International Parallel Litigation

(Tokyo District Court, 21 October 2013)

FACTS

US Company A was a shareholder of US Company Y (Defendant), which operates a casino in Nevada, USA. Japanese listed company X1 (Claimant) was A's wholly-owning parent company, X2 (Japanese limited liability company. Claimant) was a shareholder of X1, and X3 (Claimant) was the chairman of the board of directors of X1.

Y2 et al. (Defendants), who are directors of Y, suspected that X3 et al. were committing an act that violated the US Foreign Corrupt Practices Act. If a shareholder commits an illegal act, Y's casino operating licence may be deprived under Nevada State Law, and therefore, they requested Y's compliance committee to investigate. Having received a report of the investigation results that X3 and its related parties had repeated acts that seemed to violate the Foreign Corrupt Practices Act, Y's board of directors consisting of Y2 et al. made a resolution of the board of directors to reimburse Y's shares held by A (the "Resolution") and posted the contents of the Resolution on Y's homepage (the "Press Release").

Then, Y filed a lawsuit against X1 and X3 as defendants with a court in Nevada seeking a request for confirmation that Y had acted legally (the "US Proceedings"), etc. On the other hand, X1 and A filed a counterclaim against Y and its directors Y2 et al., seeking an injunction against the implementation of the Resolution and a claim for damages due to the invalidity of the Resolution.

X1 et al. filed a claim for damages with the Tokyo District Court, alleging that the request for investigation, the Resolution, and the act of posting the Press Release were all illegal. In response, Y et al. argued that Japanese courts did not have international jurisdiction.

FINDINGS

The judge held:

Dismissed.

Y's act of posting the Press Release meets the requirements of Article 3-3, Item 8 of the Code of Civil Procedure (the "CCP") since the result of damages to the reputation and credit of X3 and X1, whose chairman of the board is X3 have occurred directly in Japan. In addition, since the Press Release was placed in a state where it could be easily viewed in Japan, Y1 was able to foresee the occurrence of the results in Japan.

X2's claim for damages due to the decrease in the share price of X1 doesn't meet the requirements of Article 3-3, Item 8 of the CCP since the result was not directly arisen from the act of posting the Press Release.

Y and its director Y2's request for investigation and the Resolution do not meet the requirements of Article 3-3, Item 8 of the CCP since it cannot be said that the direct result of these acts occurred in Japan.

Then, regarding Y's act of posting the Press Release, since there are "special circumstances in which a Japanese court's hearings and trial would impair the equality between the parties or prevent the realisation of a proper and prompt trial" (Article 3-9 of the CCP) because of the existence of the US Proceedings, etc., the court denied the international jurisdiction over X1 and X3's claim regarding Y's act of posting the Press Release, and eventually dismissed all of X1 et al.'s claims.

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