17 January, 2016
Legal System
Taiwan (Republic of China or ROC) has a codified system of law, with the emphasis of the legal system placed on statutes, rather than case law. The major codes are the Civil Code, the Code of Civil Procedure, the Criminal Code, and the Code of Criminal Procedure (Codes). The contents of the Codes are drawn from the laws of other countries with similar codified systems (e.g., Germany and Japan) and from traditional Chinese laws. The supreme law of Taiwan is its constitution. The judicial system is composed of three tiers: the Supreme Court, high court and district court.
All civil and most criminal litigation originate at the district court level as the court of first instance. These cases may be presided by either a single judge or a panel of three judges for civil matters, or by a panel of three judges for most criminal matters, with a limited number of exceptions under which a single judge may be allowed to preside. The ruling of the district court at first instance may be appealed to a three-judge panel sitting either at the district court or at the high court. The ruling of the court of second instance may be further appealed to a five-judge panel sitting at the Supreme Court. Questions of law and fact are decided at trials at both the first and second instance. Appeals to the Supreme Court are limited and specified by relevant statutes but are generally available for all (but smaller) cases. As the Supreme Court only reviews questions of law, an appeal can only be made to the Supreme Court on the grounds that the lower courts misapplied the law. As judges alone decide all cases in Taiwan, there is no provision for jury trials. Although the Supreme Court functions as the final judicial authority for civil and criminal matters, it does not hear cases involving constitutional law issues. Such cases are heard by the Constitutional Court, a court composed of 15 justices, including the president and vice president of the Judicial Yuan.
There is a separate administrative court for appeals from administrative rulings. The administrative court is composed of two tiers, namely, the high administrative court and the supreme administrative court.
The final judicial remedy is to appeal to the Supreme Court or the Supreme Administrative Court, as the case may be.
Foreign judgments are enforceable in Taiwan if the court in which the enforcement is sought is satisfied with the following conditions:
(a) the foreign court rendering the judgment has jurisdiction over the subject matter according to Taiwan law; (b) the performance ordered by such judgment or its litigation procedure is not contrary to the public order or good morals of Taiwan; (c) in cases wherein the judgment was rendered by default by the foreign court, the defendant was served within the jurisdiction of such foreign court or process was served on the defendant in Taiwan with judicial assistance of Taiwan courts; and (d) judgments of Taiwan courts are reciprocally recognized and enforceable in the foreign court rendering the judgment.
Arbitration as an alternative dispute resolution method is also available in Taiwan. According to the Arbitration Act of Taiwan, written agreements to arbitrate are given binding effect by the courts. The Arbitration Act requires the courts to reject the enforcement of the foreign arbitral award if the arbitral award is contrary to the public order or good morals of Taiwan, and if the dispute is not arbitrable under Taiwan law. The courts may issue a dismissal order with respect to an application for recognition of a foreign arbitral award if the country where the arbitral award is made or whose laws govern the arbitral award does not recognize Taiwan’s arbitral awards. Aside from what is required above, the Arbitration Act also allows other grounds for challenging the enforcement of a foreign arbitral award.
Courts
The judicial system of Taiwan is composed of three levels of courts: the district courts, the high court and the Supreme Court (Courts). The district court is a trial court. The high court, including all of its branch courts and the district courts, is divided into civil division and criminal division. Further, there are specialized divisions in the district courts dealing with domestic relations, juvenile, traffic, public security, election and labor cases.
According to the Intellectual Property Organization Act, which was promulgated on 28 March 2007, Taiwan’s Intellectual Property Court was established and becomes officially operational on 1 July 2008. This is in response to the need for a more centralized and professional litigation system for disputes relating to intellectual property rights.
The jurisdiction of the Intellectual Property Court includes all first and second instances of civil proceedings involving disputes relating to the Patent Act, Trademark Act, Copyright Act, Optical Disk Act, Trade Secrets Law, Integrated Circuit Layout Protection Act, Species of Plants and Seeding Act, Fair Trade Law, and the first instance of an administrative proceeding involving disputes regarding the Patent Act, Trademark Act, Copyright Act, Optical Disk Act, Integrated Circuit Layout Protection Act, Species of Plants and Seeding Act, and Fair Trade Law. As for criminal proceedings involving trademark and secrecy matters under the Criminal Code, violation of the Trademark Act and Copyright Act or trade secret matters and pass-off matters under the Fair Trade Law, the first instance of criminal proceedings remains under the jurisdiction of the district court. However, the appeal of the first-instance decision of a criminal proceeding for the above disputes is under the jurisdiction of the Intellectual Property Court.
