Commercial Code and Act on International Carriage of Goods by Sea – Revision Bill Submitted to National Diet

By Kazuya Yamashita

Submission of Bills to Diet

The Bill to Partially Revise the Commercial Code and Act on International Carriage of Goods by Sea received Cabinet approval and was submitted to the National Diet on 18 October 2016. This Bill revises portions of the Commercial Code mainly relating to transport and maritime trade as well as portions of the Act on International Carriage of Goods by Sea. Particularly regarding the transport and maritime trade portions of the Commercial Code, because there have been no substantial revisions since the Code was established more than a century ago in 1899, it can be said that a bill long-awaited by the transport industry has finally been submitted to the Diet.
On this occasion, I would like to introduce the history of the Bill leading up to its submission to the Diet and an overview of its contents.

History of the Bill Prior to Submission to the Diet

    1. Inquiry by the Minister of Justice (February 2014)

      At the 171st meeting of the General Committee of the Ministry of Justice’s Legislative Council in February 2014, the Commercial Code (Transportation and Maritime) Subcommittee (chaired by Professor Tomonobu Yamashita of Doshisha University) was established to conduct the Justice Minister’s Inquiry #99. The inquiry was “Presentation of an outline as it appears necessary to revise the Commercial Code and other legislation related to transport and maritime from the viewpoint of responding to changes to the social and economic conditions since the establishment of the Commercial Code, accommodating the rational interests between cargo owners, transporters and other parties related to transport and responding to global trends related to maritime law systems.”

    1. Review by the Legislative Council Commercial Code Subcommittee (April 2014 – January 2016)

      The Legislative Council’s Commercial Code Subcommittee commenced its investigation in April 2014 and a Passenger Transport Working Group that was established below the Subcommittee concurrently investigated matters relating to passenger transport. The Subcommittee and Working Group had participation from various parties related to transportation including the transport industry (goods and passenger transport via land, sea and air), cargo owners, labor organizations, consumer organizations, the insurance industry, bar associations, the judiciary and university academics. The Subcommittee and Working Group held 18 and 7 meetings respectively and featured enthusiastic debate.
      During this period, an interim proposal was prepared in March 2015 and a public comment process was conducted until May of the same year. A total of 143 responses were received, which I think suggests the large public interest in the topic.
      Subsequently, the “Draft Outline of Revisions to the Commercial Code (Transportation and Maritime)” was unanimously approved by the Legislative Council’s Commercial Code Subcommittee in January 2016.

    1. Legislative Council’s Approval of Outline and Report to the Minister of Justice (February 2016)
      At the 176th meeting of the General Committee of the Ministry of Justice’s Legislative Council in February 2016, the “Outline of Revisions to the Commercial Code (Transportation and Maritime)” was unanimously approved as drafted and was reported to the Minister of Justice. The contents of the Outline can be viewed at the Ministry of Justice’s website (in Japanese).

  1. Submission of Revision Bill to the National Diet (18 October 2016)

    The Ministry of Justice then undertook the work of drafting legislation based on the contents of the Revision Outline, and on 18 October 2016 the Bill to Partially Revise the Commercial Code and Act on International Carriage of Goods by Sea received Cabinet approval and was submitted to the National Diet. (The detailed provisions of the Bill can be viewed at the Ministry of Justice’s website (in Japanese)).

Overview of the Bill

The main provisions of the Bill define revisions to portions of the Commercial Code and Act on International Carriage of Goods by Sea, while the Schedule contains amending provisions for related laws and ordinances, enforcement dates and transitional measures as an annex to these revisions.
Regarding the Commercial Code, apart from the detailed revisions regarding transport and maritime trade that are described below, other parts of the Code that are still written using the old-style katakana script (Brokerage Business, Agency business and Deposit) are revised to the modern hiragana script, thereby meaning hiragana is used throughout the revised Commercial Code. In this way, the Bill should be largely welcomed for making the entire Commercial Code’s text easier for people to understand.
Within the Bill, the substantive revisions are mainly concerned with the provisions on transportation and maritime trade, as described below.

    1. Air transport and multi-modal transport

      General rules are established regarding each mode of transportation, which will also apply to “air transport” and the combination of land, sea and air transport called “multi-modal transport”, neither of which are currently defined in the Code. Also, the liability of carriers in multi-modal transport will be in accordance with the laws, regulations, administrative orders, or treaties applicable to the mode of transport in which the cause of the loss of cargo, etc. arose.

