I. Executive Summary
This newsletter introduces the key findings of the report (the “Report”) published by the Logistics and Road Transport Bureau of the Ministry of Land, Infrastructure, Transport and Tourism (the “MLIT”) on April 30, 2025, regarding liability for damages under the Act on Securing Compensation for Automobile Accidents (the “Act”) in the context of automated driving, particularly for robot taxis and new business models. The Report clarifies the scope of the liability of the Operator (as defined below) under various business models and the requirements for exemption from liability under the Act. It also highlights the need for further legal development as fully automated vehicles become more prevalent.
This newsletter is intended to provide international clients and law firms with an overview of the evolving Japanese legal framework for automated driving.
II. Introduction
On April 30, 2025, the “Study Group on Civil Liability under the Automobile Liability Security Act for Automated Vehicles for the Introduction of Robot Taxis” of MLIT1 published the Report that revisits and updates the legal framework for liability under new business models for automated driving, particularly with the introduction of specified automated operation (the “SAO”), which is unmanned automated driving of Level 4. Before this Report, liability for damages under the Act in the context of automated driving up to Level 4 was addressed to some extent in the report of the “Study Group on Liability for Damages in Automated Driving” published by MLIT on March 20, 2018.
The current study addresses recommendations from the report of the “Sub-working Group on Social Rules for Automated Vehicles in the AI Era” (May 31, 2024), which called for a review of the Operator’s liability as Level 3 and Level 4 automated vehicles (the “AVs”) in Japan has become more widespread.
III. Overview of the Report
The Report explores liability for damages under the Act under new business models where multiple entities may jointly provide passenger transport services using AVs. It concludes that, in all such models, the main transport operator (e.g., passenger transport business operator) should be regarded as the Operator under the Act and, therefore, bear liability for damages.
IV. “Liability of the Operator” under the Act under New Business Models
1. Definitions
The Act defines “Operator” as a person that puts an automobile into operational use for that person’s own benefit, which entails both control over the operation of the vehicle (the “operational control”) and the accrual of benefits from such operation (the “operational benefit”). Typically, the term “person in possession”, i.e., the owner of an automobile, or any other parson with the right to use an automobile, that puts an automobile into operational use for that person’s own benefit, is considered the Operator.
For new business models, determining Operator status should focus on whether the entity in question has operational control and operational benefit, meaning whether it qualifies as the person in possession.
2. Passengers Are Not Operators
Passengers do not have the right to use AVs, nor do they have any legal obligation to direct its operation. Their only right is to be transported to their desired destination under contract. Therefore, passengers are not considered “persons in possession” and do not qualify as Operators under the Act.
3. Allocation of the liability of the Operator in New Business Models
(i) A passenger transport business operator that directly conducts SAO;
(ii) A passenger transport business operator that outsources part of the operation management to an SAO operator;
(iii) A municipality or NPO that directly conducts SAO; and
(iv) A municipality or NPO that outsources part of the operation management to an SAO operator
(1) Cases (i) and (iii)
A passenger transport business operator that conducts a passenger transport business by SAO must have the right to use the vehicle being used. Similarly, a municipality or NPO that provides public ride-hailing services must have the right to use the vehicle.
Therefore, the passenger transport business operator, municipality, or NPO is the person in possession and is regarded as the Operator.
(2) Case (ii)
When a passenger transport business operator outsources work related to SAO, various restrictions apply. Even if it outsources work to a contractor, it continues to provide operational instructions and retains the right to use the AV. As a result, it has operational control and is regarded as the Operator.
On the other hand, since the contractor’s work is limited to tasks agreed with the passenger transport business operator, and the relationship between them is similar to that between a manned passenger business operator and a driver — where the driver does not bear operator responsibility — the contractor is considered, except in exceptional cases where the contractor uses the AV without instruction, as not having operational control and is not regarded as the Operator.
(3) Case (iv)
When a municipality or NPO outsources work related to SAO, it retains the right to use the vehicle, and the operation must be based on an operational plan created by an operational management manager appointed by it. Therefore, municipality or NPO is considered as having operational control.
4. Summary
Similar to case (ii), the municipality or NPO is regarded as the Operator, while the contractor is not regarded as the Operator (except in exceptional circumstances).
In all cases, the main transport operator — whether a business operator, municipality, or NPO — retains the right to use the vehicle and is responsible for operational planning and management. Therefore, it is considered the person in possession and, thus, the Operator under the Act. The outsourcing service providers, such as SAO operators, are not regarded as Operators unless they use the vehicle without authorization.
This foregoing allocation of liability simplifies the process for victims to claim compensation and ensures prompt relief.
V. Exemption Requirements under the Act for New Business Models
1. Overview
The Act imposes strict liability on Operators, but if all of the following conditions are proven, the Operators will be exempted from that liability. While the report of the “Study Group on Liability for Damages in Automated Driving” in 2018 provides for an established framework for these exemption requirements, it further examines requirements (i) and (iii) as described below.
(i) The Operator and driver did not neglect due care in the operation of the vehicle; (ii) The victim or a third party (other than the driver) was at fault; and (iii) The vehicle had no structural defects or functional failures.
2. Applicability in New Business Models
(1) Not Neglecting Due Care in the Operation of the Vehicle
“Not neglecting due care in the operation of the vehicle” refers to the ordinary duty of care socially required of the driver and the person in possession, including compliance with relevant laws and regulations. It also includes the duty of care in the selection and supervision of drivers by the Operator.
In new business models, the Operator is responsible for instructing and supervising its SAO operation manager, the contractor or the SAO operation manager designated by the contractor. This includes overseeing updates to software, map information, infrastructure information, and other external data, as well as vehicle repairs and confirmation of the operational status of remote monitoring devices. Therefore, if the Operator is negligent in overseeing the contractor, it is appropriate to conclude that the Operator does not satisfy the requirement of “not neglecting due care in the operation of the vehicle.”
(2) No Structural Defects or Functional Failures
A vehicle that is in violation of the safety standards for vehicles or other laws and regulations does not satisfy the requirement “no structural defect or functional failure”. However, even if the vehicle conforms to the safety standards, it does not necessarily mean that the requirement is satisfied. “Structure and function of the vehicle” is interpreted as the structure and function that a vehicle should ordinarily have in light of general technical standards.
Even in new business models, as previously interpreted by the “Study Group on Liability for Damages in Automated Driving”, if an accident occurs due to a communication outage caused by a poor communication environment, resulting in the remote monitoring device not functioning properly and interrupting communication between the passenger and the SAO operation manager located remotely, it is considered that there is a possibility that the vehicle may be deemed to have a “structural defect or functional failure”.
VI. Future Considerations
This Report focuses on passenger transport business models. As Level 4 and Level 5 AVs are introduced in passengers’ vehicles, further legal review will be necessary, taking into account the status of technological advances, the spread of AVs, and international discussions.