With regard to a civil action, appeals to the high court are as of right in Taiwan but the appellant is required to pay the court fees. Appeals to the Supreme Court are limited and specified by relevant statutes, but are generally available for all but the smaller cases.
For claims involving property rights, the Judicial Yuan limits the right to appeal to the Supreme Court to claims of at least NTD.5 million (as at August 2015, USD1 = approximately NTD31). As the Supreme Court reviews only questions of law, an appeal may be made to the Supreme Court only on the ground that the judgment of a lower court is in violation of a law or order.
Although the law provides that the parties are required to orally debate all issues in dispute before the Supreme Court unless the court decides otherwise, in practice, the Supreme Court rarely holds hearings.
As the legal system in Taiwan is based on the civil law (and code- based law) tradition, legal matters are determined in accordance with the codes, writings of legal scholars and judges’ interpretation of the codes. As such, there is comparatively little judge-made law in Taiwan.
Legal Profession
According to the Legal Profession Act of Taiwan, legal counsels must be admitted to bar associations before they can practice as
lawyers. The legal profession in Taiwan is a fused profession, which means there is no distinction between barristers and solicitors. A foreign lawyer holding a foreign practicing certificate cannot conduct cases in Taiwan unless permitted by the Ministry of Justice and becomes a member of a local bar association if he or she meets certain qualification requirements. A lawyer admitted to practice in a foreign jurisdiction can practice the law of his original jurisdiction.
Procedure for Claims
Commencement of Proceedings
A party commences a civil action by filing a complaint at a district court that has jurisdiction over the dispute. The complaint must consist of a statement of facts and cause(s) of claims and be accompanied by evidence, including supporting documentation. In the event that the supporting documentation is in a language other than Chinese, Chinese translations must be provided.
The plaintiff in a civil action in a Taiwan court is required to pay the court fee, which is equal to approximately one percent of the value of the claim in the district court level. Although the fee is not refundable, it should be reimbursed by the defendant if the defendant loses the case and is held responsible for the court fee by the court. If the action is settled or if the action is withdrawn, two-thirds of the court fee may be refunded upon the party’s application if it is filed within three months after the settlement or the withdrawal of the action.
The court fee should be paid in New Taiwan dollars by cash or by cheques.
A lawyer admitted to practice in Taiwan may only appear in the courts pursuant to a power of attorney duly executed in the lawyer’s favor by his or her client. The recent practice of the courts does not require a power of attorney issued by a foreign party to be notarized by a notary public in the foreign jurisdiction or legalized by the relevant Taiwan consular entity (or its functional equivalent) in the foreign jurisdiction if the other party does not contest to the authenticity of such authorization.
Service of Process
Once the plaintiff pays the court fee, the next step is the service on the defendant. The courts effect service of process (normally along with the first hearing date or a notice requesting the defendant to submit a reply within ten days) either by delivering the documents through a court process server or by delivering them through the post office. If delivered by the post office, the postal delivery person is deemed to be the court process server.
If service of process cannot be effected at the defendant’s residence, office, place of business or by leaving the paper with the defendant’s housemate or colleague of suitable age and discretion, it can be effected by depositing the paper with the autonomous agency or police department of the place where service must be effected. Service by deposit takes effect 10 days from the day of the deposit. The court in which the action is pending can, on application, permit service on a party to be effected by constructive notice through publishing the content of the documents in a newspaper under certain circumstances.
Defense
A defendant must submit a defense within 10 days after receipt of the complaint and no later than five days before the oral argument hearing if one has been designated.
The First Hearing
Once service of process has been completed, the court will schedule the first hearing of the case. In general, matters not alleged in the preparatory proceedings may not be raised during the oral debate proceedings after the conclusion of the preparatory proceedings except in the following situations: (a) matters that must be investigated by the court ex-officio; (b) an allegation does not considerably delay the proceedings; (c) matters not submitted in preparatory proceedings could not be attributable to the party; or (d) matters arising in other unfair situations.
