A Japanese Court Ruled Against Us: What Does "Res Judicata" (Kihanryoku) Mean for Future Disputes?

Receiving an unfavorable judgment in any jurisdiction is a significant event for a company. Beyond the immediate consequences, a crucial question arises: to what extent does this decision preclude future litigation on the same or related matters? In Japan, the doctrine that governs the binding effect of a final judgment is known as kihanryoku (既判力), a concept akin to, but distinct from, res judicata in common law systems. Understanding the scope and implications of kihanryoku is essential for any business, including U.S. companies, that has been involved in litigation in Japan or is assessing the finality of a Japanese court decision.

This article delves into the principles of kihanryoku under Japanese civil procedure, exploring its meaning, the rationale behind it, and, most importantly, its objective, temporal, and subjective scope – essentially, what is decided, as of when, and who is bound.

What is Kihanryoku (Res Judicata) in Japanese Law?

Kihanryoku refers to the binding force that a final and conclusive judgment (one that can no longer be appealed through ordinary routes) has on the parties to the litigation and on subsequent courts. Its primary function is to prevent the re-litigation of matters that have already been definitively decided, thereby ensuring the finality of judgments and promoting legal stability. Once a judgment with kihanryoku is rendered, parties are generally barred from making assertions in a subsequent lawsuit that contradict the conclusions reached in that prior judgment.

The rationale for kihanryoku is multifaceted:

• Institutional Need for Finality: The judicial system requires a point at which disputes are considered definitively resolved to maintain its efficacy and public trust.
• Procedural Guarantee and Party Responsibility: Parties are afforded due process and ample opportunity to present their case during litigation. Having had this opportunity, they are generally expected to accept the outcome. Some legal scholars emphasize this procedural guarantee as the primary justification.
• Judicial Economy: Preventing re-litigation of the same issues conserves scarce judicial resources.

Kihanryoku typically operates in two ways in subsequent litigation:

• Negative Effect: It bars a party from asserting a claim or defense that is inconsistent with the matter decided in the prior judgment. This is often referred to as the preclusive effect (shadan kō – 遮断効).
• Positive Effect: It requires a subsequent court to treat the matter decided in the prior judgment as a settled premise for its own decision-making if that matter is a preliminary issue in the later suit.

Japanese courts are generally expected to consider the existence and effect of kihanryoku ex officio, meaning they can raise the issue on their own initiative even if the parties do not explicitly invoke it.

The Scope of Kihanryoku: What, When, and Who?

To understand the impact of kihanryoku, one must examine its three critical dimensions: objective scope (what issues are covered), temporal scope (the point in time to which the judgment relates), and subjective scope (who is bound by the judgment).

A. Objective Scope (Kyakkanteki Han'i) – What is Actually Decided?

General Rule: The Main Text of the Judgment (CCP Article 114, Paragraph 1)
The fundamental principle is that kihanryoku attaches only to "matters contained in the main text of the judgment" (hanketsu shubun ni fukumareru mono – 判決主文に包含されるもの). The "main text" (or operative part) of a Japanese judgment is the concise dispositive ruling of the court (e.g., "The defendant shall pay the plaintiff JPY X," or "The plaintiff's claim is dismissed."). This part of the judgment directly corresponds to the court's decision on the "subject matter of litigation" (soshōbutsu – 訴訟物), which is the specific legal claim or right asserted by the plaintiff and adjudicated by the court.

Reasoning is Generally Not Binding
Crucially, findings of fact or legal interpretations contained only in the reasoning (riyū-chū no handan – 理由中の判断) of the judgment generally do not acquire kihanryoku. For example, if a plaintiff sues for eviction based on ownership, and the court dismisses the claim finding the plaintiff is not the owner, the kihanryoku attaches to the dismissal of the eviction claim itself. The finding in the reasoning that the plaintiff is not the owner, while a basis for the decision, does not independently gain kihanryoku that would, for instance, automatically bar the plaintiff from asserting ownership in a different type of dispute (though it would likely be a powerful precedent).

The rationale for this limitation is to focus the preclusive effect on the ultimate outcome of the specific claim litigated. It allows parties to concentrate their efforts on the core claim and prevents them from being bound by every incidental finding where the intensity of argument or procedural safeguards might have been less. If parties wish to obtain a binding judgment on a preliminary issue (like ownership in the eviction example), they can specifically claim it, for instance, by filing an action for a declaration of ownership, or an interlocutory action for confirmation (chūkan kakunin no uttae – 中間確認の訴え, CCP Art. 145) within the pending suit.

