Settlement in Japanese Civil Appeals: How Common Is It and How Does It Work?

Japanese Attorney at Law - Bengoshi L.L.

• 7 min read

In the Japanese civil justice system, settlement (和解 - wakai) is not merely an afterthought but an integral part of the litigation process, actively encouraged by courts at all stages, including during civil appeals (控訴 - kōso). Given that an appeal often represents the final opportunity for parties to resolve their dispute before a binding appellate judgment, Japanese High Courts are generally keen to explore settlement possibilities. However, the manner in which settlement is approached, particularly in the context of evolving case management practices like "post-hoc review management" (事後審的運営 - jigo shinteki unei), has become a subject of considerable discussion and, at times, criticism, raising questions about fairness and judicial pressure.

The Japanese Code of Civil Procedure (CCP) explicitly empowers courts to attempt to facilitate settlement at any stage of the litigation, irrespective of how far the proceedings have progressed (Article 89 CCP). This provision applies equally to appellate courts. The court itself can take the lead in settlement discussions, or it may delegate this role to a commissioned judge (受命裁判官 - jumyō saibankan, typically one member of the appellate panel) or an entrusted judge (受託裁判官 - jutaku saibankan, a judge from another court).

A settlement reached in court (裁判上の和解 - saibanjō no wakai) and recorded in the court's record (和解調書 - wakai chōsho) has significant legal force: it is accorded the same effect as a final and binding judgment (Article 267 CCP). This means:

  • The litigation, to the extent covered by the settlement, is terminated.
  • The terms of the settlement are enforceable in the same manner as a judgment.
  • Any unconfirmed judgment from a lower court (i.e., the first-instance judgment that was appealed) loses its effect concerning the matters resolved by the settlement.
  • The statute of limitations for a claim confirmed by a judicial settlement is ten years (Article 169, new Civil Code).

Parties can also agree on the allocation of litigation costs within the settlement agreement; if they do not, costs are typically borne by each party respectively.

The Appellate Court's Role and Timing of Settlement Attempts

Appellate courts in Japan often view settlement facilitation as an important part of their function. Given that this stage may be the last practical chance for a negotiated outcome, judges frequently take an active role. Settlement discussions can be initiated at various points in the appellate process:

  • Before the first oral argument session: After reviewing initial filings.
  • During the first oral argument session.
  • After the examination of evidence (if any is conducted at the appellate level).
  • Just before the conclusion of oral arguments.
  • Even after oral arguments have concluded but before the judgment is rendered.

A common technique employed by judges to encourage settlement, especially when one party may have partially succeeded at first instance, is the disclosure of their provisional impression or tentative view of the case (心証の開示 - shinshō no kaiji). By indicating how the court might be leaning on certain issues, judges aim to guide parties towards a realistic assessment of their positions and foster compromise.

Settlement under "Post-hoc Review Management" (事後審的運営): A Point of Contention

The drive for efficiency in Japanese appellate courts has led to the widespread adoption of "post-hoc review management" (jigo shinteki unei), often resulting in the conclusion of oral arguments on the first day of hearing (dai-ikkai kesshin). This operational model has significant implications for how settlement is approached and has drawn considerable criticism.

The Practice:
A concerning practice described by commentators is for appellate courts, operating under this expedited model, to conclude oral arguments—sometimes without substantial prior discussion or clarification of issues with the parties—and then strongly recommend settlement. In such scenarios, the settlement discussions might be led by a single commissioned judge rather than the full panel. This judge may hint at the likely (unfavorable) outcome of the judgment if the case were to proceed, thereby pressuring a party to concede and settle.

Criticisms and Concerns:

  1. Lack of Transparency and Fairness: If substantive oral arguments are curtailed, parties might not fully understand the court's reasoning or the basis for its settlement recommendations. The settlement process can feel opaque if the court has not openly shared its evolving views on the key contested issues during a robust hearing. Parties may be pressured to settle without a clear grasp of how the court has evaluated their arguments or the evidence.
  2. Judicial Pressure and Coercion: When a judge, particularly after limiting the opportunity for full argument, strongly suggests an adverse outcome to motivate settlement, it can cross the line into undue pressure or perceived coercion. The very notion of a voluntary agreement is undermined if a party feels compelled to settle due to fear of an unfavorable judgment hinted at by the court in what feels like a procedurally incomplete process. Legal scholars have questioned whether such methods align with the ideals of a fair trial in a rule-of-law state.
  3. Role of a Single Commissioned Judge vs. Full Panel: If settlement discussions are primarily handled by a commissioned judge, there's a risk that the views expressed or impressions conveyed may not fully represent the deliberated consensus of the entire appellate panel. This can create uncertainty for parties; if they reject the settlement terms proposed by the commissioned judge and the case proceeds to judgment, the final outcome decided by the full panel might differ significantly. This potential disconnect can make parties hesitant to trust the settlement process and the impressions shared by a single judge.
  4. Misalignment with Case Merits: "Post-hoc review management" often involves the court focusing its initial assessment on the specific points of error highlighted by the appellant in their written submissions, rather than forming a comprehensive, independent view of the entire case from the ground up. If the court has not thoroughly deliberated on all aspects of the case as it would under a traditional "continuation model," its settlement proposals or the impressions it conveys might be misaligned with what the parties perceive as the true merits or with the outcome that might have resulted from a more exhaustive appellate review.

