August 2017

Recently, a famous legal topic in Japan wasthe case of a petition for preliminary disposition of injunction concerningIdemitsu Kosan Co., Ltd.

The outline of this case is as follows:

 

1. Idemitsu Kosan Co., Ltd.("Idemitsu") and Showa Shell Sekiyu KK ("Showa Shell") areboth large, listed oil companies in Japan.

 

2. In December 2016, Idemitsu, as apreparation for merging with Showa Shell, acquired 117,761,200 shares of ShowaShell (31.3% voting rights ratio) from a subsidiary of Royal Dutch Shell.

 

3. In March 2017, the founder families(“Founders”) having approximately 33.92% of Idemitsu Kosan shares announcedthat they opposed the merger between Idemitsu and Showa Shell. In addition,they invited to oppose the reassignment of the current management team at theannual general shareholders' meeting held in June 2017.

 

4. Idemitsu was unable to merge with ShowaShell if the Founders maintained their shareholding ratio. To initiate themerger, they needed to get a special resolution of the general meeting ofshareholders, but unless they lowered the Founders’ shareholding ratio, therewas no hope to get it.

 

5. Therefore, in July 2017, the board ofdirectors of Showa Shell decided to issue 48 million shares of stock by way ofpublic offering. When this new stock issue would be realized, the shareholdingratio of the Founders would be reduced from approximately 31.3% to 26.09%, soit would be possible to acquire the special resolution of the generalshareholders meeting.

 

6. The Founders alleged to the TokyoDistrict Court that Idemitsu's issue of new shares should be temporarilysuspended because it was "carried out in an extremely unfair way"according to Article 210, Item 2 of the Companies Act.

 

(For your reference)

Companies Act

Article 210           Inthe following cases, if shareholders are likely to suffer disadvantage,shareholders may demand that the Stock Company cease a share issue ordisposition of Treasury Shares relating to solicitation under Article 199(1):

(ii)          Incase where such share issue or disposition of Treasury Shares is effected byusing a method which is extremely unfair.

 

 

The Tokyo District Court rejected thepetition of the Founders on July 18, 2017, stating as follows:

 

(1) Issuance of Shares solicited under the"Extremely Unfair Method" prescribed in Article 210, Item 2 of theCompanies Act refers to a case where the issue of shares is used as a means ofachieving an unfair purpose, and when there is a dispute over the company'scontrol and if the current management team issues new shares for the mainpurpose of lowering the shareholding ratio of a specific shareholder contendingfor control and maintaining and securing control over it, it is a case done asa means to achieve an unfair purpose.

 

(2) In this case, the current managementteam and the Founders are in a relationship of virtually competing for thecontrol of Idemitsu, and the issuance of new shares in this case is beneficialto the present management team by lowering the shareholding ratio of the Founders.Therefore, it is reasonable to once suppose that the current management teamhas a purpose to place themselves in a good position.

 

(3)
(i) However, since the issue of new shares in this case will be conducted bythe public offering method, shareholders who are opposed to the currentmanagement team may also be allocated shares and, compared to third-partyallotment, the certainty of attenuating the Founder-side control ofshareholders is weak.

 

(ii) There is no evidence to suggest that ageneral shareholders meeting will be held immediately after the issue of thesenew shares, and that a merger with Showa Shell will be an agenda item at themeeting.

 

(iii) In addition, although there is doubtabout the necessity and reasonableness of funding in most cases that wereinsisted by Idemitsu, the necessity to prepare repayment funds for purchasing ShowaShell stocks is objectively apparent.

 

Therefore, there is no sufficient evidenceto assert that the main purpose of the issue of the new shares is not tofinance funds but to put the current management team in an advantageousposition in the substantial battle over company control.

 

(4) Therefore, it cannot be said that thisissue was made by the "extremely unfair method," so there is noreason for the Founders’ petition.

 

(My comment)
The judgment of the court requires that the unfair purpose of the managementside is the main one and even if management has an unfair purpose, if thenecessity of financing is recognized elsewhere, an unfair purpose is not a"major" thing, and it does not fall under the "extremely unfairmethod".

However, there are always some fundingdemands in the company, so there is almost no room for the suppression of newshares as an "extremely unfair method". Indeed, from our lawyer’sview, it is easy to advise the company about planning the issuance of newshares that does not fall under the "extremely unfair way," but thisresult is not considered justice.

I think that it should be interpreted thatif there is an unfair purpose on the manager's side, issuance of new sharesshould not be permitted even if there are other funding demands. I wonder ifthe interpretation of the precedents will change like that.

Recently, in Japan, adultery allegations against a young congresswoman were widely reported.
The woman in question used to be a member of the very popular pop group, “Speed”, but is now a single mother of a son with a hearing disorder, and a member of the House of Councilors.
Last month, one magazine reported suspicions of a love affair between her and a man in Kobe City Council.