At the first hearing in a case which involves a foreign plaintiff, the following issues are often raised by the defendant:
Security for Court Fees
The defendant has a right to demand that a foreign plaintiff who has no domicile, residence or business establishment in Taiwan be required to post a bond to secure the court fee for potential appeals to the high court and the Supreme Court and the attorney fees the defendant may incur in the Supreme Court. The bond may be posted in the form of cash, bank guarantee and cash equivalents, such as negotiable certificates of deposit. Such a motion is generally granted, and the plaintiff is generally not given the opportunity to contest the motion unless it has a domicile, office or place of business in Taiwan. If the defendant proceeds to argue the case without making the motion for the bond security, the defendant is deemed to have waived the right to ask for security to be provided.
Status of the Plaintiff
The defendant can assert that the plaintiff has no legal standing to initiate proceedings. This delays proceedings and results in the plaintiff having to prove that it validly resides in its home jurisdiction.
Counterclaims
The defendant can present oral or written counterclaims at the first hearing. The counterclaim must be presented to the courts prior to the conclusion of final oral debate at the first instance. Otherwise, it is deemed to have been waived. The defendant must pay the court fee, which is equal to approximately one percent of the amount of its counterclaim, unless the subject of the counterclaim is just the opposite to the plaintiff’s claim. No counterclaim can be raised without the opposing party’s consent in the second instance (unless
certain circumstances are satisfied). The defendant is also allowed to assert the defense of set-off.
Applicable Law
Unless the parties have agreed in advance on an applicable law in a contractual dispute, the choice of applicable law is determined in accordance with the Law Governing the Application of Laws to Civil Matters Involving Foreign Elements.
Settlement
It is common for the judge to request the parties to settle the case at the first hearing in accordance with Article 377 of Taiwan’s Code of Civil Procedure. The enforceability of a settlement made in the courts is the same as that of a final judgment.
Subsequent Proceedings
At the first hearing, the judge requires each party to present a statement of facts and claims and provide evidence which they will use to support their version of the facts and claims. A party must produce evidence to support its allegations. If a party is unable to provide evidence at the time of the hearing, the court can adjourn the hearing until evidence can be produced or, if the evidence is to be given by a witness, until the witness can be called to testify at the court.
The first hearing is the first in a series of hearings that will take place before the case is resolved. There is no statutory time period for preparatory proceedings before a trial. Instead, each case progresses as a series of hearings in which each side raises issues and allegations and presents evidence to support its version of how the issues and allegations should be resolved. The judge will set a date for oral debate, which usually takes place six to twelve months after the preparatory proceeding depending on the complexity of the case.
During preparatory proceedings, both parties are encouraged to present as much evidence as possible until the date of final oral arguments. The judge can re-open hearings if the judge deems necessary, and request either the parties to present new evidence or further explain the evidence already presented.
Proceedings in Taiwan courts, either civil or criminal, do not involve a jury. All evidence and arguments are presented to the judge in the district court (or a panel of judges in the high court and the Supreme Court) for consideration. As civil proceedings in Taiwan are inquisitorial, rather than adversarial, judges play a very active role during hearings.
Discovery
The discovery procedures in Taiwan courts are provided in the “Evidence” Articles of the Code of Civil Procedure. Common-law pretrial discovery procedures (e.g., request for answers to interrogatories, request for depositions, document production) are generally not available in Taiwan. Each party merely presents, on an ad hoc basis, the evidence that it needs in order to support its factual allegation. Documentary evidence must be submitted to the courts by producing the document. If a document, which is in possession of the other party, is to be used as evidence, a court order, which requires the other party to produce such document, is needed. If the courts consider that the fact to be proved is material, they may order the other party to produce the document. A party has the duty to produce documents which have been referred to in the preliminary pleadings or in the course of oral debate proceedings. In the event that a party disobeys the order for the production of a document in his or her possession without justifiable grounds, the courts may consider that the allegation of the other party in respect of the document is true.
Remedies
Judgment
According to Article 381 of the Code of Civil Procedure, the courts can hand down judgments when cases have progressed to a point where all relevant issues have been thoroughly considered and debated. Although the law permits courts in Taiwan to give interlocutory orders on some issues of a case before the conclusion of the legal proceedings, the courts generally do not do so.
After the preparatory proceeding where evidence has been presented to the judge, the judge will announce the date of oral argument and conclude the whole procedure after the oral argument. At the end of the oral argument, the judge will set a date to hand down the judgment when he or she considers that all issues have been fully stated and argued. The judgment will be proclaimed usually within one month following the date of final oral argument.