Exception for Adjudicated Set-Off Defenses (CCP Article 114, Paragraph 2)
A significant statutory exception to the "main text" rule concerns set-off defenses (sōsai no kōben – 相殺の抗弁). If a defendant asserts their own claim against the plaintiff as a set-off, and the court adjudicates the existence or non-existence of this cross-claim, the court's finding on that cross-claim acquires kihanryoku, but only up to the amount for which the set-off was asserted against the plaintiff's main claim. This is vital to prevent the defendant’s (cross-)claim, once judicially determined for set-off purposes, from being re-litigated. For this kihanryoku to attach, however, the court must have first found the plaintiff's main claim to be valid before proceeding to adjudicate the set-off – a procedural sequence that ensures the defendant’s claim is necessarily decided.

The Debate on "Issue Preclusion" (Sōtenkō – 争点効)
There has been academic debate in Japan regarding whether a doctrine similar to "issue preclusion" (whereby specific issues actually litigated by the parties and determined by the court, even if only in the reasoning, should have preclusive effect) should be recognized. However, the Supreme Court of Japan has generally not accepted a formal doctrine of sōtenkō that would give kihanryoku to findings in the reasoning as a general rule (Supreme Court judgment, June 24, 1969).
Nevertheless, the principle of good faith and fair dealing (shingi soku – 信義誠実の原則) can sometimes be invoked by courts to prevent a party from re-litigating an issue in a manner that is deemed abusive or unfairly prejudicial to the opponent, even if strict kihanryoku does not apply to that specific finding (Supreme Court judgment, September 30, 1976). This use of shingi soku can achieve results similar to issue preclusion in certain circumstances.

B. Temporal Scope (Jiteki Genkai) – As of When is the Matter Decided?

The Critical Point in Time (Kijun-ji – 基準時)
Kihanryoku does not freeze the legal relationship between parties indefinitely for all time. It is understood to reflect the state of affairs as it existed at a specific point: the conclusion of oral arguments in the fact-finding instance of the court that rendered the judgment (this is usually the first instance or, if appealed, the second instance, as the final appeal court is typically a law-reviewing court).

The rationale for this rule is that parties have the opportunity to present all their factual arguments and evidence up until this "critical time." Therefore, the procedural guarantee underlying kihanryoku extends to matters that could have been raised based on the situation up to that point.

• Facts and Events Occurring Before the Critical Time: Generally, all claims and defenses based on facts or legal grounds that existed before this critical time are encompassed by the kihanryoku of the judgment and cannot be raised in a subsequent lawsuit concerning the same subject matter. This applies whether or not those facts or grounds were actually presented in the first suit.
• Facts and Events Occurring After the Critical Time: Conversely, new facts, changes in legal status, or events that occur after the conclusion of oral arguments in the fact-finding instance are not barred by kihanryoku. These can form the basis for a new claim or defense, or an action to modify the previous judgment if specific statutory grounds exist (e.g., an action to seek execution immunity under Article 35, paragraph 2 of the Civil Execution Act, based on a post-judgment satisfaction of the debt).

Assertion of Pre-Existing Formative Rights After the Critical Time
A particularly complex issue within the temporal scope concerns "formative rights" (keiseiken – 形成権) – rights that, when exercised, create, alter, or extinguish a legal relationship (e.g., the right to rescind a contract for fraud, the right to terminate a lease, the right of set-off). If such a right existed before the critical time but was not exercised or asserted by a party in the first lawsuit, can it be exercised and asserted in a subsequent suit to undermine the first judgment?
The general rule, established by the Supreme Court (e.g., judgment of October 23, 1980), is that such pre-existing but unexercised formative rights are generally barred by kihanryoku from being asserted later if they could have been raised in the first action.
However, there are exceptions for certain types of formative rights, often based on their specific substantive legal nature or policy considerations. For example, a lessee's statutory right to demand that the lessor purchase the building upon termination of a land lease (tatemono kaitori seikyūken) has been held by the Supreme Court (judgment of December 15, 1995) to be assertable even after a judgment ordering eviction, if not raised in the eviction suit itself. The underlying reasons often involve the independence of the right from the primary claim in the first suit or specific protective policies.

Action to Modify a Final Judgment for Periodic Payments (CCP Article 117)
For judgments ordering periodic payments (e.g., damages for future lost income in personal injury cases, or certain types of support payments), Article 117 CCP allows for an action to modify the judgment if there has been a significant change in the circumstances that formed the basis for calculating those payments, occurring after the critical time of the original judgment.

C. Subjective Scope (Shukanteki Han'i) – Who is Bound?

General Rule: Relativity – Binding Only the Parties (CCP Article 115, Paragraph 1, Item 1)
The fundamental principle is that kihanryoku is relative; it binds only the persons who were parties to the litigation in which the judgment was rendered, and their privies. This reflects the nature of civil litigation as a process for resolving disputes between specific adversaries, and the fact that only these parties had the direct opportunity to present their case (procedural guarantee).

