Q: Defective Administrative Acts in Japan: What Happens When a Government Decision is Flawed, and Can It Be Revoked?

Administrative decisions by Japanese government agencies—be it a license grant, a tax assessment, or a regulatory order—are intended to be lawful and properly executed. However, like any human endeavor, these administrative acts (gyōsei kōi - 行政行為) can sometimes be flawed (kashi - 瑕疵). Understanding how Japanese law treats such defects, the critical distinction between "void" and merely "voidable" acts, and the circumstances under which an agency can correct its own errors through revocation or withdrawal, is essential for businesses seeking to protect their interests and ensure fair treatment.

Identifying Defects in Administrative Acts: Illegality and Inappropriateness

A defect in an administrative act can manifest in two primary ways:

1. Illegality (Ihō - 違法): This occurs when an administrative act violates a legal norm. The violation could be substantive (e.g., misinterpreting or misapplying the relevant law, acting without statutory authority, factual errors forming the basis of the decision) or procedural (e.g., failing to provide a required hearing, not giving adequate reasons for a decision). It can also involve a breach of constitutional principles like equality or proportionality.
2. Inappropriateness (Futō - 不当): This refers to an administrative act that, while not strictly illegal (i.e., it might be within the bounds of the agency's discretion and formal legal requirements), is considered suboptimal, inexpedient, or not in the best public interest based on policy considerations.

While both types of defects are undesirable, the primary focus of judicial review (challenges in court) is typically on illegality. Inappropriateness is more often a matter for administrative self-correction or review within the administrative appeal system, where the reviewing body can assess policy wisdom as well as legality. This article will concentrate on illegal administrative acts.

The Critical Distinction: Void vs. Voidable Administrative Acts

Not all illegal administrative acts are treated the same. Japanese administrative law makes a crucial distinction based on the severity of the defect:

1. Void Administrative Acts (無効の行政行為 - Mukō no Gyōsei Kōi)

• Definition: A void administrative act is one that suffers from such a fundamental and serious defect that it is considered a nullity from its very inception. It is treated as having never had any legal effect.
• Consequences: The most significant consequence is that a void act lacks kōteiryoku (公定力 – the presumption of legality or binding force that normally attaches to administrative acts). This means:
  • Its invalidity can be asserted by anyone affected, at any time.
  • It is not subject to the strict statutes of limitation that apply to challenging merely voidable acts.
  • Its nullity can be raised in collateral proceedings (e.g., in a civil lawsuit where the void act is a relevant issue) without needing a prior, separate action for revocation.
• Rationale for Recognizing Void Acts: If all flawed administrative acts were merely voidable and thus presumed valid until formally challenged within tight deadlines, then acts with extremely serious illegalities might remain in effect simply because the challenge period expired or a formal challenge was not mounted. This would be incompatible with the principle of the rule of law (hōchishugi). The concept of voidness provides a safety valve for such egregious cases.

The "Grave and Manifest Defect" Theory (Jūdai Meihaku Setsu - 重大明白説)

The prevailing standard adopted by Japanese courts and legal scholarship for determining whether an administrative act is void is the "grave and manifest defect" theory. For an act to be considered void, its defect must be both:

1. Grave (重大 - jūdai): The illegality must be serious and substantial, pertaining to a fundamental requirement for the act's validity. This could involve, for example, a complete lack of jurisdiction by the issuing agency, a clear violation of essential substantive legal provisions, a complete absence of a legally indispensable procedure, or an object that is legally impossible to achieve.
2. Manifest (明白 - meihaku): The illegality must be obvious to a reasonable third party "at first glance," without the need for detailed legal investigation or specialized legal judgment. It should be clear and unmistakable on its face. The Gantlet case (Supreme Court, July 18, 1956), which involved a complex wartime naturalization that was later found to have procedural and substantive flaws, is often cited as a foundational case for the "grave and manifest" standard, though the Court in that specific instance found the act not to be void, emphasizing the high threshold.

