Who is Bound by a Japanese Judgment? Understanding the Subjective Scope of Res Judicata and 'Reflex Effect' (Hanshakō)

The principle of res judicata (既判力 - kihanryoku) is a cornerstone of civil justice, signifying that a final judgment from a court is conclusive and binding, preventing the re-litigation of the same matter between the same parties. While the "objective scope" of res judicata defines what specific determinations within a judgment are binding (typically the decision on the ultimate claim in the main text), the "subjective scope" (kihanryoku no shukanteki han'i) addresses the equally critical question of who is bound by that judgment. The general rule is one of relativity: a judgment primarily binds only the individuals or entities who were formal parties to the litigation. However, Japanese law, through Article 115 of the Code of Civil Procedure (CCP), recognizes important exceptions where this binding effect extends to certain third parties. This article explores these rules, with a particular focus on successors in interest, and also touches upon the more debated concept of "reflex effect" (hanshakō - 反射効).

The General Rule: Res Judicata Binds the Parties (CCP Art. 115(1)(i))

The fundamental principle governing the subjective scope of res judicata is that its binding effect is confined to the parties who actually participated in the lawsuit. Article 115(1)(i) of the CCP explicitly states that a final and binding judgment is effective against "the parties." This rule is a direct corollary of the principle of party prosecution (tōjisha shugi), which underpins Japanese civil procedure. Under this principle, parties control the initiation and definition of the dispute, and they are the ones who have the opportunity to present arguments, submit evidence, and challenge the opponent's case. It is therefore a matter of procedural fairness that only those who have had this opportunity to be heard should be bound by the resulting judgment. To bind a non-party who had no such opportunity would generally violate due process.

Statutory Extensions of Res Judicata to Third Parties (CCP Art. 115(1))

While the relativity of res judicata is the starting point, Article 115(1) of the CCP itself carves out several important exceptions, extending the binding effect of a judgment to certain categories of third parties who were not formal litigants in the original action. These exceptions are carefully defined and are typically justified by the close legal or practical connection between the third party and the original litigation or its subject matter. The main categories are:

