Can lending companies legally discriminate against non-Japanese?
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| former Asahi Bank headquarters |
Steven Herman in Japan
In the year 2000, Steve Herman had lived in Japan for over ten (10) years and was forty (40) years old. He was president of the FCCJ for one year (1997~1998) and worked at TV Tokyo at the time. While it was not disclosed exactly, he hinted ("an income triple that of the average salary-man") that he had a much higher than average stable income — estimated by others to be in excess of ¥15,000,000/year. An American citizen, he did not have permanent residency at the time, but he was engaged to a Japanese national; he eventually married.He attempted to purchase a condominium in the Yoyogi area of Shibuya, Tokyo (東京都渋谷区代々木) using a real estate agent. The real estate agent took a down payment, and Steve Herman attempted to apply for a mortgage loan ¥68.5 million from Asahi Bank (あさひ銀行). The bank wouldn't accept his application.
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| Steven L. Herman |
"This is discriminatory treatment based on nationality and violates both the International Covenants on Human Rights and the Constitution, which spells equality under law."
Possible Prior Precedent?
Based on the Convention Steve Herman cited, perhaps he was inspired to file suit based on the successful application of the Convention in a case that occurred just prior to his loan denial.The Ana Bortz Case: October 12, 1999
In June, 1998, Brazilian Ana Bortz (アナ・ボルツ), 34 at the time and a reporter for a local Japanese branch of a Brazilian satellite television network (IPCTV) and a Japan resident for six (6) years, filed a lawsuit and won. In the Bortz case, the judge cited the UN Convention of the ICERD to which Japan was a signatory to, which defines illegal discrimination, in his summary. Ana Bortz is a Brazilian national married to a 『日系』 Japanese-Brazilian in Japan.Ana Bortz was refused service and asked to leave a jewelry store while shopping for a Brazil produced Hematita mineral based jewelry in Sakana-machi, Naka Ward, Hamamatsu City, Shizuoka Prefecture (静岡県浜松市中区肴町) — a city known for its large Brazilian-of-Japanese-descent (『日系』) immigrant population. In 1998, over 10,000 of the registered foreigner population of the city was Brazilian. With a population of 570,000 people, this city had at the time the largest population of Brazilians in the country.
One of the three shop co-operators initially present (a family run business: a father with his mother and younger sister) claimed that the Ana Bortz was acting unnaturally while looking at one of the store's display showcases containing two onyx necklaces in the back, so he asked her "Where are you from?" in English as she was leaving. She responded first in Japanese (「ブラジルからです。」) then in English when he seemed to fail to understand. In response to the English, 鈴木孝尚 (46 years old) said "This store does not allow foreigners" in English repeatedly and asked her to leave.
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| Ana Bortz |
「只今入場制限中 お客様が五人以上になりますと混雑しますので、その節はよろしくお願いします。尚外国人の入店は固くお断りします。」鈴木孝尚 then removed a Japanese language poster — printed and distributed to local stores by the Hamamatsu Central Police Department (浜松中央警察署) — on the store's wall and put it in front of her face. The poster was titled 『出店荒らしにご用心！』 ("Beware of store break-ins!"), which could be interpreted as insinuating that he believed she was "casing the establishment" in preparation for a burglary. When presented with the poster, Ana Bortz replied that she couldn't read 漢字 (Japanese sinograms).
"We are presently restricting admission to this store: no more than five customers at a time please. Also, foreigners are strictly forbidden."
Things escalated. The employee threatened, in Japanese, to call the police. Ana Bortz told them "okay" and called her husband and the press. After much back and forth, Ana Bortz and the reporters learned that the motivation for the owners denying them was actually:
- The were having negotiation problems with a French distributor, and suspected at first that she might be French. 鈴木孝尚 claimed he initially greeted her with the French greeting "Bonjour, madame" as well as "How are you?" and "señorita".
- The week before, one Japanese, and one who they claimed looked Brazilian — were caught on CCTV camera taking photographs of the narrow alley between the jewelry store and a game center (at that time in 1998) to its north. They said feared that someone might break into the store through the alley wall.
