency in border controls. Although pressure was – and is – exerted by the US in these directions, it also flows from the EU, and especially the WTO’s global set of rules (Pekkanen 2001). This further increased the attraction of the EU Directive as a ‘global standard’ in enacting the PL Law in 1994, aimed at substituting ex post compensation for any defective products as a means of encouraging importers and domestic manufacturers to supply safer goods, instead of complex ex ante regulation by Japanese authorities. In short, while the ‘re-birth’ of PL in Japan from the late 1980s certainly reflected growing political fragmentation and economic liberalization, it goes much too far to characterize this as ‘Americanization’. The main motivations of policy-makers and other interest groups in Japan, as well as the extent and forms of the changes, are just as much ‘Europeanization’ and ‘globalization’ – if not more so. That conclusion emerges even more strongly from Chapter 3’s detailed comparison of Japan’s PL Law with contemporary regimes in the EU (especially the UK), Australia and the US. If anything, Japan’s statutory provisions can be

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shown to be more favourable to consumers than most counterparts as originally incorporated by EU member states, despite not meeting all the expectations set out in draft proposals by consumer interests. Intriguingly, the quite pro-plaintiff Japanese court judgments which have begun to be rendered under the new Law – relatively quickly – may reflect this revealed legislative preference. Certainly, the reasoning in these cases can probably be combined effectively with academic commentary, drawing on the steady accretion now of judgments around the world applying legislation derived from the EC Directive, to refine uncertainties in specific rules as well as underlying principles. Ideas from US law, given some new uncertainties and certain clear retrenchments contained in the Restatement Third, are more likely to have to be filtered through that steadily solidifying lens. This assessment of the content of the PL Law of 1994, as increasingly interpreted by Japanese courts as well as academic commentators, helps explain the small but significant ratcheting up of product safety expectations and measures, evident particularly over the mid-1990s. Chapter 4 described first how these are reflected in an increase in lawsuits, contrary to ‘culturalist’ views of a putative Japanese preference for harmony over formal dispute resolution processes. In particular, there has been a rise in settlements, negotiated through lawyers ‘in the shadow of the law’ – the substantive provisions of the PL Law, and key institutions in Japan’s civil justice system (Haley 1978, 2002; Ramseyer 1988). Nonetheless, while ‘rational litigants’ appear to make significant cost-benefit assessments in pursuing their legal rights, some may be swayed by emotional concerns, such as bringing claims more to promote their perceptions of the public interest, or find that these concerns or preferences are susceptible to evolution or redefinition when deciding to bring or maintain their claim. Such tensions also emerge from an analysis of industry-association PL ADR Centres. Created and maintained under scrutiny from several sets of actors, they are still extensively used. Foreign observers, especially, feared that these would simply divert cases into opaque dispute resolution processes in which ‘bureaucratic informalism’ can overwhelm consumers’ rights, as tended to happen with environmental pollution cases such as Minamata. Instead, the new PL Centres can provide a complementary forum for consumers to get or cross-check information, in particular, although their processes and other institutional features need improvement if they are to serve a more direct role in resolving disputes. Another very important role is to help their own industry members to improve product safety features. The advice they give has to be realistic if even small claims can be brought before the courts – as they are – and even mostly local government-funded agencies like CLCs. Chapter 4 also presented evidence of significant rises in usage of CLCs, and other confirmation of greater consumer awareness of product safety issues, such as the PL Law, particularly from the mid1990s. This combination of developments helps explain significant improvements in a range of product safety initiatives by Japanese firms over this period, albeit with some significant differences across sectors. All these patterns appear very similar to the impact of enacting similar strict liability legislation in Europe and Australia, although comparable data is

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surprisingly hard to obtain. There are also some parallels from studies in the US, concluding that even the markedly more pro-plaintiff PL rules developed over the 1970s and 1980s (before being rolled back in the 1990s) did not have huge effects on manufacturers, except in some industries. Although there is evidence for some separate effects, it seems that it is more the combination of more expansive private law rights and enforcement with broader reputational effects, interrelating with government regulations and sanctions, that has the most significant impact. From this perspective, the impact of Japan’s PL Law in itself seems surprisingly high. The ‘expressive’ effect of legislation (Geisinger 2002) may be comparatively strong in changing predispositions towards matters like product safety, on the part of judges as well as government authorities, lawyers, and consumers themselves. Japan’s recent ‘summers of living dangerously’ may indicate that the initial effects are fading, raising the question of how to reinvigorate PL law. Yet its ‘early childhood’ over the 1990s remains a significant development, opening the way towards an interesting future for PL in Japan.

Reformulation and reform So far there have been few attempts to grapple with whether the impact of the PL Law described in Chapter 4, possibly faltering in recent years, has translated into fewer injuries from defective products. As in the US (cf. Priest 1988), it may be too difficult to find conclusive evidence on this. More surprising is a seeming lack of interest of revisiting the fundamental economic and other principles lying behind a strict liability regime applying to defective products. Yet even the theoretical issues remain difficult, and probably too little discussed elsewhere too (cf. e.g. Dewees et al. 1996; Faure 2000). This book is not the occasion to embark on an ambitious new theoretical and empirical framework for a private law regime to optimally minimize risks of harm. Rather, it concludes by examining some suggestions that have been raised for reforming Japan’s system, especially in recent years – more as an exploration of its likely future evolution over the first decade or so of the twenty-first century. Recent calls for substantive changes to the PL Law have actually been quite muted. Some lawyers’ groups have tried to resuscitate draft legislative provisions proposed by Nichibenren in 1991 (Kinkibenren ed. 2001: 48–9). In particular, to minimize the burden of proof on plaintiffs, Article 5 had called for inferences that a defect was present causing harm when ‘not of a type that usually arises’, despite the product being ‘used in a normally foreseeable way’; and that a defect was present when the product was put into circulation, unless the manufacturer proves that it arose ‘after a reasonable period of use (soto no shiyo kikan keikago)’. The former inferences and even the latter may make little difference, if Japanese courts continue to develop ways to infer that a defect must have caused the harm, extending to the PL Law some notions of res ipsa locquitur developed under the Civil Code (discussed in Chapter 3), or otherwise lessening the evidentiary burden on plaintiffs (as in the McDonald’s orange juice case: PL Law Case No. 10,

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Appendix C). The latter inference, except for the loose term of ‘reasonable period’, would bring the PL Law more in line with Article 7(b) of the EC Directive; but the inference can still be sidelined by other circumstances, as suggested for example by some recent European judgments (also discussed in Chapter 3). Perhaps these matters are best left quite vague, allowing leeway for judges to experiment in individual cases. This was the approach recommended by the Legal Deliberative Council Private Law Committee in late 1993, when the degree to which indicia of defectiveness should be enumerated in the PL Law was heavily debated (Hoshino 1994), and it does seem to have borne fruit in encouraging claims and settlements even beyond the courtroom (cf. Matsuura 2001). In this gradual process of reformulating key concepts like defectiveness, and how they are proved, judges can – and likely will – draw on the work of academic commentators and lawyers (in and out of court). What might be worthwhile is some institutionalization to produce regular ‘Restatements’, bringing together a range of practitioners and others, as in the ALI in the US.2 Yet the set of concepts and particular applications that emerges from such a project seem more likely to follow the evolving EC Directive tradition, including a current inquiry into the appropriate scope for inferring defectiveness, rather than the Restatement Third itself. This future scenario might therefore be better described as fostering ‘Reformulations’. Further, given a more prominent role generally permitted for the legislature compared to the US (cf. Waldron 1998), such ‘Reformulations’ might benefit from occasional legislative enactments – or even drafts. Even the latter might tend to vindicate one set of competing beliefs (such as the desirability of judges drawing inferences more readily in individual cases), thus swaying many ‘fence sitters’ (those no less attracted to a stricter view on such as matter) towards a belief change. Alternatively, changes in beliefs or norms may be prompted by information created primarily for the enactment of legislation, especially if the source of the information can attract broad public trust (Geisinger 2002: 67–8). Such ‘expressive’ effects of law-making may be comparatively strong in Japan, as suggested by the effects of the PL Law described in Chapter 4. Information-forcing processes, cementing or creating belief changes even among legal practitioners trained in applying less context-specific legal reasoning processes, may be fostered not only by open deliberation on ‘Reformulations’ involving an expanded group of participants. A key process can also include early ‘discovery’ or disclosure of the opposing side’s evidence, in civil proceedings. Such a requirement was strongly stated in Article 6 of the 1993 Nichibenren draft, and has been revived again recently too. However, this and related issues (like improved ‘expert’ witness systems and the introduction of ‘class actions’) have now been extended beyond the PL Law, as items recommended for further investigation by the 12 June 2001 Judicial Reform Council Final Report (Kinkibenren ed. 2001: 48–9). Again, these investigations are likely to play close attention to the recent EU debate on improving civil justice processes, especially from consumers, mentioned at the start of Chapter 2.

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If information-forcing is desirable, then some aspects of the PL Law itself might still be ripe for reform. In particular, the scope of Article 2(1) might be broadened so that ‘products’ clearly cover at least some buildings or software, and especially – given problems like mad cow disease – primary agricultural products (again, following the amending Directive of 1999). The latter may have little direct practical impact on PL claims, due to difficulties in proving the injuries were traceable to a particular supplier (Hall 2000: 468). Yet the ‘expressive’ effects may be large. From this perspective, however, the effects might be multiplied through legislative activity involving not just the PL Law or even the Code of Civil Procedure reforms, but also linked amendments to public law.

Re-regulation Indeed, the overwhelming popular reaction to Japan’s recent revelations of ongoing product safety issues has been to call for more regulation. As well as higher reporting of defects in individual products, and whistle-blowing about more widespread problems in manufacturing or design processes, it does seem feasible that firms have become complacent about product safety, or even started to cut corners because of intensifying economic stagnation since Japan’s banking crisis in 1997. Comparative studies also tend to confirm that sanctions imposed for breaches of higher governmental safety standards, including disclosure requirements, can have powerful effects on individual companies and even entire industries. There appears to be a ‘multiplier’ effect on sharemarket evaluations of company stock, which may become more significant as Japan’s companies continue to move away from debt to capital market financing, and to receive portfolio and recently foreign direct investment from abroad (Nottage 2001b). More conventionally, in Japan, the trust that regulators may lose in the industries they are responsible for, following publicized deviance by a leading firm, may be difficult to rebuild. Further, cosy relationships may continue to unravel – or at least be redefined – as Japan’s entire system of governance is rethought in the wake of the LDP’s loss of power, coalition government over the rest of the 1990s, and enactments like the Official Information Disclosure Law 1999 (Ginsburg 2002). To regain flagging public trust (Pharr 2000), and try something different to bring Japan’s economy at last out of the doldrums (cf. e.g. Schoppa 2002), regulators may therefore become more willing to raise standards and enforce them even against leaders within an industry. Nonetheless, studies from the US suggest that private law compensation claims can also have significant effects on a firm and/or an industry, through the sharemarket (e.g. Prince and Rubin 2002). Even if this mechanism does not operate as directly or extensively in Japan, other forms of actual or potential ‘reputational damage’ may arise. Chapter 4 certainly demonstrated how PL Law enactment correlated with more claiming (in various forums) and a range of measures taken by manufacturers to improve product safety activities. Thus, a better response to Japan’s ‘summers of living dangerously’ should include looking

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at ways of developing synergies between improved regulation and PL Law.3 Rather than more of one implying less of the other, thought needs to be given to productive ‘co-evolution’ of these two sub-areas of law (cf. e.g. Teubner 1992). An international perspective – indeed, a global or transnational perspective, going beyond the orthodox view of relations between nation-states – is also important. Braithwaite and Drahos (2000) show generally how national regulation has been eclipsed by globalization, but regulation itself has been globalized through states, individuals, transnational corporations, international organizations, NGOs, and ‘epistemic groups’. Specifically in relation to safety regulations, any revisions nowadays implicate global rules under the WTO (e.g. Micklitz 2000), as well as the related but sometimes distinctive norms evolving for unique regional configurations like the EU (McNelis 2001). Other important international bodies influencing general product safety include the United Nations (especially the World Health Organization, and the Food and Agriculture Organization: Guarino and Kellam 2000), the OECD, and the International Organization for Standards (ISO, Howells 1998: 159–94). Still, a more manageable starting point may be a broad-based comparison of some different parts of the world (cf. generally also Tate 2001). Much of the recent debate in Japan, and already many reforms, focus on better ways to collect data relevant for dealing with and avoiding product accidents. This carries over naturally enough to expanding access to information in private PL litigation. Another major focal point is clearer rules and stricter enforcement of recalls (Kinkibenren ed. 2001). Tighter standards for recalls, even if centring on more general risks of harm, may also assist in proving that products were defective. More recalls can also re-involve insurers and a broader variety of firms in the supply chain, through contract planning and dispute resolution, in preventing and promptly responding to product accidents. Even more relevant to PL litigation, yet relatively little discussed, is the establishment of industry standards for products. Some pressure has been brought, partly through litigation (e.g. Case No. 145, Appendix D), to raise government mandatory standards for certain items. An example is limits on certain chemicals thought to result in ‘sick house syndrome’.4 However, very little attention has yet been paid to voluntary industry standards (Howells 1998: 15–45). These are often put in place and followed by firms out of fear of potential government mandatory standards, and are some of the most interesting and practically significant norms affecting product safety. As shown for example in the ‘foundation’ litigation discussed in Chapter 3 (PL Law Case No. 12, Appendix C), and product testing for CLCs, non-binding industry standards may be considered in assessing a product’s defectiveness and other risks.5 In Japan, PL ADR Centres may play a useful role in diffusing and informally updating such industry standards, both generally and in particular cases which may involve or lead to serious disputes. Comparatively, although some studies are impressed by measures adopted in specific industries (e.g. Kinkibenren ed. 2001), the US now has quite a weak system for regulating the safety of general consumer goods. Although the Consumer Product Safety Commission was established in 1973, deregulatory

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ideology soon began starving it of funding and led it to give up on trying to set many mandatory standards involving extensive consumer input. Instead, there is a plethora of voluntary standards promulgated by three major bodies and hundreds of smaller ones, dominated by industry (Howells 2000). This institutional reality emasculates the scope for US courts to impose civil liability for breaches of such standards. However, other substantive and especially procedural or institutional features of PL law still substitute extensive remedies for those injured by unsafe products (Zick 1991). By contrast, after the EU adopted a ‘new approach’ emphasizing performance standards in 1985 (Joerges et al. 1999), it has gradually expanded resources for consumer representation in setting those standards. Compliance with resulting standards is encouraged because goods can then be certified for trading between EU member states (Egan 2001). In addition, there is an overarching obligation on all commercial suppliers to ensure their goods are safe, under a General Product Safety Directive enacted in 1992 (92/59/EEC) and considerably strengthened in 2002 (2001/95/EC, to be implemented by all member states by 15 January 2004). For example, Article 3(4) allows state authorities to take action (such as recalls and other sanctions) upon evidence of danger even when European standards have been complied with. Although enforcement still remains largely delegated to national – and even local – authorities, on 5 February 2003 the European Commission proposed a regulation to harmonize and heighten controls over all food and feed (Holland 2003), setting an interesting precedent for further expansion in enforcement mechanisms for consumer products generally. In some areas, as pointed out by David Vogel (2001: 5), European regulation of health and safety risks has become and is becoming stricter – more ‘American’ – than it ever was in the US. Japan and Australia seem to lie between these two extremes, despite again a surprising lack of comprehensive information (cf. e.g. Australian Consumers’ Council 1993). Inspections, recalls and data collection have relied more on collaboration by industries with government enforcement agencies which have – or apply – rather limited enforcement powers. There is more homogeneity in voluntary standards and the pressures to adopt them than in the US; but less consumer input and nothing as extensive as the revised Directive in the EU, especially in Japan. Moves towards the European model appear advisable for Japan, and likely over the next decade in the wake of recent product quality problems.6 This is especially true given the other dimensions of Japan’s ‘Europeanization’ of legal norms and institutions affecting product safety, indicated throughout this book. Moves in this direction should also help address certain types of risks identified by Sarumida (1996: 88–90), in a rare conceptual and comparative overview encompassing the interrelationships between PL law and government regulation, as well as market mechanisms for promoting product safety. Specifically, setting higher regulatory requirements should reduce not only what he calls ‘Type 1 risks’, with a high likelihood of occurrence and severe consequences (the main focus of protection developed also by Japanese courts, as in the ‘Big Four’ PL

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cases discussed in Chapter 2), and certain ‘Type 2 risks’ (with low likelihood of occurrence but still severe consequences, which the PL Law was partially aimed at reducing). Changes in general public safety regulation, in particular, should also help reduce ‘Type 3 risks’ (with high probability of occurrence yet limited consequences, often addressed anyway by initiatives by manufacturers, for instance by warning labels). They should also affect ‘Type 4 risks’ (with low probability and limited consequences), without the heavy costs and formalization of processes which would tend to accompany product-specific mandatory standard setting. However, problems like mad cow disease and Genetically Modified Organisms (GMOs) tend to be ‘Type 2 risks’. There remain extraordinarily complex scientific and other uncertainties associated with these issues (see e.g. OECD 2003). At the least, the regulatory response should incorporate some version of the ‘precautionary principle’ (see generally Vos 2000). Under this principle, authorities may take certain measures even when the nature and magnitude of significant risks cannot yet be determined with scientific certainty, as under Article 8 of the revised EC Product Safety Directive. In turn, developing this approach could force a helpful reassessment of the proper scope for the ‘development risks’ defence in PL law, which also grapples with what to do when risks are remote but potentially disastrous. Creating bridges in this way between hitherto quite distinct areas of law, ‘public’ and ‘private’, may be more effective than directly trying to assess the rather different ‘rationality’ of science.7 To allow for such links, and for heightened regulatory standards to also open the door to PL suits, as expected now in the EU owing to more notification obligations and heightened consumer expectations (Lovells 2002: 61–2), the scope of Japan’s PL Law should also be expanded. Adding to the probable ‘expressive’ effects outlined above, this provides another good reason for at least unprocessed primary agricultural produce to be brought within the private law statutory regime.

Conclusions Ultimately, therefore, analysis of contemporary PL Law means going beyond private law arenas like tort and contract law, and even hybrids like environmental and consumer law, into realms conventionally viewed simply as matters of public law, including criminal law.8 Public law increasingly faces challenges from privatization, both of government entities themselves and of services delivered, especially nowadays by outsourcing (see e.g. Vincent-Jones 1999) and other ‘private regulation of the public sector’ (Scott 2002). A flip-side of this, and other socio-legal transformations in most complex industrialized democracies, is that private law is also subjected to a new wave of ‘publicization’ or re-regulation (e.g. Collins 1999; Gerstenberg 2000). The intersection between private and public law is therefore where much of the action is these days, although this new ‘regulatory space’ is still being mapped (Scott 2001). Combining insights from how both private and public law ‘think’ about risks affecting health and safety

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may allow new types of experimentation implicating private and public interests (Ladeur 2002: 33–4; cf. generally Sunstein 2002). It may also improve contested interfaces with the worlds of science (cf. e.g. Edmond and Mercer 1998; Fisher 2000) and of industrial technology or business management (Kitagawa 1995; White and Pomponi 2003). In other ways, too, studying PL’s interrelationships with product safety brings in economics and politics (at micro and macro levels), theories and evidence of social change, and developments in the history of ideas. Many of these points of intersection have not been explored in detail in this book, but at least some have been signposted and tentatively linked to the past, present and future of PL in Japan. In analysing both black-letter law and such broader contextual aspects, the utility of a global comparative perspective is particularly helpful. In processes of enactment and application in different fora, in and out of courts, law can be seen to play an integral role in contemporary Japanese society, itself at a crucial juncture in its modern history (Gordon 2003). The interrelationships between Japanese law and society need continuous monitoring, and ongoing reconceptualizations, as they face a turning point in modern history (Ginsburg 2002). PL law presents a small, but significant, piece in this puzzle. Japan’s regime has come a long way over the last three decades or so. Despite differences in emphasis and priorities, remaining challenges are largely shared with other countries, reflecting a global problem: how to manage product quality and safety, in an ever more complex world.

Appendix A Translation of Japan’s PL Law

Product Liability Law (Seizobutsu Sekinin Ho, Law No. 85, 1994)

Article 1: purpose By setting forth the liability of manufacturers, etc. for compensatory damages for harm to a person’s life, health or property owing to defects in products, this Law aims to protect the harmed person, and thereby (motte) to contribute to stability and improvement in consumer lifestyle (shohi seikatsu) and to the sound development of the national economy.

Article 2: definitions (1) ‘Product’: Manufactured or processed movables (dosan). (2) ‘Defect’: The lack of safety a product ought to have, taking into account the nature of the product, its normally foreseeable manner of use, the time it was delivered, and all other circumstances relating to the product. (3) ‘Manufacturer’: (1) Any person who produces, processes or imports a product as a business. (2) Any person who presents its name, trade name, trademark or other mark (‘presents its name, etc.’) on the product as its manufacturer; or presents its name, etc. on the product so as to create the mistaken impression that it is the manufacturer. (3) Any person, other than those listed in paragraphs (2) and (3), who presents its name, etc. on the product and who can be recognized as the manufacturer in fact, considering, the manner in which the product is manufactured, processed, imported or sold and other circumstances.

