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Collecting debt in Japan, Mongolia and across the globe since 2003

ASIA-EAST - Mongolia

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HARAGUCHI INTERNATIONAL LAW OFFICE

KDX Toranomon Building 9th F, 4-3, Toranomon 1-chome, Minato-ku,
105-0001, Tokyo
Phone: +81-3-6205-4404
Fax:+81-3-6205-4405

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www.haraguchi-law.com
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TCM Japan & Mongolia—Haraguchi International Law Office

A market leader in Japanese, Mongolian and international debt collection, Haraguchi International Law Office (TCM Japan) was established in March 2003 by Mr. Kaoru Haraguchi, an international lawyer with more than a quarter of a century’s experience in handling multi-jurisdictional cases in Asia, Europe, and the United States.

We at Haraguchi International Law Office count ourselves among the very few Japanese lawyers who have been specializing in foreign debt collection for over 15 years. We occupy a unique position in a legal culture that only authorizes qualified attorneys to collect foreign debts owned by Japanese and Mongolian debtors.

In addition to providing ethical, efficient and premium quality debt collection services, we are also a favoured provider of litigation and bankruptcy services to local and global clients.

As a shareholder and active member of TCM Group, a select network of boutique law firms and collection agencies with ‘glocal’ coverage, we represent foreign creditors, foreign trade insurance companies, and foreign debt collection agencies.

Our office is also one of the leading members of the AEA, an international association in which more than 3000 worldwide attorneys from 189 countries are members. Mr. Kaoru Haraguchi is one of the directors of the AEA for the Asian district.

International Debt Collection Experts

International debt collection is what we do best. We are not only familiar with the broader legal issues concerning international debt collection; we also have in-depth experience and knowledge of such industry-specific issues as the foreign exchange risk involved in international claims, default charges, statutes of limitations, international private law, and the Act on Special Measures Concerning the Claims Servicing Business in Japan.

Testament to the expertise of our services is both the high esteem in which it is held by such companies as Nippon Export Investment & Insurance (NEXI) and China Export & Credit Insurance Corporation (SINOSURE) and the repeated praise it receives from some of world’s leading debt collection institutions.

Delivering Quality Debt Collection Services—Our Priorities

Uppermost on our list of priorities in delivering quality debt collection services are the speed and professionalism with which we execute all our debt collection actions. Time and again, prompt and professional execution has enabled us to minimize the risk of irrecoverable debt through debtor bankruptcy by bringing both creditor and debtor into more amicable alignment with each other’s needs, thereby accelerating the collection process.

Our Debt Collection Claims

The amount of single claims collected ranges from US$500 to US$100,000. We have collected more than US$20 million so far and have collected debts of US$2 million within one six-month period. On one occasion we collected US$4.6 million owed by the subsidiary of a Korean company to a North American creditor.

Clients Garnered through TCM Group

As of today, we have garnered 15 clients through our membership of TCM Group. The largest of which is a TV Broadcasting Company that was referred to us by TCM China.

Legal Representation

In addition to providing pre-legal debt collection services, we engage in the following transaction and dispute resolution activities in the field of international debt collection.

Litigation and Provisional Disposition

We represent our foreign creditors against their Japanese debtors in ensuing debt collection litigation and in winning provisional disposition for the securement of debtor assets.

Bankruptcy

We represent our foreign creditors against Japanese debtors who file for straight bankruptcy, corporate reorganization, civil revitalization, or other legal or commercial reorganization procedures permissible under Japanese law.

Our Experience in Collecting Debt Arising from the International Sale of Goods (CISG)

As a shareholder of TCM Group, we have been collecting debt that has arisen from the international sale of goods for more than a quarter of a century. Most notably, we have accumulated formidable experience in collecting debts for Japanese and Chinese creditors and, since 2015, for Mongolian creditors. We have acted as legal counsel for a major Chinese trade insurance organization and have handled numerous debt collection cases between this organization’s policyholders (between the Chinese manufacturers and exporters and the Japanese companies they were doing business with). We handle more than 100 cases at any one time, which come to a total average amount exceeding 3 billion JPY. Last year we even collected 500 million JPY in a single case.

The reasons for the trade dispute in the cases mentioned above are 1) the deteriorating financial condition of the Japanese companies resulting from surging labour costs and the weakening of the yen; and 2) product defects, especially latent defects. Regarding the latter reason, the question of which law applies—Chinese or Japanese—is central. Unless the parties to the sales agreement do not stipulate which law governs the contract, the United Nation Convention on Contracts for the International Sale of Goods (CISG) will automatically apply.

Issued by UNCITRAL, the CISG is a unified civil law convention that aims to improve international trading by providing a common legal regime for the sale of international goods. The CISG entered into force on 1 January 1988, with Japan as the seventy-first country participating in the convention as of 1 August 2009. While the majority of the participating states come from North America and Europe, some states are members of the Commonwealth states of South East Asia and some are from the Middle East.

