„The Business Judgment Rule in Japan, Germany and in the USA – a comparison“
Being held liable for the breach of fiduciary duties owed by managers was rather uncommon until the beginning of the early 1990ies. Nowadays the opposite is true: The likelihood to face a liability law suit significantly increased turning the severe liability laid out by the law (e.g. liability for all forms of negligence, often economically unbearable amounts of damage, quite limited possibilities for waivers and settlements, along with the dangers arising out of hindsight bias by the judiciary and the rather unfavorable burden of proof) into painful reality. The Business Judgment Rule seems to be the perfect remedy as it promises to alleviate the severe liability by its safe harbor allowing the managers to take risk in favor of their companies. Despite its common origin in the US numerous differences between the Business Judgment Rule in Japan, Germany and the US can be identified.
The famous ARAG/Garmenbeck-Judgment rendered by the German Federal Court (BGH) in 1997 laid the grounds for the golden decade of the Business Judgment Rule. After turning into one of the central issues in corporate law discussion in Germany the Business Judgment Rule reached its climax when it was codified (Sec. 93 para. 1 sentence 2 Stock Corporation Act, AktG). With the recognition of the Business Judgment Rule by the Supreme Court in 2010 Japanese legal scholars intensified their efforts regarding the Business Judgment Rule. However, it seems that the enthusiasm seen in Germany was hardly reached which might explain that the Business Judgment Rule in Japan is still as of today judge-made case law. My thesis will deal, inter alia, with these reasons as well as with the actual purposes of the Business Judgment Rule in Japan. Based on an introductory overview of the liability of managers in Japan the requirements, the functioning and the conjunction of the Business Judgment Rule with procedural law will be examined in-depth. Finally, the presumption that the Japanese and German Business Judgment Rule have their common roots in the US Business Judgment Rule raises the issue of legal transplants and the reasons of their different assimilation in their respective jurisdiction.