Under the Local Autonomy Law, residents can file a lawsuit to compel their local or prefectural government to seek compensation from one of its officials — in many cases the governor or mayor — for making an illegal payment out of public coffers or improperly disposing of public property. The national government has submitted to the Diet an amendment to the law that would allow municipal and prefectural assemblies to enact bylaws to place a cap on the amount of damages such officials would have to pay if a court determines that the illegal spending or property disposal was attributable to a minor error.
Behind the move is an argument that the possibility of having to pay enormous damages will make officials timid in carrying out projects requiring large sums of public money, potentially hampering the healthy development of local and prefectural administration. Over the issue of moving the Tsukiji wholesale market to the Toyosu area, for example, a group of Tokyo residents filed a suit in 2012 calling on the metropolitan government to demand that former Gov. Shintaro Ishihara cough up the ¥57.8 billion it paid under him to buy land for the new market, which the complainants say was contaminated with poisonous substances.
While the logic behind the amendment is understandable, government authorities should take care so that the proposed measure will not undermine the important function of residents’ lawsuits against government officials: to deter improper behavior by officials in matters related to the spending of taxpayer money by providing for penalties.
According to the Internal Affairs and Communications Ministry, there were 11 rulings in such lawsuits that ordered payment of compensation of ¥100 million or more from fiscal 2005 to 2015. The ministry, which was involved in preparing the draft amendment, reportedly thinks that the ceiling to be placed on the amount of damages a local government official has to pay should be set at six times the annual income of the official — in line with the standard that the Company Law places on compensation to be paid by the top executive of a company.
While the decision on the cap will rest with each local government and its assembly, the ministry plans to set an ordinance requiring that the cap should not be lower than the equivalent to three times the official’s annual income If this formula is applied to heads of municipal and prefectural governments, the amount of compensation will likely be in the range of ¥50 million to ¥100 million for governors and ¥30 million to ¥60 million for mayors.
During the process of preparing the amendment, there were calls for totally exempting local government officials from compensation payments if the degree of error committed by the officials is deemed small. That idea was eventually dropped. If the officials cannot be held liable for financial losses deriving from minor mistakes, it would become impossible for residents to hold anybody accountable for the loss of their public money or property in a number of such cases.
Local assemblies should refrain from setting the compensation cap at such a low level as to deprive the scheme of its function to penalize improper conduct by officials. Such a move would only weaken the sense of responsibility among municipal and prefectural government officials, leading to haphazard administrative actions.
One related problem is the power of local assemblies to vote to relinquish the right to demand compensation from officials. Assemblies took such a step in four of the 11 cases in which courts had ordered a compensation payment of ¥100 million or more. Among them was the municipal assembly of Kobe, which revised a bylaw to relinquish the right to demand ¥4.8 billion in compensation that a court told the city to seek from the mayor over subsidies to organizations affiliated with the city. Although the Osaka High Court in 2011 nullified the city’s bylaw and ordered it to seek ¥5.5 billion in damages from the mayor, the Supreme Court in 2012 ruled in favor of the Kobe assembly’s move.
The proposed amendment would require local assemblies to listen to the opinion of an inspection commissioner before moving to relinquish the right to demand compensation from officials, but that would not be enough to deter the assemblies from taking such steps to protect the governor or mayor — which would defeat the purpose of the residents’ lawsuit system. At the very least, a limit should be placed on assemblies’ moves to do that while such lawsuits are still pending in court.
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