Article 3: product liability The manufacturer, etc. shall be liable to compensate for damage arising from a defect in a product which it has delivered and manufactured, processed,

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Translation of Japan’s PL Law

imported or presented with its name, etc. in terms of Article 2(3)(2) or 2(3)(3), and which interferes with another’s life, health or property. Provided, however, that the manufacturer shall not be so liable for damage occurring only to the product itself.

Article 4: exemptions (1) Development risks The state of the scientific or technical knowledge (chiken), at the time the manufacturer, etc. delivered the product, was such that it was not possible to detect (ninshiki suru) that the product had a defect. (2) Component manufacturing Where a product is used as a component or raw material (genzairyo) of another product, the defect has arisen solely (moppara) because of having followed the other product’s manufacturer’s instructions (shiji) regarding design (settei), and the manufacturer, etc. is not negligent with respect to the defect.

Article 5: limitations of time (1) The right to claim compensatory damages shall be extinguished by prescription (jiko) if not exercised by the harmed person or the latter’s legal representative within three years of the time such person or representative knew of the harm and the person liable for the damage. The same shall apply after ten years have elapsed from the time of delivery by the manufacturer, etc. (2) Where the harm is caused by a substance which becomes harmful to human health when it accumulates in the human body, or where the harm shows symptoms after a certain latency period, the period set forth in the second sentence of Article 5(1) shall be calculated from the time such harm arises.

Article 6: application of Civil Code Unless otherwise provided for in this Law, the Civil Code (Law No. 89, 1896) applies to the liability of the manufacturer, etc., for compensatory damages due to a defect in a product.

Appendix B Annotated translation of PL Law Case No. 10 (‘McDonald’s Orange Juice’)

Judgment delivered on 30 June 1999 (and original delivered on that date) [Registrar’s Note]. Date of Completion of Oral Proceedings: 12 May 19991 Claim for Damages, No. 1998 (wa) 2443 Judgment [of the Nagoya District Court]2 Horakai 2–320, Midori-ku, Nagoya City Plaintiff: Kazuko Katsurakawa Counsel for Plaintiff: Masaaki Hirazuka Shinjuki 6–5–1, Shinjuku-ku, Tokyo City Defendant: Nihon McDonald Kabushiki Kaisha Representative Director of Defendant: Den Fujita Counsel for Defendant: Terumichi Saeki, Yukimasa Machida

Judgment . . .

The Defendant shall pay to the Plaintiff 100,000 Yen, plus 5 per cent interest on that sum from 13 February 1998 until day of payment.3 The rest of the Plaintiff ’s claims are dismissed. The Defendant shall bear one-fourth of litigation costs, and the Plaintiff the remainder.

Facts and reasons Claims The Defendant claims from the Plaintiff 400,000 Yen, plus 5 per cent interest on that sum from 13 February 1998 until date of payment.

1 1.1

Summary of the case This case involves: (i) a claim against the Defendant in product liability, defective performance (breach of a duty of safety in a contract of sale), and

216

1.2

Translation of PL Law Case No. 10 tort, (ii) by the Plaintiff alleging that she suffered injury to her throat from extraneous matter contained in orange juice she drank, which was manufactured and sold by the Defendant, (iii) for 300,000 Yen in damages for pain and suffering (isharyo) and 100,000 Yen in lawyers’ fees.4 Non-disputed facts, etc. 1.2.1 On 13 February 1998, the Plaintiff was an employee of Aigin DC Card Kabushiki Kaisha (‘Aigin DC Card’). The Defendant was a stock corporation engaged in the business of selling etc. food and beverages (evidence from the Plaintiff herself). 1.2.2 At around 12.35 pm on 13 February 1998, the Plaintiff purchased for 525 Yen a double cheese burger set, a combination of a double cheese burger, fried potatoes and orange juice (‘the orange juice’) manufactured by the Defendant, at the latter’s drive-through outlet in Ise-machi [in Nagoya]5 (documentary evidence Ko-1). 1.2.3 After drinking the juice, the Plaintiff vomited blood and therefore was examined at the surgery within Aichi Ginko Kabushiku Kaisha (‘Aichi Ginko’), and also at Nagoya National Hospital (‘National Hospital’) after being transferred there by ambulance.

2 Issues in dispute 2.1 Did the Plaintiff injure her throat? Plaintiff’s allegations: After drinking the juice and feeling pain in her throat, the Plaintiff went to the surgery within Aichi Ginko and was examined by Dr Akio Nagasaka (‘Dr Nagasaka’). She was told that she had an injury to her pharaynx and that it was bleeding. The doctor at the National Hospital confirmed these facts. Defendant’s allegations: According to the medical records at the National Hospital, etc. there was only the impression of some blistering, and bleeding under the mucous membrane (nenmaku ka shukketsu) of a swollen part of the pharaynx. In short, these symptoms only allowed for recognition of some spots or patches of dark blue and red to purple in the mucous membrane under the swollen part; the membrane was not ruptured and there was bleeding underneath the mucous membrane tissue (nenmaku ka soshiki: in small blood vessels). ‘Bleeding under the mucous membrane’ refers to bleeding well underneath the mucous membrane tissue (with its fine layers consisting of, from the outer layer: epidermis, the membrane layer itself, membrane muscle support, smooth muscle). This is quite different from the symptoms alleged by the Plaintiff, namely ‘feeling some extraneous matter like a glass splinter penetrating the throat, and vomit becoming red overall’. Based on such allegations, there should have been

Translation of PL Law Case No. 10

217

treatment involving doses of maturative antibiotics, and disinfectation and cleaning of the areas cut by extraneous matter penetrating the throat. Yet neither Dr Nagasaka nor the National Hospital doctor gave any treatment whatsoever based on an external injury to the mucous membrane, or on a cut or open wound in the oral cavity. In addition, it is unnatural to say that the juice was not drunk until the double cheese burger and fried potatoes were all eaten up. Dr Nagasaka’s record also only records, ‘injury to the pharynx?’; there is no definitive diagnosis such as ‘injury to the throat’. Further, the Plaintiff herself does not recall precisely in what spot she suffered the alleged injury. Given all the foregoing, there are no facts showing that the Plaintiff suffered an injury involving major bleeding. 2.2 Was the Plaintiff’s injury caused by the orange juice? Plaintiff’s allegations: The Plaintiff took the purchased double cheese burger set back to Aigin DC Card. After finishing eating up the double cheese burger and fried potatoes, she drank the orange juice. Thereupon she felt a pain in her throat like it was penetrated by something like a fragment of glass (albeit a slight one). There was bleeding from her throat and she vomited. Colleagues eating lunch with the Plaintiff also affirm these facts. Dr Nagasaka and the National Hospital doctor also affirm the facts that she suffered bleeding from injury to her pharynx due to extraneous matter within the orange juice. At the time the Plaintiff was not undertaking any dental treatment. She was in good health, and had no troubles with her pharynx, etc. Also, in the period from purchase of the orange juice until she began to drink it, there was no opportunity at all for other extraneous matter to get into it. Therefore there was no cause for her injury other than the orange juice. Defendant’s allegations: The suppliers of the Defendant’s orange juice, upon delivery, undertake a check using a metal detector. The Defendant then puts it in an orange juice machine, pours it out into a paper cup, puts on a cap, and puts the juice in a paper bag to sell it. Therefore there is no possibility of extraneous matter, able to pass through a seven-millimetre diameter straw, getting into the juice, unless this is done deliberately. Even if the plaintiff suffered injury as alleged, it must be inferred that this arose from some extraneous matter already in the Plaintiff ’s mouth going down into her pharynx.

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Translation of PL Law Case No. 10

3 Findings of this Court 3.1 First issue in dispute 3.1.1 According to the oral proceedings generally and certain documentary evidence (Ko 3-1 and 3-2, Ko 4 and Ko 6, 8, 10; Otsu 1-, 2-1 and 17, Evidence of Shinichi Yasui and the Plaintiff herself), we find the following facts. 3.1.1.1 The manufacturing process for the orange juice, alleged to be the cause of injury to the Plaintiff ’s throat, is as follows (Otsu 2-1 and 17): (1) Nihon Coca-Cola Bottlers Kabushiki Kaisha supplies ‘Conc. Juice’ (juice in concentrated form) contained in transparent film made from vinyl. (2) A corner of this film is opened by hand, scissors, etc. The Conc. Juice is then poured into containers (with no cap or cover) pulled out from inside the orange juice machine. All this is done by hand. (3) A pipe is connected to this machine for adding water. Cleaned tap water is added through this, with an oregano filter (a water cleaning device using activated charcoal), and stirred up with the Conc. Juice. (4) Cubes of ice, automatically prepared by the water cleaning device, are taken from a preservation unit (with a top surface which, as a whole, can be opened and closed) and put in a paper cup using a scoop-like instrument. All this is done by hand, and during this time the preservation unit’s top surface is wide open. Orange juice mixed in the machine is then extracted and poured in from the machine. (5) A plastic cap is put on the paper cup. 3.1.1.2 On 13 February 1998, when the Plaintiff purchased the double cheese burger set, the Defendant’s salesperson put the double cheese burger and fried potatoes in one paper bag. The orange juice with its plastic cap on top, and a straw which had been placed in an exposed manner (hadaka de) on the counter, were then put in second paper bag; at that time, the straw was not inserted in the paper cup. Both bags were then closed by folding down their openings, and placed in one vinyl bag which was handed to the Plaintiff. She took this back in that form to the Aigin DC Card staff room. During that period, the Plaintiff did not stop off anywhere, nor did she leave the bag anywhere (evidence of the Plaintiff herself). 3.1.1.3 The Plaintiff began to have lunch with her colleague, Hiromi Kawachi (‘Kawachi’). She first ate up the double cheese burger and the fried potatoes. Then she began drinking the orange

Translation of PL Law Case No. 10

219

juice through the straw. Immediately after this, she felt as if something like a fragment of glass (albeit a slight one) had penetrated the top part of her throat. She then began to feel more and more pain, and to have difficulty in breathing, and was moved by nausea. Therefore she went to the toilets, where she vomited up what she had eaten. Blood was spread throughout the vomit. After vomiting, although the Plaintiff no longer felt like her throat was being penetrated by something, she continued to feel pain. 3.1.1.4 Urged by Kawachi, the Plaintiff went to the surgery within the Aichi Ginko next to Aigin DC Card, and was examined by Dr Nagasaka. When she explained that she had vomited blood after drinking the orange juice, he instructed her to call an ambulance and be examined at the National Hospital. At the toilet at this surgery, also, the Plaintiff vomited something like hardened saliva (sputum) slightly mixed with blood. When she went to the National Hospital, her superior (Department Manager Tanaka) and Kawachi took along the orange juice that the Plaintiff had been drinking. 3.1.1.5 At the National Hospital, Dr Shinichi Yasui (‘Dr Yasui’) examined the Plaintiff. He read the letter of introduction from Dr Nagasaka and heard what the Plaintiff had to say. Upon examining her pharynx, he could not find any actual bleeding or coagulated blood, but found that there was bleeding under the mucous membrane (nenmaku no shita ni shukketsu). He also examined her stomach using a duodenum fibrescope, but did not find any extraneous matter. The orange juice that the Plaintiff had been drinking was thrown away before its contents could be examined. Dr Yasui decided that there was no need for any direct treatment of the bleeding, but because the Plaintiff had vomited, he gave her a drip-feed of medicine against vomiting, and medicine to reduce the uneasiness in her pharynx and to prevent its blistering (dropsical swelling). He also instructed her to rest. Dr Yasui’s record dated 4 March 1998 (Ko 5) records the name of the symptoms as ‘pharynx bleeding’, and additional comments as: ‘13 February 1998, saying vomiting blood, brought to Hospital emergency services by ambulance, examined; based on throat fibre[scope], bleeding under mucous membrane (nenmaku ka shukketsu) in the swollen part of the right pharynx, established an impression of blistering (dropsical swelling)’. According to the testimony of Dr Yasui, ‘bleeding under mucous membrane’ did not mean ‘bleeding in the tissue under the mucous membrane (nenmakukashoshiki ni okeru shukketsu)’, as alleged by the Defendant; but instead ‘bleeding occurring under the mucous membrane (nenmaku no shita ni okeru shukketsu)’.

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Translation of PL Law Case No. 10

After receiving Dr Yasui’s examination, the Plaintiff returned briefly to her office and then went home. She stayed there two days, lying down almost all the time, and only eating soft foods. Moreover, at the time, the Plaintiff was not having any dental treatment. 3.1.1.6 On 17 February 1998, the Plaintiff received the National Hospital record of her examination, to show to the Defendant. After consulting her superior, she made contact with the Defendant the next morning, 18 February. In discussions on 19 February, however, the Defendant denied a causal link between the orange juice and her injury. Accordingly, through her counsel, by registered mail 27 March 1998 the Plaintiff claimed damages, and brought this suit on 15 May 1998. 3.1.2 According to the above findings, Dr Nagasaka examined the Plaintiff immediately after she claimed to have vomited blood, and called an ambulance recommending her to be examined at the National Hospital. Dr Yasui, using a pharynx fibrescope, also found bleeding under her mucous membrane and wrote this in his record. We therefore hold that she suffered the injury as contained in that record (‘the injury’). The Plaintiff did not receive treatment for an external injury to the throat. However this does not determine the fact that the Plaintiff suffered the injury, because there is ample grounds for considering such treatment was unnecessary due to any cut having closed up by the time of the examination at the National Hospital, given the peculiarities of the pharynx area of the throat. There are also some aspects in the Plaintiff ’s testimony which can be seen as involving some overexaggerations in describing the state of the injury, and mistakes as to whether the left or right part of her throat was injured. However, considering that this was testimony from the Plaintiff one year after the injury, and she was confused by the shock at the time of the injury, these cannot be said to be circumstances sufficient to reverse the holding that the Plaintiff suffered the injury itself. 3.2

Second issue in dispute

As determined in 3.1 above, (1) the Plaintiff suffered the injury to her throat immediately after drinking the orange juice; (2) there was no opportunity for any extraneous matter, able to cause this injury to her throat, to get into the orange juice from the time of its sale until she drank it; and (3) the Plaintiff was not undergoing any dental treatment at the time, and (4) she drank the juice after finishing eating up the double cheese burger and fried potatoes, so it is inconceivable that she could already have had extraneous matter in her mouth. Accordingly we hold that the cause of the injury was extraneous matter in the orange juice.

Translation of PL Law Case No. 10

221

The Defendant contends that it is impossible, given the manufacturing process for the orange juice, for extraneous matter (able to pass through a straw with a seven millimetre diameter) to have got into it. However, based on our findings as to the manufacturing process found at 3.1 above, when putting the Conc. Juice into the containers within the orange machine or when scooping up the ice from the preservation unit etc., it cannot be denied that there is a possibility of extraneous matter being mixed in. Accordingly we cannot adopt this contention by the Defendant. 3.3

4 4.1

4.2

Mixing into the orange juice extraneous matter, able to create such injury to the throat of people drinking it, can be said to constitute a lack of the safety that juice generally has. Accordingly we hold that the orange juice was ‘defective’ under the Product Liability Law. The extraneous matter was not discovered, and in the end it is still unclear what it was. According to the facts found in 3.1.1.3 above, considering that probably the Plaintiff threw up the extraneous matter when she vomited the contents of her stomach, and that the orange juice was thrown away without having been examined, it is too severe to require the Plaintiff to determine the extraneous matter with any further specificity. Whatever it was, if an extraneous matter is mixed into juice able to cause injury to people drinking the juice, it is clear that the latter lacks the safety that juice usually has. Because of the clarity of the fact itself that there was extraneous matter in the orange juice sufficient to cause injury to the throat of the drinker (i.e. that it had a ‘defect’), the point that the form of the extraneous matter is unclear does not affect our abovementioned holding.

Damages After suffering the injury, the Plaintiff vomited blood, and a doctor determined that she was in a state making it reasonable for her to be taken to hospital by ambulance. At the National Hospital, she received a drip feed including medicine to prevent vomiting, and we find she suffered considerable shock from the injury. The cause also could not be ascertained because the orange juice taken to the Hospital was thrown away, and the duodenum fibrescope could not find any extraneous matter either. Thus, even after she returned home from the National Hospital, it is not beyond comprehension that she remained uneasy and fearful and that she rested at home for two days. Accordingly, we hold that the Plaintiff suffered considerable (soto na) emotional and physical distress, and for that pain and suffering we find 50,000 Yen to be reasonable (soto). In view of the contents of this case and the Defendant’s behaviour, we hold that it was necessary to engage counsel. In view of the course of these proceedings, we find 50,000 Yen to be an adequate amount in damages for lawyers’ fees, in adequate causal relation (soto inga kankei)6 to this case.

222 5.

Translation of PL Law Case No. 10 As above, we accept that the Plaintiff has grounds in this suit to claim payment, under Article 3 of the Product Liability Law, of 100,000 Yen plus interest at the rate of 5 per cent on that sum from 13 February 1998 until date of payment (as set by the Civil Code as interest damages); but we dismiss all other claims as groundless. We hold as set out in the Judgment (above) regarding litigation costs, applying both Article 61 and the main paragraph of Article 64 of the Code of Civil Procedure,7 and hold that it is not appropriate to declare this judgment open to provisional execution (karishikko).8

Nagoya District Court, 9th Civil Division9 Presiding Judge Takeaki Noda Judge Tekko Sato Judge Yuki Michino

Appendix C PL Law cases filed, 1995–2001

Key ‘DC’ = District Court ‘HC’ = High Court

8/8/96 (in tort, under Civil Code); 20/11/96 (amended claim at third hearing: also under PL Law, for one machine delivered after 1/7/95) (vs. pipe manufacturer) 18/11/96 (vs. food manufacturer)

Sapporo DC

Maebashi DC

Osaka DC (Sakai Branch)

Sendai DC

¥950,000: ¥650,000 lost earnings; ¥200,000 isharyo; ¥100,000 lawyers’ fees

¥77,000,000

¥33,000,000 ($275,000)

3. Osteopath poisoned by packed cut bacon won at pachinko (game) parlour

4. 12-year-old girl dies from poisoning from O-157 bacteria allegedly in school lunches

5. Restaurant manager claiming raw sea urchins for food poisoning of 23 customers

4/2/97 (vs. food importer, and wholesaler)

16/1/97 (vs. Osaka Prefecture, Sakai City)

24/12/95 (vs. large ink/packaging company, and others)

Niigata DC (Nagaoka Branch)

¥910,000: ¥10,000 medical expenses; ¥350,000 lost earnings; ¥500,000 non-pecuniary loss (isharyo) ¥51,000,000

1. Restaurant owner cut finger opening tea drink container

2. Electric company claiming against pipe processing company for defect in snow melting machines

Date suit brought, and defendant(s)

Court

Amount claimed: breakdown

Suit and contents

15/6/98, court-annexed settlement: solatium (mimaikin) paid after plaintiff accepted causality was dubious, and abandoned claim for isharyo 10/9/99, judgment for ¥45,380,000 (but simply holding the local government negligent, without discussing the PL Law cause of action) 25/2/99, judgment (claim rejected)

19/11/99, settlement

8/9/99, judgment (claim rejected); appealed to Tokyo HC, on 22/9/99

Result [and case report, if any]

¥18,150,000

7. 77-year-old woman killed while waiting for car, by steel car lift in parking building 8. Itchiness and hearing difficulties after using ear care product and used following instructions, the day after seeing TV ad 9. Air-conditioned installed in leased apartment dripped water onto computer plug; short led to loss of much data and work delayed one year 10. Extraneous matter in juice, throat injured and distress to 29year-old woman.

