Third-Party Litigation in Japan: When Can Someone Sue in Their Own Name for Another's Rights Voluntarily?

Japanese Attorney at Law - Bengoshi L.L.

• 10 min read

In Japanese civil procedure, the general rule is that a lawsuit is pursued by the person who holds the rights or obligations at the heart of the dispute. However, there are exceptions where a third party—someone other than the direct rights-holder—is permitted to conduct litigation. This capacity is broadly termed soshō tantō (third-party litigation standing). While some instances are explicitly authorized by statute, this article focuses on a more complex area: nin'i-teki soshō tantō, or voluntary authorization for third-party litigation, where a third party sues in their own name based on the consent or mandate of the actual rights-holder, particularly in situations not expressly covered by a specific law. The judgment in such a case, if this standing is recognized, generally extends its effects, such as res judicata, to the actual rights-holder (Article 115(1)(ii) of the Code of Civil Procedure, or CCP). This concept is most frequently encountered in actions for performance (kyūfu soshō), especially concerning the plaintiff's side.

Explicit Statutory Examples of Voluntary Third-Party Litigation

Before delving into the more nuanced uncodified scenarios, it's worth noting that Japanese law does explicitly provide for certain types of voluntary third-party litigation. These include:

  • Appointed Parties (sentei tōjisha): Under Article 30 of the CCP, multiple persons having a common interest can appoint one or more from among themselves to sue or be sued on behalf of all.
  • Endorsee for Collection of a Bill of Exchange: Article 18 of the Bills Act allows an endorsee whose endorsement is for collection purposes to exercise all rights arising from the bill, including litigation.
  • Specific Statutory Authorizations: Various other statutes also grant such standing, for example, under the Act on Building Unit Ownership, etc. (Condominium Ownership Act) for management associations or specific unit owners under certain conditions (e.g., Articles 26(4), 47(8), 57(3)), and under the Act on Special Measures Concerning Claim Management and Collection Businesses (Servicer Act) for authorized servicers (Article 11).

The primary focus of this article, however, is on the permissibility of voluntary third-party litigation when such explicit statutory backing is absent.

The Core Challenge: Balancing Party Autonomy with Procedural Safeguards

The idea of allowing one person to sue on behalf of another based purely on private authorization, without specific statutory sanction, raises several significant concerns related to the integrity and established principles of the Japanese litigation system. These concerns form the backdrop against which the permissibility of nin'i-teki soshō tantō is evaluated:

  1. Risk of Circumventing Mandatory Attorney Representation (bengoshi dairi no gensoku): A fundamental principle in Japanese litigation is that parties, if represented, should generally be represented by qualified attorneys (bengoshi) (CCP Art. 54). If any individual could easily be authorized by a rights-holder to conduct litigation in their own name, it could potentially be used as a means to bypass this requirement, allowing unqualified individuals to effectively manage lawsuits.
  2. Risk of Circumventing the Prohibition on Litigation Trusts (soshō shintaku no kinshi): Article 10 of the Trust Act (formerly Article 11) prohibits the creation of a trust where the primary purpose is to have the trustee conduct litigation. Allowing broad scope for voluntary third-party litigation without careful scrutiny could open the door to arrangements that achieve a similar outcome to these prohibited litigation trusts, even if not formally structured as a trust.
  3. Risk of Unauthorized Practice of Law: There's also a concern that unfettered voluntary third-party litigation could facilitate activities that contravene Article 72 of the Attorney Act, which prohibits non-attorneys from engaging in the business of handling legal affairs, including litigation, for others for compensation. Article 73 further prohibits acts designed to circumvent this prohibition.

These potential abuses necessitate a cautious approach to recognizing voluntary third-party litigation standing where it is not explicitly legislated.

The Judicial Approach and Key Criteria for Permissibility

Historically, Japanese courts were quite restrictive in permitting voluntary third-party litigation, acknowledging it only in very limited and exceptional circumstances. An oft-cited example was the manager (kōmoto) of a traditional mutual financing association (mujin-kō or tanomoshi-kō) being allowed to sue for the collection of contributions (Supreme Court, June 28, 1960, Minshū Vol. 14, No. 8, p. 1558).

A significant turning point came with the Supreme Court Grand Bench decision of November 11, 1970 (Minshū Vol. 24, No. 12, p. 1854). This landmark ruling recognized the standing of a managing partner of a civil law partnership (minpō-jō no kumiai) to sue for the recovery of rights belonging to the partnership. This decision paved the way for a more nuanced approach.

The current judicial framework for assessing the permissibility of uncodified voluntary third-party litigation generally requires that:

  • There is no risk of circumventing or evading the spirit and purpose of CCP Article 54 (mandatory attorney representation) and Trust Act Article 10 (prohibition of litigation trusts).
  • There is a "rational necessity" (gōri-teki hitsuyōsei) for recognizing such standing in the specific circumstances of the case.