The final remedy at the full trial stage is set out in a written judgment. The types of remedies available in large commercial disputes are judgment granting payment, declaratory judgment and judgment granting specific performance. In a judgment, the courts can order performance of an obligation or injunction relief. Generally speaking, damages are only compensatory unless both parties have expressly agreed on punitive damages in the agreement. Under certain circumstances, such as consumer protection disputes, the courts will grant punitive damages in accordance with the Consumer Protection Law if any negligence or willful misconduct is found.
Provisional Relief/Provisional Attachment
Availability and grounds
A provisional attachment is granted if the claimant shows that it will be impossible or extremely difficult to satisfy a claim by compulsory execution in the future. According to the courts’ interpretation, this includes that the defendant may dispose of its assets to defeat a claim, create a new encumbrance on its assets or make any disposition detrimental to the assets that lead to the defendant’s insolvency or allow the defendant to escape liability.
According to Article 526 of the current Code of Civil Procedure, the burden of proof lies on the creditors to show the above situation exists. Article 526 allows creditors to provide security instead of proving a prima facie case that the above situation exists, if its initial attempt to show this is not satisfactory. Generally, however, the courts require creditors to satisfy the burden of proof.
Prior notice/same-day
The courts generally order provisional attachment without prior notice to the debtor.
Main proceedings
The main proceedings do not have to be in the same jurisdiction. Both the court which has jurisdiction over the main proceedings, and the court where the property to be attached is located have jurisdiction over the application for provisional attachment.
Damages as a result
If a provisional attachment ruling is revoked for certain specific reasons (i.e., it is improper to order such attachment), the creditor should compensate the debtor for any losses incurred in relation to the provisional attachment or the provision of counter security.
Security
If the courts grant the motion, the creditor is normally required to lodge a security for proceeding with the provisional attachment. The courts have discretion to determine the amount of the security. However, the amount is normally equivalent to one-third of the full value of the claim. The opponent may prevent the attachment by posting a counter security that is equivalent to the full value of the claim.
Provisional Relief/Provisional Injunction
Availability and grounds
A provisional injunction order can be granted to secure the enforcement of a non-monetary claim if the applicant can show that it will be impossible or extremely difficult to satisfy the claim if there is a change in the status quo of the object claimed. If necessary, to prevent material harm, imminent danger or other similar circumstances, an application can be made for an injunction to maintain the temporary status quo.
Prior notice/same-day
With respect to the application for a provisional injunction, if the requirements are satisfied, the courts can grant a provisional injunction order without prior notice to the debtor if the circumstances justify it.
With respect to the application for an injunction maintaining temporary status quo, the courts generally give the parties an opportunity to be heard before issuing such an order, unless the courts consider it inappropriate to do so. The courts may, if they consider it necessary, order an urgent disposition by a ruling on a motion before issuing an injunction order maintaining temporary status quo.
Appeals
Courts of First Appeal: The High Court
A district court judgment can be appealed to a three-judge panel in the high court. A district court judgment made by a single judge through summary proceedings may be appealed to a three-judge panel in the district court.
To appeal a civil judgment, the appellant is required to submit a petition to the original court within 20 days following the receipt of the original written judgment setting forth the following:
(a) the parties and the statutory agents;
(b) a statement regarding the judgment of the district court, and a statement of objections to such judgment; and
(c) the extent to which the judgment is objected to, and in what manner the judgment is sought to be revoked or reversed; and
(d) reasons for appeal.
The district court will forward such appeal and relevant documents to the high court for review.
The proceedings in the high curt is similar to that of the district court. However, the scope of oral argument in high court is limited to the extent of appeal. Neither new argument nor new evidence is allowed to be submitted to the high court proceedings unless (a) failure to submit the argument or evidence is due to the violation of law of the district court; (b) the argument or the evidence occurs after the conclusion of oral argument at the district court; (c) the argument or the evidence is to supplement the submitted argument or evidence; (d) the facts are obvious to the court or should be investigated by the court ex-officio; (e) failure to submit the argument or evidence is not imputed to the party; (f) denial of submission of such argument or evidence is unfair. The high court strictly follows these rules.
Court of Second Appeal: The Supreme Court
While appeals to the high court are a matter of right in Taiwan, appeals to the Supreme Court can only be based on a misapplication of law by the lower courts. Appeals to the Supreme Court are limited and specified by relevant statutes, but are generally available for all but smaller cases. The parties must be represented by lawyers in the Supreme Court as the Supreme Court only deals with questions of law, rather than questions of fact. The scope of investigation in the Supreme Court is limited primarily to the extent of the appeal
unless it is an issue that the court must investigate ex-efficio or for unifying legal opinion.
