Masanori Kawai is a partner at the Japanese law firm Nagashima Ohno & Tsunematsu. He has been engaged in China-related business and served as the representative of the firm's Shanghai office since 2011.

In 2019, a Japanese company engaged in commodity trading and investment faced financial difficulties and filed for civil rehabilitation proceedings with Tokyo District Court in Japan. The court issued rulings to commence the civil rehabilitation procedure and appoint a Japanese supervisor (a bankruptcy trustee).

The company owned assets in China, including real estate, equities and publicly traded stocks in Shanghai. Since the binding force of the Japanese court’s ruling does not automatically extend to these assets in China, coordinating management and disposal of assets, both in China and Japan, was crucial for the successful implementation of the civil rehabilitation procedure. It can also ensure fair repayment to all creditors, including those in China.

"As legal counsels representing the company, we aimed to facilitate the recognition of the Japanese civil rehabilitation ruling by Chinese courts," Kawai said.

There had been no precedent for mutual recognition of court judgements and rulings between China and Japan, making this an unprecedented step in cross-border bankruptcy proceedings. 

Huang Xianhua, deputy chief judge of the bankruptcy tribunal at the Shanghai No. 3 Intermediate People's Court, said China has been paying more attention to cross-border bankruptcy and making significant progress. This case marked the first time a Chinese court recognized a Japanese bankruptcy proceeding and the ruling issued by its supervisor.

"There are a large number of Japanese enterprises with substantial assets in China," Kawai pointed out, saying this case has greatly boosted confidence in the Japanese judicial circle. Debtors in Japan undergoing bankruptcy and their representatives wishing to dispose of assets in China now have an avenue to seek recognition of these proceedings, he added. 

"We also look forward to Japanese courts making decisions to recognize rulings or judgments related to Chinese bankruptcy proceedings, further strengthening economic and trade exchanges between the two countries and facilitating the steady improvement of Shanghai's business environment," Kawai said.