This "rational necessity" is a key evaluative criterion, and its presence is judged based on the overall context, including the nature of the relationship between the rights-holder and the prospective third-party litigant, and the reasons why such an arrangement is needed.

Academic Frameworks: The "Substantive Relationship Theory" (Jisshitsu Kankei Setsu)

Influential academic theories have also shaped the understanding of this issue. One of the most prominent is the "substantive relationship theory" (jisshitsu kankei setsu), which was advocated even before the 1970 Supreme Court decision and provides a structured way to analyze permissibility. This theory generally classifies voluntary third-party litigation into two main types:

  1. Litigation "for the benefit of the authorized third party" (tantōsha no tame no nin'i-teki soshō tantō):
    • This occurs when the third party conducting the litigation has their own legitimate interest tied to the outcome of the lawsuit concerning another's right.
    • Examples include a party who has assigned a claim but retains an interest in its collection, or the seller of a house who, on behalf of the buyer, sues an unlawful occupant for eviction.
    • A key requirement here is that the third-party litigant must possess an interest in the litigation comparable to that which would qualify them for an "assisting intervention" (hojo sanka) under CCP Article 42, although this is an analogy rather than a strict identity of requirements.
  2. Litigation "for the benefit of the rights-holder" (kenri shutai no tame no nin'i-teki soshō tantō):
    • This category covers situations where the third party litigates primarily to protect or enforce the rights of the actual rights-holder.
    • Examples include the aforementioned managing partner of a civil law partnership suing for partnership claims, a labor union litigating for members' rights derived from a collective bargaining agreement, or the manager of a financing association.
    • For this type to be permissible, two conditions are generally posited:
      • The rights-holder must have granted the third party comprehensive management authority over the relevant affairs, which implicitly or explicitly includes the authority to conduct litigation.
      • The third party must have been genuinely and closely involved in the creation, management, or administration of the right or legal relationship in question, to such an extent that they possess knowledge and understanding of the matter comparable to that of the rights-holder.

The substantive relationship theory argues that if these conditions, appropriate to the type of authorization, are met, the risks of circumventing mandatory attorney representation or the prohibition on litigation trusts are significantly diminished. The third party is not a mere officious intermeddler but someone with a legitimate connection to the dispute or a recognized managerial role.

Ongoing Debates: Categorization and Additional Requirements

While the substantive relationship theory provides a useful analytical lens, academic debate continues on several fronts:

  • The Rigidity of Categorization: Some scholars find the binary classification (for the litigant's benefit vs. for the rights-holder's benefit) too rigid, as many real-world scenarios can have elements of both. For instance, a managing partner sues for the partnership (rights-holder) but also inherently for their own benefit as a partner. This has led to alternative categorization proposals, such as distinguishing based on whether the third party's standing arises from a pre-existing substantive legal status (e.g., partner, trustee) versus a pure ad hoc authorization to sue.
  • The "Own Interest" (Koyū no Rieki) of the Third Party: A significant line of argument, often raised as a critique of potentially over-broad permission under the substantive relationship theory, emphasizes that for voluntary third-party litigation to be justified, the third-party litigant should generally possess their own distinct, legally protectable interest in the subject matter or outcome of the litigation. This interest should be substantial enough that, in a sense, the third party is also litigating to protect something of their own, not merely acting as a proxy. This view tends to narrow the circumstances where such standing is recognized, especially in cases that would fall under the "for the benefit of the rights-holder" category if the third party lacks such an intrinsic stake.
  • Justifying Procedural Deviations: Allowing a third party to sue means the actual rights-holder is not the direct litigant. This can have procedural consequences concerning responsibility for litigation costs, who is the proper target for a counterclaim, who is subject to party examination (as opposed to witness examination), etc. The "own interest" requirement is sometimes seen as a way to justify these procedural shifts: the third party's stake must be significant enough to outweigh any potential procedural disadvantages or awkwardness for the opposing party or the court. Some scholars, however, downplay the severity of these procedural issues in the Japanese context, noting, for example, that attorney's fees are generally not recoverable as litigation costs, and the practical difference between examining a party versus a witness might not always be substantial.
  • The Role of "Rational Necessity" (Gōri-teki Hitsuyōsei): The "rational necessity" criterion employed by the courts can be interpreted as encompassing these considerations. It suggests that the substantive relationship between the would-be litigant and the actual rights-holder must be such that it reasonably underpins the need for the third party to conduct the litigation. This could involve factors like the rights-holder's inability to sue effectively, the third party's unique knowledge or capacity, or an established legal or contractual role that logically extends to litigation.
  • Protecting the Rights-Holder's Interests: Beyond preventing abuse, there's a growing recognition that any framework for voluntary third-party litigation must also ensure that the interests of the actual rights-holder are adequately protected by the third-party litigant. The third party should not only be authorized but also be in a position and under an obligation (fiduciary or otherwise) to act diligently and loyally on behalf of the rights-holder. The Supreme Court decision of June 2, 2016 (Minshū Vol. 70, No. 5, p. 1157), which involved a bond management company suing on behalf of bondholders, highlighted the importance of the litigant's duties and regulatory oversight in ensuring proper conduct.