¥400,000

Nagoya DC (transferred from Summary Court)

Tokyo DC

Sendai Summary Court

Tokyo DC (transferred from Summary Court at Defendant manufacturer/ seller’s request) Kyoto DC

¥70,000

6. 25-year-old woman developed skin trouble in sleep, so couldn’t sleep enough from itchiness, after using synthetic detergent in kitchen for 2 months

¥610,000: claiming purchase price, medical expenses, isharyo, and lawyers’ fees ¥4,200,000

Court

Amount claimed: breakdown

Suit and contents

7/9/98, suit withdrawn by consent

30/6/99, judgment (¥100,000) [translated in Appendix B]; 13/7/99, appealed, settled for ¥300,000 on 10/5/00 [PLN 36]

2/3/98 (vs. air conditioner manufacturer, and business which installed it) 15/5/98 (in Summary Court; transferred to DC, 6/98) (vs. McDonald’s Japan)

18/6/98, settlement; 22/6/98, suit withdrawn by consent 7/5/98, settlement (first ¥250,000)

26/8/98, settlement

5/2/97 (in Summary Court; transferred to DC, 22/4/97) (vs. chemical/cosmetic manufacturer, Kao)

13/5/97 (vs. car lift manufacturer, parking building operator, and others) 22/1/98 (vs importer/retailer, advertising agency)

Result [and case report, if any]

Date suit brought, and defendant(s)

Nagoya DC

Mito DC

Nagasaki DC

Kagoshima DC

¥81,600,000

¥59,450,000

¥210,960,000

¥25,210,000

15. Child suffocated on konnyaku jelly given by mother

16. Airbag activated when owner (a brain surgeon) was carrying out maintenance, breaking left finger. 17. Hot water boiler, tipped over, scalding toddler permanently

¥6,600,000

12. Female gallery attendant used cosmetics bought in department store according to directions, suffered from skin irritation on face 13. Surgical thread used in operation after disintegrated, patient died of the shock of losing blood and being unable to breathe 14. Chinese herbal medicine, prescribed by doctor, led to death. Kobe DC

Aomori DC

¥11,700,000

11. Computer program leased to manage sales, was defective, hence too much corporate taxes, etc. paid

¥49,620,000

Court

Amount claimed: breakdown

Suit and contents

Result [and case report, if any]

8/10/98 (vs. importer/retailer of the medicine) 30/10/98 (vs. food manufacturing/retailing company, Mannan Life) 19/11/98 (vs. Porsche Japan as importer, and car dealer) 14/12/98 (vs. manufacturer, Tiger, and retailer)

22/7/98 (vs. importer/retailer of thread)

27/9/99, settlement (¥8,000,000)

10/2/99, suit withdrawn (following 27/1/99 settlement for ¥37,000,000 in separate suit against hospital)

23/6/98, PL Law claim added 28/9/98 (vs. computer program development company, and OA leasing company) 21/7/98 (transferred from local 22/5/00, judgment (claim rejected) court 9/10/98) [1718 Hanrei Jiho 3] (vs. cosmetics manufacturing company, department store)

Date suit brought, and defendant(s)

Court Kanazawa DC N/A

Sendai DC

N/A

Tokyo DC

N/A

N/A

Amount claimed: breakdown

¥1,040,000

¥115,880,000

¥40,840,000

¥3,330,000

¥15,330,000

¥28,500,000

¥14,400,00

Suit and contents

18. Shoe suddenly came off, girl hurt chin and broke tooth

19. 25 year old man dies by carbon monoxide poisoning from car fire 20. Metal hook from windshield cover stretched on rubber cord, pierced left eye, seriously injured eyeball 21. Captain brought on charges after maritime accident claimed isharyo for mental anguish, as engines ordered by manufacturer were found to be defective 22. Glass plate, used in serving elementary school lunches, fell and shard injured second year pupil’s eye

23. Electric wheelchair ran out of control, crashing and killing user

24. Second suit relating to glass plate for school lunches, dropped when cleaning up in class room, shard injured pupil’s eye

27/11/99 (vs. US plate manufacturers, importers, and local government authority [State Compensation Law]) 21/3/00 (vs. importer [Korean-made product]) 10/8/00 (vs. two tableware manufacturers, state [State Compensation Law])

21/12/99 (vs. freighter manufacturer)

17/12/99 (vs. windshield cover manufacturer)

25/5/99 (vs. footwear manufacturer/ retailer) 18/11/99 (vs. car manufacturer)

Date suit brought, and defendant(s)

28/4/01, judgment for ¥25,500,000 [1754 Hanrei Jiho]

Result [and case report, if any]

2001 (vs. restaurant owner)

28/02/01, judgment (approx. ¥10,000,000 in total) [1068 Hanrei Taimuzu 181] 13/12/02, judgment (approx. ¥14,000,000 in total) [1085 Hanrei Jiho 15]

Result [and case report, if any]

Sources: 1 Shohisha Kujoshori ed. 1998 2 Seikatsuyohin PL Senta ed. 1998 3 Kitagawa 1998 4 Shimano 1999 5 Kokumin Seikatsu Senta, ‘PL Ho ni yoru Sosho Ichiran [Overview of PL Law Suits]’, at 6 ‘PLN’ = PL Ho/Joho Kaiko Nyusu (Newsletters)

Tokyo DC

1999–2000 (vs. importer [from Italy])

Tokyo DC

Approx. ¥38,000,000 in total

2001 (vs. Snow Brand)

Osaka DC

¥6,614,000 (including ‘punitive’ damages) [PLN 38] Various amounts

28. Botulism from olives, poisoned 12 customers, joined by restaurateur 29. Snapper fish (raw sashimi and grilled) poisoned with bacteria infected 8 customers

25/12/00

N/A

N/A

26/1/01 (vs. canned juice manufacturing company)

N/A

¥6, 600, 000

25. Three family members drank canned vegetable juice after dinner, mould-like extraneous matter in juice, caused diarrhoea for several days 26. Extraneous matter in cup of noodles, caused diarrhoea 27. Food poisoning from low fat milk, six of 13,420 victims

Date suit brought, and defendant(s)

Court

Amount claimed: breakdown

Suit and contents

Appendix D All PL suits filed, 1990–2001

Key .

Plaintiff lost Plaintiff won

Information on settlement may be available through Nichibenren, etc. Settlement during proceedings Pre-suit settlement ‘DC’ = District Court ‘HC’ = High Court ‘Hanji’ = Hanrei Jiho (law reports) ‘Hanta’ = Hanrei Taimuzu (law reports) ‘Ho N’ = Shohisha Nyusu (consumer group newsletter) Kinyu Shoji = Financial Affairs (law reports) ‘Kokusei’ = Kokumin Seikatsa Kenkyu (NCAC) ‘PLN’ = PL Ho Nyusu (later named PL Ho Joho Kokai Nyusu: PL group newsletter)

Nagoya DC: 1990 (wa) 3021 Supreme Court: 1989 (O) 1206

Nagoya DC Tokyo DC: 1995 (wa) 2328 Pre-Suit Settlement

5

7 8

10

9

6

4

3

Fukushima DC: 1993 (wa) 473; 1994 (wa) 278

Tokyo HC: 1994 (ne) 1214 Tokyo DC: 1991 (wa) 3615 Nagoya DC: 1993 (wa) 25 Nagoya DC: 1990 (wa) 3611

1

2

Court case no.

No.

Counter Table, [crushed baby: PLN 15]

Automobiles

Chlorella Foodstuffs Potato Chips Bag

Pharmaceuticals (Chloroquine)

Hard Contact Lenses [repeatedly disintegrated when washed: claimed ¥0.2m for replacement costs paid to retailer: PLN 6] Electric Fan Heater

Tobacco

Cold Storage Counter Displays Boat

Product

.

. .

26/04/95

19/05/95 23/06/95

Hoya

Shimano, National Motors Nippon Springs, Yotsuba Electrics

N/A Calbee

National

Aichi Electrics

25/07/95

(24/07/95) .

.

.

29/03/95

(12/07/95) 24/07/95

.

27/03/95

Mitsubishi Heavy Industries State

Toshiba

.

Judgment (or settlement) date [result] 24/01/95

Manufacturer

A Cases decided or settled January 1995 to February 2000

First instance

14

12

98

First appeal

Related cases Second appeal

Ho-N 28 1552 Hanji 103 893 Hanta 205

Ho-N 28

903 Hanta 168

1551 Hanji 117 903 Hanta 138 49–6 Minshu 1600 1539 Hanji 32 887 Hanta 61, 143

897 Hanta 164

Source

Tokyo DC: 1994 (wa) 25143 Tokyo HC: 1995 (ne) 3616 Shizuoka DC (Hamamatsu Branch): 1994 (wa) 534

11

Tokyo HC: 1993 (ne) 475 Hiroshima HC, (Okayama Branch): 1994 (ne) 318 Tokyo DC: 1994 (wa) 20455 Nagoya DC: 1991 (wa) 1928 Shizuoka DC: 1990 (wa) 263

16

20

19

18

17

15

Sendai HC: 1995 (ne) 387 Otsu DC: 1991 (wa) 392

14

13

12

Court case no.

No.

Diving Boat Support Exploration Vessel

Mountain Bike

Bridgestone Cycles, Shimano

Mizuno

Sanyo Yanase

Automobiles (Benz)

Golf Clubs

Nissan Motors

Automobiles (4WD), [Pajero car, wheel came off, injured etc, claimed ¥4.6m against maker and garage: PLN 2] Automobiles (Brakes)

Nippon Springs, Yotsuba Electrics Mitsubishi Motors, Konoe Mitsubishi Auto Sales

.

29/02/96

29/03/96

(19/03/96) .

.

29/02/96

08/03/96)

.

.

09/02/96

(30/01/96)

(11/01/96)

Mercedes Benz

Automobiles (Benz), [accelerated suddenly when backing out of garage, hit concrete wall and written off: PLN 15] Counter Table

(25/09/95)

Judgment (or settlement) date [result]

31/10/95

Manufacturer

Automobiles (Benz), [car Mercedes Benz burst into flames: PLN 15] Potato Chips Bag Calbee

Product

10

8

First instance

41

First appeal

Related cases Second appeal

PLN 19 Ho-N 28 1595 Hanji 110

924 Hanta 228

1590 Hanji 127 18 Hanta 186 PLN 18

Source

Osaka DC: 1989 (wa) 3112 Tokyo DC: 1989 (wa) 7264 Pre-Suit Settlement

Tokyo DC: 1995 (wa) 25635

Osaka Summary Court: 1996 (no) 2142 Osaka DC: 1995 (no) 18 Pre-Suit Settlement

24

27

28

31

30

29

26

25

23

Nagoya DC: 1994 (wa) 4182

Tokyo DC: 1989 (wa) 14265 Osaka DC: 1989 (wa) 14265 Tokyo HC: 1994 (ne) 1594

21

22

Court case no.

No.

Swing [child (8) caught, broke leg: PLN 15]

Television

Refrigerator

Nitric Oxide Disposal Towers Float to measure tank water level Automobile (Muffler) [mother and child poisoned by CO: PLN 20] White ant pesticide [injuries the day after use: PLN 18] Automobile

Automatic Door, [opened suddenly, old woman injured: PLN 15]

Blood Products

Blood Products

Product

Nagoya City

(18/02/97)

(02/12/96)

(04/10/96)

(17/09/96)

Osaka Toyopet, Toyota Motors Matsushita Refrigeration Toshiba

(22/07/96)

(13/06/96)

22/04/96

(03/96)

(29/03/96) [settlement of ¥3m]

(29/03/96)

(29/03/96)

Judgment (or settlement) date [result]

Kyatsu

Nissan Motors

Mitsubishi Resin Engineering Tokyo Measures

Green Cross, Others Green Cross, Others Kagoshima Kensetsu

Manufacturer

.

First instance

First appeal

Related cases Second appeal

Ho-N 32

PLN 23 Ho-N 32

PLN 21

Ho-N 32

PLN 21 Ho-N 32

939 Hanta 197

PLN 19 Ho-N 28 868 Hanta 217 (1st instance)

Source

Nagoya DC: 1992 (wa) 4216 Pre-Suit Settlement Tokyo DC: 1989 (wa) 7456 Pre-Suit Settlement Supreme Court: 1994 (O) 2072

Tokyo DC: 1996 (wa) 25059 Sapporo DC: 1995 (wa) 1989

32

37

Pre-Suit Settlement Osaka DC: 1991 (wa) 1716

Osaka HC: 1996 (ne) 946

39 40

41

38

35 36

33 34

Court case no.

No.

Ford Co.

Ote Super Johnson

F-80 Tokyo Measures

Riaru Kagaku

Manufacturer

4WD Automobile

Mitsubishi Motors

Ito Architects, Hokkaido Asahi Traders Konnyaku Jelly Ace Bakery Colour Television [burned Sharp down house, daughter (25) died: PLN 1]

Termite Extermination

Mustang

Hair Dye [injured eye: PLN 15] Reef Carrier Float to measure the height of water in a tank Automobile Household-use Mould Remover

Product

.

.

.

(06/08/97) 18/09/97 [awarded ¥22m in total, damages up to ¥85m held time-barred] 18/09/97 .

08/07/97

(05/06/97)

(15/04/97) 10/04/97

(26/03/97) 26/03/97

27/02/97

Judgment (or settlement) date [result]

15

First instance

58

68

First appeal

Related cases

8

Second appeal

PLN 26 92 Hanta 166 PLN 30

1618 Hanji 89 959 Hanta 199 PLN 25 Ho-N 32 1381 Hanji 21 (1st instance) 775 Hanta 185 1511, 72 856 Hanta 227 (2nd instance)

Ho-N 32

Source

Saku Summary Court: Konnyaku Jelly N/A Tokyo DC: L-Tryptophan 41997 (wa) 26736 N/A Automobile (Fuel Hole)

44

Automobile

Ear Care Product

Niigata DC (Nagaoka Multi-purpose Stepladder, Branch): 1990 (wa) 202 [collapsed and farmer fell off, injured: PLN 5, 7] Tokyo DC: Automobile (Gear Lever) 1994 (wa) 3817 [accelerated suddenly in parking lot: PLN 15] Tokyo DC: Television 1996 (wa) 8323 Osaka DC Yacht Harness

51 Sendai Summary [PL Law Court: Case 8] 1998 (HA) 188

50

49

48

47

46

45

Pre-Suit Settlement

43

Colour Television [burst into flames, claiming ¥2,000m: PLN 26]

Tokyo DC: 1992 (wa) 10995

42

Product

Court case no.

No.

(06/02/98)

(1997)

Sanyo Electrical, Daiei Nakamura Boating Industries Medic Far-East

(18/05/98)

(27/04/98)

23/03/98

Second Hand Car (02/98) Dealers Sankyo (02/03/98) Aluminium Kogyo Jaguar Japan (13/03/98)

Showa Electrical

N/A

(1997)

26/12/97

Mitsubishi Electrical Nissan Motors

Judgment (or settlement) date [result]

Manufacturer

.

.

First instance 109

First appeal

Related cases

149

Second appeal

PLN 28 38–3 Kokusei 25 [Appendix C]

1651 Hanji 92

PLN 29

PLN 25

Source

[Tokyo DC] Case Discontinued: 1998 (wa) 4138 Tsu DC (Yokkaichi Branch): 1997 (wa) 1 Osaka HC: 1997 (ne) 2709; 1997 (ne) 2824

56 [PL Law Case 9] 57

58

Tokyo DC: 1997 (wa) 7876

Automobile [smoke etc, emerged when driving, steering wheel froze, went onto shoulder and crashed into lamppost, car heavily damaged: PLN 29] Kitchen-use Synthetic Kao Detergent

Tokyo DC: 1996 (wa) 2622

55 [PL Law Case 6]

Parking Garage Lift

Kyoto DC: 1997 (wa) 1152

(15/06/98)

Judgment (or settlement) date [result]

N/A

Mitsui Yanase

Sharp

Air-conditioner

Automobile (Engine)

Colour Television

(08/10/98 [for ¥65m, i.e. most of extra amount timebarred by DC])

29/09/98

.

40

37–1 Kokusei 44 38–3 Kokusei 30 [Appendix C] 37–1 Kokusei 47 38–3 Kokusei 30 [Appendix C] PLN 30

PLN 30

1057 Kinyu Shoji 46

38–3 Kokusei 26 [Appendix C]

Second appeal

07/09/98

118

First appeal

Source

38–3 Kokusei 24 [Appendix C]

.

First instance

Related cases

(26/08/98)

Yamaguchi (18/06/98) Garages, Toshin, Meiryo Industries Checker Motors, 08/07/98 Garage Italia

Torio Foodstuffs

Cut Bacon

Maebashi DC: 1996 (wa) 622

52 [PL Law Case 3] 53 [PL Law Case 7] 54

Manufacturer

Product

Court case no.

No.

Court case no.

Supreme Court: 1995 (O) 7

Saga DC: 1995 (wa) 214

Okayama DC: 1994 (wa) 1269

Sendai DC: 1995 (wa) 652

Tokyo DC, (Hachioji Branch): 1997 (wa) 2493

Pre-Suit Settlement

Nagoya DC: 1997 (wa) 4903

No.

59

60

61

62

63

64

65

Lighter [exploded in bar, staff slightly injured, pandemonium: PLN 28]

N/A

Wheelchair Cushion

Uchigawa Ironworks

Acid treating machine [seaweed processor injured arm when clutch didn’t work (on first day of operation) and roller continued rolling: PLN 28] Golf Clubs [part came off and flew around 100m when practising: PLN 15] Telephone Adaptor .

27/10/98

(22/12/98) (20/01/99)

Tokai

(29/10/98)

90

.

24/11/98

First appeal

79

First instance

Related cases

08/10/98 . [upheld HC judgment overturning DC] 13/11/98 .

Judgment (or settlement) date [result]

TDK

Nippon Cable Telecommunications Product Importers

Mizuno

Mitsubishi Electrics

Manufacturer

Elevator [injured when foot caught in door: PLN 15]

Product Second appeal PLN 30

Source

Hiroshima DC: 1996 (wa) 1645 Nagoya HC: 1997 (ne) 228 [Kobe DC, filed 22/7//98)

67

73 74

71 [PL Law Case 5] 72

69 [PL Law Case 13] 70

Nagoya DC: 1994 (wa) 4181; 1995 (wa) 1034 Sendai DC: 1997 (wa) 65; 1997 (wa) 379 Tokyo Summary Court: 1998 (ME) 10997 Pre-Suit Settlement Sapporo HC: 1997 (ne) 495

Oita DC: 1991 (wa) 505

66

68

Court case no.

No.

Johnson & Johnson

Riaru Kagaku

Automobile Refrigerator [flames emerged from it and table top, home/bar burned down, insurance company refused to pay, arguing arson: PLN 28]

Fuji Fire Marine & Insurance

(18/03/99) 26/03/99

.

.

16/03/99

(17/03/99)

.

.

.

15/03/99

(02/99)

09/02/9

(02/02/99)

01/02/99

Honda Giken

Corona

Judgment (or settlement) date [result]

Manufacturer

Japan Tobacco Tobacco [physical and non-pecuniary harm: PLN 15] Raw Sea Urchin Ganshin Fisheries, Sanmyou

Surgical Suture

Hair Dye

Accord, Prelude [accelerated when parking, slightly injured: PLN 4] Oil Stove

Product

32

First instance 119

First appeal

Related cases

9

8

Second appeal

PLN 32

37–1 Kokusei 46 39–3 Kokusei 42 [Appendix C]

39–3 Kokusei 45 38–3 Kokusei 26 [Appendix C] 1674 Hanji 98 1001 Hanta 205

PLN 31

PLN 31

Source

Tokyo DC: 1996 (wa) 5613

Nagoya Summary Court

Pre-Suit Settlement

Fukuoka HC: 1998 (ne) 1070 Nagoya DC: 1998 (wa) 2443

76

77

78

79

82

81

Supreme Court: 1999 (O-ne) 625 Tokyo Summary Court: 1998 (ko) 24

Tokyo DC: 1992 (wa) 1128

75

80 [PL Law Case 10]

Court case no.

No.

29/03/99

Minolta Camera, Sanyo Electric

Riaru Kagaku Watagiku Disposals

Factory Pollution

Uchigawa Ironworks McDonald’s Japan

Sanyo Electrics

(27/07/99)

16/07/99

30/06/99

(10/05/99)

(28/04/99)

(06/04/99) Maruyama Factories, Nikko Factories (12/04/99) Automobile Maker, Automobile Sales Company

Judgment (or settlement) date [result]

Manufacturer

Hair Dye

Juice

Acid Disposal Unit

Refrigerator

Automobile (Ball Joint)

Word Processor [AC cord shorted, office/home half burned down: PLN 8, 16] Motor mower [blade injured eye: PLN 26]

Product

.

.

.

32

60

First instance

68

122

123

First appeal

Related cases Second appeal

1682 Hanji 106 PLN 32, 33 39–3 Kokusei 47 [Appendix C; translation in Appendix B]

1677 Hanji 82 39–3 Kokusei 49

Source

Kagoshima DC: 1998 (wa) 1183

88 [PL Law Case 17] 89

Tokyo DC: 1998 (wa) 2888

Nagoya DC: 1992 (wa) 774

87

86 [PL Law Case 4]

Miki Traders Soy Protein Foodstuffs, [recommended to atopic dermatitis sufferer as cure, developed severe skin condition: PLN 28]

Mitsubishi Ploughing machine, [crushed farmer (60): PLN Agricultural Machinery 5, 6] Hot Water Boiler Tiger Thermos

Sakai City

School Lunches (O–157)

Osaka DC: 1998 (wa) 6075 Osaka DC, (Sakai Branch): 1997 (wa) 28

85

Morozoff

Dai-Nippon Printing, J.S. Food

Tea Pack Packaging

Niigata DC (Nagaoka Branch): 1995 (wa) 287

84 [PL Law Case 1]

Ice-cream

Sanyo Electrics

Office Freezer

Tokyo DC: 1994 (wa) 24742

Manufacturer

83

Product

Court case no.

No.

(05/10/99)

(27/09/99)

10/09/99

10/09/99

10/09/99

08/09/99

31/08/99

Judgment (or settlement) date [result]

.

.

