Civil Dispute Resolution in Taiwan
September, 2007
Foreword
Taiwan is a civil law jurisdiction, and its courts are charged principally with interpreting statutory laws and have limited ability to create new remedies or laws where there is no statutory basis. Civil, criminal, and administrative cases fall under the jurisdiction of separate court systems. In addition to civil litigation, civil disputes can also be handled through arbitration, mediation, or settlement. Most foreign nationals involved in civil commercial disputes in Taiwan institute civil litigation in court or seek resolution through arbitration. For this reason, the remainder of this article will focus primarily on Taiwan's civil litigation and arbitration systems, and on issues related thereto.
1. Litigation procedures
Taiwan's civil litigation system is based primarily on the provisions of the Code of Civil Procedure (enacted in 1930 and amended 15 times since then). The following is a cursory introduction to civil litigation in Taiwan:
1.1 Organization of the court system
1.1.1 Three-level and three-instance court system:
Taiwan has adopted a three-level and three-instance court system, comprising: (1) district courts (which conduct trials of fact); (2) a High Court (also conducts trials of fact, but in principle does not allow new allegations or defense methods); and (3) a Supreme Court (conducts trials of law, does not usually hold session). If the Supreme Court finds a High Court judgment to be in violation of the law, it will remand it to the High Court for further investigation of the facts and a rehearing.
1.1.2 Organization of court sessions
Sessions at the level of district court are presided over by either one or three judges. High Court sessions are presided over by a panel of three judges. Supreme Court sessions are presided over by a panel of five judges. Taiwan does not have a jury system.
1.1.3 Qualifications and training of judges
To become a judge in Taiwan, one must hold a university degree, pass a judicial examination, and undergo a period of training before being appointed to a judgeship at one of the various district courts throughout Taiwan. From there one can be promoted to the High Court and then the Supreme Court.
1.2 Instituting litigation
1.2.1 Can foreign nationals institute litigation in Taiwan?
When a foreign national wishes to institute civil litigation in Taiwan, the court will decide, based on the provisions of the Law Governing the Choice of Law in Civil Cases Involving Foreign Elements, whether courts in Taiwan have jurisdiction. In cases such as contractual disputes, the court will usually base its decision on whether the parties have stipulated Taiwan as the locus of jurisdiction in the contract. In cases involving tortious acts, the court will decide based on whether the tort occurred in Taiwan.
1.2.2 Counsel
The person serving as counsel must in principle be an attorney who is given a Power of Attorney at each level (instance) of the litigation process. In many cases, this does not apply, however, if the Power of Attorney has been notarized and specifies that the authorization conferred thereby is not restricted to any particular level of litigation.
1.2.3 Court costs
When instituting litigation or filing an appeal, the plaintiff or appellant must first pay court costs, proportional to the monetary value of the claim being pressed at the time the litigation or appeal is instituted (at the trial of first instance, the cost shall be calculated at 1 to 0.6 percent of the claim, depending on the amount of the claim; at a trial of second or third instance, the cost shall be 1.5 times of the same at the first instance). If the court costs are not paid, the court will dismiss the lawsuit (or appeal).
For foreign plaintiffs, once the litigation has been instituted, based on Article 96 of the Code Civil Procedure, a defendant may first petition the court to demand that a foreign plaintiff without a legal presence or office in Taiwan to furnish a bond on fees for proceedings, which accounts for approximately 3% (1.5% for the second and third instances, respectively) of the entire amount claimed. Failure to pay the bond requested by the court will result in the court’s dismissal of the complaint.
1.3 Injunctive proceedings
In order to ensure that the party receiving a favorable judgment will not find it impossible or extremely difficult to carry out compulsory enforcement, Taiwan's Code of Civil Procedure provides that a party may, either before or after instituting litigation, motion the court to order provisional attachment (in the case of money claims or claims exchangeable for monetary claims) or issue a preliminary injunction (for non-monetary claims).