As the Supreme Court reviews issues of law only, its judgment should be made based on the facts found by the lower courts. If the Supreme Court deems that part of the original judgment is wrong, it should reverse the said part. However, in practice, the Supreme Court seldom hands down its own judgment. As a matter of practice, the Supreme Court remits cases back to the lower courts for most of the time and requests the lower courts to investigate into certain points or issues.
Administrative Appeal
Challenge to Defective Administrative Decisions
Under the Administrative Procedure Act, decisions made by an administrative agency are required to follow the due process. The administrative agency may hold hearings to collect the opinion of interested parties. The Act also describes the effect of administrative decisions and provides the definition of “defective administrative decisions.”
According to the Act of Administrative Appeal, if the rights or interests of a party are infringed by unlawful or improper decisions of central or local government agencies, that party may submit an administrative appeal to the government agency that made the original decision within 30 days upon receipt of the decision. Upon receipt of such appeal, the government agency may decide to revoke its original decision or submit all relevant documents and arguments to a competent government agency that is responsible for reviewing the internal appeal in order to defend its decision. The administrative appeal is determined on the basis of available documents. The government agency which reviews the internal appeal may hold an oral debate proceeding if necessary. The appeal decision should be made within three months after receipt of the appeal, with an extension available of up to two months.
Administrative Litigation Proceedings
If a party’s grievance is not resolved by the above-mentioned internal administrative appeal process, he or she may file an administrative litigation proceeding with the High Administrative Court within two months after receiving the written administrative appeal decision if his or her rights or interests are infringed by unlawful decisions of a central or local government agency. A party may also commence an administrative litigation proceeding at the High Administrative Court if no decision has been made by a central or local government within three months after initiating the internal administrative appeal, or during any two-month extension thereafter.
When a person’s rights have been infringed because a central or local government agency has failed to act when it should have acted within the prescribed period, such person may, after exhausting the internal administrative appeal procedure, initiate proceedings in the
High Administrative Court to request the said agency to perform an administrative act with respect to the specific subject matter. If a central or local government agency has rejected a person’s application, which he or she had duly applied in accordance with relevant legal provisions, and his or her rights have been infringed by such decision, he or she may also initiate an administrative proceeding.
A proceeding for declaration of nullity of an administrative decision may be commenced only when there is a denial of the said petition by the government agency responsible for the decision, or when no confirmed reply has been issued within 30 days after the filing of the petition. No proceeding for declaration of nullity may be initiated unless it is initiated by a plaintiff who will immediately benefit from a ruling of the court. The High Administrative Court should be the court of first instance.
A proceeding may also be initiated to request specific performance with respect to property interests or non-property interests other than a petition for effecting an administrative decision. With respect to proceedings of request for specific performance, the High Administrative Court should be the court of first instance unless provided otherwise.
In administrative litigation proceedings, the High Administrative Court is required to deliver a copy of the complaint and all relevant documents to the defendant government agency, and set a time limit for submission of its arguments. The timing for a judgment of administrative proceedings is set by the High Administrative Court.
The process of administrative proceedings is similar to that of civil proceedings. If the decree of the High Administrative Court is based on wrongful interpretation of laws, the disfavored party may then file an appeal with the Supreme Administrative Court within 20 days upon receipt of the judgment of the High Administrative Court.
Enforcement of Local Judgments
Local judgments are enforced through compulsory execution procedures. Compulsory execution is carried out by the bailiff of the court under the supervision of, and in conjunction with, a court clerk. A compulsory execution may be carried out in respect of
(a) a final and conclusive judgment (a judgment which is not subject to any appeal);
(b) a ruling authorizing a provisional attachment, provisional injunction or provisional execution and other rulings upon which compulsory execution may be made in accordance with the provisions of the Code of Civil Procedure;
(c) a settlement or a mediation reached in accordance with the provisions of the Code of Civil Procedure;
(d) a notarial deed made in accordance with the Public Notarization Law;
(e) a ruling of the court authorizing a compulsory execution in response to an application for permission to sell the mortgaged property by auction filed by the mortgagee; or
(f) other grounds which may be taken as executive titles in accordance with the provisions of other applicable laws.
A compulsory execution on moveable property may be carried out by means of attachment, auction or sale. An attachment of movable property may be carried out by bailiffs in accordance with the order of the responsible judge and under the supervision of a court clerk.