1. Persons Represented in Litigation (Item (ii)): "A person who became a plaintiff or defendant on behalf of another" (tanin no tame ni genkoku mata wa hikoku to natta mono). This primarily covers situations of statutory litigation representation or third-party litigation standing. For example:
   • A trustee in bankruptcy suing or being sued on behalf of the bankruptcy estate. The judgment binds the estate and, through it, the creditors.
   • A creditor pursuing a subrogated action (creditor's derivative action) on behalf of their debtor. The judgment on the debtor's right typically binds the debtor.
   • An appointed party (sentei tōjisha) litigating on behalf of a group of persons with common interests. The judgment binds the persons who appointed them.
     In these cases, the formal party is litigating rights or obligations that ultimately belong to or concern the "other person," and it is this underlying rights-holder who is bound.
2. Certain Possessors of the Subject Matter (Item (iv)): "A person who possesses the thing that is the subject matter of the claim for a party [to the original suit] or for their successor [as defined in item (iii)]." This exception is relatively narrow and typically applies to individuals whose right to possess the disputed item is entirely derivative of, and dependent upon, the party to the litigation. A classic example is a mere bailee or custodian holding an item for the defendant. If the defendant (the bailor) loses a proprietary claim concerning that item (e.g., is found not to be the owner and is ordered to return it), the bailee, whose possession is solely through the defendant, is also bound by that determination and cannot assert a right to possess against the successful plaintiff based on the defendant's defeated claim.
3. Successors After the Conclusion of Oral Arguments (Item (iii)): "A person who became a successor to a party after the conclusion of oral arguments" (kōtō benron shūketsu-go no shōkeinin). This is arguably the most significant and frequently encountered exception, and it was central to the illustrative case in Chapter 4-15 of the reference material.
   • Rationale: This provision is crucial for preventing the evasion of judgments and ensuring their practical efficacy. If a party could simply transfer the rights to, or possession of, the subject matter of the litigation to a third party after the close of oral arguments (which establishes the res judicata reference time) but before the judgment is rendered or becomes final, and if that third party were not bound by the impending judgment, the entire litigation effort could be rendered futile. The winning party would have a judgment against the original party, but the right or thing in dispute would now be in the hands of a third party against whom the judgment might not be directly enforceable. Article 115(1)(iii) closes this potential loophole.
   • Who Qualifies as a "Successor" (Shōkeinin)?
     • General Successors (包括承継人 - Hōkatsu Shōkeinin): This category includes those who succeed to the entirety, or a comprehensive portion, of a party's legal rights and obligations, such as heirs upon the death of an individual litigant, or a company that survives a merger involving a litigant company. The extension of res judicata to such general successors is usually straightforward as they step into the full legal shoes of the original party.
     • Specific Successors (特定承継人 - Tokutei Shōkeinin): This is where more complexities arise. It refers to someone who, after the reference time, acquires a specific right that was the subject of the litigation, or the specific property in dispute, from one of the original parties. The illustrative case provides a good example: Landlord X obtains a judgment against Tenant Y (who owns a building on X's land) ordering Y to remove the building and vacate the land. If, after the oral arguments in X's suit against Y have concluded, Y sells the building on the land to a third party, Z, then Z becomes a specific successor to Y with respect to the building and its possession on X's land.
   • Theoretical Basis for Defining "Successor" in Item (iii): There's ongoing academic discussion about the precise legal basis for identifying a "successor" for the purpose of this rule:
     • The "Dependence Relationship Theory" (Izon Kankei Setsu or Jūzoku Kankei Setsu) looks at whether the successor's substantive legal position concerning the litigated matter is derived from and dependent on the legal position of the predecessor (the party to the original suit). If such a dependency exists, the successor is deemed to have acquired the right or thing subject to the outcome of the litigation concerning the predecessor.
     • The "Succession to Standing Theory" (Tekikaku Shōkei Setsu) focuses on whether the third party has, in effect, succeeded to the locus standi (party qualification or tōjisha tekikaku) that the original party possessed in the litigation regarding the specific subject matter. For instance, in a lawsuit where the defendant's standing is based on their ownership and possession of a building situated on the plaintiff's land (e.g., a claim for building removal), if that building is transferred to a third party, that third party arguably succeeds to the former owner's status as the proper defendant for such a claim.
     • A broader and influential modern view is the "Succession to the Status as Subject of the Dispute Theory" (紛争の主体たる地位の承継説 - Funsō no Shutai taru Chii no Shōkei Setsu). This theory suggests that a successor is someone who, by acquiring the right or thing in dispute, effectively steps into the predecessor's position as a central figure in the underlying conflict that the litigation aimed to resolve.
   • Impact of the Successor's Knowledge (Good Faith/Bad Faith): A critical question is whether the successor's state of mind—for example, whether Z in the illustrative case knew about the pending litigation between X and Y when purchasing the building—affects the extension of res judicata to them. The dominant view in Japanese law is that the successor's subjective knowledge or good faith regarding the litigation is irrelevant for the application of Article 115(1)(iii). The provision is primarily designed to protect the efficacy of the judgment for the successful party in the original suit and to ensure the finality of that resolution. This protection should not be contingent on the successor's awareness of the litigation. The policy is that the acquired right or thing is already "burdened" by the pending litigation concerning it.
   • Nature of the Original Claim (Proprietary vs. Obligatory): Does it matter whether the original lawsuit involved a proprietary claim (e.g., based on ownership) or an obligatory (contractual) claim? Some older legal theories suggested that the res judicata effect of judgments on purely personal, contractual claims might not extend to successors of the res litigiosa (the thing in dispute) as readily as it would for judgments on proprietary claims. However, contemporary prevailing theory and judicial practice tend not to draw a strict or decisive distinction based on this categorization. If the successor effectively steps into the relevant "status as subject of the dispute" concerning the outcome defined by the judgment, res judicata can extend even if the original claim was, for example, contractual but directly concerned rights over a specific asset (such as a contractual obligation to remove a building from particular land). The focus is more on the successor's relationship to the specific right or object adjudicated than on the abstract legal classification of the original claim (supported by cases like Great Court of Cassation, April 24, 1930, Minshū Vol. 9, p. 415; and Supreme Court, April 13, 1951, Minshū Vol. 5, No. 5, p. 242).