First instance

122

125

First appeal

Related cases Second appeal

PLN 34 39–3 Kokusei 46 [Appendix C]

PLN 33 37–1 Kokusei 45 39–3 Kokusei 41 [Appendix C] PLN 33

1687 Hanji 39 1013 Hanta 81 PLN 33 39–3 52 37–1 Kokusei 43 38–3 Kokusei 30 39–3 Kokusei 40, [Appendix C]

Source

Hiroshima HC (Okayama Branch): 1999 (ne) 7 Supreme Court: 1999 (ne-uke) 13

90

Fuji Fire & Marine Insurance

Mizuno

Golf Clubs

Refrigerator

Manufacturer

Product

.

.

22/10/99

22/10/99

Judgment (or settlement) date [result] 61

First instance

74

First appeal

Related cases Second appeal PLN 34

Source

Nagano DC: 1989 (wa) 211; 1991 (wa) 220 Okayama DC: 1991 (wa) 811 Matsue DC: 1994 (wa) 58

92

94

93

Court case no.

No.

Nurse Alert Bell

I-Phone, Nippon Wireless

Rinnai

N/A

Incinerator

Gas Grill

Manufacturer

Product

B Cases filed from 1989 pending on February 2000

[25/4/01: finding minimal defect, PLN 38]

Judgment (or settlement) date [result]

.

First instance

First appeal

Related cases Second appeal

[PLN 38]

Source

Primary source: Kinkibenren ed. 2001, drawing on Nichibenren (Nihon Bengoshi Renrakukai) (ed) ‘PLho no Shushi wa Katsukasareteiru ka – PLho Seiteigo no Seihin Jiko Higai Kyusai no Jiko no Jitsujo to Kongo no Kadai – Shiryo’ [Is the Spirit of the PL Law Being Activated? Future Topics and the Current Situation Concerning Incidents involving Compensation for Harm from Product Accidents: Reference Material’], undated (updated for mid-2001 by PLN).

91

Court case no.

No.

Okayama DC: 1995 (wa) 807 Nagoya DC: 1995 (wa) 4179

96

102

101

100

99

98

Tokyo DC: 1996 (wa) 6600 1996 (wa) 22604

Nagoya HC: 1995 (ne) 493 Sendai DC: 1996 (wa) 979 1996 (wa) 1197; 1997 (wa) 1779 Yokohama DC: 1996 (wa) 982

Nagoya DC: 1994 (wa) 4776

95

97

Court case no.

No.

Blood Products [imported without radiation, patient developed GVHD and died: PLN 28] Tropical Fish Aquarium [caught fire, office half destroyed: PLN 28]

Dust Catcher

Automobile

Airbus 300 [Airplane lost balance when attempted to land manually, but autopilot did not cut off: PLN 28] Contact Lenses

Automobile [Defect in cylinder led to loss of power, crashed into oncoming car, similar defect in other car and manufacturer recall: PLN 26] Automobile (Brakes)

Product

[17/11/00: PLN 37]

(19/05/00) [PLN 35]

Jacks, Prasupa

Judgment (or settlement) date [result]

Nippon Red Cross [and hospital]

Dai-Tokyo Fire

Mazda

Hoya

Airbus Industries [and China Airlines]

Toyota

Automobile Citroen

Manufacturer

4

First instance

First appeal

Related cases Second appeal

Source

110 [PL Law Case 11] 111 [PL Law Case 15] 112 [PL Law Case 16] 113

109

108

107

105

Konnyaku Jelly

Airbag

Tobacco [seeking prohibition of sales and production due to breach of Art 22 of the Constitution: PLN 28]

Nagasaki DC: 1998 (wa) 565

Nagoya DC: 41998 (wa) 664

PC Program

Television

Automobile (Engine) [burst into flames] Television, Video

Stop-water clamp

Automobile (Airbag)

Cast Galvanised Pot

Product

Mito DC: 1998 (wa) 590

Tokyo DC: 1996 (wa) 3758 Yamaguchi DC (Hagi Branch): 1997 (wa) 17 Nagoya DC: 1997 (wa) 1799 Osaka DC: 1997 (wa) 6774 Tokyo DC: 1997 (wa) 24803 Tokyo HC: 1998 (ne) 95 Aomori DC: 1998 (wa) 207

103

104

Court case no.

No.

Phillip Morris

Porsche Japan

Mannan Life

Mitsubishi Electrical Northeast Mitsui Lease Business

Basin Plug Importers Mercedes Benz [Japan], Yanase Sony

Boofu Manufacturers Toyota

Manufacturer

01/08/00 [PLN 36]

Judgment (or settlement) date [result]

.

42

First instance

First appeal

Related cases

149

Second appeal

[Appendix C]

[Appendix C]

[Appendix C]

[PLN 36]

Source

120

119

Camping Car

Automobile

Automobile

Tokyo HC: 1998 (ne) 3513

117 [PL Law Case 12] 118

Fukuoka HC: 1999 (ne) 293 Osaka DC: 1999 (wa) 8053

Automobile (Airbag) [injury: PLN 30] Gas Fan Heater [burned down house: PLN 31] Foundation

Osaka DC: 1998 (wa) 9424 Osaka DC: 1998 (wa) 12790 Tokyo DC: 1998 (wa) 23176

116

Chinese Herbal Medicine

Nagoya DC: 1998 (wa) 4064

114 [PL Law Case 14] 115

Product

Court case no.

No.

Honda Giken Industries Ford Motors [USA, Fuji Automobiles, et al. (1998 (wa) 25, 1999): PLN 34]

Checker Motors, Garage Italia

Rinsa Kurai

Honda Giken Industries Osaka Gas et al.

Kaya

Manufacturer

.

[(12/03/01, right as creditor recognized in subsequent bankruptcy: PLN 37)] [21/12/00: . PLN 37]

[25/4/01: PLN 38]

Judgment (or settlement) date [result]

66

54

First instance

First appeal

Related cases Second appeal

[PLN 37]

[Appendix C] [1718 Hanji 3]

[PLN 38]

[Appendix C]

Source

Automobiles (Recalled Cars)

Plates for School Lunches

Tokyo DC: 2000 (wa) 29016

Hiroshima DC: 2000 (wa) 117

Tea Pack Packaging

Tokyo HC: 1999 (ne) 5289

Child’s Footwear

Local authority, Asahi Techoglass, Iwasaki Houseware, Others Toyota Automobiles

Dai Nippon Printing, JS Food

Mitsubishi Agricultural Machinery Minolta Camera, Sanyo Electricals Miki House

McDonald’s Japan

Manufacturer

(10/5/00, ¥300,000: PLN 36)

Judgment (or settlement) date [result]

84

75

87

80

First instance

First appeal

Related cases Second appeal

[Appendix C]

[Appendix C]

[Appendix C]

[Appendix C]

Source

Primary source: Kinkibenren ed. 2001, reproduced from Nichibenren (Nihon Bengoshi Renrakukai) (eds) ‘PLho no Shushi wa Katsukasareteiru ka – PLho Seiteigo no Seihin Jiko Higai Kyusai no Jiko no Jitsujo to Kongo no Kadai – Shiryo’ [Is the Spirit of the PL Law Being Activated? Future Topics and the Current Situation Concerning Incidents involving Compensation for Harm from Product Accidents: Reference Material’], undated (updated to mid-2001 by PLN).

127

124 [PL Law Case 18] 125 [PL Law Case 1 (cont’d)] 126 [PL Law Case 22]

Word Processor

Ploughing Machine

Nagoya HC: 1999 (ne) 852

Tokyo HC: 1999 (ne) 2758 Kanazawa DC: 1999 (wa) 273

Juice

Nagoya HC: 1999 (ne) 679

121 [PL Law Case 10 (cont’d)] 122

123

Product

Court case no.

No.

132

131

130

[12/1988] Osaka DC

Telephone, infested with cockroaches, lost business [PLN 4]

National 1991 (wa) 1715, Osaka TV, burned down house, DC grandma (83) died, claimed ¥22m [PLN 1] 1991 (wa) 1707, Osaka Video Deck, half of rented Victor DC apartment burned down or water damage, had to vacate, claimed ¥10m [PLN 1] Hakko Karaunji 1992 (wa) 1914, Osaka Lancia car, suddenly DC accelerated: argument over repair cost (¥0.38m, and buy back) [PLN 2]

129

NTT

National [brand of Matsushita]

1990 (wa) 4761, Osaka TV, burned down office, DC claimed ¥7.8m [PLN 1]

Manufacturer

128

Product

Court case no.

No.

C Additional cases filed 1990–2001

(9/94: settled for ¥18m) [PLN 15] (2/12/94: settled for mimaikin) [PLN15] (19/7/94, settlement: supplier responsible for repair, bought back at ¥1.6m -originally 5.4m, 6 3/10 years) [PLN 14] . 10/7/92 [appealed to Osaka HC]

29/3/94: awarded ¥4.4m [PLN 12]

Judgment (or settlement) date [result] First instance

First appeal

Related cases Second appeal

[Translated judgment at 5http://www.law. kyushu-u.ac. jp/ ~luke/tvcase. html>

Source

[6/12/] 1991 (wa) 17463, Tokyo DC

1992 (wa) 123, Tokyo DC [6/] 1992 (wa) 10094 Tokyo DC

133

134

1992 (wa) 12963, Tokyo DC

1994 (wa) 10320 Tokyo DC

(accident 11/93)

1986 (wa) 199, Wakayama

136

137

138

139

135

Court case no.

No.

Sankyo Shodoku et al

27/5/94 [¥0.25m: PLN 13]

Matsushita, Morita Denko, Daiei Nissan

(3/8/94 settlement) [PLN 14] (10/94 Nissan car, burst into settlement: flames, killed driver ‘Reasonable [PLN 14] amount satisfactory to both parties’) Bed subcontractor, (27/10/94 Baby bed, baby caught settlement: between bed and mattress, own-brander wholesaler, Seihin express deep suffocated [PLN 15] regret, ensure Anzen Kyokai never (Product Safety Association), State repeated, ¥26m) [PLN 15]

White ant pesticide, injured neighbours [PLN 8] Ceramic Heater burned down new house [PLN 13]

Judgment (or settlement) date [result]

Helen Curtis Japan (3/3/94, settlement) [PLN 12] Showa Electric

Manufacturer

Bike, handlebars came off, National Jitensha injured [PLN 7] Kogyo

(not specified) [PLN 6]

Hair dye, damaged eye: claimed ¥13.5m [PLN 5]

Product First instance

First appeal

Related cases Second appeal

Source

[7/94] 195 (wa) 807, Okayama DC

141

144

143

Via Osaka CLC

1994 (wa) 24472, Tokyo DC

140

142

Court case no.

No.

Sanyo Denki

Manufacturer

(4/10/96 settlement: ‘not full, but quite acceptable amount’: PLN 23) 26/12/00 . [PLN 37]

Judgment (or settlement) date [result]

Car, parents, child hospitalized by CO poisoning, dog died [PLN 21] Bike, front wheel jammed, Bike boy injured [PLN 25] manufacturer, retailer

(Almost full settlement, including isharyo, medical bills) [PLN 25]

(16/5/96 settlement, 85% of purchase price of ¥3.3m) [PLN 21] Car manufacturer (6/96 settlement) [PLN 21]

Car, fan belt broke, power Toyota brakes failed, injured [PLN 17, 18] Car, burst into flames, Domestic Car destroyed [PLN 21] manufacturer

Commercial Refrigerator, burned down shop goods [PLN 15]

Product First instance

First appeal

Related cases Second appeal

Source

Nagoya DC

1999 (wa) 8053, Osaka DC

2000 (ne – o) 823; Television 2000 (ne – uke) 650, Supreme Court 2001 (wa) 7122, Osaka Food poisoning from low DC fat milk, six of 13420 victims suing for total of ¥6.614m (including ‘punitive’ damages) [PLN 38] N/A (filed 18/11/99) 25 year old man died by carbon monoxide poisoning from car fire

147

148

149

151 [PL Law Case 19]

150 [PL Law Case 27]

1997 (wa) 5064, Osaka DC

146

Car airbag, injured when didn’t inflate after hitting pylon straight on [PLN 26] Generator caught fire, destroyed truck carrying it Defects in construction of new apartment [PLN 35]

‘Sick Building’ syndrome, dentist injured [PLN 25]

Via Housing Products PL Centre, etc

145

Product

Court case no.

No.

(vs. car manufacturer)

Snow Brand

Aiwaestemu, Minamiguchi Contruction et al. Mitsubishi Electrical

Honda

BMW et al.

Importer

Manufacturer

26/04/01 [PLN 38]

(07/09/01) [PLN 36]

26/1/99

(Settlemen: ¥7m) [PLN 25]

Judgment (or settlement) date [result]

.

.

42

First instance

109

First appeal

Related cases Second appeal

[Appendix C]

Source

155 [PL Law Case 25]

153 [PL Law Case 23] 154 [PL Law Case 24]

152 [PL Law Case 21]

N/A (filed 26/1/01)

Three family members drank canned vegetable juice after dinner, mouldlike extraneous matter in juice, caused diarrhoea for several days

Sendai DC (filed 1999) Metal hook from windshield cover stretched on rubber cord, pierced left eye, seriously injured eyeball N/A (filed 17/12/99) Captain brought on charges after maritime accident claimed isharyo for mental anguish, as engines ordered by manufacturer were found to be defective N/A (filed 21/3/00) Electric wheelchair ran out of control, crashing and killing user N/A (filed 10/8/00) Second suit relating to glass plate for school lunches, dropped when cleaning up in class room, shard injured pupil’s eye

152 [PL Law Case 20]

Product

Court case no.

No.

[Appendix C] [1754 Hanji]

[Appendix C]

[Appendix C]

[Appendix C]

Second appeal

(vs. importer [Korean-made product]) (vs. two tableware manufacturers, state [State Compensation Law]) (vs. canned juice manufacturing company)

First appeal

Source

[Appendix C]

28/4/01, judgment for ¥25.5m

(vs. windshield cover manufacturer)

First instance

Related cases

(vs. freighter manufacturer)

Judgment (or settlement) date [result]

Manufacturer

(vs. pipe manufacturer) (vs. restaurant owner)

Defective snow melting equipment

Snapper fish (raw sashimi and grilled) poisoned with bacteria infected 8 customers

2001 (wa) 12677, Tokyo DC

(vs. importer [from Italy])

N/A

Manufacturer

Sapporo DC

Sources: PLN and Appendix C.

158 [PL Law Case 2] 159 [PL Case 29]

Extraneous matter in cup of noodles, caused diarrhoea Botulism from olives, poisoned 12 customers, joined by restaurateur

N/A (filed 25/12/00)

156 [PL Law Case 26] 157 [PL Law Case 28]

Tokyo DC (filed 1999–2000)

Product

Court case no.

No.

13/12/02, judgment (approx. ¥10m in total)

28/02/01, judgment (approx. ¥10m in total) (19/11/99)

Judgment (or settlement) date [result] First instance

First appeal

Related cases Second appeal

[Appendix C] [1085 Hanji 15]

[Appendix C]

[Appendix C] [1068 Hanta 181]

[Appendix C]

Source

Appendix E PL ADR Centres

B Organization

[

[

[

[

10–4 Gasu Sekiyu Kiki Kaikan, Kandatacho 2–11, Chiyodaku, Tokyo 101– 0046 10–4

(03) 3255–6366; 3252–6106; (0120) 335–500

c/o Gasu Sekiyu Kiki Kogyokai (Shadan), and other Voluntary Associations

c/o Seihin Anzen (03) 3590–3421; Kyokai (specially 3590–5941; (0120) 115–457 approved under Product Safety Law 1972)

4. Gasu Sekiyu Kiki (Gas & Petroleum Appliances) PL Centre

5. Shohi Seikatsu Yo Seihin (Products for Consumer Living) PL Centre [including ‘SG’ certified products]

Kyodo Building (7F) Nihombashi Honmachi 1–5–9, Chuo-ku, Tokyo 103–0023

[

[

10–4 Toranomon 1-chome Mori Building (3F), Toranomon 1–19–5, Minato-ku, Tokyo 105–0001

(03) 3502–0282; 3502–0286; (0120) 028–222

Independent Zaidan, established by Nihon Jidosha Kogyo (Shadan)

3. Jidosha Seizobutsu Sekinin Sodan (Automobile PL Advice) Centre

[

[

[

9.30–5.30 [

(chotei)

(saitei)

(saitei)

(saitei)

(chotei)

H G Formal Intermediation mediation (assen)

Jochi Kioicho Saka Building (5F), Kioicho 6–26–3, Chiyoda-ku, Tokyo 102–0084

F Advice (sodan)

E Hours

D Address

10–4 Toranomon Yatsuka Building (3F), Atago 1–11–11, Minatoku Tokyo 105–8472

(03) 5211–0575; 5211–0593; (0120) 668–066

C Tel; fax; free dial number (prefix 0120)

2. Kaden Seihin c/o Kaden Seihin (03) 3503–3880; 3503–4044; (Home Electronic Kyokai (Zaidan) (0120) 551–110 Products) PL Centre

c/o Better Living 1. Jutaku Buhin (Zaidan) (Housing Products) PL Centre [including ‘BL’ certified products]

A Name

2263

3315

3627

3146

1350

I Total cases (as of end 3/97)

1/3/95

1/3/95

1/3/95

1/3/95

1/9195 (BUT established (1/9/94)

J Full-scale opening

METI

METI

METI

METI

MLIT

K Ministry for this area









L Website

[

[

[

9.30–4.30 [ Shinkasumigaseki Building (5F), Kasumigaseki 3–3–2, Chiyoda-ku, Tokyo 100 9.30–5.30 [ c/o Nihon Shobo Setsubi Anzen Senta, Nihon Shobo Kaikan, Toranomon 2–9–1, Minato-ku, Tokyo 105 [

(03) 3595–0488; 3595–0489; (0120) 876–532

(03) 3501–7912; 3501–7980; (0120) 553–119

Nihon Seiyaku Dantai Rengokai (Voluntary Association)

Nihon Bosai Setsubi Anzen Centre (Zaidan)

Zenkoku Seiinryo (03) 3814–9720; c/o Zengoku Seiryo 9–5 Inryo Kogyokai, 3813–9739; no Kogyokai free dial number Hongo 3–23–1, (Shadan) Bunkyo-ku, Tokyo 113

8. Iyakuhin (Medical Products) PL Centre

9. Bosai Seihin (Disaster Prevention Products) PL Centre [fire extinguishers, etc.]

10. Seikyo Inryo (Carbonated Beverages) PL Centre [now defunct]

10–4

[

7. Seikatsu Yohin Seikatsu Yohin (Daily Necessities) Fukko Centre (Zaidan) PL Centre

(saitei)

(chotei)

(chotei)

(saitei)

X

H G Formal Intermediation mediation (assen)

[

F Advice (sodan)

Iwasaki Dai-Ichi Building (4F) Nihonbashi Toyozaki-cho 8–4, Chuo-ku, Tokyo 103–0006

E Hours

(03) 3639–8881; 3639–8880; (0120) 090–671

D Address

[

C Tel; fax; free dial number (prefix 0120) 9.30–5.30 [ Tokyo Gerakubu Building (4F) Kasumigaseki 3–2–4, Chiyoda-ku, Tokyo 100–0013

B Organization

(03) 3580–1951; 6. Kagaku Seihin c/o Nihon Kagaku Kogyokai 3580–1953; PL Sodan (0120) 886–931 (Shadan) (Chemical Products PL Advice) Centre

A Name

3800

313

1993

1483

1998

I Total cases (as of end 3/97)

1/3/95

1/3/95

1/3/95

1/3/95

1/3/95

J Full-scale opening

MAFF

FDMA

MHLW

METI

METI

K Ministry for this area





L Website

(0120) 553–119

*14. Pureja Boto Seihin Sodan Shitsu (Pleasure Boat Products Advice Room)

Asano Building (6F), Ginza 2–5–1, Chuo-ku, Tokyo 104–0061

N/A

(saitei)

X

N/A

N/A

N/A

54

I Total cases (as of end 3/97)

N/A

1/7/95

1/7/95

1/3/95

J Full-scale opening

MLIT

METI

METI

METI

K Ministry for this area

L Website

Sources: Nottage and Kato 1999–2000, updated by: Minutes of the first Meeting of the Industrial Structure Council Consumer Economy Committee’s Subcommittee on Consumer Policy, 22 October 2002, available at ) ‘Omo na Seihinbetsu Saibangai Funso Shori Kikan [Main Product-Specific ADR Institutions]’ at http://www.fpmaj.gr.jp/PL/funsou.htm. * Limited scope/attention.

