Can Future Claims ("Shōrai Saiken") Be Assigned Under Japanese Law and What Are the Implications?

In today's dynamic commercial environment, the ability to leverage future revenue streams is crucial for businesses seeking financing, managing cash flow, or engaging in sophisticated financial transactions. This often involves the assignment of "shōrai saiken" (将来債権), or "future claims"—claims that are not yet in existence but are expected to arise from ongoing or anticipated business activities. Japanese law has evolved to address the validity and implications of such assignments, recognizing their economic importance while also setting certain boundaries. This article explores the Japanese legal framework governing the assignability of future claims.

What Constitutes a "Future Claim" ("Shōrai Saiken no Igi")?

Before delving into their assignability, it's essential to understand what Japanese law considers a "future claim." A future claim is one that has not yet come into legal existence at the time the assignment agreement is made. This contrasts with:

1. Existing Claims with Future Maturity Dates (期限付債権 - kigen-tsuki saiken): A claim that is already legally established but for which the performance is not due until a future date (e.g., a loan receivable where repayment is scheduled for next year) is an existing claim, not a future claim. Only its enforceability or due date is deferred.
2. Claims Subject to an Unfulfilled Condition Precedent (停止条件付債権 - teishi jōken-tsuki saiken): A claim whose existence or enforceability depends on the occurrence of an uncertain future event is generally treated as an existing, albeit conditional, claim. It's not typically classified as a "future claim" in the sense of having no current legal basis.

True future claims typically fall into two broad categories:

• Claims with an Existing Basis but Not Yet Accrued: These are claims expected to arise from a pre-existing legal relationship or contract. A classic example is future rent payments under an existing lease agreement. While the lease exists, the specific claim for rent for a future month (e.g., next January's rent) only crystallizes as that period arrives.
• Claims Where Even the Underlying Cause Does Not Yet Exist: This category includes claims that will arise from contracts or relationships that have not yet been formed at the time of the assignment agreement. For instance, a medical clinic might assign its anticipated future receivables from patients who have not yet sought treatment, or a manufacturer might assign claims from future sales contracts not yet concluded.

It's important to distinguish these from assignments of an entire existing installment receivable (e.g., for a credit sale), where the total debt amount is fixed, and only the payment dates are staggered. In such cases, it's usually an assignment of a single existing claim with phased payments, not an assignment of multiple "future claims" for each installment.

Assignability of Future Claims in Japanese Law (Civil Code Art. 466-6(1))

Japanese law unequivocally permits the assignment of future claims. This principle, long established through significant Supreme Court case law (e.g., the landmark decision of January 29, 1999), is now explicitly codified in Article 466-6, paragraph 1 of the revised Civil Code: "An assignment of a claim shall not be precluded from taking effect even if the claim is one which will arise in the future."

Rationale for Permitting Assignment

The recognition of the assignability of future claims is vital for modern commerce and finance. It enables:

• Secured Financing: Businesses can use their anticipated future income streams (such as accounts receivable from future sales or services) as collateral to obtain financing (e.g., through asset-based lending (ABL) or factoring arrangements).
• Securitization: Pools of future receivables can be assigned to special purpose vehicles (SPVs) and used as the basis for issuing securities, thereby converting future cash flows into present capital.
• Business Planning and Risk Management: Allows businesses to manage future cash flows and allocate risks associated with future revenues.

Exception: Nature of the Claim

As with existing claims, the general permissibility of assigning future claims is subject to the condition that the nature of the claim itself must permit assignment. If the future claim, once it arises, would be of such a highly personal character that its performance is tied to the specific assignor (e.g., future services of a unique artist), then it cannot be validly assigned even as a future claim.

Key Requirements for a Valid Assignment of Future Claims

For an assignment of future claims to be effective, certain legal requirements must be met, primarily concerning the identifiability of the claims and, in some exceptional cases, public policy considerations.

