Contract Drafting in Japan: My Q&A with Yusuke Sato

In November, I head to Asia—I’m giving seminars in Seoul, Tokyo, and Singapore.

I’m particularly looking forward to my seminar in Tokyo. It will be my first trip to Japan in 25 years, and my first seminar in Japan. (For more information, go here.)

I haven’t had much occasion to engage with Japanese contracts professionals. I expect that the seminar will provide plenty of opportunity for that, but I thought it would be interesting to get an early start by doing a Q&A with a Japanese contracts professional. Hence this post.

How do I decide whom to do a Q&A with? That’s easy—I pick someone who has somehow come within my orbit. I knew that Yusuke Sato has consulted A Manual of Style for Contract Drafting, so I thought it appropriate to ask him if he’d like to answer some questions about his work with contracts. He was kind enough to accept.

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Yusuke SatoQ: Please tell my readers a bit about yourself.

A: I was born and raised in Japan; my first language is Japanese. I studied law at a Japanese university and at New York University School of Law. I’m admitted to the New York State bar, not in Japan. I currently work as managing counsel for Showa Shell Sekiyu K.K., a Shell affiliate located in Japan. My work at the company involves various matters, such as mergers and acquisitions, intellectual-property licensing, and antitrust and Foreign Corrupt Practices Act compliance. (The views I express in this Q&A are my own and don’t reflect the views of my current employer or anyone else.)

Q: How did you learn English?

A: In addition to studying English at junior high school, high school, and university in Japan, I spent a few years living, studying, and working in the U.S. and Singapore. I was also fortunate enough to have had opportunities to work on cross-border transactions that required negotiation in English.

Q: To what extent do you work with contracts in English? And when you do, are you generally the drafter or the reviewer, or does it vary from transaction to transaction?

A: Approximately half of my work involves contracts in English. Whether I am the drafter or the reviewer depends on a type of transaction and who has the bargaining power. Generally speaking, I’m the drafter in buy-side transactions or when my company is in a stronger negotiating position, and I’m the reviewer in sell-side transactions or when my company is in a weaker negotiating position.

Q: How important are English-language contracts for Japanese companies?

A: English-language contracts have become important for Japanese companies nowadays. Because of globalization of the markets mainly due to developments in information technology, and also because of the projected decrease in the Japanese population, many Japanese companies have been trying to increase their overseas sales and compete in markets worldwide. That requires contracting and negotiating in English, so working with English-language contracts has become more important.

Q: Is it relevant for purposes of working with English-language contracts whether one is a Japan-qualified lawyer (Bengoshi) or not?

A: I think that what matters most is whether you’re flexible enough and experienced enough to handle whatever contracts come your way, including contracts that incorporate “Western” legal concepts, such as representations and warranties, indemnities, and residuals clauses.

Q: What are some challenges facing Japanese lawyers working with contracts in English contracts?

A: In my opinion, there are three challenges. First, some Japanese native speakers have difficulties in distinguishing the use of definite articles from that of indefinite articles. This results in frequent use of the extraneous the, something you note in your book. Second, English contracts tend to be lengthy, whereas traditionally, contracts in Japanese tend to be shorter, with the idea that other terms would be handled outside the contract. And third, Japanese native speakers are inclined to incorporate into English distinctive features of Japanese, for example use of double negatives and use of ambiguous sentences without a subject.

Q: Is there anything that you’d like to see changed, in terms of training, resources, or work practices?

A: It would be helpful if in-house counsel and outside law firms were to work together more effectively. In my experience, when an outside law firm is retained to assist with a transaction, usually they want to take control, leaving in-house counsel to play only a supportive role. Both would benefit from enhanced collaboration—outside law firms usually have broad experience and specialized expertise, and in-house counsel know the business intimately. But this is becoming less of an issue, simply because companies are increasingly handling their commercial work entirely in-house, calling on outside law firms only for specialized transactions.

Q: What do you like about working with contracts?

A: First, working with contracts can give you the opportunity to be creative. When contract negotiations are in stalemate and the deal seems about to fall apart, that’s when I try to be my most creative. If I come up with a novel solution and the other side agrees with it, that gives me a great sense of accomplishment. And second, I enjoy contract negotiations because I might learn something new every time I interact with the other side. It might be a new legal concept, a negotiation tactic, or simply how to comport myself in a way that increases the odds of a successful outcome.

Q: Does the fact that Japan has a civil-law system affect contract drafting?

A: I mentioned above that Japanese contracts tend to be short and concise. This might be due in part to the fact that Japan has a civil-law system—comprehensive default rules govern many topics, so you don’t need to address them in a contract. Nevertheless, due to the globalization of business I routinely see Japanese contracts that incorporate common-law concepts.

Q: I know that you’re familiar with A Manual of Style for Contract Drafting. Has it been a useful resource?

A: Absolutely, yes. I purchased your book around ten years ago, when I was researching the implications of best efforts provisions under U.S. law. Of course, I found in it analysis of all sorts of other relevant topics, such as how to handle shall. So your book has turned out to be one of the reference works that I consult most often when I work on English-language contracts.

Q: And a final question: I haven’t been to Japan for many years. What’s one thing I should do while I’m in Tokyo?

A: I recommend that you consider climbing Mt. Fuji, if you have the time. Mt. Fuji has been recently added to the World Heritage List. Or you could visit Tokyo Skytree in Sumida-ku, Tokyo. The tower opened to the public in 2012 and has attracted millions of tourists, both Japanese and non-Japanese.

Categories Q&A

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.