Perfecting Assignment of Claims in Japan: How Do I Ensure My Rights Against the Obligor and Other Third Parties?

You've taken an assignment of a claim from a Japanese company – perhaps accounts receivable, a loan, or other contractual rights. This transfer is valid between you (the assignee) and the assignor. However, to make this assignment legally effective and assertable against the party who owes the debt (the obligor) and, crucially, against other potential claimants to the same claim (third parties), you must "perfect" the assignment. Under Japanese law, primarily governed by Article 467 of the Civil Code, perfection (taiko yoken 対抗要件) is a critical step to secure your rights. This article delves into how to perfect a claim assignment in Japan.

Why is Perfection Necessary for Claim Assignments?

Perfection serves several vital functions:

1. Binding the Obligor: It makes the assignment legally binding on the obligor, ensuring they know to whom they must render performance (e.g., make payment). Without it, the obligor might validly pay the original creditor (assignor) and be discharged.
2. Protecting the Assignee Against Third Parties: It establishes the assignee's priority over other parties who might later assert a conflicting interest in the same claim. These third parties could include other assignees of the same claim, creditors of the assignor who try to attach the claim, or the assignor's bankruptcy trustee.
3. Providing Legal Certainty: It creates a clear and verifiable record of the transfer, reducing disputes and enhancing the reliability of claims as transferable assets.

Failure to properly perfect an assignment can leave the assignee vulnerable, potentially rendering their acquired claim unenforceable against key parties or subordinate to others.

Perfection Against the Obligor (Saimusha Taiko Yoken) – Binding the Debtor (Art. 467, Para. 1)

To make the assignment effective against the obligor (the party who owes the underlying debt), and thus obligate them to perform to you, the assignee, one of the following methods must be used:

1. Notice of Assignment from the Assignor to the Obligor (Yuzuriwatashi-nin kara Saimusha e no Tsuchi):
   • The assignor (the original creditor) must notify the obligor that the claim has been assigned to you (the assignee).
   • While the notice must come from the assignor (or someone acting with their authority, like an agent or, in some cases, the assignee if properly authorized or acting under subrogation rights), it informs the obligor that their duty of performance is now owed to the assignee.
   • This notice serves to cut off the obligor's ability to discharge the debt by paying the original creditor.
2. Obligor's Consent to the Assignment (Saimusha no Shodaku):
   • Alternatively, the obligor can give their consent (acknowledgment) to the assignment. This consent can be given either to the assignor or directly to the assignee.
   • The obligor's consent signifies their awareness and acceptance of the transfer of the claim to the new creditor.

Form of Notice/Consent (for obligor perfection only):
For the purpose of making the assignment effective solely against the obligor, the Civil Code does not prescribe a specific form for the notice or consent. It can be oral or written. However, as we will see, for perfection against third parties, a more formal requirement – an instrument with a "confirmed date" – becomes essential. Therefore, it is always best practice to use a method that satisfies this higher standard from the outset.

Effect of Perfection Against the Obligor:
Once notice has been given or consent obtained, the obligor is legally bound to render performance to the assignee. If the obligor, after proper perfection against them, mistakenly pays the original creditor (assignor), they are generally not discharged from their obligation to the assignee and may have to pay again (though they might have an unjust enrichment claim against the assignor).

Obligor's Defenses (Japanese Civil Code Art. 468):
It is crucial to understand that even after an assignment is perfected against the obligor, the obligor can still assert against the assignee any defenses they had against the original assignor that arose before the obligor received notice of the assignment or gave their consent.

• This includes defenses like the invalidity of the underlying contract, claims for defective performance by the assignor, or the prior extinguishment of the debt.
• Furthermore, the obligor can assert a right of set-off (sosai 相殺) against the assignee if:
  • The obligor acquired a claim against the assignor before receiving notice/giving consent to the assignment (Art. 468, Para. 2 applying Art. 469, Para. 2, Item 1).
  • The obligor's claim against the assignor arose from a cause that existed before such notice/consent, even if the claim itself became due later (Art. 468, Para. 2 applying Art. 469, Para. 2, Item 2).

Perfection Against Third Parties Other Than the Obligor (Saimusha Igai no Daisansha ni Taisuru Taiko Yoken) (Art. 467, Para. 2)

This is where the stakes get higher. To protect your rights as an assignee against other potential claimants to the same assigned claim, more stringent perfection requirements must be met.

Who are "Third Parties" in this Context?
"Third parties" refers to anyone who has a legal interest in the assigned claim that could conflict with the assignee's interest. This typically includes:

• Other assignees of the same claim from the same assignor (in case of double or multiple assignments).
• Attaching creditors of the assignor (creditors who obtain a court order to seize the claim as part of the assignor's assets).
• The assignor's bankruptcy trustee if the assignor enters bankruptcy proceedings.

General unsecured creditors of the assignor are not considered "third parties" for this purpose unless they take a specific legal action like attachment that gives them a particularized interest in the claim.

The Crucial "Confirmed Date" (Kakutei Hizuke) Requirement:
To perfect an assignment of a claim against third parties, the notice of assignment given to the obligor, or the obligor's consent to the assignment, must be made by means of an instrument bearing a "confirmed date" (kakutei hizuke no aru shosho 確定日付のある証書).