In the magazine, there was a picture of her holding hands with the male city councilor while sleeping on the Shinkansen (Japanese bullet train), and according to the magazine, they spent two nights together at her mansion and a hotel.

She admitted her 2-night stay with him, but she emphasized that as he was now in the process of a divorce mediation procedure against his wife, she did not cross a line. "Not crossing a line" indicates that there is no sexual relationship between them so far.

Why did she say "I have not crossed the line?"
Is there any legal significance here?
I do not know the truth (only the two people involved would know this), but let me consider this from a lawyer's point of view.

According to reports, the city councilor has been married and has two children. However, according to him, his marital relationship broke down 5 to 6 years ago, and they began to live separately since the summer of last year, and (as already mentioned) are currently following divorce proceedings.

Under Japanese family law, a husband and wife can divorce by mutual agreement, but if the agreement does not hold, the court can order a divorce only due to the following:

1) An act of adultery.
2) If one party was abandoned by the other in bad faith.
3) If it is not clear whether a spouse is dead or alive after at least three years.
4) In the event of severe mental illness.
5) In the event of a grave cause that deems continuation of the marriage difficult.

Additionally, according to the judgment of the Supreme Court, a divorce claim from the party who caused the failure of the marriage by an act such as adultery, is rejected.
In other words, for example, if a couple has already been separated for a long period of time due to the husband's adultery and it is determined that there is a grave cause that makes the marriage difficult, the husband's divorce claim will be dismissed. This is known as “the theory of the spouse who caused the break up”. Because of this, I guess the councilors couldn’t admit a sexual relationship.

Of course, in this case, because the man has already began to live separately from his wife and insists that the marital relationship has already broken down, there is a possibility that any current case of adultery did not cause the collapse of the marital relationship. However, according to the report, the wife claims that their marital relationship has not yet broken down and argues that he only unilaterally began separation. Therefore, his assertion that the relationship with the congresswoman started after the collapse of the marital relationship might be denied. Considering this risk, maybe they could not admit to a sexual relationship.

By the way, since they were holding hands while sleeping on the Shinkansen and spent two nights together, it would be normal to assume that a physical relationship exists. If so, does claiming that "a line has not been crossed" become disparaging to their honesty?

My guess is as follows:

First of all, we have to know that Japanese judges tend not to recognize the fact of adultery unless there is direct evidence. This is because Japanese judges know well that the theory of the spouse who caused the break up is often actually unreasonable. In general, many cases to which the theory is applicable have continued for a long time, and the marital relationship completely collapses. Therefore, if the judges do not intervene, only an unproductive, negative relationship remains. Thus, the Supreme Court has decided to make an exception to the theory. They stated that:

If the claim is from a spouse who caused the break up, but the separation period is comparable to their age and their cohabitation period, with no children involved, as long as the judge does not recognize any special problems that would result in unfair events due to divorce, such as one party suffering mental, social or financial hardship, the judge cannot deny the claim because it is from the spouse who caused the break up.

However, since the hurdles required by this court judge are high, the theory continues to bring disagreeable results. Therefore, my guess is that judges do not want to get too involved with, or admit too much about the fact of adultery.

Currently, a review of family law is also being discussed in our country. One idea is that if a household exists separately for a certain period of time, regardless of the cause of separation, divorce is granted.

In my opinion, such thought is more appropriate than the theory of a spouse who caused the break up.

Although this news did not receive thenationwide attention that it deserved, the revised Civil Code draft(Relationship Transaction Law) was established in the National Assembly on May26, 2017.

 

Actually, the current Japanese Civil Code(Relationship Transaction Law) was established in April 1896, so this revisionwas made about 120 years after its establishment. In 1896, the Sino-JapaneseWar had been over for a year, while in the U.S., Utah became the 45th state,and in Athens the first international Olympic Games were held.

 

Since the current civil law isextraordinarily old, some archaic words that most of us cannot read remain init. Furthermore, supplementary parts of it are subject to interpretation.Therefore, we do not understand its meaning by only reading the text.

Moreover, since the time of theestablishment of the Civil Code, there have been technological developments andadvancements, such as cars, airplanes, the Internet, and so on, which we hadnot accounted for, and these have become pretty important now.

These are the reasons why the JapaneseCivil Code has been revised.

 

Some main examples of the revisions are asfollows: First, the period of extinctive prescription, during which the claimdisappears without being exercised, has been revised. In principle, it was tenyears, but restaurant bills and lawyers' fees, etc. were two years and wecannot show rational reasons for this nowadays. Therefore, this revision wasunified into a uniform period of five years.

