When Private Actors Perform Public Duties: Who is Liable for Damages in Japan?

In an era of evolving governance models, it is increasingly common for Japanese governmental entities—both national and local—to entrust the delivery of various public services and the performance of certain public functions to private sector actors, including corporations, non-profit organizations, and social welfare entities. This delegation can enhance efficiency and bring specialized expertise to public tasks. However, it also raises a critical legal question: if harm is caused to individuals or businesses due to the negligence or unlawful conduct of these private actors while they are performing such entrusted public duties, can the government entity that delegated the task be held liable for damages under Japan's State Redress Act (Kokka Baishō Hō - 国家賠償法)? This article delves into the legal principles governing state liability in such situations, focusing on when private actors are considered to be "exercising public authority" as "public officials" for the purposes of the Act, with a close examination of a landmark Supreme Court case involving a private nursery school.

The State Redress Act (SRA) Article 1, Paragraph 1: A Quick Recap

The foundation for state liability for wrongful governmental conduct in Japan is Article 1, Paragraph 1 of the State Redress Act. It stipulates that:
"When a public official who is in a position to exercise public authority of the State or of a public entity has, in the course of performing his duties, illegally and through intent or negligence, caused damage to another person, the State or the public entity concerned shall be liable to compensate for such damage."

For liability to attach to the State or a public entity, several conditions must be met, including an act by a "public official" (kōmuin - 公務員) involving the "exercise of public authority" (kōkenryoku no kōshi - 公権力の行使), which was illegal, performed with intent or negligence, and caused damage. A key interpretative challenge arises when the individual directly causing the harm is not a formally appointed government employee but an employee of a private entity to whom public duties have been entrusted.

"Public Official" Status for Private Actors: The Concept of Functional Public Service

Japanese courts have long interpreted the term "public official" (kōmuin) under SRA Article 1(1) in a broad and functional sense. It is not strictly limited to individuals holding formal civil service appointments. The Supreme Court has consistently held that private individuals or employees of private entities can be treated as "public officials" for the purpose of establishing the State's or the public entity's liability under the SRA, if they meet certain criteria.

This "functional public official" (機能的公務員 - kinōteki kōmuin) concept focuses on the nature of the task being performed rather than solely on the formal employment status of the individual. If a private actor is entrusted with, and is actually exercising, "public authority" on behalf of, or in lieu of, the State or a local public entity, their actions (or omissions) in performing those duties can trigger the SRA liability of the entrusting governmental body. (It is important to note that this functional classification primarily serves to establish the government's vicarious liability; it does not necessarily mean that the private individual performing the act is personally liable as if they were a public official under the SRA, as the Act generally shields individual officials from direct SRA claims by victims if the State is liable).

When are Private Actors Deemed to be "Exercising Public Authority"?

This is the central and most nuanced question. For the actions of a private entity's employee to be considered an "exercise of public authority" attributable to the entrusting government body, courts typically consider a range of factors:

1. Nature of the Entrusted Task:
   • Is the task an inherently public function or one that the State or local government has a primary statutory duty to perform? For example, services related to public safety, core welfare provisions mandated by law, or certain regulatory activities often fall into this category.
   • Does the task directly relate to the fundamental rights and welfare of citizens in a way that carries a strong public interest character?
2. Acting "In Lieu Of" or "As a Substitute For" the Public Entity:
   • Is the private entity performing the task essentially stepping into the shoes of the public entity that would otherwise be directly responsible for providing that service or performing that function? The closer the private actor is to being a direct substitute for a government agency in carrying out a public duty, the more likely their actions will be seen as an exercise of public authority.
3. Statutory Basis for Entrustment and Degree of Government Control:
   • Is the entrustment of the public function to the private actor specifically provided for or contemplated by statute?
   • While not always decisive on its own, the degree of ongoing supervision, direction, or control that the government retains over the private actor's performance of the entrusted duties can be a relevant factor. However, even with considerable operational autonomy given to the private actor, if the core function remains a public duty, SRA liability can still attach to the government.
4. Interpretation of "Public Authority" (Kōkenryoku no Kōshi):
   It's crucial to understand that "exercise of public authority" in the SRA context is not limited to coercive or authoritative powers such as law enforcement, issuing commands, or making legally binding orders that directly restrict citizens' rights. The Supreme Court has adopted a broader interpretation, particularly in the context of public services and welfare administration. It can encompass the performance of public duties that are aimed at promoting the welfare of citizens or protecting their rights, especially when these duties are statutorily mandated for a public entity and directly impact the public.