Extension of Kihanryoku to Certain Third Parties (CCP Article 115, Paragraph 1, Items 2-4)
However, to ensure the effectiveness and finality of judgments and to prevent circumvention, Article 115 extends the binding effect of kihanryoku to certain categories of non-parties who are closely connected to the original litigation or its subject matter:

1. Persons Whose Rights Were Litigated by a Representative Party (Item 2): This includes individuals whose interests were represented by a person litigating in a representative capacity, such as a bankruptcy trustee acting for the bankrupt estate, or a "selected party" (sentei tōjisha – 選定当事者) representing a group of claimants with common interests. In the context of a creditor's subrogation action (saikensha dai soshō – 債権者代位訴訟), if the debtor (whose right the creditor is exercising) has been properly notified of the lawsuit (now mandated by Civil Code Art. 423-6), the judgment in the creditor's suit against the third-party obligor is generally binding on the debtor.
2. Successors in Interest After the Critical Time (Item 3): Kihanryoku extends to those who succeeded to the status of a party concerning the claim in dispute after the conclusion of oral arguments in the fact-finding instance (the kijun-ji). This covers both:
   • Universal successors: Such as heirs inheriting from a deceased party or a company that absorbed another through merger.
   • Specific successors: Such as a person who purchased the disputed property or was assigned the disputed right from a party after the critical time.
     The purpose is to prevent a judgment from being rendered meaningless by a party simply transferring their interest. While these successors are bound by the judgment, it is generally accepted that they can still raise their own independent defenses that were not available to, or not adjudicated with respect to, their predecessor (e.g., a bona fide purchaser defense if they acquired the property without notice of certain defects).
3. Persons Holding the Subject Matter for the Benefit of a Party or Successor (Item 4): This applies to individuals who possess the specific property that is the subject matter of the claim, not for their own independent interest, but solely for the benefit of a party to the litigation or that party's successor (e.g., an agent, custodian, or a family member residing with the party without an independent right to possess). Lessees or pledgees, who have their own interest in possession, are generally not included.

Extension to General Third Parties – Taiseikō (対世効 – Effect Erga Omnes)
In certain types of litigation, particularly those that determine legal status (like divorce or parentage actions under the Personal Status Litigation Act) or affect the fundamental organization of legal entities (like actions to annul company incorporation or shareholder resolutions under the Companies Act), the judgment's effect is extended by statute to bind not just the immediate parties but the world at large (taiseikō). This is necessary for societal clarity and order regarding such statuses. For example, a divorce judgment legally alters the marital status of the individuals with respect to everyone. Such extensions are usually accompanied by procedural safeguards, such as limitations on party disposition of the suit, enhanced powers for the court to investigate facts, or notice to potentially interested third parties. Often, in company law, only a judgment upholding the claim (e.g., annulling a resolution) has this broad effect, not a judgment dismissing it (this is referred to as one-sided taiseikō – henmenteki taiseikō – 片面的対世効).

Distinguishing Kihanryoku from Other Judgment Effects

It is important to distinguish kihanryoku from other effects of a final judgment:

• Enforceability (Shikkōryoku – 執行力): The power of a judgment (typically one ordering payment or performance) to be enforced through coercive measures by the state if not voluntarily complied with.
• Formative Effect (Keiseiryoku – 形成力): The power of certain judgments (typically in "formative actions" – keisei no uttae) to directly create, alter, or extinguish a legal right or relationship by the judgment itself (e.g., a divorce judgment itself creates the status of being divorced).

While all final judgments possess kihanryoku concerning what was decided, only certain types possess enforceability or formative effect.

Strategic Implications and Comparison

Understanding kihanryoku is crucial for several reasons:

• Defining the Scope of Litigation: Plaintiffs must carefully define the soshōbutsu (subject matter) of their claim, as this will determine the objective reach of kihanryoku.
• Raising All Relevant Defenses: Defendants must generally raise all defenses based on facts existing before the critical time or risk being precluded by kihanryoku from asserting them later.
• Assessing Finality: Parties can understand when a matter is truly "closed" and when new circumstances might permit further legal action.

Compared to U.S. law, Japanese kihanryoku is primarily a doctrine of "claim preclusion" tied to the specific soshōbutsu adjudicated. While the U.S. doctrine of claim preclusion often uses a broader "transaction or occurrence" test, the Japanese approach is more focused on the formally defined legal claim. "Issue preclusion" (collateral estoppel) as understood in the U.S. – where specific issues of fact or law actually litigated and determined are binding in subsequent different claims – does not have a direct, formal equivalent in Japanese kihanryoku, although, as mentioned, the principle of good faith can sometimes achieve similar results in preventing re-argument of settled points.

Conclusion

Kihanryoku is a fundamental doctrine in Japanese civil procedure that underpins the finality and binding nature of court judgments. Its carefully defined objective, temporal, and subjective scopes determine the extent to which a decided matter is precluded from re-litigation. For businesses, including U.S. companies, that are or may become involved in the Japanese legal system, a clear grasp of kihanryoku is indispensable for evaluating the long-term consequences of judicial decisions, formulating effective litigation and dispute resolution strategies, and understanding when a legal chapter is truly closed.