The Impact on Parties: Feeling Heard vs. Feeling Pressured

For a settlement to be truly successful and accepted by the parties as a fair resolution, it's often crucial that they feel they have had an adequate opportunity to present their case and have their arguments considered. If the appellate process, particularly through "first-day conclusions," curtails this opportunity, parties may enter settlement discussions feeling unheard or that the court has already made up its mind based on an incomplete picture.

This can lead to dissatisfaction even if a settlement is reached, as it may be perceived as a coerced compromise rather than a genuinely negotiated agreement. The quality of justice and party satisfaction are not solely determined by the outcome but also by the perceived fairness of the process leading to that outcome.

Interestingly, some analyses suggest that while settlement rates in Japanese High Courts rose significantly over past decades, there has been a more recent decline. For example, one source notes a high of 35.6% in 2015 (though an earlier figure for 1985 was 11.8%, suggesting a general upward trend over the very long term). However, the critique associated with the "post-hoc review" and "first-day conclusion" practices is that when courts give less time for hearings and for parties to fully articulate their positions, subsequent settlement recommendations, which might just reflect a judge's quick assessment, can be less convincing or acceptable to the parties. A more deliberative process, where parties feel their arguments have been thoroughly aired and understood, might foster a more receptive environment for meaningful settlement negotiations.

Distinguishing In-Court vs. Out-of-Court Settlements During an Appeal

It's also important to distinguish between judicial settlements (裁判上の和解) reached within the appellate court proceedings and out-of-court settlements (裁判外の和解 - saibangai no wakai) that parties might reach privately while an appeal is pending.

  • In-Court Settlement: As discussed, this is recorded by the court and has the effect of a final judgment, terminating the appeal and superseding the first-instance judgment.
  • Out-of-Court Settlement: This is essentially a private contract between the parties. It does not automatically terminate the appeal proceedings. For the appeal to end, the parties would typically need to include a provision in their private settlement agreement that the appellant will withdraw the appeal (控訴の取下げ). If the appeal is subsequently withdrawn, the first-instance judgment becomes final. If the appeal is not withdrawn, the appellate court would theoretically continue with the case, though the out-of-court settlement would likely alter the substantive legal relationship between the parties and would need to be brought to the court's attention as a new development affecting the dispute.

Key Considerations for Parties in Appellate Settlement Discussions

Parties and their counsel engaging in settlement discussions at the appellate stage in Japan should consider:

  • The Court's Provisional Views: If the court or a commissioned judge offers a provisional impression (心証の開示), try to understand its basis. Is it from a single judge or the panel? How deeply has the court analyzed the full record?
  • Preserving the Right to Be Heard: While engaging in settlement is often pragmatic, ensure that it does not come at the cost of forgoing a fair opportunity to have the merits of the appeal properly adjudicated if settlement talks fail.
  • The "Shadow of the (Potential) Judgment": Settlement negotiations invariably occur in the shadow of what the court might decide. The challenge under jigo shinteki unei is that this "shadow" can sometimes be cast very early and forcefully, potentially based on an incomplete judicial review.
  • Enforcement of the First-Instance Judgment: If the first-instance judgment involved a monetary award or other enforceable orders and has already been (partially or fully) executed, this must be factored into any settlement agreement at the appeal stage.

Conclusion

Settlement in Japanese civil appeals is a widely used and judicially encouraged mechanism for dispute resolution. It offers parties a final chance to control the outcome of their case before a potentially unpredictable appellate judgment. However, the interaction of settlement practices with the trend towards "post-hoc review management" and "first-day conclusions" warrants careful consideration. While the disclosure of judicial impressions can facilitate realistic negotiations, there is a fine line between helpful guidance and undue pressure, especially if parties feel their opportunity for a full hearing on the merits of their appeal has been prematurely curtailed. Ensuring that the pursuit of efficiency does not compromise the fairness and transparency of the settlement process remains a key challenge for the Japanese appellate system.