The "Formal Theory" vs. "Substantive Theory" of Res Judicata Extension to Successors

A further layer of complexity arises concerning the scope or content of the preclusion that binds the successor under Article 115(1)(iii). Specifically, if the successor has defenses against the plaintiff that were personal and unique to them, and which the original party (the predecessor) could not have raised, how does the extension of res judicata affect these defenses?

• The "Formal Theory" (Keishiki-setsu): This is generally considered the prevailing view. It holds that the successor is bound by the res judicata of the prior judgment to the same extent as the predecessor would have been. This means the successor is precluded from re-litigating any issues or raising any defenses that the predecessor raised or, importantly, could have raised (and are therefore barred by the preclusive effect of res judicata against the predecessor). However, this theory also maintains that the successor remains free to assert any defenses that are personal and unique to the successor themselves, arising from the circumstances of their own acquisition or from legal rules that specifically protect them (and which the predecessor could not have invoked). For example, if the successor acquired the property from the predecessor in good faith and under circumstances that grant them special statutory protection against the plaintiff's claim (e.g., as a bona fide purchaser protected under Civil Code Article 94(2) against a claim that the predecessor's title was based on a fictitious transaction, or as someone who acquired title by good-faith prescription where the conditions are unique to their own period of possession), the extension of res judicata from the predecessor does not bar the successor from raising these personal defenses.
• The "Substantive Theory" (Jisshitsu-setsu): This alternative theory takes a different approach. It suggests that if the successor possesses such a unique, personal substantive defense that would have successfully defeated the plaintiff's claim had the successor themselves been a party to (or able to assert this defense in) the original suit, then the res judicata of the judgment against the predecessor should not extend at all to that successor. In essence, the prior judgment becomes irrelevant to them because their unique defense fundamentally alters the legal calculus. A Supreme Court decision from June 21, 1973 (Minshū Vol. 27, No. 6, p. 712), which involved a successor claiming protection as a bona fide third party under Civil Code Article 94(2), has sometimes been interpreted by proponents of this theory as lending it support (though the precise holding and its implications are debated).

The Formal Theory is generally favored by most scholars and appears more consistent with the underlying policy of Article 115(1)(iii). The primary purpose of extending res judicata to successors is to ensure the efficacy and finality of the judgment against the right or property in dispute, preventing its easy frustration through transfers. The Formal Theory achieves this by binding the successor to the outcome concerning the predecessor's rights and obligations, while still preserving the successor's ability to raise genuinely new and personal defenses that were not and could not have been litigated in the first action. If res judicata did not extend at all merely because a successor might possess a unique defense (as the Substantive Theory might imply), the practical utility of Article 115(1)(iii) would be significantly undermined.

The Concept of "Reflex Effect" (Hanshakō - 反射効)

Beyond the statutory extensions of res judicata under Article 115(1), Japanese legal discourse also grapples with a more controversial and less formally codified concept known as "reflex effect" (hanshakō). This refers to situations where a judgment rendered between two parties (Party A and Party B) is argued to have an indirect, "reflexive" legal consequence for a third party (Party C) due to a specific, pre-existing substantive legal relationship between C and either A or B. This is distinct from the direct binding effect of res judicata.

The Classic Example: Guarantor and Principal Debtor:

• Creditor X sues Principal Debtor Y for repayment of a loan. Y successfully defends the suit, and a final judgment is entered determining that the loan debt does not exist (e.g., because it was already paid or was never validly formed).
• Subsequently, Creditor X sues Guarantor Z, who had guaranteed Y's supposed loan debt.
• Can Guarantor Z benefit from the judgment in the X vs. Y lawsuit, to which Z was not a party? Z is not a successor to Y in the sense of Article 115(1)(iii).