An attachment shall be executed either by
(a) posting a paper script on the property attached; or
(b) leaving a brand or impression of sealing-wax on the property attached.
Compulsory execution against immovables may be carried out by means of attachment, auction or compulsory administration. Attachment of immovables will be carried out by any of the following:
(a) proclamation;
(b) sealing up the immovables attached; or (c) ordering surrender of a deed.
In the case of compulsory execution enforced against the debtor’s claim for the payment of money against a third party, the execution court should ex-officio prohibit the debtor from collecting such money (or making other dispositions) and prohibit the said third party from paying such money to the debtor. The court may allow the creditors to collect the said money, or assign the said right of claim to the creditors.
Where the debtor, under executive title, is required to perform a specific act and has failed to do so, the court may order a third party to act for the debtor at the debtor’s expense. If no one else can perform the act but the debtor, the court may specify a time limit for the debtor to perform his or her obligation. If the debtor fails to perform, and disobeys the court order, the court may arrest him or her and place him or her in custody, or impose a penalty of no more than NTD300,000. If the executive title is an order allowing an act or prohibiting the debtor from doing a specific act, and the debtor fails to obey, the courts may arrest him or her and place him or her in custody, or impose a penalty of not more than NTD300,000.
Recognition and Enforcement of Foreign Judgments
Requirements for Enforcement of Foreign Judgments
Article 402 of the Code of Civil Procedure states that a final and binding judgment rendered by a foreign court should be recognized unless any of the following circumstances is satisfied:
(a) the foreign court rendering the judgment lacks for jurisdiction over the dispute in question according to Taiwan law;
(b) the defendant defeated is not responded to the action brought against him (however, this does not apply where service is made in the country where the court rendering the judgment is located, or where service is effected in Taiwan through judicial assistance);
(c) the contents or litigation proceeding of the foreign judgment is contrary to the public order or good morals of Taiwan; and
(d) judgments given by Taiwan courts are not reciprocally recognized by the foreign country concerned.
Where the requirements of Article 402 are met, the recognition of a foreign judgment will be finalized and a request may be made to the civil execution department of a district court for attachment of the assets of the Taiwan party. In practice, the attachment process usually takes approximately two weeks to complete. The execution fee is 0.8% of the claim. In the case of immovable or high-value assets, it takes approximately two months from the filing of attachment to the moment when the assets are ready for auction. In the case of bank accounts, the minimum execution period is approximately one and a half months.
Service of Process through “Judicial Assistance”
The procedure for service of process through the judicial assistance of Taiwan courts is provided in the Law Governing the Extension of Assistance to Foreign Courts (Assistance Law). The Assistance Law provides that the request for assistance by a foreign court should be stated in writing (Request for Assistance) and transmitted through diplomatic channels.
The Assistance Law further requires that
(a) the Request for Assistance should state the name, nationality, domicile or residence, or business office or establishment of the person to be served;
(b) the written request and documents to be served through judicial assistance must be translated into Chinese and the translation must be certified as to its accuracy; and
(c) a certification should be issued by the country of the commissioning court declaring that it would render the same degree of assistance should the courts in Taiwan have the same or similar matter which requires the commissioning of one of the foreign country’s courts to handle the matter.
The original foreign court papers do not have to be notarized or otherwise authenticated, but should contain the seal or signature of a member of the foreign court. The judicial assistance procedure may take a long period of time, for it at least takes approximately two to five months to complete the procedure.
Arbitration
Arbitration Law
The Arbitration Act in Taiwan seeks to reflect the basic principles of international arbitration. As the scope of arbitration matters is not limited to commercial disputes, the parties may enter into an arbitration agreement for disputes that may be resolved by settlement.
Arbitration Agreement
As the arbitration agreement must be made in writing, an oral agreement between the parties will not suffice. An agreement to arbitrate reached by way of an exchange of fax messages, telegrams, letters or any other similar means can be treated as an arbitration agreement in writing.
The parties may determine the rules governing the arbitral proceedings, the place of arbitration, and the language of arbitration. The Act empowers the arbitral tribunal to rule on its own jurisdiction and competence, on the existence or validity of the arbitration agreement, and irregularities in the proceedings.
The Arbitration Act expressly provides that the validity of an arbitration clause that forms part of a principal contract may be determined separately from the rest of the contract. According to the principle of separability, an arbitration clause continues in force and effect if the contract becomes null, void, revoked, rescinded or terminated.
