Japanese court acknowledges foreign gambling debt – positive news for the gaming industry
A Japanese court recently sided with a cruise ship operator who took legal action against a Japanese customer who gambled at his casino while on the Asia-Pacific high seas using a facility credit granted by the casino.
In its decision issued in March 2021, the Tokyo District Court authorized the plaintiff to assert its claim against the defendant the sum of approximately HK $ 6.18 million with interest, which was incurred by the defendant under a check cashing facility agreement with the gambling applicant.
The plaintiff obtained a default judgment in Hong Kong and then brought an action in Japan against the defendant who is a Japanese national to enforce the judgment in Hong Kong.
The defendant challenged the lawsuit in Japan on a number of grounds, the main one being the breach of public order. Despite the defendant’s opposition, the Hong Kong default judgment has been recognized by the Tokyo District Court and can therefore be enforced against the defendant.
In reaching its decision, the Tokyo District Court ruled on the following key points:
- Money loaned under an agreement governed by foreign law for gambling outside Japan was not contrary to Japanese public policy as set out in Article 118 (iii) of the Civil Procedure Code; and
- Enforcement of a Hong Kong judgment based on gambling debts was not contrary to Japanese public policy.
The applicant operates a deep-sea cruise ship in the Asia-Pacific region. The customer is a Japanese national residing in Japan who has entered into a check cashing facility agreement with the complainant (i.e. a credit facility). The law governing the agreement is Panamanian law with a non-exclusive jurisdiction clause in favor of the courts of Hong Kong.
After the client defaulted and failed to respond to the plaintiff’s letter of formal notice, the plaintiff initiated legal proceedings against the client in Hong Kong, served him with the summons in Japan by the through the Japanese authorities and successfully obtained the default judgment in Hong Kong.
In allowing the plaintiff’s request, the Tokyo District Court interpreted the agreement as an agreement to provide loans of money for the purpose of entertainment at the casino. The boss sought to challenge the Hong Kong ruling on the basis, among other things, of a “violation of Japanese public order”. On this issue, the Court accepted that the operation of a casino on a ship on the high seas and the money loaned for entertainment in a casino were not illegal under the laws of Panama, where the ship was registered. . In addition, the relevant transactions were all made outside of Japan. Therefore, the Court concluded that there was not sufficient reason to say that the judgment was contrary to Japanese public policy.
The boss also sought to challenge the proceedings on other grounds, including the service of the judgment, but the same decision was overturned by the court.
The significance of this case is the Japanese court’s recognition of a Hong Kong default judgment based on gambling credit. This is positive news not only for cruise ship operators, but also for the gaming industry as a whole, which can now consider suing Japanese nationals or VIP clients who have assets in Japan in a jurisdiction where they can get a judgment, and then try to domesticate the judgment in Japan for execution.
The move is also a welcome trend as Japan plans to develop world-class integrated resorts in the country where VIP credit customers naturally contribute to its gaming revenue.