My Japanese Debtor Isn't Collecting Its Own Claims: Can I Use the "Creditor's Subrogation Right" (Saikensha Daiiken) to Protect My Interests?

Japanese Attorney at Law - Bengoshi L.L.

30 May 2025 • 8 min read

Imagine a scenario: your Japanese debtor owes you a significant sum, but they themselves are owed money or have other actionable rights against a third party. Frustratingly, your debtor is taking no steps to enforce these rights, thereby diminishing their own assets and, consequently, your chances of recovery. In such situations, Japanese Civil Code Article 423 et seq. provides a powerful tool known as the "Creditor's Subrogation Right" (Saikensha Daiiken 債権者代位権), allowing a creditor to step into the debtor's shoes and exercise the debtor's rights against that third party. This article explores the nature, requirements, scope, and effects of this important legal remedy.

What is the Creditor's Subrogation Right (Saikensha Daiiken)?

The Saikensha Daiiken is a right granted to a creditor to exercise a right belonging to their debtor, in the creditor's own name, when the debtor fails to exercise it themselves. The primary stated purpose of this right, particularly the type focused on here, is the preservation of the debtor's general assets (sekinin zaisan 責任財産). These assets form the common security for all of the debtor's creditors, and the subrogation right acts as a preparatory measure to ensure that these assets are maintained or recovered, ultimately facilitating compulsory execution if necessary.

However, the Saikensha Daiiken also possesses a de facto function that can be very attractive to the exercising creditor. Due to rules allowing the subrogating creditor to demand direct payment or delivery of assets from the third party (under Article 423-3 of the Civil Code), and the potential to then set-off their own claim against what is recovered (if monetary), it can sometimes operate as a simplified method for the subrogating creditor to achieve satisfaction of their own claim, potentially ahead of other general creditors.

It's important to distinguish this from the "Actio Pauliana" (Sagaikoi Torikeshi Ken), which allows a creditor to nullify fraudulent acts by the debtor that intentionally diminish their assets. The subrogation right, in contrast, deals with the debtor's inaction in exercising their existing rights.

Key Requirements for Exercising the Subrogation Right (Asset Preservation Type)

To successfully invoke the Saikensha Daiiken for the purpose of preserving the debtor's general assets, several conditions, primarily outlined in Article 423 of the Civil Code, must be met. The creditor asserting this right generally bears the burden of proving these elements.

Existence of the Creditor's Claim (Hi-Hozen-Saiken 被保全債権):
The creditor must have a valid existing claim against their debtor. This "preserved claim" can be monetary or non-monetary (e.g., a claim for delivery of specific goods, which could ultimately convert into a monetary damages claim). It does not need to be judicially confirmed by a "title of obligation" (saimu-meigi), nor does it need to have arisen before the debtor's right that the creditor seeks to subrogate. However, if the creditor's claim is itself unenforceable (e.g., a natural obligation, or a claim barred by certain defenses), it cannot be the basis for subrogation (Art. 423, Para. 3).
The Creditor's Claim Must Be Due (Rikoki Torai 履行期到来) (Art. 423, Para. 2):
Generally, the creditor cannot exercise subrogation unless their own claim against the debtor is due. This reflects the principle of not interfering prematurely with the debtor's management of their affairs.
- Exception for "Acts of Preservation" (Hozon-Koi 保存行為): A crucial exception exists for "acts of preservation." If the purpose of exercising the debtor's right is merely to preserve it (e.g., interrupting the running of the statute of limitations on the debtor's claim against a third party, applying for a preservation-type registration), the creditor can do so even if their own claim against the debtor is not yet due.
Necessity for Preservation – Debtor's Insolvency (Mushiryoku 無資力) (Generally Required):
For the general asset preservation type of subrogation, the creditor must demonstrate a "necessity to preserve their claim." This usually translates to proving the debtor's insolvency (mushiryoku). Insolvency here means that the debtor's total liabilities exceed their total assets, and they lack sufficient financial resources (including creditworthiness and earning capacity) to fully satisfy all their creditors. The subrogating creditor typically needs to show that without exercising the debtor's right, their own claim is unlikely to be fully satisfied.
- This insolvency assessment is made considering the debtor's overall financial situation.
- The insolvency generally needs to exist at the time the subrogation right is exercised or, if litigated, by the close of oral arguments in the fact-finding stages.
- Exceptions to the Insolvency Requirement: Beyond acts of preservation, insolvency is also not required if the creditor is subrogating a right specifically to perfect their own distinct claim against a specific asset (e.g., subrogating the debtor's right to obtain property registration so the creditor can then enforce a mortgage against that property). This falls into a different category of subrogation focused on realizing a specific right, rather than preserving general assets.
Existence of the Subrogated Right (Hi-Dai-Kenri 被代位権利):
The debtor must possess a valid, exercisable right against a third party (the "third-party obligor").
Debtor's Non-Exercise of the Subrogated Right:
The debtor must be failing to exercise their own right. It is not necessary for the creditor to first demand that the debtor exercise the right. The debtor's reasons for not exercising the right are generally irrelevant.
The Subrogated Right Must Not Be "Exclusively Personal to the Debtor" or Non-Attachable (Art. 423, Para. 1, proviso):
- Exclusively Personal Rights (Isshin-Senzoku-Ken 一身専属権): Certain rights are considered so personal to the debtor that their exercise should be left to the debtor's sole discretion. Creditors cannot subrogate these. Examples include:
  - The right to file for divorce or dissolve an adoption.
  - The right to claim consolation money (solatium) for defamation or other personal infringements before the amount has been fixed by agreement or court judgment (Supreme Court judgment, October 6, 1983, Minshu 37-8-1041). Once objectified into a monetary claim, it may become subrogatable.
  - Certain family law rights concerning status or inherently personal relationships.
    However, property rights arising from family law relationships (e.g., a crystallized claim for property division upon divorce) may be subrogatable.
- Non-Attachable Rights: Rights that are prohibited from seizure under execution laws (e.g., certain welfare benefits, legally protected portions of salaries) cannot be subrogated, as their exercise would not ultimately benefit the general pool of creditors.