In the event that one of the parties to an arbitration agreement commences a legal action, the court should, upon application by the adverse party, suspend the legal action and order the plaintiff to submit to arbitration within a specified time unless the defendant proceeds to respond to the legal action.
International Arbitration for Investment Disputes
Although Taiwan is not a party to the 1965 Convention on the Settlement of Investment Disputes (ICSID), which is also referred to as the Washington Convention, Taiwan has entered into bilateral investment treaties with many countries (for example, Singapore, Thailand, Malaysia and India). Due to the lack of formal diplomatic ties with other countries, bilateral investment treaties are regarded as a useful instrument for the promotion and protection of foreign investments.
Institutional and Ad Hoc Arbitration
The Rules of Arbitration Associations were formulated in accordance with Article 54 of the Arbitration Act. These rules provide that all arbitration associations should be organized in accordance with the provisions of the rules to register arbitrators for handling arbitration cases. Although social groups and professional associations are permitted to establish arbitration centers to provide arbitration services in Taiwan, the Arbitration Association of the Republic of China remains to be the oldest and the most active arbitration association in Taiwan. Ad hoc arbitration is also permitted under Taiwan law.
Provisional Relief
Provisional relief (for example, provisional seizures) may be granted by the courts upon application by the applicant before a request for arbitration is submitted to the arbitration association. The courts may grant provisional relief in respect of arbitrations that take place outside Taiwan. However, this practice is not commonly seen in Taiwan.
Enforcement of Arbitral Awards
An arbitral award has the same legal force and effect as a final court judgment in Taiwan. The award will be binding on both of the contending parties. The court may refuse to enforce an arbitral award or revoke an arbitral award in certain circumstances. However, the court does not render a new judgment in respect of the matter in dispute. Questions of whether the opinion of the arbitrators is proper and whether the award is proper in terms of substance are matters to be determined by the arbitrators in their sole discretion.
The courts will not review the substantive aspects of an arbitral award.
In principle, it is necessary to obtain the court’s enforcement order in order to enforce an arbitral award. According to Article 38 of the Arbitration Act, the court should not grant an enforcement order if
(a) the arbitral award concerns a dispute not contemplated by the terms of the arbitration agreement, or exceeds the scope of the arbitration agreement, unless the offending portion of the award may be severed and the severance will not affect the remainder of the award;
(b) the reasons for the arbitral award were not stated, as required, unless the omission was corrected by the arbitral tribunal; or
(c) the arbitral award commands a party to perform an act that is prohibited by law.
Revocation of Arbitral Awards
A party may institute proceedings in a district court for revocation of an arbitral award based on the following grounds:
(a) the circumstances stipulated in Article 38 of the Arbitration Act (see above) exist;
(b) the agreement to arbitrate was null and void, or has been invalidated before the rendering of the award;
(c) the arbitral tribunal failed to direct either or both of the parties to present its or their contentions, or if either or both of the parties were not lawfully represented in the arbitration proceeding;
(d) the composition of the arbitral tribunal or the arbitral proceedings is contrary to the arbitration agreement or the law;
(e) the arbitrator(s) violates the obligation of disclosure prescribed in Paragraph 2 of Article 15 of the Arbitration Act and appears to be partial or has been requested to withdraw but continues to participate in the tribunal, provided that the request for withdrawal has not been dismissed by the court;
(f) any participating arbitrator violated his or her duty in the arbitration, and such violation leads to criminal liability;
(g) either of the parties or its agent has committed a criminal offense in respect of the arbitration;
(h) any of the evidence upon which the arbitration was based is found to be forged or fraudulently altered; or
(i) the criminal or civil judgment, court order, or administrative decision upon which the arbitration was based has been rescinded or modified by a subsequent judgment, duly affirmed by an appellate court, or by a subsequent administrative decision.
The foregoing paragraphs (f) to (h) are only applicable where a conviction has been confirmed or where criminal proceedings have not been commenced or have been discontinued for a reason other than insufficiency of evidence. The foregoing paragraphs (d) and (e) to (i) are applicable only when the arbitration result can be adversely affected.
Recognition and Enforcement of Foreign Arbitral Awards
Foreign Arbitral Awards
The Arbitration Act provides that a foreign arbitral award is any arbitral award that is rendered outside of Taiwan, or any arbitral award rendered in Taiwan with foreign arbitration rules as its procedural rules.
