Japanese Law and the Global Diffusion of Trust and Fiduciary Law

• Author: Masayuki Tamaruya
• Position: Professor, Rikkyo University College of Law
• Pages: 2229-2261

2229

Japanese Law and the Global Diffusion of

Trust and Fiduciary Law

Masayuki Tamaruya*

I. INTRODUCTION ......................................................................... 2229

II. JAPANESE RECEPTION OF TRUSTS .............................................. 2231

A. INTERNATIONAL BOND ISSUES AND AMERICAN

MORTGAGE TRUSTS ............................................................. 2231

B. COMMERCIALIZATION OF TRUSTS AND THE RISE OF

TRUST COMPANIES .............................................................. 2233

C. CODIFICATION OF SUBSTANTIVE TRUST LAW .......................... 2236

D. POST-WAR INTERACTION ...................................................... 2240

III. EAST ASIAN RECEPTION AND JAPANESE LAW .............................. 2242

A. COLONIAL IMPOSITION ........................................................ 2242

B. TRUST COMPANIES AND BANKING REGULATION ..................... 2244

C. CODIFICATION IN EAST ASIA ................................................. 2246

IV. THE RISE OF FIDUCIARY LAW ..................................................... 2251

A. JAPANESE REFORM MOVEMENTS ............................................ 2252

B. EAST ASIAN DYNAMISM ........................................................ 2256

C. THE RISE OF FAMILY TRUSTS ................................................ 2258

V. CONCLUSION ............................................................................ 2260

I. INTRODUCTION

From the seventeenth century onward, the idea of trust spread outside

England as part of the British Empire’s colonial activities and as a result of

* Professor, Rikkyo University College of Law. This Article is based on the research I

conducted in 2016–2017 as a visiting scholar at Harvard Law School’s East Asian Legal Studies

program and Harvard Yenching Institute. I also received generous financial support from

Harvard Yenching Institute and Japan Society for the Promotion of Science (JSPS Kakenhi Grant

No. 15KK0100). Earlier versions were presented at various conferences in Cambridge, Sao Paolo,

Harvard, UCLA, Singapore, and Iowa, and I thank the conference participants for their helpful

comments. I am particularly grateful to David English, Thomas Gallanis, J. Mark Ramseyer,

Robert Sitkoff, Hang-Wu Tang, and Stelios Tofaris for their continuous support.

2230 IOWA LAW REVIEW [Vol. 103:2229

London’s prominence in the international capital market. The path of trust

diffusion diverged into two routes. One route went around the Cape of Good

Hope toward the East, through South Africa and India, and then to Japan.

The other path went West, crossing North America and the Pacific Ocean to

reach Japan in the early twentieth century. Thus, the two routes merged in

early twentieth century Japan. The California Civil Code of 1872 and the

Indian Trust Act of 1882, as well as the contemporary commercial practices

of American trust companies, provided important sources of reference for the

drafter of Japanese trust legislation in 1922.1

The diffusion of trust law did not end in Japan. The westbound diffusion

continued to Taiwan and Korea through Japanese imposition of its law and

industry regulation as part of its colonial expansion in the early twentieth

century.2 While the colon ial impact diminished over time after World War II,

the common self-identification as civil-law jurisdictions and the similarities in