A. Specificity and Identifiability of the Assigned Future Claims ("Jōto Saiken no Tokutei")

While the claims themselves are not yet in existence, the assignment agreement must describe the future claims with sufficient specificity so that they can be objectively identified if and when they do arise. The legal standard is one of "identifiability" (識別可能性 - shikibetsu kanōsei) rather than absolute certainty at the time of assignment. The scope of the assigned future claims must be clear enough to distinguish them from other potential future claims of the assignor.

This specificity can typically be achieved by defining the claims by reference to:

• The Obligor(s): If the future claims will be against specific, known obligors.
• The Underlying Contract or Legal Relationship: The existing or anticipated contract (e.g., a master supply agreement, a specific lease) or legal relationship from which the claims will arise.
• The Type of Claim: For example, "all accounts receivable from sales of widgets," "all future lease payments under lease agreement X."
• The Period of Accrual: A defined period during which the claims are expected to arise is often a key element of specificity. For instance, "all accounts receivable arising from sales made during the calendar year 2026." The Supreme Court, in its January 29, 1999 decision, affirmed that specifying a start and end period, along with other identifying details, can satisfy the specificity requirement for a pool of future medical診療報酬債権 (shinryō hōshū saiken - medical service fee claims).
• Geographic or Business Scope: For broader assignments, defining the claims by reference to a specific business operation or location (e.g., "all receivables from the Tokyo branch operations").

Assignment Without Specifying Obligors: It is generally possible under Japanese law to validly assign a pool of future claims even if the individual obligors are not specifically identified at the time of the assignment agreement, provided the source or type of claims within the pool is sufficiently defined (e.g., "all future accounts receivable arising from the assignor's nationwide retail operations"). The Act on Special Rules for Assignment of Movables and Claims (動産債権譲渡特例法 - Dōsan Saiken Jōto Tokurei Hō), which provides a public registration system for assignments of claims (primarily for businesses), was amended in 2004 to explicitly allow for the registration of assignments of future claims where the obligors are not individually specified. This statutory development implicitly recognizes the substantive validity of such assignments.

B. The Probability of the Claim Arising ("Saiken no Hassei Kanōsei")

A crucial clarification provided by the Supreme Court (decision of January 29, 1999) is that a low probability of the future claim actually arising, as assessed at the time of the assignment agreement, does not, in itself, invalidate the assignment agreement.

The rationale is that parties entering into an assignment of future claims are presumed to understand and accept the inherent uncertainty. They are essentially contracting about a potential future asset. If the claim ultimately fails to materialize, this is generally treated as a matter of breach of the assignment contract by the assignor (e.g., if the assignor warranted the generation of such claims or failed to take necessary steps to bring them about) or as a risk allocated by the contract, rather than a basis for declaring the assignment agreement itself void ab initio. The focus is on the contractual allocation of the risk of non-materialization, which might lead to remedies like damages against the assignor or termination of the assignment agreement, depending on its terms.

Timing of Assignee's Acquisition of the Future Claim (Art. 466-6(2))

Once it is established that future claims can be validly assigned, the next question is: when does the assignee actually acquire these claims? Article 466-6, paragraph 2 of the revised Civil Code provides a clear answer: "In the case referred to in the preceding paragraph [i.e., assignment of a future claim], the assignee shall acquire the claim that has arisen as a matter of course (当然に - tōzen ni)."

While the statute simply states that the assignee acquires the claim "as a matter of course" when it arises, there has been considerable academic discussion regarding the precise legal mechanism:

• Successive Acquisition Theory ("Keiyu Shutoku Setsu" - 経由取得説): This theory posits that the future claim first comes into existence legally vested in the assignor and is then instantaneously (or at least conceptually) transferred from the assignor to the assignee pursuant to the prior assignment agreement.
• Direct/Original Acquisition Theory ("Chokusetsu Shutoku Setsu" / "Genshi Shutoku Setsu" - 直接取得説・原始取得説): This theory suggests that, by virtue of the prior assignment agreement, the future claim, when it materializes, arises directly in the hands of the assignee, without notionally passing through the assignor's legal ownership first.