• What is a "Confirmed Date"? A confirmed date is an official, legally recognized, and verifiable date stamp affixed to a private instrument by an authorized body. Its purpose is to provide objective proof that the document (and thus the notice or consent it embodies) existed on or before that specific date. Common methods for obtaining a confirmed date in Japan include:
  1. Notarization: Having the instrument (e.g., the notice of assignment or the obligor's written consent) notarized by a Japanese notary public (koshonin 公証人). The notary will affix their seal and a date.
  2. Content-Certified Mail with Date Stamp (Naiyo Shomei Yubin 内容証明郵便): Sending the notice of assignment to the obligor via this special postal service. The post office keeps a copy of the content and officially records the date of dispatch, which serves as a confirmed date. This is a very common and practical method.
  3. Other official certifications of date on documents as prescribed by law.

The confirmed date itself does not validate the content of the document but irrefutably establishes its existence as of that date. This temporal marker is essential for determining priority among conflicting claimants.

Determining Priority Among Multiple Conflicting Claimants

When multiple parties assert conflicting rights to the same assigned claim, the "confirmed date" mechanism plays a pivotal role in resolving priority:

1. Multiple Assignees of the Same Claim:
   If an assignor assigns the same claim to two or more assignees:
   • Priority is not determined by the date of the assignment agreements themselves.
   • Priority is not determined by the date indicated on the confirmed date instrument (e.g., the notary's date stamp on the notice).
   • Rather, priority is determined by the time of arrival of the notice (bearing a confirmed date) at the obligor, OR, if perfection is by consent, the date of the obligor's consent (which itself must be via an instrument with a confirmed date). This principle was firmly established by the Supreme Court (e.g., judgment of February 19, 1974, Minshu 28-1-1). The assignee whose perfected notice reaches the obligor first, or who obtains the obligor's perfected consent first, generally prevails.
   • Simultaneous Arrival/Consent: If multiple perfected notices arrive at the obligor simultaneously, or if multiple perfected consents bear the same date, the assignees are generally considered to rank equally. In such a scenario, each assignee may demand their pro-rata share of the claim from the obligor if the total amount assigned exceeds the claim. Alternatively, any one of them can typically claim the full amount, and the obligor can discharge their debt by paying any one of the equally ranking assignees (or by depositing the amount due with an official depository).
2. Assignee vs. Attaching Creditor of the Assignor:
   • If the assignee perfects their assignment against third parties (i.e., notice with a confirmed date reaches the obligor, or perfected consent is obtained) before an attachment order concerning the claim is served on the obligor, the assignee generally has priority over the attaching creditor.
   • Conversely, if the attachment order is served on the obligor before the assignee perfects against third parties with a confirmed date, the attaching creditor generally has priority.
   • If the perfection by the assignee and the service of the attachment order on the obligor occur simultaneously, they are often treated as having equal rights, potentially leading to the obligor depositing the funds.
3. Assignee vs. Assignor's Bankruptcy Trustee:
   • An assignee who has perfected their assignment against third parties (with a confirmed date) before the commencement of the assignor's bankruptcy proceedings generally has priority over the assignor's bankruptcy trustee with respect to the assigned claim. The claim is considered to have left the assignor's estate.

Special Perfection System for Assignments by Corporations (Act on Special Provisions, etc. Concerning Transfer of Movables and Claims)

Recognizing the need for a more streamlined perfection method for bulk assignments of monetary claims by corporations (which are common in securitization and other financing transactions), Japan has a special law: the "Act on Special Provisions, etc. Concerning Transfer of Movables and Claims" (Dōsan oyobi Saiken no Jōto no Tokurei ni Kansuru Hōritsu, often called the "Movables and Claims Assignment Special Provisions Act").

• Claim Assignment Registration System: This Act allows for the perfection of assignments of monetary claims by corporations (and certain other specified entities) through registration in the Claim Assignment Register (Saiken Jōto Tōki Fairu 債権譲渡登記ファイル). This register is maintained electronically by the Legal Affairs Bureau.
• Effect of Registration: A valid registration under this system has the same legal effect as a notice of assignment to the obligor bearing a confirmed date for the purpose of perfection against third parties (other than the obligor of the assigned claim themselves).
• Perfection Against the Obligor Still Requires Separate Civil Code Measures: Crucially, registration under this special Act does NOT perfect the assignment against the obligor of the assigned claim. To make the assignment binding on the obligor and obligate them to pay the assignee, the assignee (or assignor) must still separately provide notice to (or obtain consent from) the obligor in accordance with the general Civil Code rules (Article 467).
• Priority: Priority between multiple assignments registered under this special law is generally determined by the chronological order of registration.

This registration system is widely used for large-scale assignments of receivables as it avoids the logistical burden of sending individual confirmed-date notices to numerous obligors for the purpose of third-party perfection. However, assignees must remember the separate step of Civil Code perfection against each obligor.

Conclusion

Perfecting an assignment of claims in Japan is a critical, often two-tiered, process. First, the assignment must be made effective against the obligor, typically through notice from the assignor or the obligor's consent. Second, and vital for protecting the assignee's rights against other potential claimants, this notice or consent must be evidenced by an instrument bearing a "confirmed date," or, for corporate assignments of monetary claims, through registration in the special Claim Assignment Register. The "confirmed date" establishes an objective temporal marker that is paramount in determining priority among conflicting interests. Failure to adhere to these perfection requirements can significantly jeopardize an assignee's ability to realize the value of the assigned claim.