Can an Unincorporated Association Sue or Be Sued in Japanese Courts? Understanding Legal Capacity

In the realm of Japanese civil procedure, the ability of an entity to participate in a lawsuit as a plaintiff or defendant hinges on a concept known as tōjisha nōryoku, or the capacity to be a party. While this capacity is straightforward for natural persons and duly established corporations, the legal standing of unincorporated associations—entities that operate with a degree of organization but lack formal legal personality—presents a more nuanced picture. This article explores the legal framework in Japan that determines whether and how such associations can access the judicial system.

The General Principle: Capacity to Be a Party and Legal Personality

The foundation for determining who can be a party to a lawsuit is laid out in Article 28 of Japan's Code of Civil Procedure (Minji Soshō Hō). This article generally dictates that the capacity to be a party is governed by the Civil Code (Minpō) and other relevant laws, effectively linking procedural capacity to substantive legal personality. Under Japanese law, legal personality is typically conferred only upon entities established in accordance with specific statutory procedures, a principle known as hōjin hōtei shugi (the principle of statutory corporation).

However, recognizing that various groups and organizations operate substantially as cohesive entities without formal incorporation, Article 29 of the Code of Civil Procedure carves out an important exception. It states that an association or foundation that is not a juridical person but has a designated representative or administrator may sue or be sued in its own name. This provision is central to understanding the litigation capacity of unincorporated associations.

Unincorporated Associations (Kenri Nōryoku Naki Shadan) and Capacity to Be a Party

The term kenri nōryoku naki shadan refers to an "association without legal personality" but which possesses the functional substance and structure of an organized group. Common examples include alumni associations, neighborhood associations, and academic societies. To address the legal challenges these entities face, Japanese jurisprudence developed the "doctrine of association without legal personality" (kenri nōryoku naki shadan no hōri). This doctrine aims to grant a degree of legal standing, particularly procedural capacity, to these de facto organizations that operate in a manner similar to formally incorporated bodies.

A landmark Supreme Court decision on October 15, 1964 (Minshū Vol. 18, No. 8, p. 1671) outlined the essential characteristics for an entity to be recognized as a kenri nōryoku naki shadan. These include:

• An established organizational structure.
• The operation of majority rule in its decision-making processes.
• The continuity of the association as an entity, irrespective of changes in its individual membership.
• Clearly defined methods for representation, the operation of general meetings, and the management of its property.

Subsequently, the Supreme Court, in a decision dated October 19, 1967 (Minshū Vol. 21, No. 8, p. 2078), applied these criteria to interpret the scope of Article 29 of the Code of Civil Procedure, thereby linking the substantive recognition of an unincorporated association to its procedural capacity to be a party in litigation.

Prevailing academic opinion further refines these criteria, often summarizing them into four functional requirements that an unincorporated association must meet to possess tōjisha nōryoku:

1. Internal Independence: The association maintains its identity and continuity regardless of members joining or leaving.
2. External Independence: A designated representative is in place who acts on behalf of the association, and the association operates as a distinct entity separate from other legal subjects.
3. Internal Organization: The association has established rules or bylaws governing its operations, and there are mechanisms (such as general meetings) through which the will of the members is reflected in the association's decision-making.
4. Financial Independence: The association possesses its own property, managed independently and distinctly from the personal assets of its members.

The Crucial Role of Financial Independence (Zaisan-teki Dokuritsusei)

Among these requirements, "financial independence" frequently becomes a focal point in determining an unincorporated association's capacity to be a party. It's important to distinguish between two aspects of this concept:

1. The formation of distinct "association property" (dantai zaisan), which is segregated from the individual property of its members. This essentially refers to a pool of assets dedicated to the association's objectives.
2. The mere existence of "individual assets" that are managed separately as the association's property.

Japanese legal scholarship and case law emphasize that the first aspect—the clear establishment of association property as a distinct financial entity—is indispensable for recognizing capacity to be a party.

A significant Supreme Court ruling on June 7, 2002 (Minshū Vol. 56, No. 5, p. 899), involving an unincorporated association as a plaintiff, shed further light on this. The Court clarified that possessing fixed assets or a substantial foundational fund is not an absolute prerequisite. Instead, an association may be deemed financially independent if it has a secured mechanism for obtaining the income necessary for its operations and activities, and if a system is in place for managing its income and expenditures. These financial aspects are to be considered comprehensively alongside other organizational factors.

Consider, for instance, a sports club (Case 1 in the reference text) that operates on annual membership fees but owns no real estate. Such a club's annual fee system could be seen as a "mechanism for obtaining income". The existence of a system to manage these fees and any other club funds would then speak to the formation of distinct association property.

There has been some academic discussion on whether financial independence is a necessary condition only when the unincorporated association is a defendant in a monetary claim. However, if "financial independence" is understood as the indispensable formation of distinct association property (rather than the mere existence of some assets), this view aligns with the 2002 Supreme Court decision, which treated the formation of such property as a core requirement regardless of the association's role as plaintiff or defendant.

Procedural Implications: Internal Decisions for Litigation

The internal decision-making process of an unincorporated association is also significant when it intends to initiate litigation. In Case 1, the sports club held an extraordinary general meeting and passed a unanimous resolution to sue its counterparty. This internal mandate is crucial because the subject matter of the lawsuit—in that case, a claim for a financial contribution—is considered association property, collectively owned by all members under a form of co-ownership known as sōyū.

A loss in such a lawsuit could substantially affect the association's future operations and viability. Therefore, securing the consent of all members (or a duly authorized majority, depending on the association's rules and the nature of the claim) for initiating legal action is often equated with the members consenting to the disposition of that particular right or asset. This includes granting the association, through its representative, the authority to manage and potentially compromise the claim in litigation.