Supreme Court decisions, particularly those concerning security assignments of future claims (e.g., decisions of November 22, 2001, and February 15, 2007), have held that, in the absence of specific contractual stipulations deferring the effect of the assignment, the assigned future claim is considered "definitively assigned" by the initial agreement. When the claim subsequently arises, the assignee acquires it "as a matter of course" without requiring any further act from the assignor. While these judgments don't explicitly adopt one academic theory over the other, their emphasis on the definitive nature of the initial assignment and the automatic acquisition by the assignee upon the claim's generation leans substantively towards a model where the assignee's right is established robustly from the outset, with the claim vesting in them immediately upon its creation. Some scholars interpret this as meaning the status of being the person to whom the future claim will accrue is transferred at the time of the assignment agreement, and the claim itself then materializes in the hands of the assignee.

Regardless of the precise theoretical construction, the practical effect is that a validly executed assignment of future claims ensures that those claims, once they come into being, belong to the assignee.

Perfection of Assignment of Future Claims Against the Obligor and Third Parties

The ability to assign future claims is complemented by rules allowing for their perfection against the obligor and third parties. Article 467, paragraph 1 of the Civil Code, which governs perfection (対抗要件 - taikō yōken), explicitly includes "assignment of a claim that has not yet arisen" within its ambit.

This means that the standard perfection methods—notice from the assignor to the obligor, or the obligor's acknowledgment (consent), typically bearing a fixed date stamp (確定日付 - kakutei hizuke) for effectiveness against third parties—can be undertaken at the time the assignment agreement for the future claims is made, even before the claims themselves have actually come into existence. This was also the position under established case law (e.g., Supreme Court, November 22, 2001) prior to its explicit codification.

While the perfection steps can be taken at the time of the assignment agreement, the perfection becomes fully effective with respect to a specific future claim when that claim actually arises and falls within the scope of the assignment as defined in the agreement. This allows assignees of future claims to establish their priority and rights from an early stage.

Invalidity of Future Claim Assignment Agreements (Public Policy Considerations)

Although future claims are generally assignable, an agreement to assign future claims can, in exceptional circumstances, be deemed void if it contravenes public order and good morals (公序良俗違反 - kōjo ryōzoku ihan) under Article 90 of the Civil Code.

The Supreme Court, in its landmark decision of January 29, 1999, provided guidance on this, stating that such invalidity might arise under "special circumstances." The Court indicated that a comprehensive assessment is needed, considering factors such as:

• The assignor's financial situation at the time of the agreement.
• The outlook for the assignor's business operations.
• The content of the assignment agreement, particularly the duration for which future claims are assigned and the breadth of the claims covered.
• The circumstances surrounding the conclusion of the agreement.

Based on these factors, an assignment of future claims might be found void (in whole or in part) if:

1. It Unduly Restricts the Assignor's Business Activities: If the terms of the assignment (e.g., an excessively long duration or an overly comprehensive scope covering all or substantially all of the assignor's future income) impose restrictions on the assignor's ability to conduct their business or earn a livelihood that "markedly deviate from the scope considered reasonable in light of common social conventions." This protects against assignments that effectively enslave the assignor's future economic freedom.
2. It Causes Undue Prejudice to Other Creditors (Often in the Context of Excessive Security): If the assignment (particularly a blanket assignment of future claims for security purposes) grants the assignee an excessively broad claim over the assignor's future assets, potentially stripping the assignor of any unencumbered future income that would otherwise be available to satisfy other creditors. This is especially relevant if the assignor is in financial distress. This aspect ties into concerns about "over-collateralization" (過剰担保 - kajō tanpo).