Nihon Shutei Kogyo (Shadan)

N/A

[

[

9–5

(03) 3829–2518; Komagata 4–22–4 Sumida-ku, Tokyo 3829–2549; no free dial number 130

Nihon Dangu *13. Dangu (Toys) PL Centre Kyokai (Shadan) [including ‘ST’ certified products] 9.30–5.30 N/A

[

[

9–5.15

(03) 5640–0902; c/o Nihon Kenzai Sangyo Kyokai, 5640 0905; no free dial number Nihonbashi MI Building, Horitome-cho 1–4–3, Nihonbashi, Chuoku, Tokyo 103

Nihon Kenzai *12. Kenzai PL Sangyo Kyokai Sodanshitsu (Construction Materials PL Advice Room) [now called ‘Interia [Interiors] PL Centre]

X

[

[

9–5

(03) 3502–0576; c/o Hatsumei Kaikan, Torano3502–0829; no free dial number mon 2–9–14, Minato-ku, Tokyo 105–0001

Nihon Keshohin Kogyo Rengokai (Shadan)

11. Nihon Keshohin Kogyokai PL Sodanshitsu (Japan Cosmetics Industry Association PL Advice Room)

H G Formal Intermediation mediation (assen)

F Advice (sodan)

D Address

E Hours

C Tel; fax; free dial number (prefix 0120)

B Organization

A Name

Notes

1 ‘Re-orienting’ Japan and its law 1 Nitta 2001; ‘Snow Brand to Shut Suspect Osaka Plant’, Mainichi Daily News [Online], 24 December 2000. In August, Labour Ministry officials had insisted that employees at the Osaka plant not be forced to work more than four hours overtime per day, as specified in a labour management agreement. ‘Snow Brand Burned Over Forced Overtime’, Mainichi Daily News [Online], 4 August 2000. 2 See Nottage 2000a; and PL Law Case No. 27, Appendix C. 3 ‘Recalling the Summer of Eating Dangerously’, Mainichi Daily News [Online], 27 August 2000. The same phrase was used in ‘Food Industry Cooks Its Goose’, Mainichi Daily News [Online], 20 August 2000. It is a play on words relating to the 1982 movie set in Indonesia, ‘The Year of Living Dangerously, starring Mel Gibson (who moved from the US to Sydney when he was 12: ). 4 ‘DaimlerChrysler Uses its Clout at Mitsubishi: German Carmaker Renegotiates Deal Amid Japanese Company’s Scandal’, International Herald Tribune, 9–10 September 2000, 9; ‘MMC President to Quit’, Mainichi Daily News, 27 August 2000. 5 D. Eisenberg, ‘Anatomy of a Recall’, Time (New York edn), 11 September 2000, 28. 6 See e.g. the website of the National Consumer Affairs Centre of Japan (NCAC, Kokumin Seikatsu Senta), at ; and a searchable online database at the Ministry of Transport (MoT) at . 7 ‘Ex-Snow Brand Execs Convicted Over Meat Scam’, Mainichi Daily News, 22 November 2002, ; ‘Mislabelling Scam Extends Beyond Mini-Tomatoes’, Mainichi Daily News, 17 February 2002, . 8 Cf. e.g. Ian O’Donnell, ‘Interpreting Crime Trends’, Irish Criminal Law Journal 12: 1, 10–16 (2002). In Japan, Gordon (2003: 324–5) notes that although recent killings by juveniles have attracted huge media attention, violent crimes by youths were greater in the 1950s and 1960s. On some other problems in assembling and interpreting crime statistics for Japan, see e.g. Finch 2000. See also briefly Pharr (2000), on burgeoning reports of corruption and other scandals involving politicians. 9 See e.g. Kinkibenren ed. 2001; ‘Consumer Lifestyle Products Recall Handbook’, released by the Ministry of External Trade and Industry (METI) on 5 September 2002 (available at ); and the Cabinet Office’s Quality of Life Policy (Consumer Policy) section on ‘Corporate Codes of Conduct’ (). 10 ‘Damages Limitation’, The Economist 353: 67 (1999).

256

Notes

11 ‘Japan’s Scales Begin to Tilt Towards Consumers’, Financial Times, 2 August 2002, 12. 12 Freeman 2000. Cf. e.g. Reich 1984b; Noble 2000a. 13 Japanese publications propounding theories of Japanese uniqueness (nihonjinron: Dale 1988) also surged during the 1960s and 1970s. Perhaps this was precisely because Japan was already being subjected to increasing globalization of its economy and foreign relations (cf. generally Morris-Suzuki 1998: 167). Not surprisingly, this literature is still quite popular (Befu 2001). 14 On following business interests, see e.g. Samuels 1986; Pempel 1986; Friedman 1988; Rosenbluth 1989; Callon 1995; Uriu 1996; Mito 1998; Yoshimatsu 2000; Schaede 2000. On following the LDP, see e.g. Curtis 1988; Muramatsu 1993; Ramseyer and Rosenbluth 1993. 15 According to its latest surveys (1998 and 2000) of around 700 residents in large cities in Japan, five other Asian countries, three European countries and the US, Japan had by far the lowest evaluation of politicians, and a significantly lower evaluation of administrative bodies, as well as slightly lower evaluations of higher educational institutions and large corporations in the financial sector (Dentsu Institute for Human Studies 2001: 3). 16 Richardson 1997; Broadbent 1998; Schwartz 1998; Gelb and Estevez-Abe 1998; Leblanc 1999; Lam 1999; Smith 2000; Johnson 2000. 17 See e.g. Tilton and Carlile 1998; Lincoln 1999; Vogel 2001; Boyer and Yamada 2000. Compare e.g. Schaede and Grimes 2002; Maswood et al. 2002. 18 See e.g. Tessa Morris-Suzuki 1994; Gordon 1998; Vanoverbeke 1998; Vlastos 1998; Sasaki-Uemura 2001. 19 Dentsu Institute for Human Studies 2001: 37–8. 20 See also Schultz 2001; Marshall 2002; Uga 2002. 21 However, the steady growth of the internet in Japan (Ibusuki and Nottage 2002) has also given rise to many new types of consumer transactions, complaints, and government responses (Matsumoto 2002). 22 Anderson 2001; Nottage 2001c; Taylor 2001. Other conference papers on this theme, and two other broad themes relating to Japanese law, are also collected in Tom Ginsburg et al. (2001), available from <www.capi.uvic.ca> or <www.law.usyd.edu.au/anjel/>. 23 Haley 1991. See also Nottage and Wollschlaeger 1996; Wollschlaeger 1997; and Upham 1998. 24 By the late 1990s, however, Upham (1996, 1998) appeared less certain whether the bureaucracy has been calling the shots, and how to appraise governmental responses to social problems especially once they have begun to emerge through the courts. 25 Cf. e.g. Micklitz 2002; Hesselink 2001; Nottage 2003a. 26 See e.g. ‘Consumer Policies in Japan, Fiscal Year 2001 Annual Report’, at . 27 By contrast, my doctoral dissertation (Nottage 2002) starts instead from a general theory – that the Japanese legal system and its contract law resembles the US in its orientation towards substantive reasoning (although not necessary the same political, ethical or other substantive reasons) compared to Anglo-New Zealand law. It then tries to fit in observations from comparative black-letter law and empirical research that are consistent with this hypothesis, and to justify discrepancies and develop new dimensions to the ‘form-substance’ dichotomy. While the end result may pass the lawyer’s muster ‘on the balance of probabilities’, and even ‘beyond a reasonable doubt’, it leaves open many questions and loose ends. Especially for those who prefer the view that exceptions prove the rule or are otherwise most interesting when making comparisons (Taylor 2001), building up a general theory from such aspects would also be a justifiable methodology. 28 E.g. Schwartz 1998; Richardson 1997; Broadbent 1998; Maclachlan 2002. 29 Such ‘bilateral’ comparisons are still useful. See e.g. the set of papers from a 1995 conference on ‘The Reception in Japan of the American Law and its Transformation

Notes

257

in the Fifty Years Since the End of World War II’, reproduced in Volume 26 of Law in Japan: An Annual (2000). They just leave too much out of the picture. Even a sketch of other dimensions seems better than leaving large parts of the canvas blank. Even more disappointing are theories developed by observers outside Japan, and applied to the latter without an explicit comparisons being drawn at all (e.g. Ramseyer and Rasmussen 2003). No matter how abstractly interesting the theory, its impact is lessened by ignoring or not explaining its provenance, and by not testing whether it works ‘at home’ or in third countries. 30 On the former, see e.g. Black 2001; Scott 2001; Ladeur 2002. On the latter, see e.g. Joerges et al. eds 1997; Edmond 2002; and Mercer forthcoming. 31 For this and other views on the pros and cons of moderation and balance, going back to the sixth century BC in various parts of the world, see Nottage 2001a: 37. 2 The still-birth and re-birth of product liability in Japan 1 A similar tendency, demonstrating even more conservatism in reform of contract law than in the US around this period, was evident in the law reform initiatives which generated New Zealand’s ‘Contract Statutes’ over the 1960s and 1970s (Nottage 2002: Part Two Introduction). 2 The emergence of strict liability in civil cases involving defective milk products, over the first half of the twentieth century, may also have been related to moves towards strict liability in criminal prosecutions in this area (see generally Wright and Huck 2002). 3 Moore and Viscusi 2001: 3–5; Galanter 1990; Cochran 2000; Robinson 2000. See further the Introduction to Chapter 4. 4 A recent illustration of the continued pressure to rein in PL litigation, and the complex political situation, comes from national security legislation enacted in late 2002 which extended a mandatory national compensation programme to cover ‘components or ingredients’ of any vaccines. Following belated protests that this overly benefited manufacturers of the Thimersal drug, an amendment of 13 February 2003 repealed these amendments (Chung and Casher 2003: 19–20). 5 Larroumet and Pillebout 2002 (discussing the judgment of the Tribunal de grande instance de Montpellier, 2e`me ch. B., 9 July 2002). Another major reason for the French government’s delay was the delicacy of the development risks defence issue in the context of political and legal wrangles resulting from contaminated blood scandals in the 1980s (Larroumet 2001b; see generally Steffen 1999). 6 Some claims appear to have been settled, after an English company which supplied a drug containing Thalidomide to an Australian distributor lost its application to prevent a victim proceeding with a claim against the English company in the New South Wales courts. See Distillers Co. (Biochemicals) Ltd. v. Laura Anne Thompson [1971] AC 458 (PC). Thanks to the formidable combination of David Harland and Ross Anderson for discovering this. 7 The body which has replaced the NCAAC (as well as the National Advisory Council on Consumer Affairs and the Australian Consumers’ Council) is the Commonwealth Consumer Affairs Advisory Council (CCAAC). The following is from the CCAAC’s Terms of Reference, kindly provided by Bev Schmidt in the Federal Treasury (personal communication, 18 March 2003) who assists as the Council’s secretariat: ‘The Council provides independent advice to the Parliamentary Secretary to the Treasurer, Senator the Honorable Ian Campbell. CCAAC is a non-statutory body appointed by the Minister. . . . Part of the responsibilities of the Parliamentary Secretary to the Treasurer is for the Consumer Affairs Division which forms part of the Treasury Department. CCAAC’s activities are supported by a Secretariat located in the Consumer Affairs Division. . . . The role of Council is to provide independent advice to the Minister for Financial Services and Regulation on current and emerging ‘cutting-edge’ consumer

258

8 9

10

11

Notes

issues. . . . CCAAC’s membership totals ten, including a Chair. All members serve as individuals rather than as representatives of organizations or interest groups, although members are selected on the basis of their appreciation of the range of consumer perspectives.’ The predecessor Councils were scattered over various government departments, making information difficult to manage; and all have advised the relevant minister, so papers are not generally published. However, the Australian Consumers’ Council (1993) issued a discussion paper on product safety, discussed in Chapter 5; and the CCAAC is currently finalizing a paper on ‘Principles for the Appointment of Consumer Representatives: A Process for Governments and Industry’. See the website of the HIH Royal Commission of Inquiry initiated in 2001, at , and e.g. Baxt 2002. See Pengilley 2000. Further, in British American Tobacco Australia Services Limited v. Cowell (as representing the estate of Rolah Ann McCabe, deceased) [2002] VSCA 197 (6 December 2002) the Supreme Court of Victoria’s Court of Appeal overturned the first instance judgment awarding damages against a global tobacco company, after striking out its substantive defence because of alleged irregularities in its ‘document retention policy’. The case was returned for trial on the merits. Ironically, just seven years prior to this, Travers (1995) had recommended the opposite solution: amending section 75AR of the TPA to ensure that rights conferred by Part VA supersede all rights in general tort law to recover compensation for loss caused by defective goods (and also to abolish the overlapping Part VA Div 2A). It also noted that (para. 5.45): The ACCC opposes any reduction of the level of consumer protection provided by the TPA. Its opposition is based on concepts such as the ‘economics of accidents’, ‘the optimal allocation of risk’, and ‘efficient management of risk’. The Panel accepts that these are valid considerations. But we do not view personal injury solely as a regulatory mechanism or risk-management tool. The Panel believes that, consistently with its Terms of Reference, other considerations need to be taken into account. These include the inherent value of personal autonomy, and the desirability of persons taking responsibility for their own actions and safety.

Further explaining the ACCC’s objections, see Griggs 2002. 12 ‘CC’ refers to the Civil Code; ‘SCL’ refers to the State Compensation Law (No. 125, 1947); ‘ADCIL’ refers to the Automobile Injuries Indemnification Law (No. 97, 1955). When more than one cause of action was alleged in a case, each is recorded separately, so the total number in the middle column exceeds the number of ‘typical PL case’ judgments (132). When claims were made against multiple defendants in the same proceedings, these are counted only once. ‘Quality assurance liability’ is a type of implied aclassical warranty allegation, which proved unpopular with Japanese courts (Kato et al. 1994: 132). 13 See e.g. the list of writing in Japanese on the subject collated in Kato ed. 1994: 1269–71. See also Niibori and Cosway 1967. 14 This summary of the first three of these cases draws primarily on Kitagawa 1989, Matsumoto 1997 (which reproduces many sections from Kitagawa, without attribution), Kato 1994, and Shoji and Sugai 1992. 15 See Kato 1994: 1201–2; and Shoji and Sugai 1992: 90–101. As Matsumoto observes (1997: 16), this was not the end of this tragic saga either. The settlement and the Foundation did not provide compensation for death caused by the defective products. Issues such as Morinaga’s negligence, causation, and liability of the state were also not addressed in the settlement. A further suit claiming civil liability was filed, but in 1985 the Takamatsu High Court eventually held in favour of Morinaga on the grounds of the statutory limitation period. Fifteen years later, Morinaga temporarily closed a

Notes

16 17 18

19

20 21

22 23

24

25 26 27 28

259

production line when 20 children fell ill after drinking its milk. See G. Nishiyama, ‘Japan’s Top Bakery Hit By New Food-Poisoning Scare’, Reuters, 17 July 2000. As of 1981, 309 had been certified as victims, but the actual number has been estimated as up to 1,000, and the number of deaths from this tragedy remains uncertain (Matsumoto 1997: 16–17). See Hamada et al. 1986: 89; Matsumoto 1997; Kato 1994: 1176–1205. See also ‘Diary of a Plaintiffs’ Attorney Team in the Thalidomide Litigation’, Law in Japan 8: 136 (1975). Matsumoto 1997: 17; Kato 1994: 1176-226; Hamada et al. 1986: 90; Goto 1991: 115–19. For the translated terms of the settlement, see Law in Japan 12: 19 (1979). In comparative perspective, see Fleming 1982: 303–4. For a plaintiff lawyer’s harrowing account of litigation against Takeda Pharmaceutical (involved also in SMON litigation) and Ono Pharmaceutical (Thalidomide) regarding blindness caused by a related drug sold over the 1960s, chloroquine, see Goto 1991. ‘Kaimei Sumazu, Koisho Nao [No Progress on Causes, Still Symptoms]’, Asahi Shimbun, 24 November 1998, 4. This chapter’s account of the litigation is derived primarily from Fujita and Kuze 1994: 643–95; Y. Kato 1989; and Reich 1982 (revised and updated in Reich 1991: 17–57). Its major brand name for detergents, soaps and so on, Kanebo, remains a household name in Japan. Disturbingly, more than three decades later, employees in a factory noticed that a 2.6 centimetre bolt was missing from a production line, but simply replaced it without even reporting the incident to the plant manager. Then, after a consumer later complained upon finding the bolt in a can of Bolognese sauce produced at the factory, the company covered this up for a month. See ‘Food Industry Cooks Its Goose’, Mainichi Daily News [Online], 20 August 2000. Rather similarly, Snow Brand reportedly recycled milk products returned after tainted products were put on the market in June 2000: Teruaki Ueno, ‘Japan Hit by New Food-Poisoning Scares’, Reuters, 15 July 2000. Freeman (2000) argues that Japan’s ‘press club’ system for political reporting forces journalists to lock-step and generally not engage in journalism which would upset the ruling elite, to a degree unparalleled even in the UK. However, the Asahi Shimbun played a very important role in raising environmental issues, especially from the late 1960s, and Reich (1984b) concludes that reporters developed symbiotic relationships with outsiders just as in the US. Since the 1990s, diversification of the media in Japan, especially television, is another important dimension to be considered (see generally Noble 2000a). This is similar to res ipsa locquitur doctrine in Anglo-American tort law, namely a rebuttable presumption that the defendant was negligent when the plaintiff shows that the causality of the accident was within the former’s exclusive control and that the accident is one that does not normally occur without negligence (see also Nottage and Kato 1999–2000: para 86–100; and Chapter 3). Cooter and Ginsburg (1996: 302–4) are therefore incorrect when characterizing Japanese courts as having retained a simple negligence test, leaving on plaintiffs the burden of proving negligence. Perhaps correcting this would significantly affect the results of their regression analysis of comparative judicial activism. Asahi Shimbun, 16 March 1987, 1. ‘Poisoning Victims Agree to Return Compensation’, Mainichi Daily News, 29 October 1996, 14. ‘Kanemi Yusho Hanrei Kari Shikkokin – Henkan Chotei, Nennai Shuketsu e [Provisional Execution Money in the Kanemi Oil Case: Repayment Conciliation, Towards Resolution Within Year-End]’, Asahi Shimbun, 24 November 1998, 24. See also Reich 1991: 194–200. Reich (1982: 133, note 48) adds that group consciousness may actually facilitate the move to litigation, citing the example of the

260

Notes

Isotsu villagers in the Yokkaichi air pollution case (see generally Gresser et al. 1981: 105–23). He notes however that it was important that they were assisted by the proximity of organizational and technical expertise in Yokkaichi city and nearby Nagoya University. Similarly, one reason for more ready rights assertion by groups, rather than individuals, is to resolve collective action problems. This helps explain why (more localized) environmental litigation remained more salient in the 1970s and 1980s, while product liability faded from view. By contrast, while Feldman (1997: 217) points out that in Japan ‘most often, rights are asserted on behalf of groups, once people with similar concerns are united’, he suggests that this is because compared to the US, ‘asserting the primacy of individual over collective interests must be done with caution, since the rhetoric about rights make clear the identification of such assertion with selfishness and arrogance’ (see also Feldman 2000: 163). The latter may also be true, to a degree, even today; but collective action incentives are an important factor. 29 The interrelationships between criminal and civil law in a PL context also deserve further study. See generally Cartwright 2001, Parry 2002. There is a tendency to see criminal law as substituting for civil liability (cf. e.g. Kondrat 2000, urging more criminal sanctions applied to harms to the environment), but it may be better to have them complementing and feeding off each other. 30 Perhaps it goes too far to term the latter ‘informal’, since in many cases the settlements involved Court-annexed conciliations under statutory provisions. See generally Wada 1997. Matsumoto (1997: 18) also observes of the four mass torts cases that ‘the effectiveness of settling disputes of this nature is often preconditioned on the filing of a law suit, or even on the court’s rendering a final judgment in favour of the plaintiff ’. However he does not indicate whether, at least in the latter case, this is a result of increased certainty making settlement more economical, or this is because of other advantages of dispute resolution which merges more with less formal normative processes. By contrast, Taft (2000) suggests that while individuals in the United States often may want an apology from alleged wrong-doers, in addition or even instead of monetary compensation, apology tends to be perverted by viewing or using it in instrumentalist terms (e.g. in mediation attempts). This may be related to apologizing potentially having a prejudicial effect, under United States law, should a dispute end up in court. This indicates the practical difficulty of achieving Wada’s vision of ongoing dispute ‘resolution’ merging informal with formal processes, in a symbiotic way. Nonetheless, the parallel pursuit of monetary compensation and reparation in the form of apologies and the like, deserves closer studies. Unfortunately, Sanders et al. (1998: 902) run these together as ‘restorative’ remedies. A more general problem with that comparative study was that vignettes, including one involving an automobile design defect and injuries, were presented to respondents in Tokyo in 1993, arguably a crucial juncture in the ‘rebirth’ of PL in Japan described later in this chapter. 31 Compensation, for instance, presents a peculiar dilemma in mass injury cases (cf. Fleming 1982). While each victim naturally wants full compensation, collectively this may bankrupt the tortfeasor(s), leading to toning claims down. Thus, victims can be forced into building up a long-term relationship with the source of their woes. As the four mass injury PL cases show, however, this need not mean litigation is precluded; indeed, litigation or re-litigation may provide the only or the best way to initiate or even maintain the necessary relationship. Thus, the following statement by Feldman (1997: 217), contrasting rights and rights rhetoric in Japan as opposed to the US, must be limited to particular categories of pre-existing relationships: ‘It is a bad strategy to start talking about rights, because the other party will recoil, the relationship will be severely damaged and the possibility of a fast or advantageous solution will vanish. Thus the public, aggressive assertion of rights is reserved for particular types of conflicts, generally those in which hopes of continuing a relationship between the parties have been abandoned and possibilities for informal agreement have been abandoned.’

