Collective investment scheme

Finding

According to the National Consumer Affairs Centre, the consultation number of investment scam to rural consumer centers was 2,218 in fiscal 2006, while it was 1,941 in fiscal 2005.[1] Collective investment scheme has been effective manner for bogus trader to invite consumer fraudulent transaction.

Collective investment scheme

The scheme is defined as a way of investing money with a large number of people to participate in a wider range of investments that may not be feasible for an individual investor hence many investors share the costs of doing so.In domestic law, the scheme had been not regarded by any law and any administrative body so far.[2] Therefore, bogus traders could raise fund from many consumer, and incurred a serious damages.

Large scale scams in the past

Scams related collected investment scheme were as follows:[3]Toyota shoji case (1985) … JPY 202,500,000,000 (lump sum damage), Yatsuyo case (2002) … JPY 154,900,000,000, Keizai Kakumei Klub case (1997) …JPY 35,000,000,000, G.O group case (2002)…. JPY 30,200,000,000, Orange Kyosai case (1997)….JPY 8,500,000,000

Future restriction

However, the collective investment scheme will be regarded as securities from September 2007, thus it will also be regulated by the Financial Products Trading Act.

---

[1] http://www.kokusen.go.jp/pdf/n-20070620_1.pdf[2] Administrative structure for achieving consumer policy in Japan, http://www.consumer.go.jp/seisaku/shingikai/bukai21/sanko9.pdf

[3] http://www.consumer.go.jp/seisaku/cao/shohishakyouiku/2002kenkyu/file/2bu_2.pdf

State of the art defense in strict procuct liability

The Product Liability Act (Act No. 85 of 1994) was enacted in 1994, which is based on the 1985 European Product Liability Directive (EEC 85/374).

The act approved a strict or a no-fault product liability scheme that enable to any person who suffers personal injury or property damage as a result of defective product to recover compensation from the manufacturer without the need to prove negligence.

Article 3(Product Liability)

The manufacturer, etc. shall be liable for damages arising from the infringement of life, body or property of others which is caused by the defect in the delivered product which was manufactured, processed, imported, or provided with the representation of name, etc. described in item 2 or item 3 of paragraph 3 of the preceding Article, provided, however, that the manufacturer, etc. shall not be liable when the damages
occur only with respect to such product.

Since enacted the act, about 100 court rulings are found nationwide.

The law admits states of the art defence that a manufacturer should not be liable for harm caused by a product that met the best prevailing standards of design, performance and safety at the time it was manufactured.

Article 4(Exemptions)

In cases where Article 3 applies, the manufacturer, etc. shall not be liable as provided in Article 3 if he/she proves that:
(i) the defect in such product could not have been discovered given the state of scientific or technical knowledge at the time when the manufacturer, etc. delivered the product;

Concerning the food poisoning case, the ruling of the Tokyo District Court on 13th December 2002 rejected the counterclaim of the state of art defence stated by the defendant.