Ana Bortz demanded that the 70 year old mother, running the store alone after the owner had to leave to take his child to the hospital for an appointment, apologize to her in writing, as that is what she believed a store would do if she was Japanese. The mother then hastily wrote a written apology with nothing but the word "Sorry" in Japanese in a notebook. Ana Bortz insisted this was not enough, and demanded that the employee write more. She did, but she refused to remove the "no foreigners" hand-made poster she created, and then shook hands with Ana Bortz with the encouragement of the police. This was the final apology that she wrote:
「言葉が通じなくてごめんなさい。これしか言いようがありません。」However, Ana Bortz refused to accept this revised apology because she believed it was not sincere nor an admission of racial discrimination, saying "She does not really seem sorry".
"Sorry there was a miscommunication. That's all I'm going to say about it.”
The mother operating the store at the time with the younger sister confirmed that indeed it wasn't sincere because she was being forced to write it was she was hoping that writing it would finally get everybody involved to just leave the store. She replied in Japanese:
「実は反省していません。頼まれているから書いているだけです。本当は、早く帰って欲しいのです。」
"In fact, I am not sorry. I only wrote it because I was asked to. All I really wanted was for you to leave."
They had been inside the small narrow 33m² store with a group of people for almost three hours.
The police then mediated and said to Ana Bortz that they couldn't force the employee to write an apology:
「これ以上はできない。」Ana Bortz and the group eventually left, but not before informing them she was going to sue. And she did, two months later.
"She can not do any more than this."
The verdict
In October, 1999, the Shizuoka Prefecture Hamamatsu District Court agreed with the plaintiff Ana Bortz, with the judge finding the owners of the unregistered ㈲晴美堂貿易 committed illegal discrimination (不当差別) in the form of racial discrimination activity (人種差別行為) which constituted an illegal act (不法行為) under Civil Code Article 709/710 (民法７０９／７１０条), and deliberately shoving the police poster in front of her constituted defamation/slander or insult and awarded her ¥1,500,000 plus 5% interest for a total of ¥1,550,000 which part of which was to be used to pay for litigation and lawyer expenses for her lawyer. Ana Bortz also asked for ¥452,000 for translation and interpretation fees, but this was denied.Ruling Hamamatsu District Judge at the time, 宗哲朗, used tort law to apply the international law domestically:
“Whether they have Japanese citizenship or not, discrimination based on race or skin color is clearly prohibited as racial discrimination under CERD. … This was an illegal act against an individual. … Ejecting the plaintiff from the store merely because she was a Brazilian was unfair. Defendant's (鈴木孝尚) actions — ejecting plaintiff either because she was Brazilian, or because she was not French — are acts of racial discrimination with respect to the Brazilian plaintiff."Because the the judge used tort law to apply the international law domestically, it couldn't be appealed under Japanese law.
The judge, through his comments above, believed that the real reason Ana Bortz was being denied service was not because she was a foreigner and not a Japanese national/citizen, but because she was Brazilian (a particular nationality), which runs afoul of the international discrimination law.
Domestic International Treaties & the Japan Constitution
Steve Herman also cited the Convention on the Elimination of Racial Discrimination in court. He and Bortz could do this because of Article 98, paragraph 2 of the Japanese Constitution:第９８条
②日本国が締結した条約及び確立された国際法規は、これを誠実に遵守することを必要とすろ。
Article 98
(2) The treaties concluded by Japan and established laws of nations shall be faithfully observed.
Japan has been a member of the ICERD Convention since December of 1995, with the following limitations:
- Japan does not recognize all of the Article 4 measures dealing with hate speech, as this is incompatible with the Constitution of Japan (Article 21)'s guaranteed with qualification rights regarding speech, opinion, association, and assembly. Japan is not alone in rejecting or limiting the Convention's Article 4: eighteen (18) other countries (including France, the United Kingdom, and the United States) do not or will not proactively recognize the part of the treaty that limits freedom of expression.
- Japan does not recognize "competence" under Article 14, which is an individual international complaints mechanism. Japan is not an outlier here, as only 58 states have recognized it.
The first two paragraphs of Article 1 of that Convention — MoFA (外務省) has the full English version and Japanese version on its site — says:
And Article 6 says:
- … any distinction, exclusion, restriction or preference based on race, [color], descent, or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural or any other field of public life.