Enforcement of Foreign Arbitral Awards
A court’s order on recognition and enforcement must be obtained before a foreign arbitral award can be enforced in Taiwan. As a rule, the recognition and enforcement of foreign arbitral awards are not limited to any particular countries. Any foreign arbitral award may be enforceable in Taiwan, provided that the requirements of the Arbitration Act are satisfied. The Arbitration Act provides that a court should dismiss the plea for recognizing a foreign arbitral award if
(a) the recognition or enforcement of the arbitral award will be in violation of public order or good morals of Taiwan; or
(b) the dispute is not arbitrable under Taiwan law.
In addition to the above, a court may dismiss a plea for recognizing a foreign arbitral award if the country where the arbitral award was made or whose laws govern the arbitral award does not recognize Taiwan’s arbitral awards on a reciprocal basis.
The requirement of reciprocity arises under Article 49 of the Arbitration Act. As Taiwan is not a signatory to the 1958 New York Convention, the reciprocity requirement can be an obstruction to the recognition of foreign awards. However, Article 49 of the Arbitration Act does not make such a clause compulsory. The courts have given a liberal interpretation of the term “reciprocity” in some cases.
The Supreme Court has held that even if an arbitral award is made in a foreign jurisdiction that does not recognize and enforce arbitral awards made in Taiwan, the court may nevertheless decide to recognize and enforce the foreign arbitral award at its discretion in order to enhance and promote international judicial cooperation.
Courts in Taiwan have recognized and enforced some foreign arbitral awards made in certain countries and jurisdictions, such as the United States, the United Kingdom, Hong Kong, France, Switzerland, Korea and Vietnam. On the other hand, although countries like Singapore, Germany and Canada have substantial commercial ties with Taiwan, there are a few court precedents regarding recognition of arbitral awards rendered in these jurisdictions. As such, in order to ensure that the foreign arbitral award may be enforced, it is suggested that the reciprocity issue be verified beforehand if the parties to a contract wish to arbitrate their disputes in another jurisdiction but intend to enforce the arbitral award in Taiwan.
Resistance to Recognition and Enforcement of Foreign Arbitral Awards
If a party applies to the courts for recognition of a foreign arbitral award which concerns any of the following circumstances, the respondent may request the courts to dismiss the application within 20 days from the date of receipt of the notice of the application:
(a) the arbitration agreement is invalid as a result of the incapacity of a party according to the law chosen by the parties to govern the arbitration agreement.
(b) the arbitration agreement is null and void according to the law chosen to govern the agreement or, in the absence of choice of law, the law of the country where the arbitral award was made.
(c) a party is not given proper notice regarding the appointment of an arbitrator or of any other matter required in the arbitral proceedings, or any other circumstances that lead to lack of due process.
(d) the arbitral award is not relevant to the subject matter of the dispute covered by the arbitral agreement or exceeds the scope of
the arbitration agreement, unless the offending portion can be severed from and does not affect the remainder of the arbitral award.
(e) the composition of the arbitral tribunal or the arbitration procedure is contrary to the provision of the arbitration agreement or, in the absence of an arbitration agreement, the law of the place of arbitration.
(f) the arbitral award is not yet binding upon the parties or has been suspended or revoked by a competent court.
Mediation
Several types of mediation could be undertaken by the parties in a dispute, including mediation in the court, mediation conducted by the mediation committee of a town or city, and mediation conducted by the Public Procurement Commission. Mediation is generally non- binding unless parties agree otherwise.
For government procurement cases, mediation through the Complaints Review Board for Government Procurement matters of the Public Procurement Commission (CRBGP) is a commonly used method. The suppliers invariably apply to the CRBGP for mediation in an effort to resolve commercial disputes with the government. This is because under the Government Procurement Law, a government authority cannot object to applications for mediation. Where a government authority does not agree to the resolution proposed by the CRBGP in a construction-related mediation, it may not object to an arbitration filed by the supplier.
Pursuant to the Arbitration Act, in the absence of any arbitration agreement to the contrary, the parties may choose to submit their dispute to mediation and mutually appoint an arbitrator as a mediator to conduct the mediation. Upon the successful conclusion of the mediation between the parties, the mediator will record the outcome of the mediation in a mediated agreement. A mediated agreement has the same force and effect as that of an arbitral settlement agreement. However, the terms of the mediated agreement may be enforced only if the courts have granted an application for the enforcement by a party and issued an enforcement order.
For further information, please contact:
Wynn Pakdeejit, Partner, Baker & McKenzie
milton.cheng@bakermckenzie.com