The rationale for the "manifestness" requirement is often linked to the protection of legal stability and the reliance interests of third parties. If a defect is not obvious, others may have relied on the act's apparent validity. However, if the illegality is so patent that no reasonable person could or should have relied on it, this justification weakens. Courts have generally held that an agency's mere failure to conduct an adequate investigation, which might have revealed a latent defect, does not in itself make the defect "manifest."

Relaxation of "Manifestness" – The Supplementary Requirement Theory (明白性補充要件説 - Meihakusei Hojū Yōken Setsu)

While the "grave and manifest" standard remains dominant, courts have shown some flexibility. In specific situations, particularly where the protection of third-party reliance is not a significant concern and the primary impact of the act is between the administrative agency and the addressee, a defect that is exceptionally "grave" might render an act void even if it was not strictly "manifest" to all.

A key case in this context is an uncontested tax assessment case (Supreme Court, April 26, 1973). The Supreme Court suggested that for tax assessments (which largely concern only the tax authority and the specific taxpayer), if there is a fundamental error in the core requirements of taxation (e.g., taxing a non-existent income or a person with no tax liability whatsoever) and it would be grossly unjust to compel the taxpayer to bear the burden of this error, the assessment could be treated as void due to its gravity and the resultant injustice, even if the defect wasn't immediately obvious without examining the taxpayer's specific circumstances. This approach is sometimes referred to as the "manifestness as a supplementary requirement" theory, indicating that in cases of extreme gravity and injustice, the manifestness criterion might be applied less rigidly.

2. Voidable Administrative Acts (取り消しうべき行政行為 - Torikeshiubeki Gyōsei Kōi)

• Definition: These are administrative acts that contain a legal defect, but the defect is not so severe as to meet the "grave and manifest" threshold for voidness.
• Consequences: Voidable acts possess kōteiryoku. This means they are treated as legally valid and effective unless and until they are formally revoked (annulled) by a competent authority—either by the issuing administrative agency itself (through self-correction), by a higher administrative body upon an administrative appeal, or by a court in an action for revocation (torikeshi soshō - 取消訴訟). Critically, legal challenges to voidable acts are subject to strict statutes of limitation (typically six months from knowledge of the act for court actions under the Administrative Case Litigation Act). If not challenged within this period, the act becomes final and unchallengeable (fukasōryoku - 不可争力), even if it was illegal.

For businesses, the distinction between a void act and a merely voidable act is of immense practical importance. A void act can be disregarded (though caution and legal advice are essential), and its invalidity can be raised defensively at any time. A voidable act, however, must be complied with unless formally overturned, and any challenge must be initiated promptly within the legal deadlines.

The Administration's Power to Correct Its Own Errors

Administrative agencies are not always reliant on external challenges to address flawed acts. They possess powers to self-correct, primarily through "revocation by the agency" (shokken torikeshi) and "withdrawal" (tekkai).