A party filing a motion for injunction must in principle state the reasons for the motion and for the injunctive order. To decide whether to grant an injunctive order, the courts usually holds a hearing to determine whether a preliminary injunction is necessary under the circumstances; there is no prior hearing for a provisional attachment. After receiving a court order for injunctive relief, a party may post bond as provided for in the court order and motion the court, with a court fee of 0.8% of the attached assets, to issue a compulsory enforcement order requiring attachment of the obligor's assets. The courts usually sets the bond amount at one-third the monetary value of the underlying claim for a provisional attachment, and at the full value of the obligor’s possible liability arising from a preliminary injunction. If the obligee fails to motion the court for compulsory enforcement within 30 days of receiving the injunctive order, the order expires. In addition, the obligor may file to the court a motion to post counterbond (typically a sum of money), where provided for in the attachment order, for exemption from the provisional attachment order. It is very difficult to avoid a preliminary injunction order by posting a counterbond, but this is up to the court’s discretion.
In addition, if the obligee, after issuance of a provisional attachment order, does not promptly institute litigation, the obligor may motion the court to order the obligee to institute litigation within a specified time period (7 – 10 days). If the obligee violates the court order by failing to institute litigation within the prescribed time period, the obligor may file a motion to the court for revocation of the provisional attachment order.
1.4 Discovery
There is no adversary discovery system in Taiwan. It is the court that presides over the evidence gathering and investigation procedures. If a party seeks to obtain documents held by the other party or any third party, or to obtain deposition from the persons having knowledge related to the claim etc., he shall file a motion to the court, with such party’s reasons for doing so, and request the court to order the relevant persons to submit documents or to be present witnesses. The court has the discretion to decide whether or not to grant the motion. If a party fails to abide by the discovery orders of the court, the court may make an adverse determination against him on the pertinent issue; however exception may be made based on privacy, trade secret, privilege or related concerns. In addition, the court also has the discretion, without any motion on the part of the parties, to investigate any evidence , provided that each party shall be granted an opportunity to express differing opinions on such investigation.
Further, we note that a “preservation of evidence” procedure is available under the Code of Civil Procedures for the purposes of preserving the integrity of evidence which are relevant to a possible case, and such procedure may proceed prior to or after the underlying litigation has been instituted. In addition to preservation of the evidence, such procedure also has an important function in that it allows the parties to have a preliminary indication of the scope of evidentiary materials at stake at a very early stage, based on which they may reconsider whether or not to initiate or continue the underlying litigation. Furthermore, the parties may, on the date of evidence preservation, reach an agreement with regard to the claim, the facts, the evidence or other matters of the case, which will have binding force on both parties in the subsequent proceedings.
Where parties of a foreign litigation seek to obtain evidence in Taiwan, the court of R.O.C. may provide assistance provided that the requirements of the Statute Governing Assistance to Foreign Courts (the “Statute”), as attached in Appendix I, are satisfied. According to Articles 1, 3 and 4 of the Statute, the request for discovery proceeding to be conducted by a court of R.O.C shall be made by a foreign “court” via diplomatic agencies and the country of the requesting court shall represent that it will provide assistance to the courts of R.O.C. if a corresponding request is made by the latter.
1.5 Litigation procedures
As mentioned above, the parties must pay court costs in advance, submitting payment to the district court together with relevant documentary evidence. After litigation has been instituted, the court will first carry out preparatory procedures. The two sides submit the relevant documentation, and the points of contention will be identified.
The parties may submit documentary and human evidence, and request forensic analysis. In civil cases there are no statutory restrictions on what is admissible as evidence. Any evidence favorable to one's case may be presented to the court. It is up to the court to determine the probative force of the evidence. Relevant evidence must in principle be presented during the trial of first instance. No additional means of attack or defense may be presented at the trial of second instance (first appeal) except under special circumstances.
Upon filing civil charges, the plaintiff may state its willingness to post bond in order to have the court, in the event it issues a judgment favorable to the plaintiff, concurrently order provisional enforcement. After the issuance of a favorable judgment, the plaintiff may file a motion for provisional enforcement in accordance with the content of the judgment. The obligor may also state its willingness to post bond in order to have the court exempt it from provisional enforcement when the judgment is handed down.