 

Next, the interest rate in the case ofperformance delay. Previously, it was 5%, but this was too high for the lowinterest rate era of deflation, so it was lowered to 3%. In addition, we willuse a floating system in order to review the rate every three years.

 

Third, review of the joint guaranteesystem. From now on, if the notary does not confirm the intention of theguarantor, the guarantee will not be accepted. By allowing the opportunity torethink during the process of confirming the notary, easy agreement to a jointguarantee is prevented.

 

Fourth, the rule of the lease securitydeposit. Before, the Civil Code had only one Article on the security deposit(619 (2)), and it was very crude. But this revision clearly states that thelessee is responsible for repair costs due to age-related deterioration.

 

Fifth, regulations concerning 'contracts'presented to an unspecified number of consumers, such as Internet mail ordershave also been newly established. Consumer protection is aimed at byprescribing that those with content deemed to unilaterally harm the profits ofconsumers are nullified.

 

This revised Civil Code bill was summarizedin the proposed amendment over a period of more than five years afterconsultation with the Legislative Council, and a bill was submitted to the Dietin March 2015. However, the Security Treaty and the political issues at thattime had prolonged the hearing in the Diet. The Diet thus finally passed therevisions other day.

 

Some legal officials said there is no needto change the current civil law, but I think that the current Japanese CivilCode was extremely outdated. Since the revised Civil Code is to be enforcedwithin 3 years from promulgation, it is still not applied to our lives. But asa legal professional, I think that we have to establish a better society byimplementing this civil law.

1   If your honor is damaged on the net, thefirst thing to come up to my mind is to make a request to delete the defamationpage directly to its administrator. However, some malicious administrators donot meet this.

2.   Then, next, we will consider whether wecan request deletion by using court procedures such as provisional dispositionand litigation. However, for example, if the location of the administrator isnot described on the website (including WHOIS information), or even in the caseof being described, when it is a paper company such as Argentina or USA orNevada state, there are some problems.

First of all, when you do not know theaddress of the administrator, you cannot use temporarily disposition orlitigate because the court does not come to know the delivery address in thefirst place. In addition, in the case of a foreign paper company, provisionaldisposition and litigation can be brought under certain requirements, but evenif you win, because they are located outside Japan, there is no way to forceprovisional disposition decision or judgment except that the foreign countryallows forced enforcement by using Japanese judgment and so on. After all, as ajudgment of the court came out, there is no other choice than to"ask" to delete it arbitrarily. In other words, you cannot delete ona website that does not listen to "your wish".

3.   Now is it possible to delete theslanderous article and not to display it on the search engine? This is a way todelete search results, which has been drawing attention recently.

Currently, when we browse web pages, weoften search the desired page with a search engine such as Google. Therefore,unless it is displayed as a search result in the search engine, it becomespractically difficult to access the page (unless you know the URL in advance).This will result in an effect similar to page deletion. Regarding deletion ofthis search result, the Tokyo District Court decided on October 9, 2014, and itbecame a topic because it approved it for the first time.

Such deletion of search results can be aneffective solution against defamation on the net, but it should be noted thatthe Supreme Court of Japan does not have any examples yet recognized. Also inthe judgment of the Supreme Court issued on January 31 this year, deletion hasbeen denied in conclusion.

Also note that as a lower court's tendency,it is said that defamation must be contained in the search result title orsnippet (excerpt of the page itself) itself. Even if the site which is caughtin the search itself has a terrible libelous expression, even if the title orexcerpt displayed as the search result does not contain a libelous expression,currently it seems difficult to delete the search result.

In addition, depending on the judgment ofthe lower court, there is a strict judgment that the deletion is not permittedunless it is obvious from the expression itself that it is non-truthful.According to this judgment, if the honor is damaged by a false statement, it iseasy to prove that it is false, but if it is not known from the defamationexpression itself that it is false, the deletion will not be permitted.

In this way, cases of deletion for searchresults are also limited.

4.   Then, for example, among defamation onthe net,

A foreign paper company is anadministrator
The administrator did not accept any deletion
Title displayed on search result itself and snippet does not includedefamatory expression
In such cases, it is very difficult to take a legal action.

Apart from legal responses, there are alsoso-called SEO countermeasures and anti-SEO countermeasures. These aretechnically an attempt to lower the search ranking of libelous pages, but theinformation of defamation will not disappear.

     More than anything, despite the occurrenceof an illegal event, there is no legal way to respond, which is a very problem. 
As Japan is a legal nation, it is necessaryto block such loopholes. There should not be such thing that a law - abidingcountry does nothing to solve the problem of such slanderous sites. I hope wewill respond promptly by legislation or justice (in some cases, establishing aninternational cooperation system on deletion of articles).

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