If such an internal resolution is absent, the association's standing to sue (tōjisha tekikaku) might be challenged, especially if the lawsuit falls outside the scope of the association's ordinary business activities or exceeds the authority granted to its representative under its bylaws. A Supreme Court case from February 8, 1980 (Hanrei Jihō No. 961, p. 69) underscored the importance of member consent, requiring unanimous agreement from all members of a village community for a lawsuit concerning the confirmation of ownership of common land (iriaichi), as this was deemed fundamental property of the group. While not every lawsuit by an unincorporated association involves fundamental property like land, if the potential loss from a lawsuit could jeopardize the association's very existence, obtaining broad, if not unanimous, member approval is a critical step to ensure its standing as a plaintiff. There is also jurisprudence (e.g., Supreme Court, May 31, 1994, Minshū Vol. 48, No. 4, p. 1065) that suggests a special majority rule, rather than strict unanimity, might suffice in certain circumstances, depending on the association's internal rules and the nature of the matter.

Legal Effect of Recognizing Capacity to Be a Party (Article 29)

When an unincorporated association is granted the capacity to be a party under Article 29, a fundamental question arises: whose right is actually being litigated? If the association itself, lacking full legal personality, cannot formally hold property rights, then such rights (like the monetary claim in Case 1) are considered to belong to all its members collectively (sōyū).

The prevailing legal view in Japan (koyū tekikaku kōsei) is that applying Article 29 effectively treats the unincorporated association as if it were a legal person for the specific purpose of that lawsuit. This means the association can assert the claim as its own right and demand that any judgment award be paid directly to the association itself.

An alternative perspective (soshō tantō kōsei) posits that the association acts as a form of litigation trustee (soshō tantōsha) for the rights collectively held by its members. Under this view, the lawsuit would, in essence, be for payment to the members, though pursued by the association in its name. Some scholars argue that Article 29 itself provides the basis for this litigation trust-like capacity.

Regardless of which theoretical construction is adopted, the practical outcome is that if an unincorporated association meets the criteria for Article 29, it can proceed with the lawsuit in its own name.

Special Issues: Unincorporated Associations and Real Property Registration

A particular set of challenges arises when unincorporated associations are involved with real property, primarily due to their inability to be the registered titleholder under Japan's real property registration system. This was illustrated in Case 2 of the reference material.

If property is collectively owned by the members of an unincorporated association, registering it in the names of all individual members (e.g., 100 members of a club) as co-owners is highly impractical. Any change in membership would render the registration inaccurate and necessitate burdensome updates.

The common workaround, sanctioned by case law, is to register the property in the individual name of the association's current representative. The Supreme Court's "representative individual name theory" (daihyōsha kojin meigi setsu), articulated in a decision on June 2, 1972 (Minshū Vol. 26, No. 5, p. 957), holds that real property belonging collectively to the members of an unincorporated association is deemed to be held in trust by the representative in their individual capacity, but for the benefit of all members. When the representative changes, the new representative can sue the former representative to compel the transfer of the registered title, analogous to a change of trustee in a formal trust.

Can the unincorporated association itself sue to have the property registered in its own name? The answer is generally no. Such a claim would lack a valid basis for relief (seikyū tekikaku) because, under the current registration law, the association itself is not a recognized entity capable of holding registered title.

However, can the association sue to have the property registration transferred to the individual name of its new representative? A Supreme Court decision on February 27, 2014 (Minshū Vol. 68, No. 2, p. 192) affirmed that an unincorporated association does have standing as a plaintiff in such a lawsuit. This allows for a practical procedural route that aligns with the association's substantive property rights, even if indirect. For an association to register property in its own name directly, legislative amendments to the real property registration laws would be necessary.

Enforcement Against Unincorporated Associations

What happens when a judgment for a monetary claim is rendered against an unincorporated association? The association's collective property (sōyū zaisan) serves as the asset base for satisfying the judgment debt. Assets that are clearly identifiable as belonging to the association and held in its name, such as bank accounts, can generally be targeted for enforcement without major procedural hurdles.

Enforcement against real property, however, presents difficulties. Since the association cannot be the registered owner, its real estate is typically registered in the individual name of its representative (or perhaps a third party). This mismatch between the judgment debtor (the association) and the registered property owner (the individual representative or third party) can block standard compulsory sale procedures, as the execution documents would not align.

Historically, some academic theories proposed that creditors could execute against property registered in the representative's name by proving it substantively belonged to the association, drawing analogies to certain provisions in procedural law. However, a Supreme Court decision on June 29, 2010 (Minshū Vol. 64, No. 4, p. 1235), rejected this direct approach, at least for real estate registered in the name of a third party (who might not be the current representative but holds it for the association). The Court indicated that a creditor holding a monetary judgment against the association would first need to obtain a separate confirmatory judgment establishing that the specific real property, though registered in a third party's name, indeed belongs collectively to the association's members. With this ancillary judgment, the creditor could then proceed with execution against the property. This ruling, while aiming to provide a path for enforcement, has generated considerable academic debate regarding its procedural complexity and implications for creditors.

Conclusion

The capacity of unincorporated associations to participate in Japanese civil litigation is a vital aspect of procedural law, allowing these de facto entities a means to resolve disputes and protect their collective interests. Article 29 of the Code of Civil Procedure, as interpreted by courts and scholars, establishes a framework based on organizational substance and financial independence. While this framework provides access to justice, complexities remain, particularly concerning property rights, internal governance for litigation decisions, and the enforcement of judgments. The ongoing evolution of case law and academic discourse continues to shape this area, balancing the need to recognize the legal reality of these associations with the broader principles of legal certainty and procedural fairness.