The Supreme Court ruled Friday that suits involving foreign governments are within the jurisdiction of Japan's judicial authorities, changing a 78-year-old legal precedent.
The top court ordered the Tokyo High Court to retry a lawsuit in which two firms in Tokyo sought a 1.78 billion yen payment for computers and peripheral equipment from the government of Pakistan.
The Tokyo District Court ruled in favor of the plaintiffs in August 2001, but the high court overturned the decision in February 2003.
The high court ruling followed a December 1928 decision by Japan's prewar Supreme Court that foreign governments were exempted from Japan's jurisdiction.
Friday's ruling is likely to have an impact on solving conflicts over trade and employment issues between foreign governments and Japanese firms, as Japanese courts are expected to no longer dismiss suits against other governments.
In the precedent-setting judgment, presiding Judge Isao Imai said exempting foreign governments for their nonsovereign acts regulated by such laws as the Civil Code and Commercial Code is an outdated practice.
People can sue over business deals against foreign governments as long as their sovereignty isn't violated, he said.
A focal point in the high court retrial will be whether Pakistan's sovereignty is infringed upon after that government's exemption from Japanese court jurisdiction is lifted. The plaintiffs filed the suit in September 2000, saying they had not received payment for computers and related equipment from the Pakistani government according to contracts made in 1986.
The two firms appealed the high court ruling, saying foreign governments aren't exempt from suits on commercial deals.