    1. Duty to give notice regarding dangerous goods; indemnity of carrier when not at fault

      Provisions that impose a duty upon shippers to give notice when the cargo is a dangerous good have been newly added for the purpose of securing the safe transport of the increasingly wide category of dangerous goods.
      Regarding the liability to pay damages for shippers who breach this duty to give notice, opinions in the Legislative Council’s Commercial Code Subcommittee were largely divided on whether the shipper should bear liability even when responsibility is not attributable to the shipper. As a result of the various debates, it was eventually decided that the shipper will be liable for damages concerning loss that arises from a breach of the duty to give notice regarding dangerous goods, but the shipper will not be liable for damages when responsibility for the breach is not attributable to the shipper.
      Because various parties including manufacturers, trading companies, consigned freight forwarding businesses and consumers can be the shippers of dangerous goods within the distribution of goods, this allows for flexible judgments to be made depending on whether responsibility is attributable to each party.

    1. Reduction of tort liability of carriers and their employees

      The current law’s provisions that reduce the carrier’s contractual liability, such as exempting the carrier from liability when the shipper does not declare that the cargo is an expensive good (Commercial Code, Art. 578) and fixing the amount of damages the carrier is liable for (Commercial Code, Art. 580), are basically understood as not extending to the tort liability of the carrier and its employees. So that the purpose of these provisions is not lost, the effect of the provisions is to be extended to the tort liability of the carrier and its employees.

    1. One-sided enforcement provisions regarding liability of passenger carriers

      Concerning the liability of passenger carriers, contractual clauses that reduce the carrier’s liability for the death or personal injury of the passenger are invalidated for the purpose of securing passenger safety. However, from the viewpoint of the reasonable operation of transportation businesses and to secure truly necessary transport, some room has been left for indemnity clauses in exceptional circumstances, such as the carrier’s liability when the major cause is transport delays, and also transport in disaster-stricken areas and the transport of seriously ill persons, etc.

    1. Time charters

      Regarding time charter parties frequently used in maritime transportation business (contracts for use of a ship by a party for a fixed period of time, where the ship is equipped (i.e. provided with the necessary equipment etc. for the voyage) and provided with a crew by the Shipowner), basic provisions have been newly established as a new type of contract.

    1. Duty to ensure seaworthiness changed to a liability for negligence

      Regarding the duty to ensure seaworthiness (duty to ensure that the ship has the capacity to safely perform the voyage through maintenance of the ship and provision of an appropriate crew) in domestic maritime transportation, under the current law the liability for a breach of this duty is interpreted as an absolute liability (Commercial Code, Article 738; see Supreme Court decision dated 15 March 1974). Considering factors such as balance with international maritime transportation, the strict liability for a breach of the duty to ensure seaworthiness in domestic maritime transportation is changed to liability for negligence only.

    1. Sea waybills

      Basic provisions are established regarding sea waybills, which are frequently used in trade in addition to bills of lading.

    1. Extinctive prescription of claims arising from collision of ships

      Under the current law, tort liability related to property damage due to a collision of ships is subject to extinctive prescription 1 year from the time that the victim became aware of the loss and the perpetrator (Commercial Code, Article 798 (1); see Supreme Court decision dated 21 November 2005). In consideration of balance with international conventions, claims will be subject to extinctive prescription 2 years from the time of the tortious act. Regarding tort liability for personal injury, unlike international conventions, a short extinctive prescription period is not established in the Commercial Code from the point of view of respect for human life; claims are instead subject to extinctive prescription 3 years from the time that the identity of the perpetrator becomes known, in accordance with Article 724 of the Civil Code (5 years after the Civil Code is revised).

    1. Marine insurance

      Regarding marine insurance, it has been expressly provided that the policyholder must notify of important matters regarding risk at the time of taking out a policy.

  1. Revisions to Act on International Carriage of Goods by Sea

    Regarding the limits of the carrier’s liability defined in Act on International Carriage of Goods by Sea, the revised Act will define a limit of liability for the entire cargo rather than defining liability limits for each individual package, in order to address the other countries’ interpretation of the international convention (the Hague-Visby Rules) that is the source of the Act.

Conclusion

In this way, some parts of the revision may be seen to benefit one party only when the provisions are looked at individually, but when looked upon in its entirety, the revision is intended to rationally reconcile the interests of all parties related to transportation, including carriers, cargo owners, consumers, laborers who work in transportation and insurers, and because it also conforms to modern and global business practices, quick passage by the National Diet is desired.

Further, for businesses involved in transportation, it is recommended that the contents of standard agreements and contracts are reviewed based on the contents of this revision. Certainly, there are opinions such as that many of the Commercial Code’s provisions are default provisions that can be excluded and therefore lack meaningfulness; for example, from the aspect of contract formation, it can be thought that when contractual clauses are the same as the provisions of the Commercial Code a minimal explanation of their reasonableness etc. is sufficient, but on the other hand, when contractual clauses differ from the provisions of the Commercial Code the party that demands the clause must explain the reasonableness etc. of the clause. While taking note of this type of function of the Commercial Code as a powerful guideline from the aspect of contract formation, I would like everyone to take this opportunity to consider revising the contracts and forms that you have at hand.

(Translated from the original Japanese)