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32 In 1995, the Social Democratic Party led coalition government reached a final settlement in litigation against the government still being pursued by some Minamata disease victims (George 2001: 269–71; Osiander 2001). 33 Such as management’s use of sokaiya in Chisso Co shareholders’ meetings, against those afflicted by Minamata disease (Chisso K.K. v. Goto, Osaka District Court, 28 March 1974, Hanrei Jiho 734: 20, translated in Yanagida et al. 1994: 499–504). 34 See e.g. Wallace 1995. This is certainly not to say that pollution is no longer a problem in Japan today; it is fuelled by the ‘construction state’ mentality and vested interests (MacCormack 2001). Suits over dioxin levels are only one instance showing the contrary: ‘Residents File Suit Against Waste Fuel Plant’, Japan Energy Scan, 14 September 1998; ‘Incinerators’ Foul Fumes Choke Prefectures’, Inter Press Service, 4 June 1998. But the root of that problem is primarily how to manage burgeoning quantities of waste, from private and public sources as well as industrial waste. Hence it represents a rather new environmental problem compared to the likes of Minamata and the other big pollution cases. Similarly, air pollution remains a serious problem in some areas, as evidenced by litigation in Kawasaki successfully concluded on 5 August 1998 (‘Young and Old Choke on Price of Development’, Mainichi Daily News, 26 August 1998, 2). Yet that case was also quite novel in involving claims for harm from more dispersed emissions, rather than contamination from particular factories. 35 This counter-trend may be related to the post-war judiciary’s lack of political independence, alleged particularly by Nakazoto and Ramseyer (1998: 17–20). Their statistical analyses, however, do not consider product liability cases, surely also ‘politically charged’. Further analysis should also differentiate between the periods before and after 1980. 36 In fact, only in early 1998 was the precise chain of causation determined. Another complex problem was whether or to what extent poisoning in the Minamata case could be passed on through the generations. Of course, this problem is also distressingly apparent in the case of victims poisoned by PCBs in the Kanemi case, as mentioned above (note 19). But it is less evident in other PL cases. Further, the PCB poisoning led to banning its production, and increasing concern nowadays about the potential effects of pre-existing stocks on the environment. Yet this too is rather unique to the Kanemi case. 37 The account in this section is adapted primarily from the fine study by Otake 1982, supplemented by the chronology in Kato ed. 1994, and further updated by some newspaper reports. 38 Otake 1982: 92–3. When Fuji Heavy Industry Co. Ltd. failed in 1998 to recall its Legacy model, MOT fines and then criminal prosecutions ensued. This showed again that the authorities were (perhaps increasingly) willing to pull manufacturers back in line when flagrant breaches become apparent or – more precisely – when they become public issues. Not heeding such warnings cost Mitsubishi Motors Corporation dearly in July 2000, as mentioned at the outset of Chapter 1. 39 ‘Ni Hikoku no Yuzai Kakutei [Two Defendants Guilty Verdicts Confirmed]’, Asahi Shimbun, 24 January 1987, 23. Matsuda and the remnants of the Union survived through to the 1990s. With typical hyperbole, Eberts and Eberts (1995: 89) dub him ‘Japan’s Ralph Nader’. 40 This section draws extensively on Kato 1994b; and the chronology in Kato ed. 1994. 41 For some rare media coverage, see Asahi Shimbun, 8 December 1976. There are parallels to the Commission’s unsuccessful attempts to promote a PL Directive over most of this period. 42 Further, on 12 January 1985 the Asahi Shimbun had claimed that Kanemi itself had siphoned off 3.5 billion yen to a newly formed company, while asserting financial difficulties. 43 This is also speculative, but it could become a consideration once it is clear that the ‘first-best’ option (no policy change) must give way (beefing up PL because ex ante

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safety regulations had to be liberalized). Cf. Yoshimatsu (2000), showing how contentious deregulation in Japan is promoted by the distinct interests of the larger export-driven Japanese companies (like automobile manufacturers), and Keidanren as their main peak organization. See e.g. Sarumida 1996: 84. By contrast, unnamed sources in the US Embassy in Tokyo reported to Maclachlan (2002: 272 note 18) that the Embassy, at least, did not express opinions regarding enactment of the PL Law to avoid Japanese resentment hampering the SII talks. Her sources also suggested that the Embassy was ambivalent about enactment because ‘some US businesses were complaining that the introduction of strict liability rules would constitute another nontariff barrier to imports’. The latter seems an odd view, given that PL Law enactment was widely promoted and eventually accepted as a substitute for rolling back regulations, which businesses and trade negotiators had long criticized as a more pervasively opaque barrier to trade. Omura 1998a. See also Nobuko Hiwasa, ‘We’re Making Progress: A Japanese Activist Says Consumers Are Gaining Ground’, Time Magazine, 25 September 2000 (Asia edition), 48. See e.g. PLN 1: 2 (1991). Confounding some sceptics, legislation applying to national government agencies was enacted in 1999, in effect from May 2001, after a government subcommittee was formed in 1995 (Kadomatsu 1999). This legislation was partly inspired precisely by problems in obtaining records in Big Four and other PL litigation, such as the SMON case (Schultz 2001: 132–3). Other groups have been less successful in evolving out of a lobby group for PL Law enactment (see e.g. Madge 1999). Cf. e.g. Gordon 1984; Dezalay and Garth 2001. In law as in politics, it is important to avoid ‘whiggism’ – ‘interpreting history backwards. After one knows the outcome, one re-reads history’ (Reed 1999: 190) – either in perceiving ‘progress’ towards a modern liberal democracy, or clever manipulation by elites (cf. Maclachlan 1999: 263).

3 Comparing the PL Law with other ‘strict liability’ regimes in Europe, Australia and the US 1 A good example has been the German Civil Code’s requirement that claims for pain and suffering (equivalent to isharyo under Japanese law or ‘general damages’ under Anglo-Australian tort law) are not permissible unless specifically permitted under legislation (Schulz and Halbgewachs 1993: 368). Because the EC Directive does cover such claims, German lawyers have had to bring them under the Code, reducing the incentive to argue – or at least focus on – the German legislation implementing the Directive. Even in that country, however, the situation is in flux. On 24 September 2001, the German cabinet approved a draft amendment to the Code allowing claims for pain and suffering following ‘infringement of the body, health, freedom or sexual self-determination of a person, if that infringement was precipitated deliberately or if the type and duration of the damage is not insubstantial’. The most important consequence anticipated was to allow pain and suffering claims ‘in laws relating to pharmaceuticals, product liability and environmental liability’ (Gruenes 2001: 13). However, on 16 April 2002 (with effect from 1 August 2002), the German Parliament did not insert this amendment because it considered that ‘courts will have the opportunity to make a decision in every case according to the individual circumstances’ (Brock 2002b: 16). 2 One semi-official translation of the PL Law is available at , on the Japanese government’s website for consumer affairs (with extensive other information, but overwhelmingly in Japanese), linked also to the Cabinet Office’s website (with other information in English also at ). This ‘tentative translation’ has been widely reproduced (e.g. in Kato ed. 1994; EPA 1994; Matsumoto 1997), but contains for

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example a significant error in Article 4(2). This book’s translation benefited from a translation with some commentary produced by participants in a seminar series run at Tokyo University Law Faculty by Professor Noboru Kashiwagi and Professor Gerald McAlinn (then at Aoyama Gakuin University, both now at Chuo University). Provisions of the TPA, as for all Australian legislation, are freely available through the Australasian Legal Information Institute at . The EC Directives on PL, and extensive information on other consumer protection initiatives, can be found on the European Commission’s Consumer Affairs website at . Unfortunately, the American Law Institute does not even make freely available the text of the sections from its Restatements. R 3d }19 Comment d: 270. The commentary adds here: ‘Courts have refused to impose liability in the absence of a showing by a plaintiff that either [. . .] X-rays or other forms of radiation treatment were defective or that the medical technicians acted negligently. These cases may reflect the courts’ traditional refusal to impose strict liability on providers of medical care’. In England, the Court of Appeal recently dismissed a claim framed in negligence for alleged radiation sickness caused by electro-magnetic field exposure while working on a radio mast (Davis & Docherty v. Balfour Kilpatrick [2002] EWCA Civ 736, 23 May 2002). The case attracted considerable commentary for the upholding of the trial Judge’s decision not to rule on what must have caused the plaintiffs’ symptoms, particularly in light of Article 8 of the European Convention of Human Rights now incorporated into English law (e.g. Van Ommen 2002). There appears to have been no discussion on whether and how such claims might be framed under the EC Directive strict liability regime. On 30 September 2002, the US District Court in Maryland granted the defendants’ motion to exclude testimony of the plaintiff ’s experts, trying to establish that mobile phone usage caused the plaintiff ’s brain cancer, because several published epidemiological studies were held to have found no scientifically reliable basis to conclude that the use of wireless handheld phones causes brain cancer (Newman et al. v. Motorola et al. 218 F Supp 2d 769). However, the Court did not mention the Restatement Third, or even what causes of action were involved. See especially Article 4 of the latter (translated at ). However, the only remedy is cancellation of the contract, leaving claims for damages to case law mostly applying the Civil Code (EPA 2000). Particularly in Australia, section 52 of the TPA imposes potentially broad liability and more expansive remedies for ‘misleading or deceptive conduct’ in trade (e.g. Kellam and O’Keefe 1996). In Japan, moreover, considerations of free speech are less important than the US, where they have been quite uniquely powerful (Krotoszynski 1998). For much more comprehensive treatment of many difficult issues, see e.g. Ishii and Harada 1996. In the EU, the Commission drafted a Directive on liability for services (OJ C 12 (January 1990) 8), but this remains to be finalized. In Japan, see e.g. Matsumoto 1999. For background information on circumstances through to the mid-1990s, see Leflar 1996. The Final Report of the government’s blue-ribbon Judicial Reform Council, dated 21 June 2001 (and translated on the Japanese Prime Minister’s website at ), noted delays and growing court congestion arising from medical misadventure suits. It recommended several measures to halve the delays in such cases involving specialized knowledge (Chap. II. Part 1. 2). PL Law Case No. 11 (in Appendix C), brought on 22 July 1999, involved a PL Law claim against the manufacturer of surgical thread which broke down causing blood loss and death. The plaintiff discontinued the suit on 27 January 2001, after settling the case against the hospital which had used the thread in operating on the plaintiff (Shimano 1999: 45–6). No doubt it was brought only

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under the Civil Code because the hospital in this case was not the ‘manufacturer’ (or importer) of the product as required in Article 2(3) of the PL Law. However, unlike in many US jurisdictions according to the Restatement, there is no reason why such a claim for a defective product used in a surgical procedure could not be brought against a hospital under the PL Law if it had been the ‘manufacturer’, provided the transaction could be considered analagous to supply of a product. See also the ‘snapper’ case (No. 29, Appendix C) discussed in the text below, where the defendant did not contend that the poisoned fish served was outside the scope of the PL Law because it constituted supply of a service, rather than a product. Hodges (2000a: 63) observes that Article 3 of the Directive does not make it clear whether the builder who incorporates defective materials into a building or structure will be liable in addition to their manufacturer(s), but that such liability is expressly provided for in section 46(3) of the Consumer Protection Act 1987 (‘CPA’, incorporating the Directive in the UK). The issue does not seem to be on the EU’s agenda for reforming the Directive, however (cf. e.g. Hodges 2000b: 127). For Australian law, compare e.g. Butt (2001). Cases dealing with the latter situation are few, however, and deal primarily with diseased pets. By contrast, ‘if the challenged condition or characteristic is inherent in the nature of the animal or is subject to change over time, such as friskiness or the tendency to bite, courts have refused to hold the suppliers of live animals strictly liable’ (RN Comment b: 275). Claims involving such beasts are not limited to ‘litigious Americans’. In 2000, there were media reports of a woman attacked by a wild monkey claiming against Mino City (near Osaka) when the monkey attacked her in the local authority’s park. See, respectively, the English High Court’s Hepatitis C case (just cited in the text), where the defendants had agreed that blood products were covered by the Directive and the CPA; Larroumet (2001b), although the provisions amending the Code Civil in 1998 further to the EC Directive were not directly applicable; and Stapleton (2002a: 1253), discussing a Dutch Court’s holding that HIV infected blood was defective but covered by the development risks defence. Further, in the ‘Danish kidney’ judgment referred to the ECJ (Case C–203/99, 2001 ECR I–3569) and discussed further in the text below, the defendant local authority operating the hospitals claimed against does not seem to have raised any objection along the lines that human organs were not ‘products’ under the Directive or Danish implementing legislation. In Australia, there is generally no liability for ‘abnormally sensitive plaintiffs’ in claims based on negligence, contractual warranty, and Division 2A of the TPA (Travers 1995: 1009–10). Accordingly, it should also be difficult to claim successfully under Part VA of the TPA. It might also be read in when interpreting the EC Directive, bolstered now by adoption of the EC Directive on Certain Aspects of the Sale of Consumer Goods and Associated Guarantees (1999/44/EC). Oughton and Willett (2002: 309–10) argue that distinctions between new and used products, and more generally price and quality, may be relevant in determining ‘the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect’, although they do not tie these distinctions specifically to ‘safety’ inherent in the concept of ‘quality’. More generally on the ‘pre-emption’ issue peculiar to US law, see e.g. Smith and Grage 2000. Compare e.g. PL Cases Nos. 3, 70 and 113 (Appendix D); British American Tobacco Australia Services Limited v. Cowell (as representing the estate of Rolah Ann McCabe, deceased) [2002] VSCA 197 (6 December 2002, Victoria Court of Appeal); and generally Tanase ed. 2000. Tellingly, the lawsuits in the US which resulted in a massive ‘national settlement’ by tobacco companies in 1998 were effectively unjust enrichment claims brought by states enacting or threatening legislation, arguing that they had expended

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billions of dollars on health care while the companies’ knowingly distributed addictively unsafe products without adequate warnings. However, on 14 July 2000, a court in Florida awarded US$145 billion in a class action involving 300,000–700,000 smokers (Pengilley 2000). Cochran (2000) also perceived more scope for succeeding in PL claims against cigarette manufacturers, and indeed alcoholic beverages as ‘the next step in hedonic product liability’. In contrast, Robinson (2000) suggests that PL Law does not provide a sound basis for imposing liability on manufacturers of handguns. Tobacco litigation in Europe still has had little success (see the special feature in European Product Liability Reporter 4 (2001): 15–19). This contributed to the European Parliament and Council adopting a Directive (2001/37/EC) expanding earlier directives governing the content and marketing of tobacco products. It was controversial because it has been justified primarily on public health grounds, with only ‘potential’ internal market benefits, and the ECJ was asked to rule on whether this provided adequate competence even under present EU law (Doherty 2002). Interestingly, the case arose from a reference from English High Court proceedings centring on British American Tobacco (Investments) Limited, but supported by Japan Tobacco. On 10 December 2002, the Court upheld the new Directive because it ‘genuinely had as its object the improvement of the conditions for the functioning of the internal market’, and there was ‘no bar that the protection of public health was a decisive factor in the choices involved in the harmonizing measures which it defines’ (Case C–491/01 para. 75). Another issue is whether the TPA should be interpreted to allow ‘extraterritorial’ claims thereunder against foreign manufacturers, in addition to importers. Dutson (1996) admits that a doctrinal analysis suggests not, but prefers a purposive approach allowing expansive application to prevent Part VA being undermined by manipulations of corporate structure and to be consistent with the view preferred for the EC Directive. Takaya (1999: 175) argues that the PL Law should also be applicable by Japanese courts faced by proceedings against foreign manufacturers. In most circumstances, however, it will be more practical to sue an importer. This judgment also illustrates the importance for the plaintiff of proving that the harm had been caused by the alleged defect. In rejecting the claim on this basis too, the Court relied on expert witness evidence that the plaintiff ’s cuts did not correspond to the contours of the pack’s opening, and that the manufacturer was unable to find such harm arising to others from the supply of over 100 million packs. Similarly, in Illustration 2 to section 2 of the Restatement Third (Comment c: 19), where it is posited that the defect in a bottle had arisen while under control of the retailer (even without its fault), the glass manufacturer and the bottler are said not to be liable. On the first point, the thrust of the defendant’s allegations (Appendix B para. 2.1) was that there was no significant injury or bleeding in her throat, and hence no damage. In particular, the written record of the second examining doctor could be interpreted as him having found only bleeding underneath the throat tissue, inconsistent with the plaintiff ’s allegation of a sensation of her throat having being punctured by some extraneous matter like a fragment of glass. Assisted by that doctor’s testimony, however, the Nagoya District Court seems to have interpreted the record as identifying a cut right through to underneath the tissue, from where bleeding had then ensued. On this point, it seems to have been important first that the Plaintiff went out from her workplace to the nearby McDonald’s outlet and carried her Double Cheeseburger Set (containing the juice) straight back, without stopping off on her way back or putting the goods down somewhere (Appendix B para. 3.1.1.2), so that no extraneous matter other than from the outlet could have got into the juice (para. 3.2(2)). The judgment does not record the timing involved, but presumably the Court had ample grounds to believe the Plaintiff ’s testimony in this regard. The Court may also have been influenced first by the fact that a straw was not inserted into the lid on the cup of juice, which might have allowed extraneous matter from other sources to get in. Another

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possibly related fact was that the cup and separate straw were put into a paper bag with its ends folded down, anyway, and this was then put into another plastic bag to be carried away (para. 3.1.1.2). These circumstances differ from those in a judgment rendered almost contemporaneously in favour of McDonald’s (allowing its motion for summary judgment) by the US District Court for the District of Columbia, on otherwise remarkably similar facts. In Odom v. Jebroa Enterprises (t/a McDonald’s Restaurant) 47 F Supp 2d 42 (1999), a cup of pink lemonade bought by the plaintiff had been carried back to his workplace with only a lid on ‘and a straw was inside’ (meaning, presumably, inserted through the lid). In addition, however, District Judge James Robertson stressed that this cup of juice was then left some distance from where the plaintiff resumed working, with his foreman also working in the vicinity, so that it was not within his exclusive control for almost two hours. It also can be noted that he resumed installing insulation on a roof over that period, presumably involving more risk of falling debris than walking down a street, as the case before the Nagoya District Court. The plaintiff in the latter case was also fortunate to have a workplace colleague also able to give testimony that the plaintiff felt an injury to her throat immediately upon drinking the orange juice, as well as the testimony of two independent physicians who examined her very promptly thereafter. (Similar circumstances are not spelt out in the US District Court case, although they may have been present there too.) Moreover, the Nagoya District Court preferred the plaintiff ’s testimony that she drank the juice only after finishing eating the double cheeseburger and fried potatoes (para. 3.2), despite the defendant contending that this would be ‘unnatural’ (para. 2.1). That pleading made it easier to pinpoint the juice as the only possible source of the extraneous matter which could have got into her throat. Otherwise, presumably, the plaintiff would have had to bring evidence as to the standard production process for hamburger and fried potato manufacturing in the outlet. (The plaintiff in the US District Court, of course, did not face this problem.) The plaintiff ’s pleading therefore seems rather ingenious, although it could well have been perfectly honest. A similar observation could also be made about her pleading, also accepted by the Court (para. 3.1.1.3) that the thing in her throat felt like a glass fragment (para. 2.2). How could she distinguish that sensation from that caused by a bit of metal, for instance, which would be more likely to be picked up by metal detectors at least at concentrate stage (para. 2.2), thus making it less likely that the defect lay in the juice? 20 Compare e.g. Kitagawa and Nottage 1999 with Hirazuka (2000: 3). The latter also remarks that the 19 lawyers engaged by McDonald’s for the appeal tried to suggest that the cause of the plaintiff ’s throat injury could have been the hot cheeseburger, quite easily rebutted because she had taken it back to her workplace on a cold winter’s day. 21 The Osaka District Court rejected the causes for the fire alleged by the defendant, but did not affirmatively and specifically establish the cause or the defect in the television set: ‘Ultimately, based also on all the evidence in this case, it must be said that it is unclear what sort of causal defect existed in the television set, and by what means it came to catch fire’. Nonetheless, the Court ruled that ‘the set must be seen as unreasonably dangerous because we hold that it started to emit smoke and flames while being used reasonably (including being left on ‘standby’ mode in which electricity passes through only part of the circuitry)’. Regarding the time at which the defect arose, the Court added that the television set ‘was produced only about eight months prior to catching fire, . . . during that period we cannot find that the plaintiff touched the internal structure of the set, nor that a third party repaired the set, so it can be presumed that the causal defect existed when the defendant put the set into circulation’ (Hanrei Taimuzu 842: 69). 22 In A. v. National Blood Authority [2001] 3 All ER 289 at para. 53(v), where the development risks defence under EC Directive Article 7(e) was rejected, the English High Court remarked that its wording was different from that of TPA section

