NINoritake Ito
日本語/EN

Business disputes / for individuals in Japan

Business Disputes in Japan: Legal Help for Foreign Professionals, Founders and Investors

Doing business in Japan does not always go according to plan. Advice under Japanese law, in English, for foreign professionals, founders and investors.

Describe your situation Common disputes

You may have completed work for a Japanese company but not been paid. A consulting agreement may suddenly have been terminated. A startup may have promised you shares or stock options that you never received. A relationship with a co-founder or business partner may have broken down. Or money advanced as a loan or investment may not have been returned as expected.

For foreign professionals and investors, these disputes can be particularly difficult because the contract may be in English while the company, assets and legal proceedings are in Japan.

This page explains some of the most common business disputes involving foreign individuals and Japanese companies.

Common disputes

Common Business Disputes Involving Foreign Clients

1. Unpaid fees and invoices

A common situation involves a freelancer, consultant, developer, designer or other professional who performs work for a Japanese company but does not receive the agreed compensation.

Typical explanations include:

  • “The deliverables were not satisfactory.”
  • “Internal approval has not yet been completed.”
  • “We will pay after our customer pays us.”
  • “The project was cancelled.”
  • “There was no formal written contract.”

Whether payment can be recovered depends on the agreement between the parties, what work was performed and the evidence available.

A signed contract is helpful, but it is not always essential. Emails, Slack or other chat messages, invoices, proposals, specifications and payment history can also become important evidence.

Read more: Unpaid Freelance Fees in Japan →

2. Termination of freelance and consulting agreements

Foreign engineers, consultants and other professionals working in Japan are often engaged under gyomu itaku agreements rather than employment contracts.

When the relationship ends suddenly, important questions include:

  • Did the client have a contractual right to terminate?
  • Was advance notice required?
  • Was the agreement fixed-term or indefinite?
  • Was there an alleged breach?
  • Is compensation still payable for work already performed?
  • Was the person truly an independent contractor, or could the relationship legally be treated as employment?

Japan’s Freelancer Act may also apply to certain transactions between businesses and freelancers.

For some engagements lasting six months or more, a business terminating or declining to renew the engagement may be required, subject to exceptions, to provide at least 30 days’ advance notice.

However, the statutory notice obligation and the civil-law validity of a termination are separate questions. A failure to provide statutory notice does not automatically mean that the termination itself is legally invalid.

Read more: Contract Termination in Japan →

3. Stock options and equity disputes

Startup compensation frequently includes shares, stock options or promises of future equity.

Disputes often arise when a foreign employee or executive leaves the company before an IPO or acquisition.

“You will receive 2% of the company” does not necessarily establish what legal rights have actually been granted.

The documents must be examined carefully.

Relevant materials may include:

  • offer letters
  • employment or consulting agreements
  • stock option agreements
  • shareholder resolutions
  • board minutes
  • cap tables
  • vesting schedules
  • leaver provisions
  • emails or messages concerning the equity arrangement

One of the most important questions is whether stock options or shares were legally issued, or whether the company merely promised to issue them in the future.

Read more: Stock Option and Equity Disputes in Japan →

4. Founder and business partner disputes

A disagreement between founders is rarely just one dispute.

It may simultaneously concern:

  • share ownership
  • voting rights
  • management authority
  • company bank accounts
  • loans made by a founder
  • intellectual property
  • confidential information
  • director positions
  • customer relationships
  • whether one founder should buy out another

The first step is therefore usually to identify which rights belong to the company and which rights belong personally to each founder.

A commercial solution may involve a share transfer, resignation, repayment of founder loans, transfer of intellectual property, release of claims and rules concerning future competition or confidentiality.

Read more: Founder and Business Partner Disputes in Japan →

5. Loans and investment disputes

Money provided to a company or business partner can have very different legal characteristics.

For example, JPY 10 million transferred to a startup could legally be:

  • a loan
  • payment for shares
  • an investment under an investment agreement
  • an advance
  • a contribution to a joint venture
  • money transferred under an informal agreement

This distinction matters.

A lender generally has a contractual claim for repayment when the loan becomes due.

An equity investor, on the other hand, does not ordinarily have the right to demand repayment of the investment simply because the business performed poorly.

The legal basis for recovery must therefore be identified before making a demand.

Read more: Recovering Loans and Investment Money in Japan →

Guides

The five guides in this series

More specific situations

Which of these sounds like yours?

Each card notes the first things I check. They are starting points for a conversation, not conclusions about your case.

Freelancer

Unpaid fees and invoices

“The work was delivered in spring. They keep saying payment is being processed.”

First checksWhat the order or the chat record says about price and deadline. Since November 2024, Japan's Freelance Act generally requires a client to set a payment date no later than 60 days after receiving the work.

Freelancer

A contract cut short

“We had a year-long retainer. They ended it by email with a week's notice.”

First checksThe termination clause and how long the engagement has run. For continuing engagements of six months or more, the Freelance Act generally requires 30 days' advance notice.

Freelancer

Work rejected, refund demanded

“They used the site for two months, then said it didn't meet the spec and want their money back.”

