Who Represents a Corporation in Japanese Litigation, and What Happens if They Lack Authority?

Corporations, as distinct legal entities, participate in civil litigation through individuals who act on their behalf—their legal representatives. This raises fundamental questions within Japanese civil procedure: How is the authority of such a representative established and verified? And, more critically, what are the legal consequences if a person purports to represent a corporation in court but, in fact, lacks the proper authority to do so? These issues are not merely technical; they touch upon the core principles of due process and the validity of judicial proceedings. The Japanese Code of Civil Procedure (CCP), in Article 37, generally provides that provisions concerning statutory agents (who act for individuals lacking full litigation capacity, like minors) apply mutatis mutandis to corporate representatives.

Determining the Corporation's Representative in Litigation

The authority to act for a corporation in legal proceedings is typically defined by the specific laws governing that type of corporate entity. For instance:

• A stock company (kabushiki kaisha) is generally represented by its representative director (daihyō torishimariyaku) (Companies Act, Art. 349(1), (4)).
• A general incorporated association (ippan shadan hōjin) may be represented by its directors or a specifically designated representative director (Act on General Incorporated Associations and General Incorporated Foundations, Art. 77(1), (4)).
• A school juridical person (gakkō hōjin) is typically represented by the president or chairperson of its board of directors (rijichō) (Private Schools Act, Art. 37(1)).

When a lawsuit is filed against a corporation, the name of its legal representative must be stated in the complaint (CCP Art. 133(2)(i), by virtue of the application of rules for statutory agents under Art. 37). Proof of this representative authority, such as a certified copy of the relevant entries in the corporate register, is generally required to be submitted to the court (Rules of Civil Procedure, Art. 18, applying Art. 15 mutatis mutandis). The corporate register thus plays a pivotal role, as it is the public record upon which parties and the court typically rely to ascertain who is empowered to act for the corporation.

Service of process, such as the initial complaint and summons, on a corporate defendant is formally addressed to this registered representative. In practice, while it can be served at the representative's personal address, it is also commonly served at the corporation's principal office or relevant branch office.

The Problem: When Registered and Actual Representatives Diverge

A significant issue arises when the individual listed in the corporate register as the representative is not, or is no longer, the actual, duly authorized representative of the corporation. This discrepancy can occur for various reasons, such as a failure to promptly update the register after an internal change (e.g., dismissal or resignation of a representative) or, in some cases, an erroneous initial registration.

The case scenario provided in the reference text (Chapter 1-4) illustrates this problem: a school juridical person was sued, with service made on the individual (A) listed as its president in the corporate register. However, A had been dismissed from this position more than six months prior to the lawsuit, and a new president (B) had been appointed, though the corporate register had not yet been updated to reflect this change. The lawsuit proceeded without the corporation's actual participation, leading to a default judgment.

Does "Apparent Authority" Apply to Litigation Representation?

In the realm of substantive commercial transactions, Japanese law provides protections for third parties who rely in good faith on outward appearances of authority. Doctrines such as apparent authority (e.g., Civil Code Art. 109 for general agency, Companies Act Art. 354 for apparent representative directors) or the principle that unregistered changes in representation cannot be asserted against bona fide third parties (e.g., Commercial Code Art. 9, Companies Act Art. 908) can bind a corporation to acts undertaken by someone with only apparent, but not actual, authority.

A crucial question is whether these principles, designed to protect reliance in business dealings, extend to procedural acts within litigation, particularly the authority to represent a corporation. Could the plaintiff in the illustrative case, having relied on the un-updated corporate register, argue that the dismissed president A still had apparent authority to receive service and represent the school juridical person in court?