The Suita City Private Nursery School Case (Supreme Court, January 25, 2007): A Landmark Decision

The Supreme Court (First Petty Bench) judgment of January 25, 2007 (Minshū Vol. 61, No. 1, p. 1) provides a definitive illustration of these principles.

Facts of the Case:
The case involved a tragic incident where a young child died due to alleged negligence on the part of staff at a private nursery school (hoikusho - 保育所) located in Suita City, Osaka Prefecture. This nursery school was operated by a private social welfare corporation (shakai fukushi hōjin - 社会福祉法人).

A critical fact was that the City of Suita had, pursuant to the Child Welfare Act (Jidō Fukushi Hō - 児童福祉法), "entrusted" (itaku - 委託) the actual provision of child daycare services (保育の実施 - hoiku no jisshi) for children in its jurisdiction to this private social welfare corporation. Under the Child Welfare Act, municipalities bear a primary statutory responsibility for ensuring that necessary child daycare services are provided for children within their area who require them (e.g., due to parental employment). While municipalities can operate public nursery schools directly, they are also explicitly authorized by the Act to entrust the implementation of these services to qualified private entities like social welfare corporations.

The child's parents sued both the social welfare corporation (under general civil tort law, specifically employer liability) and the City of Suita (under Article 1(1) of the State Redress Act) for damages arising from their child's death. The key legal issue for the SRA claim against the City was whether the alleged negligence of the staff employed by the private nursery school could trigger the City's liability.

The Supreme Court's Ruling: City Held Liable under SRA Article 1(1).
The Supreme Court affirmed that the City of Suita could be held liable under the State Redress Act for the damages caused by the negligence of the private nursery school's staff.

Reasoning – Private Staff as "Functional Public Officials" Performing Public Duties:

1. Nature of the Entrusted Public Duty: The Court emphasized that providing child daycare services is not merely a private contractual matter when undertaken within the framework of the Child Welfare Act. It is a significant public service that municipalities are legally obligated to ensure for the welfare of children and their families. It is a core component of the public child welfare system.
2. Private Corporation and its Staff Acting "In Lieu Of" the City: The Supreme Court reasoned that when Suita City entrusted the actual implementation of these statutorily mandated daycare services to the private social welfare corporation, that corporation and its employees (the nursery school staff) were effectively performing a task that the City itself would otherwise have had to carry out directly through its own public officials or facilities. In providing these services, they were acting "in lieu of public officials of the entrusting public entity" (委託した公の団体等の公務員に代わって公の職務に従事する者).
3. Provision of Entrusted Daycare as an "Exercise of Public Authority": The Supreme Court interpreted the "exercise of public authority" broadly in this specific context. It was not confined to acts involving command, coercion, or the formal issuance of administrative dispositions. The Court found that the provision of these statutorily mandated child welfare services by the entrusted private entity, which directly impacted the well-being, care, and safety of children under a public scheme, constituted an "exercise of public authority" within the meaning of SRA Article 1(1). The public nature of the duty, its grounding in child welfare law, and its direct impact on citizens were key.
4. City's Ultimate Responsibility and Non-Delegable Duty (in essence): The Supreme Court's decision underscores the principle that a public entity, like Suita City, which bears the ultimate statutory responsibility for ensuring the provision and proper quality of essential public services like child welfare, cannot entirely escape potential SRA liability simply by delegating the day-to-day operational performance of those services to a private entity. If the service remains part of its core public duties, and if the entrusted private actor is functionally exercising "public authority" in carrying out those duties, the entrusting public entity remains accountable under the SRA for unlawful and negligent acts committed by the private actor's employees that cause damage in the performance of those specific entrusted public duties.