この条約において、「人種差別」とは、人種、皮膚の色、世系又は民族的若しくは種族的出身に基づくあらゆる区別、排除、制限又は優先であって、政治的、経済的、社会的、文化的その他のあらゆる公的生活の分野における平等の立場での人権及び基本的自由を認識し、享有し又は行使することを妨げ又は害する目的又は効果を有するものをいう。
- This Convention shall not apply to distinctions, exclusions, restrictions or preferences made by a State Party to this Convention between citizens and non-citizens.
この条約は、締約国が市民と市民でない者との間に設ける区別、排除、制限又は優先については、適用しない。
CERD, General Recommendation 30: Discrimination against non-citizens, adds this about the interpretation of the above:
- States Parties shall assure to everyone within their jurisdiction effective protection and remedies, through the competent national tribunals and other State institutions, against any acts of racial discrimination which violate his human rights and fundamental freedoms contrary to this Convention, as well as the right to seek from such tribunals just and adequate reparation or satisfaction for any damage suffered as a result of such discrimination.
締約国は、自国の管轄の下にあるすべての者に対し、権限のある自国の裁判所及び他の国家機関を通じて、この条約に反して人権及び基本的自由を侵害するあらゆる人種差別の行為に対する効果的な保護及び救済措置を確保し、並びにその差別の結果として被ったあらゆる損害に対し、公正かつ適正な賠償又は救済を当該裁判所に求める権利を確保する。
While the Japanese Constitution similarly says:
- Article 1, paragraph 2 [regarding distinctions between citizens and non-citizens], must be construed so as to avoid undermining the basic prohibition of discrimination; hence, it should not be interpreted to detract in any way from the rights and freedoms recognized and enunciated in particular in the Universal Declaration of Human Rights…
- … some [human rights], such as the right to participate in elections, to vote and to stand for election, may be confined to citizens[/nationals].
第１４条A few notes on these articles and the translations/interpretations to/from Japanese and English:
すべて国民†は、法の下に平等であつて、人種、信条、性別、社会的身分又は門地‡により、政治的、経済的又は社会的関係において、差別されない。
Article 14
All of the people† are equal under the law, and there shall be no discrimination in political, economic, or social relations because of race, creed, sex, social status or family origin‡.
- † The Japanese Constitution talks about freedom from certain types of discrimination from the perspective of Japanese nationals in the Japanese canonical version — the English version often uses "people" where the Japanese version uses "[Japanese] national" (国民). In many constitutions "people" (especially capitalized), is usually legally defined to mean citizens/nationals who are legally linked to that country and its constitution.
- ‡ National/Ethnic/Family "origin" does not refer to one's current nationality/citizenship; in the Japanese version, "family origin" is written as 『門地』, which means your lineage.
Interestingly, the early GHQ/SCAP drafts used the word "national origin" and used the Japanese phrase 国籍起源 (nationality origin) for the equivalent of article 14 (article 13 in the draft) and also had an additional clause saying that non-Japanese were equal under the law. Furthermore, the anti-discrimination clauses applied to "natural persons" (自然人); In Japanese law this phrase is used to refer to a person or individual, not in a "natural-born (not naturalized) citizen" sense. These provisions and phrases were removed from later revisions:
第十三条
一切ノ自然人ハ法律上平等ナリ政治的、経済的又ハ社会的関係ニ於テ人種、信条、性別、社会的身分、階級又ハ国籍起源ノ如何ニ依リ如何ナル差別的待遇モ許容又ハ黙認セラルルコト無カルヘシ …
Article XIII.
All natural persons are equal before the law. No discrimination shall be authorized or tolerated in political, economic or social relations on account of race, creed, sex, social status, caste or national origin. …
第十六条
外国人ハ平等ニ法律ノ保護ヲ受クル権利ヲ有ス
Article XVI.
Aliens shall be entitled to the equal protection of law.
You can't disguise racial discrimination as nationality discrimination
So does this mean that the international Convention does not apply to any case where someone discriminates against you on the basis of your nationality? Not necessarily.To give an example, let's suppose that a bank does not like (racially) black people and only does business with white people. A potential black customer is denied a loan and takes them to court. The bank, from the application, knows that the black person is a Nigerian national, and uses the following defense to the court, "we weren't discriminating against the customer on the basis of his race. We were discriminating against him on the basis of his nationality."