First checksHow the specification was fixed, whether there was an acceptance step, and whether the client's own conduct amounted to acceptance. System and web projects often turn on these facts.

EmployeeFreelancer

Contractor on paper, employee in practice

“I had fixed hours, a company email and a manager. My contract calls me a consultant.”

First checksHow much control the company had over your time and your methods. If the reality is employment, the rules on overtime, dismissal and paid leave can apply whatever the contract is headed.

Employee

Dismissal, or pressure to resign

“They gave me a month's notice and a resignation form to sign, and called it a restructuring.”

First checksWhether this is a dismissal or a resignation you agreed to — the difference decides what you can claim. A dismissal without objectively reasonable grounds can be held invalid. Take advice before signing anything described as voluntary.

Employee

Bonus, commission or incentive not paid

“My offer letter promised a performance bonus. After I resigned, they said I no longer qualify.”

First checksThe wording of the offer letter and the bonus rules, any condition that you be employed on the payment date, and whether the amount had already been fixed by a formula.

EmployeeExecutive

Stock options and shares at exit

“I was told my options were worth something. Now HR says they lapsed the day I left.”

First checksThe option allotment agreement, the resolution that issued the options, the vesting and forfeiture terms, and any buy-back clause for shares you already hold.

EmployeeFreelancer

Non-compete and confidentiality claims

“My former employer says my new job breaches my non-compete and is threatening to sue.”

First checksThe duration, geography and scope of the restriction, and whether you were compensated for it. Japanese courts have limited restrictions that go further than the legitimate interest being protected.

Executive

Removed as a director

“The shareholders voted me off the board halfway through my term.”

First checksWhether the resolution was validly passed, and whether there was a justifiable reason. Under the Companies Act, a director removed without one may claim damages, typically measured by the remaining compensation.

ExecutiveOwner

Co-founder or joint-venture breakup

“My co-founder left and still holds 40% of the company. We never signed anything about that.”

First checksThe articles of incorporation, any founders' or shareholders' agreement, the share transfer restrictions, and what was agreed about intellectual property and customers.

OwnerFreelancer

Money lent or invested, never returned

“I put ¥5 million into a friend's business. There's no contract, just LINE messages.”

First checksWhether it was a loan, an investment or a gift, and what the records show. Bank transfers and chat messages often carry more weight than people expect.

Evidence

What Evidence Should You Preserve?

If a dispute is developing, preserve the documents before communications or accounts become inaccessible.

Important evidence often includes:

  • signed contracts and amendments
  • email
  • Slack, Teams, LINE or other chat messages
  • invoices
  • bank transfer records
  • proposals and statements of work
  • files showing delivery of work
  • cap tables
  • board or shareholder documents
  • screenshots of relevant systems
  • records of negotiations

Do not delete messages simply because they appear unfavorable. The full context may later become important.

Time limits

Claims expire. Don’t wait for the other side to get back to you.

Most contract claims (fees, loans, refunds)5 yrs
Unpaid wages, from each payday3 yrs

The period for a contract claim runs from when you knew you could claim. Different periods apply to particular claims, so treat these as general guides and check your own case early.

Jurisdiction

Can a Foreign Person Sue a Japanese Company in Japan?

Foreign nationality does not prevent a person from bringing a civil claim in Japan.

Whether a Japanese court has jurisdiction depends on the circumstances, including the defendant, place of performance, contractual jurisdiction clauses and other factors.

The governing law must also be considered in international contracts.

Japanese court proceedings are conducted in Japanese. Documents submitted to the court generally need to be in Japanese, and foreign-language evidence may require Japanese translations.

This makes early organization of English-language contracts and communications particularly important.

Demand letter

Should You Send a Demand Letter Before Filing a Lawsuit?

Often, yes.

A lawyer’s demand can clarify:

  • the amount claimed
  • the legal basis
  • the relevant contractual provisions
  • the evidence supporting the claim
  • the deadline for payment or response

Many commercial disputes are resolved through negotiation without a final court judgment.

However, a demand letter should not be sent mechanically. In some cases, preserving assets, evidence or litigation strategy may require a different approach.

Process

How a case usually moves

Most disputes are resolved at step 3 or 4. The later steps are there so that the other side knows you can take them.

  1. Conflict check and first call

    I confirm that I do not act for the other side, and then we talk through what happened and what you want out of it.

    Please don't send documents until the conflict check is cleared.

  2. Document review and assessment

    I read the contract and the records, and give you a view on the strong points, the weak points, the likely range and the cost of each route.

    You get the scope and the fee in writing before any paid work starts.

  3. Demand letter

    A formal letter from a lawyer setting out the claim and a deadline. This alone often moves a payment that has been stalled for months.

    Usually sent by contents-certified mail , which creates proof of what was demanded and when.

  4. Negotiation

    Settlement terms, payment schedules, mutual releases. I draft the settlement agreement so that it can be enforced if payment stops again.

    A settlement can be made enforceable, for example through a notarial deed.

  5. Court procedures

    If the other side will not engage, the route depends on the claim and its size.

    Payment demand for undisputed debts; small claims up to ¥600,000; labor tribunal , designed to finish within three hearings; or ordinary litigation.