The argument for allowing Z to benefit relies on the accessory nature of the guarantee obligation (保証債務の附従性 - hoshō saimu no fujūsei). Under Japanese substantive law (e.g., Civil Code Art. 448), a guarantee obligation is typically extinguished if the principal debt it guarantees is extinguished or found not to exist. Therefore, if the principal debt has been judicially declared non-existent as between the creditor (X) and the principal debtor (Y), it would be highly inconsistent and arguably unjust to then hold the guarantor (Z) liable to X for what is, in effect, a "non-existent" principal debt. Proponents of reflex effect argue that Z should be able to invoke the finding of the prior X-Y judgment regarding the principal debt in their own defense against X. This is termed a "reflex effect" because the primary res judicata operates only between X and Y, but its legal logic "reflects" onto the X-Z relationship through the substantive law linkage of the guarantee's accessory nature.

Theoretical Basis and Ongoing Debate:

• The theoretical justification for reflex effect is complex, especially under the prevailing "procedural law theory" of res judicata in Japan (which views res judicata primarily as a procedural bar to re-litigation between parties, not as an event that directly alters substantive legal reality).
• Some scholars, adhering strictly to the procedural nature and relativity of res judicata, deny the existence of reflex effect as a distinct legal doctrine, arguing that the guarantor (Z) must independently prove the non-existence of the principal debt in their own litigation with the creditor (X), although the prior X-Y judgment might have strong evidentiary value.
• Others, however, seek to justify recognizing a reflex effect in limited situations, even under a procedural theory of res judicata. They might argue for it based on the need to avoid practically irreconcilable and unjust outcomes, by analogy to the underlying policies of Article 115(1) CCP (such as preventing the circumvention of definitive judicial resolutions or protecting third parties with very closely linked interests who had no compelling reason to intervene if the primary obligor was actively and adequately defending the claim), or based on broader principles of procedural good faith or systemic fairness.

Scope and Characteristics of Reflex Effect (if recognized):

• Generally Beneficial Only: If reflex effect is acknowledged, it usually operates only to benefit the third party (e.g., the guarantor Z can use the principal debtor Y's victory against the creditor X). It does not typically bind the third party to an unfavorable judgment rendered against the related party (e.g., if Y had lost to X, Z would generally not be automatically bound by that loss and could still raise their own defenses against X and contest the existence or validity of the principal debt). This asymmetry is often justified by the lack of direct procedural guarantee (opportunity to be heard) for Z in the original X-Y lawsuit.
• Requires Invocation by the Third Party: Unlike res judicata, which the court is generally expected to apply ex officio if its conditions are met, any reflex effect typically needs to be affirmatively raised or argued by the third party who seeks to benefit from its application.

The concept of reflex effect remains a subject of ongoing academic debate in Japan. It is not as firmly established or as broadly applied as the statutory extensions of res judicata under Article 115(1), and its precise theoretical underpinnings and scope continue to be discussed.

Conclusion

The subjective scope of res judicata in Japanese civil procedure adheres to the fundamental principle that judgments primarily bind the parties who participated in the litigation, a reflection of due process and party autonomy. However, to ensure the practical efficacy of judgments and to address the realities of changing legal relationships, Article 115(1) of the CCP provides crucial exceptions, extending this binding effect to certain well-defined categories of third parties. Among these, the extension to successors in interest who acquire rights or property after the close of oral arguments is particularly vital for preventing the frustration of adjudicated outcomes. The nuanced debate surrounding the scope of preclusion against such successors, particularly when they possess unique personal defenses, highlights the ongoing effort to balance finality with substantive fairness. Beyond these statutory extensions, the more debated concept of "reflex effect" attempts to address situations where a judgment between two parties has a logical and unavoidable impact on a closely related third party due to substantive legal links, though its theoretical basis and application are less universally settled. Together, these rules and doctrines strive to create a coherent framework that upholds the finality of judgments while appropriately accounting for the complex web of relationships that can be affected by civil litigation.