Distinguishing from Other Entrusted Tasks and Purely Private Activities

The Suita City nursery school decision is a very significant one, but its principles are not automatically applied to every situation where private entities perform tasks that have some connection to public functions or receive government funding. The specific statutory framework, the nature of the function, and the degree to which the private actor is truly stepping into the shoes of the government are all crucial.

Courts have, for instance, sometimes been more reluctant to find direct SRA liability for the acts of private entities that are merely "designated" by the government to perform certain technical inspections (e.g., private garages designated to conduct vehicle safety inspections) or private hospitals providing general medical care to the public (even if they receive payments from the public health insurance system or are subject to government regulation and subsidies). In such cases, the private entity might be viewed as operating more under its own professional responsibility or based on a direct private contractual relationship with the service user, even if it is part of a broader regulatory scheme. The defining characteristic in the Suita nursery school case was the municipality's direct statutory obligation to itself provide or ensure the provision of the child daycare service, and its entrustment of that specific public duty to the private actor.

Liability of the Private Entity and its Employees Themselves

It is important to reiterate a point about the SRA: when the State or a public entity is found liable under Article 1(1) for the acts of an individual (whether a formal civil servant or a "functional public official" like an employee of an entrusted private entity), that individual is generally not concurrently personally liable to the victim under the SRA itself. The SRA shifts the financial burden of compensation to the governmental entity. (The government may, in cases of gross negligence or willful misconduct by the individual, have an internal right to seek reimbursement from them, but that is a separate matter).

However, the private entity itself (the social welfare corporation operating the nursery school in the Suita case) can also be, and often is, sued directly under general civil tort law – for example, for its own organizational negligence or, more commonly, for employer liability (shiyōsha sekinin - 使用者責任) under Article 715 of the Civil Code for the negligent acts of its employees. In many such situations, both the government (under the SRA, based on the "functional public official" doctrine) and the private entity (under the Civil Code) may be found liable, potentially leading to joint and several liability towards the victim. Issues of contribution or indemnification might then arise between the government and the private entity based on their respective degrees of fault or their contractual arrangements. The 2007 Supreme Court judgment primarily focused on establishing the conditions for the City's SRA liability.

Conclusion: Governmental Accountability in an Era of Outsourced and Entrusted Public Services

As modern governments in Japan, like those in many other countries, increasingly adopt models of governance that involve "outsourcing," "entrusting," or partnering with private sector actors and non-profit organizations to deliver a wide array of public services, the question of ultimate governmental accountability for harms that may arise in the course of delivering those services becomes ever more critical.

The Supreme Court of Japan's 2007 decision in the Suita City private nursery school case provides a strong and clear affirmation that the State or a local public entity can be held liable under the State Redress Act for the unlawful and negligent acts of a private entity's employees. This liability arises when the private entity has been entrusted with performing a core public duty for which the government itself bears primary statutory responsibility, and where the performance of that duty by the private actor can be characterized, in a functional sense, as an "exercise of public authority."

This landmark judgment underscores that merely delegating the operational performance of public duties to private actors does not automatically shield the government from its SRA liability if those duties are carried out improperly and cause harm to citizens. The key factors lie in the nature of the function entrusted, its statutory basis as a public responsibility, and whether the private actor is effectively acting "in lieu of" the government in fulfilling that primary public duty. This principle is crucial for ensuring that citizens have a meaningful pathway to redress when harmed in the course of receiving services that, at their core, remain the government's fundamental responsibility to provide safely, lawfully, and with due care.