UK–Japan Legal Dialogue in a Changing World

UK–Japan investment and trade flows are growing alongside the UK’s expanding legal services exports. With rising cross-border transactions and merger and acquisition (M&A) deals increasing the need for international lawyers in Japan, UK–Japan legal collaboration has become more important than ever.

The British Chamber of Commerce in Japan hosted an expert panel in Tokyo in September to consider such issues amid geopolitical shifts, evolving trade frameworks and increasing cross-border disputes.

Returning to Japan for his second official visit, Richard Atkinson, president of the Law Society of England and Wales, joined the panel comprising Peter Harris, partner at Clifford Chance; Yuko Nitta, partner at Utsunomiya Chou Attorneys at Law; and Jacky Scanlan-Dyas, partner at Hogan Lovells, with Dominic Sharman, partner at Baker McKenzie, acting as moderator.

Atkinson said his September visit had afforded him the opportunity to meet with various Japanese legal associations, industry bodies and government ministries, including the Ministry of Justice and the Cabinet office. The aim of his visit was to improve the registration system for gaiben (registered foreign lawyers) in Japan.

'On this occasion our priority has been to remove the one year overseas [legal practice] requirement in the qualification area, and also to try and meaningfully shorten the period of registration,' Atkinson said. 'Last year, we had a small win, with the Ministry of Justice implementing a reduction in the scope of documentation that has been required, but we’re now looking for what we’ve described as more meaningful changes.'

The reforms are set to impact a growing number of international lawyers, currently totalling around 80 in Japan with English law qualifications, second behind those with US qualifications, according to Nitta.

She said among the requirements to becoming a gaiben in Japan are three years of work experience as a lawyer, with at least one year employed outside Japan, as well as a financial base, an office and accommodation in Japan, and 'good standing' in the lawyer’s own jurisdiction.

Expanding M&A

Growth in UK–Japan trade and M&A deals is driving increased demand for M&A lawyers, according to Scanlan-Dyas.

She pointed to 2023 data showing Japan had over £78 billion invested in the UK, while the UK had £3 billion invested in Japan. Both numbers mark a 9% rise from 2022 to 2023, with Japan’s UK investment sustaining around 180,000 jobs.

Sectors such as renewable energy, defence, aerospace, real estate and advanced manufacturing are key areas for UK–Japan investment, she added, citing examples such as Japanese general trading company Marubeni’s 'green hydrogen' investments in the UK and collaboration among the UK, Japan and Italy on next-generation fighter jets.

For UK investment in Japan, Scanlan-Dyas noted the growing role of private equity, which saw a 40% increase last year. Driving this increase is a 'large pool of companies with potential for improved performance,' she said, pointing out there are more than 4,000 listed companies in Japan.

Other factors include a weaker yen, an ageing population that is sparking a 'succession crisis' in Japanese companies, a stable regulatory environment, corporate governance reforms and 'the low cost of capital … money is not free here anymore, but nearly free.'

Reforms, cultural issues

Asked about further potential reforms, Harris pointed to the need for better integration between the offices of law firms in Japan and England, which could be facilitated by simpler visa requirements.

However, Sharman said changes to UK visas could be challenging in the current anti-immigration environment, with domestic pressures for a lower migration intake in the UK.

Atkinson said a survey of member firms of the Law Society of England and Wales found the 'high cost of opening and maintaining an office' to be a deterrent to establishing a presence in Japan. Affected firms typically seek tax breaks or other incentives to overcome such challenges.

Other issues include the 'unavailability of LLPs' [limited liability partnerships] in Japan, with some firms concerned over their potential overseas liabilities.

Harris said UK–Japan ties are broader than just England and Wales, with the potential for Scottish and Northern Irish legal associations to add their weight to the push for easier gaiben registration in Japan.

The panel also considered issues facing younger lawyers, including confusion over the gaiben registration process, language barriers and Japan’s infamous work culture.

These pressures are compounded by the time zone’s demands, as Scanlan-Dyas explained: 'The hours in Japan are pretty challenging. We are in the 'Goldilocks time zone,' where early morning calls and late-night calls are usual, and almost everything we do is cross border in an international law firm.'

Other issues raised by younger lawyers include the need to wear 'formal attire' in Japan more often, as well as a different style of negotiating compared to the UK’s higher risk tolerance approach of 'let’s get the deal done and work out the problems afterwards.'

Value of legal services

Atkinson said the UK legal profession’s £9 billion worth of exports and £7.4 billion trade surplus had earned it recognition in Whitehall.

'We have argued that legal services are not only relevant as a sector in themselves, but they’re also an enabler for growth with other sectors … that’s an argument that’s very much landed with the UK Department for Business and Trade,' he said.

'The attitude is positive for the government towards legal services and their recognition, and we continue to lobby for legal services to be included in free trade agreements where they’re entered into around the world,' he added.

From a Japanese viewpoint, Nitta said Tokyo aims to attract more foreign direct investment and position itself as 'the financial head of Asia, as well as the dispute resolution capital,' meaning 'many of the recommendations made by the UK government and Law Society are consistent with the goals of Japan.'

Among the topics raised by the audience were the rise of artificial intelligence and its impact on the legal profession’s future, along with the growth of private equity in Japan, with such firms seen as 'very litigious.' Harris observed that private equity firms recognise the potential value that can sometimes be unlocked by making claims such that, even if an investment is underperforming, it may still be considered a valuable 'litigation asset.'

'We have close to 200 activist investors in Japanese listed companies. Now they’re starting to make themselves heard and we will see more litigations flowing out of that,' Scanlan-Dyas said.