Limitations on Derivative Actions in Germany and Japan to Prevent Abuse

Abstract

This paper investigates the limitations on corporate derivative actions in Germany and Japan that are designed to prevent abuse. The analysis is based on the historical deve­lop­ment of the deriva­tive action in the respective jurisdictions, the current status of the derivative action and the specific limitations in existence. By comparing the two systems of limitations on the derivative action against a similar background of abusive sôkai-ya and ‘robber share­holders’, which create a specific necessity for limitations, the effec­tive­ness of the limita­tions is assessed. It is found that comparatively there are twice as many limitations on the derivative action in Germany as there are in Japan. Further it is found that the lowering of the filing fee for the derivative action and the reduction of further limita­tions has been one factor that has led to an increase in the number of derivative actions in Japan, which seems to suggest an increase in abusive derivative actions. In com­parison, under the German legal system it is found that there are too many limitations, which not only act to prevent abuse but which completely prevent the effective use of the relatively new derivative action in Germany. It is therefore suggested that the limitations in Germany need to be significantly lowered, while the seemingly effective limita­tions in place in the Japanese system should be further refined, for exam­ple by a thorougher disclosure duty for all settlements to deter abusive settlements to pay off the abusive litigant.