Under the CERD, scrutiny is supposed to occur to make sure that "discrimination against nationality" is not being used as a pretext or excuse to discriminate against other factors such as creed, race, or sex. Indeed, this may have been a factor in Judge 宗哲朗's decision in Bortz v. Suzuki, as the defendants admitted that they were concerned in particular with Brazilians (and possibly French), not all people of non-Japanese nationality.
The verdict for Herman v. Asahi Bank: reasonable discrimination
“It is necessary for a bank to make a guideline for conditions for housing loans to make profits. … It is reasonable for the bank to turn down the request from a foreigner who is not certain to stay in Japan.”Continuing, the judge added that even if the plaintiff had every intention of staying in Japan, it is always possible for a foreigner to be involuntarily separated (ex. lack of visa renewal or deportation or overseas family emergency) from Japan, making it difficult to continue to pay the principal or interest and difficult to collect the collateral, increasing the cost of business and risk for the loan:
"… even if [his property] were secured by person or thing in Japan, the expense, time and effort needed to manage and collect the debt would invariably be greater than if the debtor had remained in Japan."Steve Herman probably did not help his case when he claimed that Asahi bank had
"a secret manual that forbids them from accepting an application from anyone who is not a citizen or resident of Japan",because this provides support for the bank's argument that systematic discrimination is not done by race, ethnicity, or origin, but rather is formally done by legal nationality/citizenship, and it doesn't single out a particular nationality and applies to all non-nationals.
As for the "secret manual": most lending institutions, in Japan and overseas, both for structured and unstructured credit (ex. credit cards), keep the some or all of the criteria (depending on laws and regulations) for assessing debt risk a secret, both for proprietary business and competitive advantage reasons and for reasons of security: keeping the formulas and guidelines confidential hinders attempts to analyze the rules for weaknesses or loopholes that can be exploited. It is also a business advantange to keep ones business rules a secret from competing businesses.
The flight risk test applies to Japanese as well as non-Japanese
Asahi Bank further bolstered its case by claiming that it also refused to offer credit and loans to Japanese nationals who were legal mid to long term resident overseas. In other words, the criteria being used to evaluate the difficulty of collecting on a loan is not just based primarily on nationality, but whether or not the individual, being Japanese or non-Japanese, possessed easy means to flee the legal jurisdiction which provides easy domestic tools for debt collection. Being in a foreign country for a period greater that a short term visa usually requires a visa and a job and requires establishing roots such as a residence (rented or purchased).It's true that both Japanese and non-Japanese might be able to obtain the means (some easier than others) to leave the legal jurisdiction of the loan was issued, but it is much easier for a foreigner or a Japanese national with a overseas resident visa and a "life there" to quickly leave Japan to hinder (intentionally or unintentionally) attempts to legally collect on a loan issued from Japan.
Other countries interpretations of CERD and discriminating against non-nationals for loans
There are some exceptions to the "can lending companies discriminate" opinions in other countries. For example, take the case of Ziad Ben Ahmed HABASSI versus Denmark in 1997. Habassi was a Tunisian national, born in 1972, and long-term resident of Århus, Denmark. He was married to a Danish citizen at the time and had a good credit record. He was applying for a loan for a car alarm. The loan application required him to state that he was a Danish citizen. Habassi, who had a permanent residence permit for Denmark, signed and submitted the application despite the requirement.
Habassi won against his bank ("Sparebanken Vest")/country† using CERD. Denmark had tried, as its defense, using the CERD exception regarding allowing nationality to discriminate, but was denied. The ruling viewed that when assessing a non-national loan applicant’s capacity to repay, nationality cannot reasonably be the sole guiding criterion:
Non-Japanese national Special Permanent Resident (特別永住者) are treated more like Japanese nationals than foreigners from the perspective of evaluating credit-worthiness. Special Permanent Resident status is not something that is a reward for time spent in Japan. Due to historical reasons it is almost as difficult, if not impossible, for a SPR to return to the country of their nationality (almost always Korea or China). This is also why there are different rules for deportation for someone with a Special Permanent Resident SoR compared to regular Permanent Residents or other foreign residents of Japan.
From a practical perspective, Special Permanent Residents have about as easy of time emigrating from Japan as someone with only Japanese nationality because they are almost always born in Japan, have lived their whole life in Japan, and are monolingual (Japanese) and can only communicate effortlessly in Japan.