The prevailing stance of the Japanese Supreme Court has been to consistently deny the general applicability of these apparent authority doctrines to the representation of a corporation in litigation. A line of key decisions underscores this restrictive approach:

• Supreme Court, September 30, 1966 (Minshū Vol. 20, No. 7, p. 1523): The Court refused to apply a provision of the Private Schools Act (Art. 28(2)), which generally prevents a school juridical person from asserting unregistered changes in its representative against a third party, in the specific context of determining who could validly represent the school in litigation.
• Supreme Court, November 1, 1968 (Minshū Vol. 22, No. 12, p. 2402): Similarly, the Court held that the rule concerning the non-assertion of unregistered corporate matters against bona fide third parties (then Commercial Code Art. 9(1), now Companies Act Art. 908(1)) does not apply to establish who has the authority to represent a company in a lawsuit challenging the validity of a shareholder resolution.
• Supreme Court, December 15, 1970 (Minshū Vol. 24, No. 13, p. 2072): This decision explicitly stated that doctrines of representation by estoppel or apparent authority (such as Civil Code Art. 109(1) or the then-equivalent of Companies Act Art. 354 regarding apparent representative directors) do not apply to procedural acts undertaken in court.
• Supreme Court, November 26, 1982 (Minshū Vol. 36, No. 11, p. 2296): The Court also found that a provision concerning the effect of acts done by one parent under joint parental authority (Civil Code Art. 825) was not applicable to validate a litigation retainer agreement entered into with an attorney by only one parent.

The rationale behind this judicial reluctance to extend apparent authority to litigation representation is multi-faceted:

1. Distinct Nature of Litigation: Civil litigation is viewed as a public process aimed at the authoritative determination of substantive legal rights and obligations by state power, making it fundamentally different from private commercial transactions where reliance interests are paramount.
2. Statutory Exclusions for Commercial Agents: Provisions relating to apparent authority for certain commercial agents (e.g., former Commercial Code Art. 42(1) proviso; current Commercial Code Art. 24, Companies Act Art. 13) specifically limit the scope of such apparent authority to "any non-judicial acts," thereby implicitly excluding acts within court proceedings.
3. Need for Clarity and Uniformity: The validity of procedural acts within a lawsuit must be clear and determined uniformly. Allowing validity to depend on the subjective good or bad faith of the opposing party (a key element in apparent authority claims) would introduce uncertainty and instability into the litigation process.
4. Fundamental Importance of Proper Representation: The lack of proper representative authority is considered a grave defect. It is a matter subject to the court's ex officio investigation (investigation on its own initiative). Furthermore, if a judgment is rendered despite such a defect, it constitutes an absolute ground for further appeal (CCP Art. 312(2)(iv)) or for a retrial (CCP Art. 338(1)(iii)), highlighting the fundamental importance attached to ensuring genuine representation.

Despite this firm judicial stance, many legal scholars in Japan have argued in favor of applying apparent authority doctrines, at least in certain circumstances, to corporate litigation representation. Their arguments include:

• The practical difficulty for outsiders to verify a corporation's true internal representative status beyond consulting the publicly accessible corporate register.
• The potential unfairness to a party who has reasonably relied on the information in the register, especially if the corporation itself was negligent in failing to update its registration. The risk of discrepancies, they argue, should arguably be borne by the corporation that controls the accuracy of its public filings.
• The analogy to CCP Art. 36(1), which provides that the termination of an agent's power does not take effect against the opposing party in litigation until that party is notified, suggests that the law itself sometimes prioritizes the outward appearance of authority for the sake of procedural stability and the protection of reliance.
• A strict separation between substantive transactions (where apparent authority is recognized) and litigation (where it is not) can be artificial, as litigation often arises directly from those substantive dealings.

Modern Scholarly Trends: Seeking a More Nuanced Approach

Reflecting these academic critiques, some contemporary legal thought seeks a more nuanced approach than a blanket denial of apparent authority in litigation. Rather than an all-or-nothing rule, this perspective suggests a case-by-case analysis, taking into account the specific circumstances, particularly regarding the protection of the corporation's due process rights versus the reliance interests of the opposing party.