What Rights Can Be Subrogated?

Subject to the limitations above, a wide array of the debtor's rights can be subrogated if they are suitable for preserving the common security of creditors. These include:

Monetary claims (e.g., debts owed to the debtor).
Claims for the delivery of property.
Formative rights (keiseiken 形成権), such as the right to rescind or terminate a contract the debtor has with a third party, the right to set-off mutual debts, or the right to invoke the statute of limitations (prescription) in the debtor's favor against a claim by a third party (Supreme Court judgment, September 26, 1968, Minshu 22-9-2002).
Certain public law rights, such as the right to apply for property registration.
Certain procedural rights directly linked to substantive rights, like the right to file a lawsuit to enforce a claim.

The Mechanics of Exercising the Subrogation Right

In the Creditor's Own Name: The subrogating creditor exercises the debtor's right in their own name, not as a representative or agent of the debtor.
Judicial or Extra-Judicial Exercise: The right can be exercised either by filing a lawsuit against the third-party obligor (a "creditor's subrogation lawsuit" or saikensha dai sosho) or through out-of-court demands and actions.
Scope of Exercise (Art. 423-2): If the subrogated right is divisible (e.g., a monetary claim for ¥1,000,000, while the creditor's own claim is ¥600,000), the creditor can only exercise the subrogated right to the extent necessary to preserve their own claim. This means they can generally only demand up to the amount of their hi-hozen-saiken from the third party if the third party's debt to the debtor is larger.

Effects of Exercising the Subrogation Right

The exercise of the Saikensha Daiiken has several important legal consequences:

Benefit Accrues to the Debtor's Estate (Theoretically): In principle, any assets or benefits recovered through the subrogation exercise legally accrue to the debtor. They become part of the debtor's general assets, available for satisfaction of all creditors according to their respective rights and priorities.
Creditor's Right to Demand Direct Payment or Delivery (Art. 423-3):
A pivotal provision is Article 423-3, which states that if the subrogated right is a claim for the payment of money or the delivery of movable property, the subrogating creditor can demand that the third-party obligor make the payment or delivery directly to the creditor themselves. This is a significant feature that underpins the "simplified collection" aspect of the subrogation right.
De Facto Preferential Satisfaction: When a creditor receives direct payment of money under Article 423-3, they can then often effect a set-off (sosai 相殺) of their own claim against the debtor (hi-hozen-saiken) against the obligation they now have to remit the recovered funds to the debtor. This can result in the subrogating creditor achieving a form of preferential satisfaction of their claim, effectively bypassing the pro-rata distribution that would occur in a formal insolvency proceeding. This aspect has made the Saikensha Daiiken a potent, and sometimes controversial, tool for individual creditor recovery.
Third Party's Defenses (Art. 423-4): The third-party obligor, when faced with a subrogation claim, can assert against the subrogating creditor any defenses they could have asserted against the original debtor. For example, if the debtor's claim against the third party was invalid, or subject to a set-off by the third party, these defenses remain available.
Debtor's Continued Right to Act (Art. 423-5): Even after a creditor has initiated a subrogation action, the debtor is generally not prevented from exercising or disposing of the subrogated right themselves, nor is the third party prevented from performing directly to the debtor. This can lead to complex situations if, for instance, the debtor collects the claim or waives it after the creditor has started subrogation proceedings but before the creditor secures the asset. If the third party performs to the debtor after being notified of a subrogation lawsuit by the creditor (see below), the third party's obligation to the subrogating creditor may not be discharged. To definitively prevent the debtor from dealing with the asset, the creditor might need to seek provisional remedies like an attachment.
Extinguishment of the Subrogated Right: When the third-party obligor performs to the subrogating creditor (pursuant to Art. 423-3), the debtor's right against the third-party obligor is extinguished to the extent of the performance.

Creditor's Subrogation Lawsuit (Saikensha Dai Sosho)

If the subrogation right is exercised through a lawsuit:

The subrogating creditor sues the third-party obligor. The claim being litigated is the debtor's right against the third party, with the creditor acting in a capacity often described as a type of statutory litigation representative.
Duty to Notify the Debtor (Art. 423-6): The subrogating creditor who has filed a lawsuit must, without delay, give notice of the lawsuit to the debtor. This is a critical procedural safeguard to ensure the debtor is aware of the action being taken concerning their rights and has an opportunity to intervene or otherwise protect their interests.
Effect of Judgment on the Debtor: A final and binding judgment in a creditor's subrogation lawsuit is generally binding on the debtor as well, as per Article 115, Paragraph 1, Item 2 of the Code of Civil Procedure (which concerns judgments binding on those whose rights are being managed or disposed of by another in litigation).

Conclusion

The Creditor's Subrogation Right (Saikensha Daiiken) is a distinctive and potent feature of Japanese civil law, offering creditors a proactive means to protect their interests when a debtor fails to manage their own assets diligently. While its primary doctrinal aim is the preservation of the debtor's estate for all creditors, the ability to demand direct payment and effect set-offs often allows the exercising creditor a significant practical advantage. Successful invocation requires careful attention to its specific requirements, including the nature of the creditor's claim, the debtor's insolvency (where required), the debtor's inaction, and the non-personal nature of the right being subrogated. For businesses dealing with Japanese debtors, understanding the Saikensha Daiiken can be crucial for strategizing debt recovery and asset preservation.