Product Liability 2009 - Arnold & Porter LLP

Japan
198
White & Case LLP Japan
1.2 Does the state operate any schemes of compensation for
particular products?
Yes. The Japanese government operates compensation schemes for
pharmaceuticals and for products that are deemed to have specific
risks. One such scheme is the Preventive Inoculation Law (Law
No. 68 of 1948 as amended), which compensates the victims of
injuries caused by inoculations. This scheme is entirely funded by
the Japanese government without contribution by the private sector.
Another scheme is the Pharmaceuticals and Medical Devices
Agency Law (Law No. 192 of 2002 as amended) which established
the Pharmaceuticals and Medical Devices Agency (the “MD
Agency”). Under this scheme, compensatory payments covering
medical and funeral expenses are made to individuals or their
families in the event of illness, disability or death caused by side
effects of pharmaceuticals. To administer the scheme, the MD
Agency charges pharmaceutical companies a contribution amount
(kyoshutsu-kin). There are two types of contributions: one is a
general contribution that is charged annually to all companies that
manufacture, import or market drugs, based on sales revenue. A
second contribution is made by specific companies involved in the
manufacture, import or marketing of drugs that are discovered to be
dangerous or cause injury.
Another scheme is found under the Consumer Products Safety Law
(Law No. 31 of 1973 as amended, the “CPSL”). The CPSL
established the Consumer Product Safety Association (Seihin Anzen
Kyoukai) (the “CPSA”) which administers a “safety-goods mark” or
SG-Mark programme for certain, classes of products together with a
related consumer compensation programme for persons injured by
products carrying the SG-Mark. To carry the SG-Mark, a company
must have its products conform to the safety specifications and
requirements promulgated by the CPSA. The compensation
programme is funded by the CPSA through, among other means, the
sale of SG-Mark stickers which are attached by the company to all
products that meet the SG-Mark standard. Adherence with the SG-
Mark standards is voluntary, but for many products, commercial
pressures compel adherence. Adherence to an SG-Mark standard
does not absolve a company of liability; it only provides a means by
which a consumer may seek compensation in the event of an injury.
The CPSA will compensate a person up to 100 million yen,
depending on the severity of the injury, for claims brought within a
defined number of years after purchase of the product by the
consumer. The CPSA bases payment on various factors. For
example, the CPSA will not pay any compensation in the event that
the injured party was contributorily negligent.
1.3 Who bears responsibility for the fault/defect? The
manufacturer, the importer, the distributor, the “retail”
supplier or all of these?
Under the JPLL, the classes of persons and entities that may be
liable for injuries caused by a defective Product include: (i) any
person who manufactures, processes, or imports the Product as a
business; (ii) any person holding himself out to be a manufacturer
of a Product by putting his name, trade name, trademark or other
feature on the Product, or any person who puts his name, etc. on the
Product in a manner mistakable for the manufacturer’s name; and
(iii) apart from any person mentioned in the preceding subsections,
any person who affixes his name to a Product and who may be
recognised as a manufacturer-in-fact, taking into consideration the
manner in which the Product was manufactured, processed,
imported or sold, or any other relevant circumstances (hereinafter,
the “Manufacturer”). In addition, liability may pass through the
final Manufacturer and include subcontractors, raw material
providers and part suppliers. In such cases, subcontractors, raw
material providers and part suppliers may be jointly and severally
liable with the Manufacturer for damages. Nevertheless,
subcontractors, raw material providers and parts suppliers have
defences to liability. See question 3.1 below. Manufacturers,
subcontractors, raw material providers and part suppliers may also
be liable under the CCJ. Only a party that breaches a contractual
duty and is in privity of contract with the injured party can be liable
under contract law.
1.4 In what circumstances is there an obligation to recall
products, and in what way may a claim for failure to recall
be brought?
The JPLL does not contain a provision that expressly obligates a
Manufacturer to recall or repair a Product found to be defective in a
product liability lawsuit. However, the aforementioned CPSL grants
government ministries the power to promulgate standards applicable
to specific classes and types of products, to investigate complaints
relating to particular products, compel manufacturers and importers
to disclose information relating to allegedly unsafe products, and
order product recalls or other remedial actions. For the majority of
consumer products, the ministry that has regulatory oversight is the
Ministry of Economy, Trade and Industry (“METI”).
Under the recently revised CPSL, a company is legally obligated to
take some form of remedial action if their product causes a “serious
product accident” to stop such accidents from further arising or
spreading. Such action could include investigating the nature and
cause of the accident, reporting the accident to a government
ministry, commencing a recall, repairing the product or making a
public announcement to warn consumers. A “product accident” is
defined as any accident that is either: (1) a product accident that
damages the life or body of a consumer; or (2) a product accident in
which a consumer product is destroyed or damaged, potentially
causing life-threatening or bodily injury to a consumer; and (3)
which could have been caused by a product defect. In other words,
in the case where an accident causes injury to a person, property or
the Product, unless it is clear that the cause is not a defect, the
incident is deemed to be a product accident. A “serious product
accident” means those product accidents in which the injury that
occurs or may occur is serious, and the nature or appearance of the
accident fulfils the criteria laid down by regulation. Criteria have
since been promulgated by METI to include: (1) fatal accidents; (2)
product accidents causing injuries with aftereffects that take more
than 30 days to heal or that leave the body permanently disfigured;
(3) fires; and (4) carbon monoxide poisoning.
In the event of a “product accident”, whether and what steps the
company might take are within the discretion of the company, but
companies are strongly encouraged to file a report to METI and
institute remedial actions that are appropriate under the
circumstances.
Under the powers granted in the CPSL, if at anytime a ministry such
as METI concludes that the remedial actions being taken by the
company are insufficient in light of the potential or foreseeable
danger associated with the Product, such ministry may order the
remedial actions it deems necessary. Such actions could include
ordering the company to conduct a total or partial recall of the
Product, offer all purchasers component replacement or repair
service, or place advertisements in national media to warn
consumers of the danger.
Aside from possible civil liability stemming from the failure to
recall, repair or warn consumers of a potential danger, violation of
the CPSL or a ministry order carries with it possible criminal fines
and criminal prosecution of the company and its directors, officers
and employees.
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