1. Revocation by the Agency (Shokken Torikeshi - 職権取消): Correcting Initial Flaws

• Definition: Shokken torikeshi (literally, "revocation by own authority") is the act by an administrative agency of annulling one of its own previously issued administrative acts due to a defect (illegality or, in some views, serious inappropriateness) that existed at the time the original act was issued.
• Grounds: The basis for shokken torikeshi is an initial flaw in the act.
• Effect: The effect of shokken torikeshi is generally retroactive (sokyūkō - 遡及効). This means the administrative act is treated as if it had never existed from the beginning. If a business received benefits (e.g., a subsidy) under an act that is later revoked retroactively, it might be required to make restitution.
• Who Can Revoke: The administrative agency that originally issued the act (shobun-chō - 処分庁) clearly has the power to revoke it. Whether a superior administrative agency can also directly revoke an act of its subordinate is a point of some legal debate, though a superior agency can typically order the subordinate agency to undertake the revocation.
• Legal Basis: The prevailing legal view in Japan is that an administrative agency has an inherent power to revoke its own illegal acts as part_of its general duty to ensure lawful administration (i.e., to uphold the rule of law). A specific statutory provision explicitly authorizing revocation is generally not considered necessary for an agency to correct its own illegal acts.
• Restrictions on Revoking Beneficial Administrative Acts: A critical issue arises when the flawed administrative act was beneficial to the recipient (e.g., a license, a permit, a subsidy). While revoking an unlawfully imposed burdensome act (e.g., an illegal tax assessment) is generally straightforward and even desirable, revoking a beneficial act can upset the legitimate expectations and reliance of the recipient.
  • Japanese law and jurisprudence seek to balance the public interest in rectifying illegal administrative actions with the private interest in legal stability and the protection of reliance.
  • Consequently, the power to revoke a beneficial administrative act is generally restricted. It is typically permissible if:
    • The recipient obtained the benefit through fraudulent means or other serious misconduct.
    • There are overriding public interest reasons that necessitate the revocation, even if this harms the recipient's reliance interests. The Supreme Court, in a judgment on September 9, 1958 (Minshū Vol. 12, No. 13, p. 1949), indicated that such revocation of a beneficial (albeit flawed) act is permissible only when there are "special public interest needs." This involves a careful balancing of the gravity of the defect, the nature of the benefit, the extent of the recipient's good-faith reliance, any harm to third parties or the public if the act remains, and any measures available to mitigate the recipient's loss.

2. Withdrawal (Tekkai - 撤回): Responding to Subsequent Changes in Circumstances

• Definition: Tekkai is the act by an administrative agency of terminating the future effect of an administrative act that was validly issued at the time of its creation, because new facts or circumstances have arisen after its issuance that make its continued existence inappropriate, contrary to public interest, or inconsistent with its original legal or factual premises.
• Grounds: Unlike shokken torikeshi, tekkai is not based on an initial defect in the act. The act was lawful when made. The grounds for withdrawal are subsequent developments.
  • Examples:
    • The recipient of a license subsequently violates its conditions or engages in conduct that disqualifies them.
    • A significant change in public policy or scientific understanding makes the continuation of a previously permitted activity undesirable (e.g., withdrawing a manufacturing approval for a pharmaceutical product after new evidence emerges demonstrating unforeseen serious side effects, as might be covered under provisions like Article 74-2 of the modern Pharmaceuticals and Medical Devices Act).
    • The factual circumstances that formed the basis of the original act have fundamentally changed, making the act pointless or counterproductive.
• Effect: The effect of tekkai is generally prospective only (shōraikō - 将来効). The administrative act ceases to have legal effect from the point of withdrawal into the future. It does not nullify the act retroactively.
• Legal Basis for Withdrawing Beneficial Acts: The question of whether an agency needs explicit statutory authority to withdraw a beneficial act (that was initially valid) is also a subject of legal discussion, similar to the revocation of beneficial acts:
  • One view, often supported by case law such as the physician's designation withdrawal case (Supreme Court, June 17, 1988), suggests that if a compelling public interest arises that necessitates terminating an existing beneficial administrative act, withdrawal may be permissible even without an explicit statutory provision authorizing withdrawal for that specific reason. In this case, a physician's designation to perform legally permitted abortions was withdrawn due to involvement in illegal adoption brokering. The Court allowed the withdrawal based on the serious breach of professional ethics and public trust, even without a direct statutory clause for withdrawal on such grounds, after weighing the public interest against the physician's detriment. This view often implies that if a lawfully granted beneficial act is withdrawn for reasons of public interest not attributable to the recipient's fault, compensation for resulting losses might be due.
  • An alternative view argues that withdrawing an established beneficial act constitutes a new infringement on the recipient's acquired rights or legal position. Therefore, consistent with the principle of reservation of law (hōritsu no ryūho), such a withdrawal should require a specific statutory basis authorizing it, especially since many modern regulatory statutes do explicitly provide for grounds and procedures for withdrawal or revocation of licenses and permits. Exceptions might be recognized if the original administrative act explicitly included a "reservation of the right of withdrawal" (tekkai-ken no ryūho - 撤回権の留保) as an ancillary provision, or if a fundamental factual premise essential to the act's existence has completely disappeared (e.g., if a permit is granted for a specific building that is later destroyed).