The major CISG member states are the United States, Canada, Mexico, all European states except the United Kingdom, Turkey, Russia, Ukraine, China, South Korea, Mongolia, Singapore, Australia, New Zealand, and Iraq. The major non-member states include the United Kingdom, Hong Kong, Taiwan, Thailand, Malaysia, Vietnam, Philippines, Myanmar, Indonesia, India, Pakistan, Bangladesh, and Sri Lanka.

CISG member states all agree that adopting the CISG greatly helps in circumnavigating the costs that are incurred as a result of the uncertainty in determining the governing law and of then applying the foreign law in question. CISG member states can avoid having to apply the state laws of the countries they are doing business in if the parties to the sales contract explicitly agree to the provisions of the CISG. For instance, a Japanese company may elect to apply Japanese state laws as governing the performance of the sales contract because it finds itself in a position of greater bargaining power (very often the party with the greater bargaining power will apply its state laws over the CISG). Likewise, the ruling court in a given case may avoid having to apply the laws of a foreign state in the resolution of a dispute over the international sale of goods.

One of the conditions placed upon signatories to the CISG is that its provisions carry the same force as state laws without these provisions having to be enacted into law at the state level. In other words, in jurisdictions where the CISG is in force and where the dispute in question is one over the international sale of goods, the provisions of the convention shall be applied directly as though they were state laws. The clarity and concreteness of the convention’s provisions are such that the courts of member states can invoke them as their trial rules.

Being a member state therefore means that the CISG becomes the de facto governing law in terms of the international sales of goods, irrespective of state laws that otherwise govern the commercial activities of the parties to the sales agreement.

We at Haraguchi International Law Office have applied the provisions of the CISG in the numerous international trade dispute cases that we have handled since August 2009. We foresee the application of the CISG as a growing trend in our future business development.

Our Experience with the Japanese Exclusive Jurisdiction Clause in Mongolia

Unlike Japanese debtors, Mongolian debtors often do not want to pay their debts on an amicable basis. In such cases, creditors need a Mongolian lawyer with power of attorney to assist them in collecting the debt through the litigation process.

If the debt is large enough, international arbitration does represent a workable solution given that international arbitration awards are enforceable in Mongolia. However, as arbitration in a third country often proves to be very expensive as a means of collecting small-to-medium-size debts, foreign creditors—such as Japanese companies—will sometimes insert an exclusive jurisdiction clause in the sales agreement with the Mongolian debtor. Under this clause both parties are constrained to file the litigation in the stipulated place of arbitration or litigation—in our example, in Japan.

In cases where such an exclusive jurisdiction clause is in force, the Mongolian debtor will often ignore the demands of the Mongolian lawyer to pay the outstanding debt because it knows that the lawyer has no authority to collect the debt in a Mongolian court.

The questions here, then, are (1) whether the judgement rendered by the court of Japan is enforceable under Mongolian law, and (2) whether the exclusive jurisdiction clause is still valid in Mongolia if the judgement handed down by a Japanese court is unenforceable.

On the first question, the answer is an unequivocal no. The Civil Procedure Code of Mongolia has the following to say on the enforceability of foreign judgments:

Procedures for the enforcement of Mongolian and foreign court decisions are determined by the legislation of Mongolia and the international treaties that Mongolia has concluded with a foreign country or to which it is a party.

As current Mongolian legislation does not prescribe adherence to state laws on this point, the Mongolian courts will generally follow the provisions of the international treaty with respect to executing the judgement of the foreign court. Mongolian courts will only approve of those foreign court judgements that have been issued by the courts of the member countries of such treaties.

Because Japan and Mongolia have not concluded a treaty on the international sale of goods, a judgement handed down by a Japanese court cannot be enforced in Mongolia.

This leaves us with the second question—whether Japanese exclusive jurisdiction is still holds even when a Japanese court judgement proves unenforceable.

Given that the judgment rendered by a Japanese court is not enforceable in Mongolia, any performance of the exclusive jurisdiction clause would bring about an unfair result in favour of the Japanese company. The Japanese creditor is not in a legal position to enforce the Japanese court judgement in Mongolia, as filing such a lawsuit against a Mongolian debtor is prohibited under Mongolian law. This ultimately means that a Japanese creditor has no recourse to a legal remedy against the defaulting Mongolian debtor when it comes to the Japanese exclusive jurisdiction clause.

In a situation such as this, the Mongolian court is most likely to ignore the exclusive jurisdiction clause in the sale’s agreement and take up the case itself. The Mongolian debtor cannot therefore ignore the Mongolian lawyer’s demand to file litigation in Mongolia, even when the sales agreement from which the debts have accrued contains an exclusive Japanese jurisdiction clause.

We highly recommend discussing the language of the dispute resolution clause with a lawyer or law firm that has full knowledge of and comprehensive experience in Mongolian, Japanese and international litigation practices.