Timing

When Should You Speak With a Lawyer?

It is useful to obtain advice early if:

  • the amount in dispute is significant
  • the other side has denied liability
  • a contract is about to be terminated
  • stock options or shares may be cancelled
  • the company appears financially unstable
  • communications have suddenly stopped
  • you are being asked to sign a settlement or release
  • litigation has already been threatened

A short review at an early stage can sometimes prevent the dispute from becoming substantially more complicated.

Why a corporate lawyer

I know how the other side prepares

I have sat on the company side

Four years in Rakuten’s legal department, then corporate and M&A practice. I know how companies draft these clauses, which ones they expect to hold, and where they are ready to settle.

Documents first

These disputes are decided on records: the agreement, the emails, the chat logs, the bank transfers. I build the case from what can be shown, and tell you early if the record is thin.

English with you, Japanese with them

You get the advice in English. Letters to the other side, negotiations and any court filings are handled in Japanese, and I explain each document before it goes out.

Fees & scope

What I take on, and what I refer

Fees

Fees depend on the amount claimed, the complexity and the route. After the first review I set out the scope and the fee in writing, and we sign an engagement letter before paid work begins. Nothing is billed that you have not agreed to.

I do not promise outcomes. I will tell you plainly if the cost of pursuing a claim is likely to outweigh what you could recover.

Outside this practice

Divorce, custody and other family matters; traffic accidents and personal injury; medical malpractice; criminal defence; visa and immigration applications.

For these, or for disputes governed by foreign law, I can point you to appropriate counsel. Company-side and startup work is described on the startup legal page.

FAQ

Questions people ask before writing

General answers about how these matters work in Japan. Your own case may differ.

I am leaving Japan soon, or I have already left. Can I still bring a claim?

Usually yes. Living abroad does not remove a claim against a company in Japan, and you can instruct me from outside the country — meetings are held by video and documents are exchanged electronically. In ordinary civil litigation your attorney appears for you, so you generally do not need to fly back. Some procedures, such as a labor tribunal, proceed on the basis that the party attends, and whether you can take part remotely is for the court to decide in each case. I will tell you at the outset what your case is likely to require of you.

Will a dispute with my employer affect my visa?

A civil dispute is not in itself an immigration matter. But a work-based status of residence is tied to your employment: when a contract with the employing organisation ends, a mid- to long-term resident generally has to notify the Immigration Services Agency within 14 days, and a long gap in activity can come up at renewal. I do not handle visa or immigration applications. Where that side needs attention I will say so early, so that the two are handled in step rather than one undoing the other.

My contract is governed by the law of another country. Does that end the discussion?

Not necessarily. Between businesses, a governing-law and jurisdiction clause is generally respected. Employment is treated differently: where the work is performed in Japan, mandatory protections of Japanese labour law can still be applied at the employee's request even though the contract names another country's law. A foreign-law clause is worth reading carefully rather than treating as the answer.

All the documents are in Japanese and my Japanese is limited.

That is the ordinary situation here. I read the Japanese originals and explain them to you in English. Letters to the other side and anything filed with a court are prepared in Japanese, and I go through each one with you before it goes out.

All I have is a chat thread. Is that enough?

Often it is more than people expect. LINE, Slack, WhatsApp and email exchanges, together with bank transfer records, are ordinary evidence in Japanese civil practice, and a contract can be formed without a signed document. What matters is whether the records show what was agreed and what was done. If the record is too thin to support a claim, I will say so at the assessment stage rather than after you have spent money.

How long does it take?

A demand letter and the response to it usually play out over a few weeks. Negotiated settlements often conclude within one to three months. A labor tribunal is designed to finish within three hearings. Ordinary litigation typically runs a year or more, which is one reason most matters settle before that point.

The amount is not large. Is it worth instructing a lawyer?

Sometimes it is not, and I will say so. For smaller undisputed debts there are lighter routes — a payment demand, or small claims for amounts up to ¥600,000 — and in some cases a single demand letter is the sensible end of the matter.

Will the other side know that I contacted a lawyer?

Not unless and until you decide to send something. The first conversation is confidential, and nothing goes to the other side without your instruction. Wanting to understand your position before deciding anything is a perfectly ordinary reason to get in touch.

Contact

Discuss Your Business Dispute in Japan

If you are a foreign professional, founder or investor involved in a dispute with a Japanese company or business partner, the first step is usually to identify the relevant contract, evidence and legal relationship.

English-language contracts and communications can be reviewed together with the applicable Japanese legal issues.

Typical matters include:

  • unpaid freelance and consulting fees
  • termination of independent contractor agreements
  • stock option and equity disputes
  • founder and shareholder disputes
  • joint business disputes
  • loan and investment recovery

Please contact me with a brief explanation of the dispute and the key documents available. Please read the engagement policy first; contacting me does not create an attorney–client relationship, which begins only when we sign an engagement letter.

Go to the contact form

This article provides general information about Japanese law and does not constitute legal advice for any particular matter. The applicable rules and available remedies depend on the facts, contractual terms and other circumstances of each case.