Impact of Agency Self-Correction on Businesses

The powers of shokken torikeshi and tekkai mean that even administrative acts that businesses have received and relied upon are not entirely immutable.

• If a business has benefited from a flawed (illegal) administrative act, it faces the risk of retroactive revocation, potentially including demands for restitution of benefits, though this risk is mitigated if the business acted in good faith and the public interest in revocation is not overwhelming.
• If a business holds a valid administrative act (e.g., a license), it can still face prospective withdrawal if subsequent circumstances (including its own conduct) provide legal grounds for such action. Understanding the conditions under which withdrawal is permissible according to the relevant statutes and legal principles is crucial for long-term planning.

Other Considerations: Cure, Conversion, and Succession of Illegality

Beyond voidness and agency self-correction, a few other doctrines relate to defective administrative acts:

• Cure of Defects (Kashi no Chiyu - 瑕疵の治癒): In very limited circumstances, minor procedural or formal defects in an administrative act (e.g., an initial failure to provide sufficiently detailed reasons for a decision, if this is fully rectified later without causing prejudice to the addressee's ability to challenge the act) may be considered "cured." This doctrine is applied narrowly and cautiously, as it can undermine procedural safeguards.
• Conversion of Defective Acts (Kashi no Tenkan - 瑕疵の転換): An administrative act that is invalid as one type of act (e.g., an invalid order) might, under strict conditions, be treated by a court as a different, valid type of administrative act (e.g., a non-binding request), if it fulfills all the essential requirements of that other act, this aligns with the agency's overarching (presumed) lawful intent, and such conversion does not unfairly prejudice the addressee. This is also a rarely applied doctrine.
• Succession of Illegality (Ihōsei no Shōkei - 違法性の承継): This issue arises when there is a sequence of administrative acts, where a later act (Act B) is legally predicated on an earlier act (Act A). If Act A was illegal but is no longer open to direct challenge (e.g., because the statute of limitations has expired), can a party challenging Act B argue that Act B is illegal because it is founded upon the illegality of Act A? As a general rule, such "succession" or "inheritance" of illegality is not permitted, in the interest of legal stability. However, an exception may be made if Act A and Act B are so integrally linked in achieving a single, ultimate legal effect that denying the succession of illegality would effectively deprive the affected party of any meaningful opportunity to challenge the overall administrative process. The Supreme Court, in a judgment on December 17, 2009, also indicated that the adequacy of procedural guarantees available to challenge the first act can be a factor in deciding whether to allow its illegality to be raised in a challenge to a subsequent act.

Conclusion: Vigilance and Prompt Action Required

The Japanese legal framework for dealing with defective administrative acts is a complex interplay of doctrines aimed at upholding the rule of law while also ensuring administrative efficiency and legal stability. For businesses, the key takeaways are:

• The distinction between void and merely voidable administrative acts is critical. Void acts, suffering from "grave and manifest" defects, are legal nullities. Voidable acts are presumed valid until formally overturned.
• Administrative agencies possess powers to revoke initially flawed acts (shokken torikeshi) and withdraw initially valid acts (tekkai) due to subsequent changes. However, these powers, especially when affecting beneficial acts relied upon by businesses, are subject to significant legal constraints, including the protection of legitimate expectations and overriding public interest requirements.
• Due to the presumption of legality (kōteiryoku) and strict time limits for challenging voidable acts (fukasōryoku), businesses must be vigilant in scrutinizing administrative decisions that adversely affect them and be prepared to take prompt legal action (administrative appeals or court litigation) if they believe an act is unlawful.

Navigating these doctrines often requires expert legal advice to assess the nature of any defect, the potential legal consequences, and the most appropriate strategies for response or redress.