The Prerequisite of "Authorization to Litigate" (Soshō Tsuikō no Juken)

Regardless of the theoretical framework, a fundamental prerequisite for nin'i-teki soshō tantō is that the third party must have received authorization to litigate from the actual rights-holder. The primary issue here often revolves not around the necessity of authorization itself, but its form and sufficiency.

  • Explicit vs. Implied Authorization: Clear, explicit, and preferably written authorization specifically for litigation, granted at or near the time of filing suit (akin to the system for appointed parties, sentei tōjisha), is generally unproblematic. However, in many practical scenarios, such explicit, contemporaneous authorization may not exist. Instead, the authority to litigate is often sought to be inferred from a broader, pre-existing grant of substantive powers. For example, a partnership agreement might give a managing partner comprehensive authority to conduct the partnership's business and manage its assets; the question then becomes whether this general authority implicitly includes the power to initiate or defend lawsuits concerning partnership rights. Courts will retrospectively examine the scope of the original mandate.
  • Substantive Relationship as a Basis for Implied Authorization: When the third party holds a significant pre-existing substantive role (e.g., managing partner, trustee, agent with broad powers) that is closely tied to the rights in question, the lines can sometimes blur. The authority to litigate may be seen as a natural or necessary adjunct to their existing responsibilities. In such cases, the voluntary third-party litigation, though nominally based on "authorization," begins to resemble situations where standing arises more directly from the third party's established legal status or function, moving closer in character to some forms of statutory third-party litigation where specific authorization for each lawsuit might not be the central validating factor.

The Supreme Court Decision of June 2, 2016: A Case Study

The Supreme Court decision of June 2, 2016 (Minshū Vol. 70, No. 5, p. 1157) provides a modern illustration of these principles. The case concerned a bank (X), acting as a bond management company, which filed a lawsuit in its own name to claim redemption of yen-denominated bonds issued by a foreign state (Y), on behalf of numerous bondholders (A, et al.).

The management agreement between the bank and the bond issuer (for the benefit of the bondholders) included a clause granting the bank all necessary judicial and extrajudicial powers to receive payments or to preserve the claims under the bonds. This clause was incorporated into the terms of the bonds and disclosed to the bondholders in prospectuses.

The Supreme Court upheld the bank's standing as a voluntary third-party litigant.

  • Authorization to Litigate: The Court found that the bondholders, by purchasing the bonds under terms that explicitly granted such litigation authority to the management company, had effectively given their consent. This was framed as the beneficiary's declaration of intent to accept the benefit (including the management company's role) in a contract for the benefit of a third party.
  • Rational Necessity / Legitimate Interest: The Court's reasoning also rested on several factors that established the "rational necessity" and legitimacy of the bank's role:
    • Analogy to Statutory Schemes: The bonds were similar in nature to corporate bonds. Under the (then-former) Commercial Code, a corporate bond trustee was generally mandated to protect the collective interests of public bondholders and was statutorily empowered to act on their behalf. The contractual arrangement in this case deliberately mirrored this established statutory framework for collective investor protection.
    • Fiduciary Duties and Regulatory Oversight: The bank, as a regulated financial institution, was subject to banking laws and supervision. Furthermore, the management contract imposed duties of good faith, fairness, and due care upon the bank towards the bondholders. This provided assurance that the bank would conduct the litigation appropriately and in the bondholders' best interests.

This decision demonstrates a willingness by the Court to recognize voluntary third-party standing in complex financial contexts where a representative entity plays a crucial role in protecting the collective interests of many dispersed rights-holders, especially when the arrangement is well-defined, transparent, and supported by analogies to statutory investor protection mechanisms. However, the specific grounds of this case (regulated entity, quasi-statutory role) mean it doesn't necessarily open the floodgates for all types of contractual litigation authorizations.

Conclusion

Voluntary third-party litigation standing (nin'i-teki soshō tantō), where not explicitly provided by statute, is a cautiously granted procedural capacity in Japan. The core considerations revolve around ensuring that such arrangements do not undermine fundamental procedural principles like mandatory attorney representation and the prohibition against litigation trusts, and that there is a "rational necessity" or a compelling, legitimate interest justifying the third party's role as litigant. The nature and depth of the substantive relationship between the third-party litigant and the actual rights-holder, the clarity and scope of the authorization to litigate, and the adequate protection of the interests of both the rights-holder and the opposing party are all critical factors. While landmark Supreme Court decisions have provided important guidance, the assessment remains highly fact-specific, requiring a careful balancing of competing interests and procedural values.