economic growth models can explain the presence of parallel trust doctrines

in these East Asian jurisdictions. On the eastbound route, Hong Kong and

Singapore have emerged as the two major commercial hubs in Asia with

vibrant trust practices based on English common law. Today, these two routes

converge in mainland China. Trust industries have played a vital role in the

development of the Chinese market economy since Den Xiao Ping declared

the opening up policy in 1979. While the westbound influence can be see n in

the Chinese trust legislation in 2001, Hong Kong and Singapore on the

eastern route cater to the needs of wealthy clients in China through the use

of offshore trusts.3

This Article will trace these less frequently traversed paths of trust law

diffusion, with the dual aim of identifying the role of Japanese law in shaping

the global evolution of the fiduciary norm and examining the doctrinal and

conceptual implication that the understanding of these historic paths can

bring about. Part II traces the process of Japanese reception of trusts. This

complicated process, under various economic and geopolitical pressures,

defined the particular context in which trust was introduced and developed

in Japan and East Asia. Part III looks at the reception of trusts in East Asian

jurisdictions and examines the complex and sometimes troubling role that

Japan and its law played in the process. Part IV discusses the development in

the past three decades and examines the deepening of the fiduciary norm in

Japan and East Asia. We will see that these historical, comparative, and

conceptual inquiries help us envision the future course of trust law and

practice in an increasingly globalized and competitive landscape.

1. See infra Part II.C.

2. See infra Part III.A.

3. See infra Part III.C.

2018] GLOBAL DIFFUSION OF TRUST AND FIDUCIARY LAW 2231

II. JAPANESE RECEPTION OF TRUSTS

In April 1900, Masayoshi Takagi set out on a corporate mission for

Daiichi Bank, modern Japan’s first commercial bank, to survey the operation

of American trust companies. 4 He visited Chicago, Buffalo, Syracuse, New

York, Philadelphia, Baltimore, Washington D.C., and Boston to meet with

officials at major trust companies.5 His report upon his return in 1901 divided

the trust companies’ lines of business into family asset management and

commercial services, but his primary interest was in the latter. 6 While

recording his observations about the American trust companies’

organizational structures, 7 fund management methods, 8 income and

expenses, 9 and directors’ compensations, 10 he extensively discussed state

regulatory legislation. 11 In the final chapter, Takagi argued that the

establishment of reliable trust companies in Japan would help introduce

foreign capital, which he saw as the pressing national agenda.12

Introducing foreign capital by using trusts and regulating trust

companies are topics that are barely mentioned in today’s law school classes

on trust law or even in academic law journals in the United States or the U.K.13

Nevertheless, these commercial aspects of American trust practices provided

the chief motive for reception of trusts not only in Japan but also in many East

Asian jurisdictions in later years.

A. INTERNATIONAL BOND ISSUES AND AMERICAN MORTGAGE TRUSTS

The Secured Bond Trust Act of 1905 14 was the first significant legislation

to introduce the concept of the trust in Japan. 15 This was intended to facilitate

collateral bond issues by authorizing trust companies to hold and manage

certain corporate assets in trust as collateral.16 Under this legislation, trustee

4. MA SAYOSHI T AKAGI, THE REPORT OF THE AMERICAN TRUST COMP ANY BUSINESS

PRACTICES i (1901).

5. Id. at i–iv.

6. Id. at 7, 111–14.

7. Id. at 30–44.

8. Id. at 86–96.

9. Id. at 106–09.

10. Id. at 110.

11. Id. at 67–86.

12. Id. at 117–20.

13. See, e.g., LAWRENCE M. FRIEDMAN, DEAD HANDS: A SOCIAL HISTORY OF WILLS, TRUSTS,

AND INHERITANCE LAW 134–35 (2009); Lawrence M . Friedman, The Dynastic Trust, 73 YALE L.J.

547, 563 n.58 (1964).

14. Tanpo-tsuki shasai shintaku-hō [Secured Bond Trust Act], Law No. 52 of 1 905 (Japan)

(providing for trust contract to secure collateral for bond issues; hereinafter Secured Bond Trust Act).

15. For the historical account of Japanese Trust Law, see Makoto Arai, Japan, in TRUSTS IN

PRIME JURISDICTIONS 255, 256–61 (Alon Kaplan ed., 4th ed. 2016).

16. TSUNEO ŌTORI, THE LAW OF CORPORATE OBLIGATION 74–75 (1958) ; TORAJIRO IKEDA,

ON THE LAW OF TRUSTS FOR SECURED BONDS 112–13 (1907).