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75AK(1)(c); but such differences do not really seem significant. But see Giblett (2003), discussing now Regal Pearl Pty. Ltd. v. Stewart [2002] NSWCA 291 (15 November 2002). Compare the Supreme Court Judgment of 27 November 2001 (3rd Petty Bench, Hanrei Jiho 1769: 53; noted by Hiroo Sono, Hogaku Semina 262: 144–5 (2002)). The Court held that an apartment purchaser’s claim for hidden defects (kashi tampo sekinin) under Civil Code Article 570 was time-barred because it was not brought within one year of becoming ‘aware of the facts’ in accordance with Article 566(3)), which the Court interpreted as meaning ‘taking delivery’ – even though the purchaser did not actually learn of the defects until 21 years after taking possession, and had brought suit during the year after that. However, the Supreme Court returned the case to the trial Court to determine whether asserting this time limitation was an ‘abuse of rights’ under Civil Code Article 1. Nottage and Kato 1999–2000: para. 85–780. This has been underpinned by efforts at standardization by judges facing a major social problem in resolving traffic accident disputes (see generally Foote 1995). For the UK, see e.g. Kemp 1999. See generally Mildred (2000: 41); and Schulz and Halbegewachs (1993: 368). However, on 24 April 2001, the Regional Court of Munich (19 O. 8647/00) awarded a total amounting to DM one million for pain and suffering when a married man was left almost paralysed and suffered brain damage in a traffic accident caused by the gross negligence of the defendant. The Court reportedly stressed that awards needed to ‘keep pace with the inflationary development of costs of living’, and that as German courts had been reluctant to grant awards of more than some DM 100,000, the (then still not final) judgment was ‘seen as a first move towards compensation amounts comparable to those in Anglo Saxon jurisdictions’ (Cordes 2001: 32). On the other hand, as mentioned above (note 1), the German Parliament decided in 2002 not to amend the Civil Code to allow for pain and suffering awards under legislation implementing the Directive. Section 16 provides more express guidance on the question of ‘increased harm due to product defect’. For example, section 16(a) states that where a ‘defect is a substantial factor in increasing the plaintiff ’s harm beyond that which would have resulted from other causes, the product seller is subject to liability for the increased harm’. English tort law is unclear in these sorts of situations, following the Court of Appeal’s decision by majority in Holtby v. Brigham & Cowan (Hull) Limited [2000] 3 All ER 41. See the cases cited above (note 14); XYZ & Others v. Schering Health Care Limited & Others (unreported, High Court (QB), 29 July 2002); and the judgment of the District Court of Frankfurt/Main (221 O. 54/01, 29 October 2001) rejecting a claim for deep vein thrombosis allegedly caused by long-distance flights (Brock 2002b). In 1994, the JFTC conducted a well-publicized survey to determine whether subcontractors were being squeezed by larger firms in conjunction with enactment of the PL Law. See (searching under ‘seizobutsu sekinin’). On the steady improvement in the JFTC role, even through to the mid-1990s, see Beeman 2002. Showing parallels with Germany, rather than the US (the country usually contrasted with Japan), see Haley 2001. These tendencies appear to have been accelerating over the 1990s. See e.g. Visser ‘t Hooft 2002. Interestingly, the new French legislation (which, like the PL Law, does not restrict coverage to ‘consumer goods’) prohibits limitation clauses except in the case of non-consumer goods (Civil Code Article 1386–15). See, respectively, e.g. A. v. National Blood Authority [2001] 3 All ER 289, XYZ v. Schering Health Care Limited (unreported, High Court (QB), 29 July 2002), Bogle v. McDonald’s Restaurants Limited [2002] EWHC 490; Graham Barclay Oysters Pty. Ltd. v. Ryan 117 ALR 18 (2000), Cook v. Pasminco Limited [2000] FCA 677; the ‘snapper’ and ‘olives botulism’ food poisoning cases (PL Law Cases Nos. 28 and 29, Appendix C). Exceptionally, Taiwan’s Consumer Protection Law, enacted on 13 January 1994 and containing product liability provisions in Sub-chapter One, provides that: ‘consumers

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may lodge complaints directly with the business operators, consumer protection groups, or the local government’s consumer service centre. Business operators are given 15 days to ‘properly handle’ consumer disputes. If a complaint is not properly addressed, a consumer may complain to a consumer protection official of the local government. If neither of these two complaints is properly addressed, the consumer may petition for mediation by a Consumer Dispute Mediation Commission to be established by each local government’. Juang (1997: 235–7) criticizes these provisions as unclear, however, along with the transparency of the accreditation process for consumer protection groups which (if qualified) can bring a class action suit on behalf of 20 or more consumers. 4 The PL Law in action 1 The nine involved contamination of a municipal water supply (in which the Water Authority conceded liability under the strict liability Water Acts anyway: see now A.B. v. S.W. Water Servs. Ltd., 1993 QB 507 (C.A. 1992); synthetic insulin; yoghurt containing hazelnut puree; design of an aluminium ladder; manufacturers of a crashed aircraft and some of its components; salmonella from a sandwich bar; more from an airport restaurant; a caustic oven cleaner; and broken surgical scissors. Anecdotal reports were of claims relating to pacemakers, dissolvable stitches and a speculum, injection of a pharmaceutical, two more cases of salmonella poisoning, occasional injuries from exploding bottles, and small claims for damage to personal property caused by defective household electrical appliances (Mildred 1996: 51–55). 2 Many are helpfully appended in Stapleton 2002a. See also some other cases discussed in Chapter 3. A major study on the current impact of the EC Directive at various levels is being completed in 2003 by the UK-based law firm, Lovells, for the European Commission. 3 Moore and Viscusi (2001: 10–13) acknowledge, but mostly contest, four hypotheses: (i) insurers competing for new policyholders by lowering premiums below loss levels, (ii) collusion among insurers to raise premiums, (iii) sensitivity to greater riskiness of products, and (iv) risk-averse insurers setting premiums higher than actuarially justified to cover some unforeseen contingency (e.g. asbestos). They also observe that aggregate liability insurance premiums have declined in real terms between 1988 and 1998, and that they returned to their pre-‘crisis’ levels as a percentage of all insurance premiums. 4 See, for example, No. 1 (in particular), and Nos. 3, 11, 15 and 16. On the alleged entrenchment of ‘pre-modern’ preference for harmony over individual rights assertion in more rural areas, see e.g. Kawashima 1963. 5 Although the club was delivered before 1 July 1995, so the PL Law was not directly applicable, the Court apparently accepted that if a ‘defect’ could be established (in terms of Article 2) then negligence under the Civil Code could be inferred. The Court then ruled that Mizuno, the golf club manufacturer, was liable under the Code; but not for the loss alleged, arguing that the fear experienced by the plaintiff after the head broke off was not yet a legal interest protected under Japanese tort law. It will be interesting to see if this cautious approach is extended to the ‘sea captain’ PL Law case, No. 21 in Appendix C. 6 Only the year, not date, of filing is available for reported judgments in Cases No. 20 (‘car mask’, filed 1999, so it must have taken at least 16 but no more than 28 months), No. 28 (‘botulism from olives’, filed 1999–2000, so 14–26 months), and 29 (‘snapper’ fish poisoning, 2001, 12–23 months). 7 See generally Ramseyer and Nakazoto 1988, 1989. A drop-off in PL Law cases filed would also be consistent with a clear retrenchment in case law, towards favouring defendants; or even simply greater clarity in substantive law, favouring neither plaintiffs nor defendants. Neither seems plausible, at least in cases of allegedly defective foodstuffs.

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8 For example, Kigawa (2000: 4) berated the Osaka High Court for not giving weight to the plaintiff ’s expert evidence, in upholding a successful defence by Mitsubishi Electric regarding an allegedly defective television, asserting that it ‘showed the low level of Japanese “culture” in examining and deciding on technical issues’. (The judgment was delivered on 1 August 2000, shortly before Mitsubishi announced a large-scale recall of various television models.) However, in another short article published four months beforehand, Mioka (2000) had applauded a judgment finding a servicer liable for engine leaks, without insisting on expert evidence. Like all arguments bringing in ‘culture’, therefore, we need more than anecdotes. 9 See generally Irene Kunii, ‘Stand Up and Fight’, Business Week, 11 September 2000, 54. 10 See ‘Consumer Policies in Japan, Fiscal Year 2001 Annual Report’ at . For an outline in English, see ‘SG System’, at . In Japanese, more details are available on the website of the Association, and at METI’s website at . 11 See, e.g. ‘7.1 Sodan Uketsuke Kensu [7.1 Numbers of Cases Received]’, available at ; ‘Heisei 12-nendo Kaden Seihin PL Senta Nendo Matome [Annual Summary for the Electrical Appliances PL Centre, Fiscal 2000]’, available at . 12 See e.g. PLN 1: 1 (1991), PLN 8: 1 (1993), PLN 15: 1 (1995), PLN 17: 1 (1995); Nichibenren ed. 1995. 13 By contrast, only three ‘quality’ claims were resolved in this way; 65 were resolved by informal intermediation or what the Centre describes as ‘direct negotiations’ involving ‘helping consumers to order their assertions, then advising consumers and getting their consent to contact manufacturers, encouraging direct negotiations to record a resolution of the matter’. See Heisei 12-nendo Kaden Seihin PL Senta Nendo Matome [Annual Summary for the Electrical Appliances PL Centre, Fiscal 2000], available at , at (4). 14 See, respectively, Tollemache 1996 (and generally McDermott and Skinnon 1999: 474–7), and James 1999; Last and Nijgh 1999; Mendes Cabecadas 1999; Landrum 2000; and . 15 Several Centres have published surveys, generally recording high levels of satisfactions also from consumers. See e.g. ‘Heisei 12-nendo Kaden Seihin PL Senta Nendo Matome [Annual Summary for the Electrical Appliances PL Centre, Fiscal 2000]’, available at at (6). However, these surveys appear to be based on users whose cases have been completed, who will tend be more satisfied than those who move on to complaining in another forum. 16 See the minutes of the meetings of the Industrial Structure Council Committee and Subcommittee available through , and of the Social Policy Council at , together with Nippon Keidanren initiatives (e.g. at ). Incidentally, the Japan Business Federation was created in May 2002 by merging Keidanren (Japan Federation of Economic Organizations) and Nikkeiren (Japan Federation of Employers’ Associations). In 2002 its membership comprised 1,232 companies including 71 foreign owned companies, 127 industrial associations, and 47 regional employers’ associations (as of 18 June 2002). 17 See ‘Seizobutsu Sekininho ga Shoshisha oyobi Jigyo ni Oyobashita Eikyo [The Influence Exerted on Consumers and Firms by the PL Law]’, Appendix 2 at . These final results are from EPA 1997, reproduced in Kato 1999. See also EPA 1998. 18 See ‘Seizobutsu Sekininho Shiko 6-nenme no Seihin Anzen Jiko ni kakawaru Kujo Sodan no Doko ni tsuite [On Trends in Complaint Discussions Relating to Product Safety Accidents in the

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Sixth Year of the PL Law Coming Into Effect]’, available at . On shifts in Japan’s regulatory framework since the mid-1990s, see generally e.g. Kadomatsu 1999 and Uga 2002. For an overview of the NCAC’s work, see ‘NCAC – Gyomu Annai [Introduction to Activities]’, . On the changes to the Committee structure and other aspects of local government consumer law in Tokyo, resulting for example in four cases being resolved in 2001 (compared to only 24 since 1976) within 6.5 months on average (instead of 9.3 months), see Appendix 2 to the Minutes of the 21 November 2002 meeting of the Industrial Structure Council Consumer Economy Committee’s Consumer Policy Subcommittee, at . On positive and negative developments in central government funding recently, see e.g. ‘Consumer Policies in Japan, Fiscal Year 2001 Annual Report’ at . In the 1990 survey, only 547 responses were received from 2,682 corporations (20.4 per cent). The increase in corporations surveyed, and the improved response rate, already indicate a heightened interest generally in corporate legal affairs in the first half of the 1990s. This interest was largely maintained in the 2000 survey (Keieihoyukai et al. eds 2001). It was sent to 5,077 corporations; 1,183 (23.8 per cent) responded. Cf. Kono 1997: 73 (asserting that the results of a 1990 survey ‘apply mainly to major Japanese corporations’). Note also that the Commercial Code was amended in 1990 to increase minimal required capital in stock corporations (kabushiki gaisha) to 10 million yen, and to 3 million yen in limited liability (close) corporations (yugen gaisha). This may contribute to the low number (49) of very small respondents in the 1995 Survey. To set this in more context, 43.2 per cent responded ‘shareholder derivative suits’, a major challenge to corporate governance and affairs in Japan over the 1990s (see e.g. Kawashima and Sakurai 1997); 44.3 per cent responded ‘abiding by antitrust law’ (see generally e.g. Beeman 2002); 27.3 per cent responded ‘securing a risk management system’; 9.9 per cent responded ‘restructuring’, implying labour issues (see e.g. Foote 1996); and 7.4 per cent responded pollution and environmental issues (see e.g. Kawashima 1995). Rankings were generally similar in the 2000 survey, although the percentages varied, partly because of more choices offered. Asahi Shimbun, 24 November 1997; Japan Times, 25 December 1997. Mori 1996: 19. However, one director of a major Japanese insurance company reportedly estimated that about 40 per cent of large companies took out PL insurance, but only about 10 per cent of small- to medium-sized firms did so (Yomiuri Shimbun, 20 February 1997). After a predictable flurry of writing on practical and legal issues arising from this form of liability insurance, relatively little has been published on what has happened to the PL insurance market in Japan. Another 10.8 per cent could not say either way whether consumer consciousness had changed, and 11.5 per cent thought that it had not changed much. See ‘Seizobutsu Sekininho ga Shoshisha oyobi Jigyo ni Oyobashita Eikyo [The Influence Exerted on Consumers and Firms by the PL Law]’, Appendix 2 at . See e.g. the recalls now prominently displayed (in Japanese) by the NCAC, at ; the National Institute of Technology and Evaluation, at ; and the Ministry of Land, Infrastructure and Transport, at . See also generally Aya Furuta, ‘Crisis-Management Failures Send Firms Back to School’, The Nikkei Weekly, 11 September 2000. This article also mentions that insurers have been developing new packages particularly for food companies, extending coverage to costs of recalls, publicity efforts, and loss of earnings. This is fairly explicit, for example, in the Consumer Contracts Law (No. 61, 2000). Article 10 basically just restates the general Civil Code principle that parties must act

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in good faith. But including this in legislation containing other rules directed specifically at consumer contracts is expected to encourage judges to apply principles of good faith beyond the usual circumstances (notably, for example, in claims involving smaller versus larger firms: Taylor 1993). 5 The future of PL in Japan: reformulation, reform and re-regulation 1 ‘Paranoia Over Labels Leads to Rampant Recalls of Food’, Asahi Shimbun [Online], 6 May 2003. 2 By contrast, the exhaustive ‘Restatement’ of PL case law under the Civil Code by Kato et al. (1994) was produced solely by academics. One former judge has produced another compendium extending to PL Law rules (Masuda 1997). There appears to be considerable scope for more structured collaboration amongst different jurists. 3 An earlier example of seemingly quite effective interaction between PL Law and product safety regulation, albeit still quite opaque, is presented by konnyaku jelly snacks in the late 1990s. See Nottage 2000b: 228–34. 4 ‘Shikku Hausu – Kenzai ni Shiyo Seigen [Sick Houses: Restrictions on Use of Building Products]’. Nihon Keizai Shimbun, 7 February 2002. 5 See e.g. Kokumin Seikatsu Senta, ‘Oritatami Jitensha no Anzensei [The Safety of Folding Bicycles]’ (Report dated 9 May 2002, at ). 6 In a discussion paper published in May 2000, the Australian Federal Treasury proposed enactment of a general safety provision, along the lines of the EC Safety Directive, or even New Zealand’s Consumer Guarantees Act 1993 (albeit designed primarily as a private law regime). See Department of the Treasury, ‘Product Safety: Policy Review’ (Canberra, May 2000) paras. 4.4 and 5.5. Nothing appears to have happened since, despite the winding back of tort law remedies outlined in Chapter 2. 7 As Fisher (2000) points out, perceptions of lawyers or regulators about the objectivity of science may be overstated. Nonetheless, there are significant differences which create difficulties for the legal world (see e.g. Joerges 2001; King 2002). 8 See generally Cartwright 2001; Parry 2002. Little academic work has yet been published on how best to marry criminal law with product safety regulation in Japan. On some overlapping issues relating to enforcement of environmental controls, see e.g. Kondrat 2000. Appendix B: Annotated translation of PL Law Case No. 10 (‘McDonald’s Orange Juice’) 1 See the Code of Civil Procedure as amended in 1996 (Law No. 109: ‘New CCP’) Article 251 ‘(Date for Rendering Judgment) The Judgment must be rendered within 2 months of the date of completion of oral proceedings’. This differs from the Article 190 of the original Code (Law No. 29 of 1890: ‘Old CCP’), which required judgment within 2 weeks; but that period was often not complied with, since no effective sanction was provided (Hattori and Henderson 1983–5: }7.06[4]). These translations of statutory provisions, and this entire judgment with translations, are mine (updated from Kitagawa and Nottage 1999). 2 The claim was initially filed in the Nagoya Summary Court on 15 May 1998, but on the former’s initiative it was transferred to the District Court in mid-June 1998 (Hirazuka 2000). The Summary Court generally has jurisdiction over claims up to 900,000 Yen (see Court Law, No. 29 of 1890, Article 33(1)(i)), but has discretion to transfer the case to the relevant District Court: see New CCP Article 18 ‘(Summary Court’s Discretionary Transfer). Even when the suit lies within its jurisdiction, upon motion or at its own initiative and if it finds it appropriate, the Summary Court may transfer part or all of the suit to the District Court having jurisdiction over the place in

272

3

4

5

6

7

8

Notes

which the Summary Court is located’ (substantively identical to the Old CCP Article 31–2, on which see Hattori and Henderson 1983–5: }4.06[4][b]; see also }4.04[2]). Special procedures for the Summary Court are set out in New CCP Articles 270–280 (similar to Old CCP Articles 352–359). Additional procedures for small claims of up to 300,000 Yen in the Summary Court, much more user-friendly, are a new feature in New CCP Articles 368–381. Civil Code Article 419 (‘The amount of compensation for damages due to nonperformance of a money obligation shall be determined by the legal rate of interest . . .’), Article 404 (‘Absent contrary agreement, for a claim bearing interest the rate of interest shall be 4 per cent per annum’). As explained in Chapter 4 of this book, the latter rate is much higher than current interest rates in Japan, which are close to zero, encouraging more claims to be brought to court or settled more quickly. As explained further in Chapter 4, Japanese law generally follows the ‘American rule’, and does not allow the winning party to claim its lawyers’ fees. However, an exception has long been recognized for victims injured by tortious acts who are thereby obliged to engage a lawyer and instigate proceedings to protect their interests; if successful, they can claim reasonable fees. See Hattori and Henderson 1983–5: }10.01. This also can encourage personal injury claims. This establishes the jurisdiction of the Nagoya District Court in this case, under New CCP Article 5(1) (a proprietary claim, i.e. one not involving monetary value, can be brought in the place of performance of the obligation; see also the substantively identical to the Old CCP Article 5, on which see Hattori and Henderson 1983–5: }4.05[4][a]). This principle was borrowed from German law by Japanese scholars and courts to establish the scope of damages awarded for breach of an obligation. This was despite the rule laid down in Civil Code Article 416, allowing for compensation for (1) ‘damages as would ordinarily arise from the non-performance of an obligation’, and (2) ‘damages which have arisen from special circumstances if the parties had foreseen or could have foreseen them’. (Common lawyers will recognize this as a restatement of Hadley v. Baxendale (1854) 9 Exch. 341, extended to breach of obligations in tort as well as contract; but in fact the latter drew on French law (see Smith 1992: 523). Nowadays, many Courts use wording like ‘adequate causation’, but define the scope of damages in the light of Article 416 (see Uchida 1997: 149–51). New CCP Article 61 ‘(General Principle in Apportioning Litigation Costs) The losing party shall bear litigation costs’; New CCP Article 64 (‘Apportionment When Partial Success). At its discretion, the Court shall apportion the litigation costs of each party, in a case in which there has been partial success. However, in some circumstances, it can apportion all litigation costs to one party’. These provisions are substantively identical to the old CCP Articles 89 and 92. On the latter, see Hattori and Henderson 1983–5: }10.01 (in allocating litigation expenses, the losing party’s justification for initiating or opposing the action is not considered; this might constitute an actionable tort), and }10.03 (in so doing, the Court takes into account not only the quantitative and qualitative proportion of each party’s claims affirmed or rejected; but also other factors such as the general principles mentioned under }10.01, or under }10.02, e.g. precipitous initiation of litigation or inadequately presented preparatory writings (Old CCP Article 90, substantively identical to New CCP Article 62) or delays (Old Article 91, substantively identical to New CCP Article 63)). New Article 259 ‘(Declaring Provisional Execution). On motion by the parties or at the Court’s own initiative, and with or without requiring security, if it finds it necessary the Court may declare open to provisional execution a judgment on a proprietary claim’. This is substantively identical to Old CCP Article. 196, on which see Hattori and Henderson 1983–5: }7.06[9] (this is to prevent a defendant concealing assets or bringing an unfounded appeal to delay execution; prerequisites are that (1) the judgment is on a proprietary claim, as opposed to one not involving monetary value,

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and (2) the needs of the plaintiff and possible injury to the defendant justify this holding, duly considering the possibility of reversal; in practice under the old CCP, provisional execution had been the rule rather than the exception). While it is too early to say whether the latter trend will prevail under the new CCP, by not declaring its judgment to be open to provisional execution in this case, the Nagoya District Court might have signalled that it was not totally confident about its judgment. On the other hand, although McDonald’s appealed, it settled the case for Yen 300,000 on 10 May 2000 (Hirazuka 2000). 9 A single judge usually hears cases decided by a District Court, but a three-judge collegiate court is required in exceptional cases such as appeals from Summary Courts or where a collegiate court rules that they should be so decided (Court Law Article 26). Only a small minority of cases come before a collegiate court under the latter route, usually when a single judge requests a division to make such a ruling in a difficult or complicated case (see Hattori and Henderson 1983–5: }3.01[3]). Much more unusual was that Judge Noda was one of the few still in Japan which have been allowed to join the Bench from the ranks of practising lawyers (bengoshi: see Hirazuka 2000).