It is important to note that the threshold for invalidating an assignment of future claims on public policy grounds is high. The Supreme Court used phrases like "markedly deviate" and "undue disadvantage," indicating that only exceptional cases would warrant such a finding.

Furthermore, like any contract, an assignment of future claims could also be void under Article 90 if it constitutes a "profiteering act" (暴利行為 - bōri kōi), for example, if the assignee exploited the assignor's distressed circumstances, inexperience, or rashness to secure grossly unfair terms.

Future Claim Assignments and Assignor Insolvency

The assignment of future claims, especially for security purposes, raises complex issues when the assignor subsequently enters insolvency proceedings (e.g., bankruptcy - 破産 - hasan; civil rehabilitation - 民事再生 - minji saisei; or corporate reorganization - 会社更生 - kaisha kōsei). A key debate revolves around whether and to what extent future claims that arise after the commencement of the assignor's insolvency proceedings are still captured by the pre-insolvency assignment.

• "Fixing" or "Crystallization" of Security: If a security assignment over future claims continues to attach to all claims arising post-insolvency, it can significantly hamper the debtor's reorganization efforts (in rehabilitative proceedings) by diverting all incoming revenue to the secured assignee, or it can affect the equal distribution among creditors (in liquidation). This has led to discussions about "fixing" or "crystallizing" the scope of the security interest at the time of the insolvency commencement, potentially limiting its reach over claims generated purely by post-commencement activities of the insolvency trustee or the debtor-in-possession.
• Procedural Mechanisms: Insolvency laws provide certain procedural tools that can affect the enforcement of security interests, including those over future claims. For example, under the Civil Rehabilitation Act (民事再生法 - Minji Saisei Hō), a court may issue a stay order ("chūshi meirei" - 中止命令) to suspend the enforcement of security rights (including the collection of assigned future claims) if such enforcement would jeopardize the debtor's rehabilitation (Article 31). This allows for a period to negotiate with the secured creditor or to find alternative solutions.

These insolvency-related aspects are highly specialized and involve a detailed interplay between the general principles of claim assignment under the Civil Code and the specific policies and provisions of Japan's various insolvency statutes.

Preliminary Agreements for Assignment of Future Claims ("Saiken Jōto no Yoyaku")

Parties may also enter into a preliminary agreement (or option agreement) for the assignment of future claims (将来債権の譲渡予約 - shōrai saiken no jōto yoyaku).

• Validity: Such preliminary agreements are generally considered valid, provided that the future claims which will be the subject of the assignment (if and when the option is exercised) are identifiable to a reasonable degree at the time the option is exercised (Supreme Court, April 21, 2000).
• Uncertainty of Amount: The fact that the exact monetary amount of the future claims is not fixed at the time the preliminary agreement is made does not, in itself, invalidate the preliminary agreement. The amount will be determined when the claims arise and the option to assign is exercised.
• Timing of Transfer and Perfection: In the case of a preliminary agreement, the actual transfer of the claim occurs only when the right to complete the assignment (the option) is validly exercised by the entitled party. Consequently, the perfection of the assignment against the obligor and third parties (through notice/acknowledgment with a fixed date stamp) can generally only be effected from this point of transfer, not from the earlier date of the preliminary agreement itself. This is a key difference from a direct, outright assignment of future claims, where perfection steps can often be taken at the time of the initial assignment agreement.

Conclusion

Japanese law provides a clear and increasingly explicit framework for the assignment of future claims ("shōrai saiken"), recognizing their crucial role in modern financial and commercial activities. The ability to assign claims that are yet to arise is affirmed, subject to requirements of specificity for identifying the claims and, in exceptional cases, limitations based on public policy. The timing of the assignee's acquisition of such claims and the methods for perfecting the assignment are key considerations. While complexities arise, particularly in the context of assignor insolvency or preliminary agreements, the overarching legal direction supports the treatment of future claims as valuable and transferable assets, thereby facilitating a wide range of economic transactions.