A key question in this nuanced approach is: if it is discovered during the course of litigation (especially on appeal) that the person who purported to represent the corporation lacked actual authority, must all prior proceedings involving that individual be nullified, or can they be salvaged or ratified?

• The strict judicial view, denying apparent authority, would logically lead to the nullification of prior acts if proper representation was absent from the outset (e.g., if service was made only on an unauthorized individual and the corporation itself had no notice). The process would typically need to be reinitiated with proper service on the true representative.
• Scholars advocating for a degree of protection for reliance might argue that if the opposing party reasonably relied on the registered representative, prior proceedings might be upheld, with the true representative being given an opportunity to take over the litigation. Some limit this to situations where the corporation, despite the misrepresentation, had some means of knowing about the lawsuit and failed to take steps to correct the representation issue.
  This reflects an attempt to balance the procedural right of the corporation to be genuinely represented with the need to avoid undue prejudice to a party who acted in good faith based on public records. In the illustrative case, if the school juridical person (Y) was entirely unaware of the lawsuit because the complaint was only served at the dismissed president A's personal address (and not the school's official address or on its actual current representative B), it would generally be considered unfair to bind the corporation to the default judgment rendered without its participation.

Procedural Consequences When Lack of Authority is Discovered on Appeal

If a first-instance judgment is rendered against a corporation, and it is subsequently revealed on appeal that the person who represented the corporation in the lower court lacked proper authority, the appellate court must address this fundamental defect. Several courses of action are theoretically possible:

1. Dismissal of the Original Suit: If the initial service of process was made on an unauthorized individual and was therefore ineffective to properly bring the corporation before the court, one might argue the entire lawsuit was improperly initiated and should be dismissed. However, this is rarely the immediate outcome if the defect is curable.
2. Cure by the Appellate Court: The appellate court could direct the plaintiff to amend the pleadings to name the true representative and then order fresh service of the complaint on that true representative. The true representative would then have the opportunity to ratify the prior proceedings (CCP Art. 37, Art. 34(2)). Japanese case law confirms that such ratification can occur even at the appellate stage (Supreme Court, August 27, 1959, Minshū Vol. 13, No. 10, p. 1293). If a true representative cannot be ascertained or refuses to act, the court might consider appointing a special representative for the litigation (CCP Art. 37, Art. 35). However, if the corporation effectively lost at the first instance (as in the reference Case where a default judgment was entered), expecting the true representative to willingly ratify unfavorable prior proceedings is often unrealistic. Appointing a special representative when a true one exists but is unwilling to ratify also presents its own set of problems.
3. Remand to the First-Instance Court (The Prevailing Approach): The most common and judicially favored approach is for the appellate court to reverse the first-instance judgment and remand the case to the first-instance court for a new trial (CCP Art. 308(1)). The Supreme Court, in its December 15, 1970 decision (the same case that denied the applicability of apparent authority to litigation acts), endorsed this method. The first-instance court is then tasked with ensuring that the corporation is properly served through its actual, authorized representative and that the litigation proceeds with genuine corporate participation from that point forward. This approach prioritizes the corporation's fundamental due process right to be properly represented and to have its case heard, even if it means the plaintiff must effectively restart the first-instance proceedings.

Conclusion

Ensuring proper legal representation is a cornerstone of corporate litigation in Japan. While the corporate register serves as the primary public source for identifying a corporation's representatives, discrepancies between the register and the actual internal state of the corporation can and do occur. Japanese courts have historically adopted a strict stance, largely refusing to apply doctrines of apparent authority to acts of procedural representation in litigation. This position prioritizes the due process rights of the corporation and the integrity of the judicial process over the reliance interests of opposing parties in this specific context. If a defect in representation is discovered, especially at the appellate level, the typical remedy is to remand the case to the first-instance court. This ensures that the matter is adjudicated with the corporation being genuinely and authoritatively represented, thereby upholding the fairness and validity of the ultimate judgment. The consistent judicial emphasis on actual authority underscores its critical importance in the Japanese civil justice system.