In April 2020, Japan’s antitrust regulator, the Japan Fair Trade Commission (JFTC), issued draft rules and guidelines establishing, among other things, limited confidentiality protections for attorney-client communications in certain JFTC investigations. The JFTC seeks public comments on these drafts by May 15, 2020.
Japanese law provides no protection for attorney-client communications other than requiring attorneys to maintain client confidences. This may not be a significant concern in civil litigation, because Japan does not have broad U.S.- or U.K.-style discovery requirements, but the lack of an attorney-client privilege could be a serious concern in government investigations, where authorities could seek to obtain sensitive attorney-client communications as part of an on-site inspection (also known as “dawn raids”). This is especially true in antitrust cases, in which there may be parallel investigations or related civil cases in other jurisdictions, such as the U.S. and the U.K., where there could be significant consequences from the disclosure of attorney-client communications.
In response to such concerns, the JFTC proposed new rules and guidelines pursuant to the June 2019 Amendments to the Japanese Antimonopoly Act. The amendments include updates to the leniency program for entities who cooperate with JFTC antitrust investigations. Under the draft rules and guidelines, when the JFTC performs on-site inspections as part of an investigation for an allegation of unreasonable restraint of trade (e.g., cartels and bid-rigging) which is eligible for the leniency program, entities which are subject to the on-site inspections can follow prescribed procedures to designate certain attorney-client communications as “confidential.” Unlike other jurisdictions, the JFTC conducts on-site inspections on cooperating entities who applied for leniency, as well as entities that did not apply for leniency. Thus, in effect, the proposed protections provide a mechanism by which a leniency applicant can avoid being deemed to have waived privilege as a result of cooperating with the JFTC.
In order to qualify for protection, the designated documents and data must contain or reflect confidential communications with outside Japanese law counsel regarding legal advice related to the alleged violation of unreasonable restraint of trade under investigation. Confidentiality protections do not apply to internal communications with in-house counsel, internal notes, or internal investigations conducted by the entity itself. Importantly, the draft rules specify that the protections do not apply to communications with foreign attorneys, including those who are registered to practice in Japan (“gaikokuho jimu bengoshi” or “gaiben”). Moreover, communications regarding matters other than the unreasonable restraint of trade under Antimonopoly Act or for the purpose of committing or assisting with unlawful acts do not qualify for protection.
The entity also must take steps to ensure that the documents and data are treated as confidential internally. Specifically, the entity must label qualifying documents and data confidential as “Specific Communication Under the Rules on Investigations by the JFTC” (公取委審査規則特定文書), store the documents and data in a location separate from non-privileged documents, and limit access to the documents and data within the company to a need-to-know basis.
Once the entity under investigation identifies the documents and data it seeks to protect, it files an application and the documents and data are to be placed in a sealed envelope and delivered to a “Determination Officer,” an official designated within the JFTC Secretariat who is unrelated to the investigation at issue. The entity must also submit a log summarizing the documents and data in question.
If the Determination Officer determines that the designated documents and data qualify for confidentiality protection, the documents and data will be returned to the entity without the JFTC investigators ever accessing them. If the documents and data are deemed not to qualify, they will be sent to the JFTC investigators. The entity can file a petition to appeal the Determination Officer’s decision and can further appeal the outcome of that petition in district court.
Because these proposed protections for attorney-client communications are limited to JFTC antitrust investigations for allegations of unreasonable restraint of trade (e.g., cartels and bid-rigging) that are eligible for the leniency program, they would not apply in other types of antitrust investigations, criminal antitrust investigations, or non-antitrust investigations conducted by other Japanese government authorities.
The deadline for public comments to these proposed rules and guidelines is May 15, 2020 at 6 p.m. Japan Time. For more information about how to submit comments, please visit: https://www.jftc.go.jp/en/pressreleases/yearly-2020/April/200402.html.
KEY REQUIREMENTS AND LIMITATIONS
- Applies only to allegations of unreasonable restraint of trade under Anti-Monopoly Act
- Communications must be related to the alleged conduct under investigation
- Communications must be with outside Japanese counsel—not in-house counsel or non-Japanese counsel
- Communications must be labeled and maintained in a particular manner
- Entity seeking protection must submit a privilege log