Although there aren't any documented policies or cases of it yet, having nationalities in addition to Japanese, in the eyes of a bank evaluating risk, could be viewed as being a higher lending risk than somebody who only has Japanese nationality because it is easier for a somebody possessing a nationality in addition to Japanese to flee the legal jurisdiction, making it harder to collect. Obviously, concealing or withholding any information (such as additional nationalities) from a bank and having it discovered will probably reflect negatively on one's evaluation, regardless of whether the hidden information was benign from the perspective of the evaluation.
A bank evaluating this would have to be careful in its evaluation to make sure that they are evaluating/discriminating not on the basis of "Family Origin" / lineage (『門地』) — doing so would be unconstitutional (違憲) according to the Constitution of Japan's Article 14 — and rather on the presence or absence of additional nationalities (in other words, treating people whose first nationality was Japanese as equally and fairly as those whose first nationality was not Japanese) They would also have to figure out how to deal with Japanese nationals who acquire or possess additional nationalities involuntarily and can't get rid of their other nationalities.
"The applicant’s permanent residence or the place where his employment, property or family ties are to be found may be more relevant."† Denmark is not only party to the CERD Convention, but also party to the CERD's "optional protocol" (which many countries, including Japan and the United States, decline to implement), which allows individuals to appeal and bring a case against the state itself. Thus, after losing his case against the Danish Bank, Habassi was able to bring one against the state of Denmark. Steve Herman could not since the Japan is not a party to the optional protocol.
Permanent Resident (永住者) Status of Residence (SoR; 在留資格)
Most (but not all) Japanese banks evaluate both Japanese national and foreign national creditworthiness by various simple, measurable, documented, and verifiable variables; these variables usually represent a tendency towards 定着性 (how "established" or "settled down" something is) with respect to Japan and the difficulty in preventing a default or recovering money due:- How long you have lived in the same residence in Japan
- Whether you own or rent your residence
- How long you have worked for the same employer
- How big and stable that employer is — measured by the capitalization (資本金) and number of employees
On most types of loan applications (especially credit card applications) in Japan, there will be specific questions on the application form that ask about the above factors.
- ... whether or not you have a Permanent Residency (PR; 永住者) Status of Residence (SoR; 在留資格)
Non-Japanese national Special Permanent Resident (特別永住者) are treated more like Japanese nationals than foreigners from the perspective of evaluating credit-worthiness. Special Permanent Resident status is not something that is a reward for time spent in Japan. Due to historical reasons it is almost as difficult, if not impossible, for a SPR to return to the country of their nationality (almost always Korea or China). This is also why there are different rules for deportation for someone with a Special Permanent Resident SoR compared to regular Permanent Residents or other foreign residents of Japan.
From a practical perspective, Special Permanent Residents have about as easy of time emigrating from Japan as someone with only Japanese nationality because they are almost always born in Japan, have lived their whole life in Japan, and are monolingual (Japanese) and can only communicate effortlessly in Japan.
Dual Nationals Could Have it as Hard as Foreigners?
And interesting side effect of Japanese banks attributing less 定着性 (stability) to Japanese nationals who live (meaning they have the means and ability — acquired a visa to easily and legally live and work and travel outside the legal jurisdiction of the State of Japan (日本国), which also implies the language ability, skills, and investments and finances to remain in that country for a long period of time.Although there aren't any documented policies or cases of it yet, having nationalities in addition to Japanese, in the eyes of a bank evaluating risk, could be viewed as being a higher lending risk than somebody who only has Japanese nationality because it is easier for a somebody possessing a nationality in addition to Japanese to flee the legal jurisdiction, making it harder to collect. Obviously, concealing or withholding any information (such as additional nationalities) from a bank and having it discovered will probably reflect negatively on one's evaluation, regardless of whether the hidden information was benign from the perspective of the evaluation.
A bank evaluating this would have to be careful in its evaluation to make sure that they are evaluating/discriminating not on the basis of "Family Origin" / lineage (『門地』) — doing so would be unconstitutional (違憲) according to the Constitution of Japan's Article 14 — and rather on the presence or absence of additional nationalities (in other words, treating people whose first nationality was Japanese as equally and fairly as those whose first nationality was not Japanese) They would also have to figure out how to deal with Japanese nationals who acquire or possess additional nationalities involuntarily and can't get rid of their other nationalities.
[special thanks to Timothy Webster for the legal analysis help with the Bortz v. Suzuki case]