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Index

administrative law 4–5, 13, 55; official information disclosure 5, 11, 17, 65, 149–51, 191, 208; State Compensation Law 38, 258n12 agricultural products 31–2, 71, 85–8, 153, 208; Agricultural Standards Law 3, 202 (see also ‘mad cow’ disease) allergic or abnormally sensitive defendants 91, 99, 264n11 alternative dispute resolution (ADR) 15–17, 20–1, 30, 143, 146, 150–1, 154, 158, 160, 164, 174, 176, 178–82, 184–9, 191, 198–9, 200–1, 205, 209; apology 51, 260n30; ‘dispute resolution pyramid’ 20, 158, 199; mediation 49, 54, 159–60, 177–8, 180, 183, 183–5 (Table 4.6); PL ADR Centres 16–17, 20, 150, 158, 160, 174–88, 180, 185–8, 191, 198–9, 201, 205, 109, 253–7; settlements 17, 46–8, 51, 57, 62, 136, 149, 157–8, 160, 166, 168–9, 170–4, 199, 201, 205, 207, 260n30 American Law Institute (ALI) 17, 24, 26, 75, 207 asbestos 140 Australian Competition and Consumer Commission (ACCC) 33, 91, 93, 108, 129, 138, 151, 258n11 Automobiles 1–3, 37, 39, 56–9, 60, 64, 69, 157, 161, 172–3, 177, 181–2, 187, 202–3, 260n30, 262n43; Automobile Injuries Indemnification Law (AIIL) 58–9, 258n12; Daihatsu 2; Fuji Heavy Industries 261n38; Honda 56–8; Mitsubishi 2–3, 6, 115, 172–3, 255n4, 261n38; Nissan 56–8; Suzuki 57; Toyota 56, 58 (see also Ministries in Japan (Transport; MOT)) and Users’ Union)

Bar Associations and their Federation (Nichibenren) 65, 165, 170, 180, 183, 199, 206–7; ‘Big Four’ 96, 135, 147, 169, 175, 204, 210; environmental pollution cases 39, 52–3, 55, 141, 205, 260n28; PL cases 36, 38, 40–56, 59, 61, 68–9, 72, 96, 135, 138, 144, 147, 149, 157, 160, 168–70, 137, 175, 195, 204 blood products 51, 88–90, 97–8, 86, 100, 104, 109, 118, 128, 136, 172, 257n5, 264n10, 266n22 ‘botulism in olives’ case (App. C No. 28) 111–12, 267n30, 268n6 ‘breast implants’ case (County Court) 117–18 Bridgestone (and Firestone) 2 BSE see ‘mad cow’ disease burden of proof 27, 31–2, 44, 58, 72, 74, 79, 111–19, 127, 146, 153, 173, 206–7, 259n24 bureaucracy in Japan 7, 11–12, 17, 43, 150, 256n24; ‘bureaucratic informalism’ 16, 20, 39, 53–4, 59, 177–9, 185, 205, 256n24 (see also administrative law and Economic Planning Agency and Ministries in Japan) bystanders 23, 25, 27, 33, 58 ‘car mask’ case (App. C No. 20) 95, 162–3, 167–8, 268n6 causation 4, 31, 33, 35, 42, 50, 54–5, 61, 66, 77, 88, 117, 133, 138–9, 140–1, 146, 167, 173, 272n6 ‘caustic soda’ case 91, 93–4, 108, 129, 138–9, 151 Civil Code (generally) 15, 40, 36, 38 (Table 2.2) (see also PL regimes (other principles and regimes))

Index civil justice system in Japan: Judicial Reform Council 15, 137, 145–51, 153, 158, 160, 164, 166, 169–70, 186, 200, 203, 205, 207; juries 27, 38, 42, 45, 53, 58–9, 65, 73, 78, 93, 121–2, 125, 128, 135–6, 138, 140, 142, 144–6, 148, 152, 263n7; legal aid 41, 165 (see also civil procedure) civil procedure or CCP 4, 15, 17, 20, 116, 119, 138, 145–9, 151, 166–7, 173, 179, 186, 208, 273–5; delays 1, 12, 16, 22, 50, 135, 165–7, 169, 174, 191, 200, 263n7, 272n7; discovery and experts 146–9, 207, 263n3, 265n16, 269n8; execution 46, 272n8; lawyers’ fees 163–5, 272n4 civil society 8, 17–18; citizens’ movements (shimin undo) 53; Non-Profit Organizations Law 8; social problems (shakai mondai) 4, 12, 39 class actions 147–8, 179, 265n14, 268n31 (see also Bar Associations and their Federation (‘Big Four’ and PL cases)) collective action 19, 39, 53, 58, 68–9, 167, 204, 260n28 comparative law 16, 18–19, 21, 72, 75, 203, 256n29; black-letter law or ‘law in books’ 19, 21, 71–145 (Table 3.3), 203, 212; context or ‘law in action’ 22, 72–76 (Table 3.2), 145–51, 154, 203; ‘legal transplants’ 19, 69 competition law 14–15, 141; JFTC 142, 267n28 ‘condom’ case (QB) 112–17 consolation money (mimaikin) 40, 46, 168 consumer law 4–5, 14–16, 22, 27, 30, 39, 154, 203, 211, 270n19; Consumer Contract Law 14, 270n27; Consumer Protection Basic Law 10, 14, 16, 22; Instalment Sales Law 14, 22 Consumer Protection Act (CPA) 29, 33, 83, 94, 103, 120–1, 127, 154 consumerism in Japan (generally) 6, 8–11, 16, 20, 257n7; ‘consumer informalism’ 179–80, 185; Consumer Lifestyle Centres (CLCs) 11, 21–2, 54, 62, 97, 150, 178, 181–2, 189–91, 196, 199, 201, 205, 209; consumer reactions to PL Law 189–91; Kansai Liaison Committee 65, 165, 169–70, 191; Kokumin Seikatsu Senta (NCAC) 189–91, 255n6; Nader, R. 56, 65, 261n39; Shufuren (Housewives’ Federation) 173 contract law 4, 13–15, 22–5, 27, 29, 32–3, 36, 40, 72, 120, 143, 211, 256n27, 257n1, 270n27; ‘aclassical warranty’

305

24, 33, 36, 38 (Table 2.2), 258n12; privity 36 (see also disclaimers, exclusions or limitations of liability) corporate law or governance 4, 22, 142, 192, 192–4, 255n9, 265n15, 270n20, 270n22 criminal law and prosecutions 2, 5, 57, 211, 255n8, 260n29, 271n8 ‘Danish kidney’ case (ECJ) 29, 30–1, 70, 75, 79, 83, 92, 106, 108–9, 117, 121–2, 127, 129, 144–5, 151, 264n10 defects 90–105, 111–18; ‘consumer expectations’ 17, 20, 22, 26, 99–101, 211; design defects 25, 89, 98–101, 118, 168, 195, 200; manufacturing defects 25, 27, 33, 36, 38, 55, 58, 80, 89, 98, 100–1, 168; ‘obvious’ risk or danger 99, 103; proving specific defects 113–18; warning, information or instructions defects 76, 80, 82–84, 90–4, 97–9, 100–4, 116–18, 129–30, 133, 138–9, 149, 151, 195–6 deliberative councils (generally) 66, 188, 211, 269n16; Legal Deliberative Council 61, 67, 207; Social Policy Council 61, 66–7, 178, 188 (see also civil justice system in Japan ( Judicial Reform Council)) delivery (of defective goods) 111–13 deregulation 6, 8–9, 10–11, 13–15, 17, 22, 67, 262n43; General Agreement on Tariffs and Trade (GATT) 63, 204; Structural Impediments Initiative (SII) 62–3; World Trade Organization (WTO) 63, 204, 209 deterrence 3–4, 22, 80, 83, 124 (see also PL regimes (purposes)) development risks defence 20, 29, 31–3, 36, 70, 89–90, 124–31, 152–31, 211, 257n5, 264n10, 266n22 disclaimers, exclusions or limitations of liability 142–3 drugs see pharmaceuticals EC Directive or PL Directive (generally) 16, 20, 27–32, 70–1, 203, 268n2; implementation differences 70–71 (Table 3.1); impact see PL regimes (comparative effects) Economic Planning Agency (EPA) 54, 61–4, 66–7, 75–90, 95–8, 101, 105, 107–8, 111, 119–22, 125, 131–2, 135–6, 138–9, 140, 142–3, 145, 147–8, 150, 178–9, 188, 190, 196

306

Index

environmental law 4, 53–6 (see also ‘factory emissions’ case) European Union (EU) 16, 19, 20–1, 26–32, 36, 39, 68–9, 71–5, 154–5, 195, 203–5, 207, 209–11; Commission 27–9, 30–2, 30–4, 60, 154, 210; Council 27–8, 30–1, 33, 56, 60–1, 66–8; European Court of Justice (ECJ) 29–31, 70, 75, 79, 83, 92, 106, 108–9, 117, 121–2, 126–7, 192, 144–5, 151; Parliament 27–8, 30–1, 34, 66 ‘expressive’ function of law 200–1, 206 ‘factory emissions’ case (FCA) 92, 106 federal vs. state law 24–6, 34–6, 85, 95–6, 106, 109, 138–9, 145 firearms 102, 265n14 foodstuffs 1–3, 9–10, 24–5, 33, 36–7 (Table 2.1), 71, 100, 202–3, 210, 168–9, 197, 200, 259n15, 259n21, 267n30; bacteria 2, 86, 91, 111, 161–2, 167 (see also ‘botulism in olives’ case); Food Sanitation Law 2, 202; mis-labelling 3, 255n7, 271n1 foreign pressure (gaiatsu) 11 ‘foundation’ case (App. C No. 12) 91, 96–8, 102, 149, 163 housing see property losses in PL: real property imports (into Japan) 63, 172, 204, 259n44 industry or business groups in Japan; ‘industry informalism’ 20, 39, 54, 175, 178–9, 185; Keidanren (Federation of Economic Organizations) 67, 188, 262n33, 269n16; keiretsu (corporate groups) 8; Product Safety Association 175–6, 178 information see defects (warning, information or instructions defects), administrative law (official information disclosure) insurance 17, 25–7, 32, 34, 41, 54, 59, 62, 80, 85, 87, 119, 144–6, 154–5, 175–6, 178, 187, 192, 195–8, 200, 203, 268n3, 270n24 internet 3, 11, 176, 256n21 ‘iron triangle’ 8, 10, 16, 53 Japanese studies: consensus vs. conflict 49–52; heterogeneity vs. homogeneity 17, 48; perspectives on Japan 6–8, 255n8; pluralism 11, 18, 69

Japanese law theories: Americanization 13, 199, 204, 210; culturalist 12, 48–9, 158, 269n8; formal vs. substantive reasoning 13–14, 124, 256n27; hybrid 51, 159–60, 200–1, 205; institutional barriers 12, 49–50, 158, 164–7, 172, 200; rationalist 12–13, 50–1, 159, 168–70, 200; social management 12 joint liability see PL regimes (multiple parties) ‘Kanemi’ (rice bran oil) case 42–9 (Table 2.3), 50–2, 55–6, 61–2, 64, 68–9, 134, 261n36, 261n42 lawsuits involving PL: comparative figures 154–6, 169; known in Japan 36–8 (Tables 2.1 & 2.2), 161–74; suits under the PL Law since 1995 161–70, 223–8; all suits over the 1990s 170–4, 229–52 (see also Bar Associations and their Federation (‘Big Four’ and PL cases) and alternative dispute resolution (settlements)) legal academia 59–61, 65–6, 75–6, 152, 207; Hoshino, E. 61; Kato, I. 40, 60, 66; Kato, M. 40, 60–1, 65; Kitagawa, Z. 14, 60; legal education 15, 149, 151; Matsumoto, T. 163, 188; Morishima, A. 60, 65; Private Law Association (shiho gakkai) 60, 65; Sono, K. 60; Wagatsuma, S. 60, 145 legal profession 15, 18, 149, 151; corporate legal department staff 192–6; judges 13, 16, 24, 26, 36, 42, 68, 73–5, 78–9, 94, 138, 145, 147, 149, 157, 159, 166, 170, 200, 206–7, 261n35, 267n24, 271n27; lawyers or attorneys 24, 34, 38–9, 40, 42, 45, 49, 54, 65–7, 69, 119, 137, 147, 163–7, 170, 172–3, 177, 183, 186–7, 190, 200, 205–7; prosecutors 2, 41, 43, 57–8 legislators in Japan; Communist Party 49, 52; Diet or Parliament 28, 30–1, 34, 66–68, 98, 179; Japan New Party 67; ‘legislative formalism’ 20, 39, 53–4, 179, 185; Liberal Democratic Party (LDP) 7, 8, 10, 11, 13, 53, 66–8, 179, 204, 208, 256n14; Renewal Party 67–8; Social Democratic Party 68, 261n32 (see also local authorities or government) local authorities or government 54, 66, 75, 78, 83, 88, 92, 96–8, 101–2, 112–14, 125, 127, 136, 145–6, 149–50, 159, 190, 205, 264n9–10, 268n31; Local Government Law 14, 54

Index ‘mad cow’ disease 3, 6, 21, 31, 88, 203, 208, 211 manufacturing processes in Japan; quality management 10; reactions to PL Law 191–8 Matsushita 114, 173 McDonald’s: ‘hot coffee’ cases 103–5, 267n30; ‘juice’ cases 113–14, 118–19, 161–2, 161–2, 166–8, 170, 173, 206, 215–22 media (reporting) 1, 5–6, 10, 17–18, 27, 34, 42–3, 49, 51–2, 54–7, 59, 66–8, 84, 105, 119, 157, 158, 161, 169, 179, 188, 201, 203–4, 255n8 medical misadventure 85, 117, 149, 167, 263n3, 263n7 milk products 1–2, 5, 40–1, 68, 162, 169, 202, 257n2, 258n15 Minamata 4, 19, 39, 49, 53, 55, 202–5, 261n32 Ministries in Japan: Agriculture (MAF or MAFF) 3, 43, 202, 209; Construction (or MLIT) 45–6, 51, 54, 129, 174, 178, 254; Health and Welfare (MHW or MHLW) 40–5, 62, 136, 178; International Trade and Industry (MITI or METI) 2, 54, 56, 62–4, 66, 177–8, 183, 188, 254–7; Justice (MOJ) 29–30, 33, 38–9, 48–9, 61, 67–8; Transport (MOT or MLIT) 56–7, 270n26 (see also bureaucracy in Japan) Mitsubishi Electric 2–3, 269n8 Morinaga 1–2, 40–1, 43, 50, 55, 68, 202, 258n15 negligence 5, 26–7, 29, 33–8, 41, 43–5, 55, 58–9, 61, 77, 79–81, 85, 89–91, 96–7, 99, 102–4, 113, 115, 117, 120–2, 126, 128, 131–2, 134, 138–9, 143, 145, 149, 152, 154, 167, 175, 173, 257n15, 259n24, 263n3, 264n11, 268n5 New Zealand 27, 146, 271n6 ‘oral contraceptives’ case (QB) 8, 104 ‘oysters’ case (FCA) 129–30, 267n30 pain and suffering (isharyo) 40, 42, 46, 120, 137, 162, 165, 169–70, 262n1 PCB 45, 50, 56, 134, 261n36 pharmaceuticals 14, 19, 36, 89–90, 157, 257n4, 257n6, 259n18, 262n1, 268n1; cosmetics 161, 166–8, 177, 187 (see also ‘foundation’ case); DES 140–1; Drug Side Effects Industries Relief Fund 54;

307

Pharmaceutical Affairs Law 14, 96–7; SMON 42, 50, 53, 259n18, 262n46; Thalidomide 19, 27, 32, 36, 41–2, 53, 257n6, 259n18; vaccines 257n4 (see also PCB) PL Law (generally) 16–17, 66–7, 71–153; historical development 36–69, 203–4; effects 160–201; future 206–12 (see also reform of PL law) PL regimes 3–4; comparative effects 154–60 (see also lawsuits involving PL); component manufacturing 120, 131–4, 257n4, 268n1; ‘defects’ (see defects); development risks defence (see development risks defence); ‘goods’ or ‘products’ 82–90; liability for damages 111–24 (see also property losses in PL); limitations of time (see time limits); ‘manufacturer’ vs. other suppliers 105–11; other principles and regimes – causation (see causation), comparative negligence 60, 138–9, limitation clauses (see disclaimers, exclusions or limitations of liability), multiple parties 139–40 (see also class actions), other regimes 143–5 (see also Civil Code), pain and suffering (see pain and suffering); purposes 78–82 precedent 33, 49, 62, 64, 73, 75, 108, 169, 187, 210 product safety regulation 3, 21, 95–6, 101–2, 208–11; Consumer Product Safety Law 14, 175; Product Safety Directive 30, 32, 154–5, 210–11, 271n6 (see also re-regulation) property losses in PL: real property 37, 82, 84–5, 123, 208; consumer or ‘personal’ vs. ‘business’ property or losses 25, 123–4, 163 (Table 4.2); to defective product itself 119–23 punitive damages 16, 26, 34, 38, 72, 105, 138, 157, 169 recalls 2–4, 6, 154–5, 169, 172, 177, 197–8, 202, 209–10, 255n5, 255n9, 270n26 refrigerators 173 reform of PL law 24–6, 33–6, 88, 206–8 re-regulation 8, 202, 208–11 Restatements (generally) 17, 70–1, 203; ‘Reformulations’ 206–7, 271n2; Restatement Second (section 402A) 19, 24–5; Restatement Third (R 3d) 17, 20, 26, 169, 205, 207

308

Index

retailers 4, 23–4, 26, 33, 36, 110, 120, 190, 260n17 (see also PL regimes (‘manufacturers’ vs. other suppliers)) Sanyo 115, 173 ‘school lunch’ case (App. C No. 4) 91–2, 105, 161 science 19, 21, 23, 54, 125–6, 211–12, 271n7 ‘sea urchins’ case (App. C No. 5) 86, 109, 111–12, 161–3, 166–7 services 4, 14–15, 25, 30, 54, 58, 84–5, 109–10, 140, 156, 160, 176, 180, 183, 185, 188, 190–2, 194–6, 198–9, 201, 211, 263n6 Sharp 33, 57, 92, 98, 114, 171, 173, 176, 186 ‘sick house’ problems 172, 209 SMON 42, 50, 53, 141 ‘snapper’ (fish) case (App. C No.29) 55, 79, 86–7, 97, 122, 126, 129, 137, 162, 167–8 software 83–4, 122, 161, 166, 195, 208 Snow Brand 1–3, 5–6, 40, 43, 68, 162, 169, 202, 255n1, 255n7, 259n18, 259n22 strict liability (generally) 5, 24, 27, 33–4, 61, 111–13 ‘summers of living dangerously’ 1–5, 20–1, 188, 198, 201–2, 206, 208, 255n3

‘tampons’ case (QB) 94 ‘tea pack’ case (App. C No. 1) 111, 161, 163, 166–8, 186 televisions 2–3, 114–15, 149, 202, 266n21, 269n8 Thalidomide see pharmaceuticals time limits 134–7 tobacco 26, 30, 34, 136, 172, 258n9 tort law (generally) 3, 14, 24–5, 27, 33, 36, 39, 55, 60–1, 72, 81, 87, 89, 103, 120–1, 123, 140–1, 151–2, 156, 200; ‘tort crisis’ or ‘tort reform’ 25–6, 34–6, 64, 81, 124, 136–7, 148, 151, 153, 200 Trade Practices Act (TPA) Part VA (generally) 32–5, 153 traffic accidents 50, 56, 170, 180, 267n24 ‘tyres’ case (NSW) 113, 135 United Nations 40, 60, 209 Users’ Union (or Union) 28, 57–9, 61, 64–5 Variant Creutzfeldt-Jakob Disease (vCJD) 3, 88 vaccines 14, 36, 89–90 (see also pharmaceuticals) welfare (statism) 38, 40–1, 68, 74, 80, 136, 146, 151, 178