Litigation in Taiwan normally lasts nine months to a year at each level of the court system, but the duration may be shorter or longer than that depending on the complexity of the case.
After a judgment is handed down, if the unsuccessful party wishes to appeal it must file its appeal with the court that originally heard the case within 20 days after receiving the judgment. Any party filing an appeal with the Supreme Court must be represented by an attorney, and errors of law in the judgment are the only permissible grounds of appeal. Moreover, a case cannot be appealed to the Supreme Court unless the monetary value of the claim involved meets a certain minimum (the current minimum is NT$1.5 million).
1.6 Compulsory enforcement proceedings
Once it has obtained an enforceable instrument a disputant may pay a court fee of 0.8% of the attached assets and institute compulsory enforcement against the obligor's assets. The term "enforceable instrument" (or “executive title”) generally refers to final judgments that have become unappealable, provisional attachment orders, provisional injunction orders, provisional enforcement orders, litigation settlements, litigation mediation accords, and so forth.
The typical enforcement proceeding involving real estates is composed of the following steps: attachment (in the case of provisional attachment and provisional injunction orders, only an attachment procedure is involved); liquidation (auction); allotment. When carrying out an auction, the court will first set an auction price (the court may either set the price itself or hire an outside appraisal). If any items are left unsold at an auction, the court will reduce the price (usually to 80 percent of the previous auction price) and re-auction them. The maximum number of price reductions is three (i.e. a total of four auctions). If items remain unsold after that, the court will issue the obligee a debt obligation certificate. When the obligor has sufficient assets to offset the debt, the obligor may file motion once again for compulsory enforcement and no additional compulsory enforcement fees shall be paid.
1.7 Recognition and enforcement of foreign court judgments
Compulsory enforcement of a final and unappealable judgment issued by a foreign court cannot be carried out in Taiwan until a Taiwan court has handed down a judgment approving enforcement. Such approval will not be granted where: (1) under Taiwan law, foreign courts do not have jurisdiction; (2) the defendant against which the judgment was made did not respond to the lawsuit; (3) the content of the judgment or the litigation procedures were not in conformance with Taiwan laws and regulations, or contravened public morals; or (4) the country in question does not reciprocally recognize Taiwan court judgments. Countries that currently reciprocally recognize court judgments with Taiwan include the United States, Canada, and Japan, Hong Kong, People’s Republic of China etc. (The situation with respect to other countries remains unclear at this point.)
2. Arbitration procedures
Taiwan's Arbitration Act was first enacted in 1961, and has been amended four times since then. Taiwan's current Arbitration Act was drafted with reference to the UNCITRAL Model Law on International Commercial Arbitration as well as legislation in Britain, the United States, Germany, and Japan. Most of the cases handled under the Arbitration Act involve construction projects, securities, and international trade disputes. The following is a general introduction to Taiwan's current arbitration regime.
2.1 Arbitration organizations
Taiwan has four arbitration associations: (1) The Arbitration Association of the Republic of China; (2) Taiwan Construction Arbitration Association; (3) Chinese Construction Industry Arbitration Association; and (4) The Association of Labor Dispute Arbitration, R.O.C. Most arbitration cases are referred to The Arbitration Association of The Republic of China.
2.2 Arbitration agreements
To file for arbitration, the parties to a dispute must enter into a written arbitration agreement with each other (may be done in the form of a formal agreement, letter, fax, telegram, etc). The coverage of an arbitration agreement is limited in scope to a certain range of legal relationships, and to disputes arising from such legal relationships. Moreover, it must be set forth by statute that such disputes may be resolved through settlement.
2.3 Composition of arbitration tribunals
An arbitration tribunal may be composed of one arbitrator or an odd number of arbitrators. Unless the arbitration agreement stipulates otherwise regarding the appointment of arbitrators, each party to the dispute will appoint one arbitrator, and the arbitrators appointed by the two parties will jointly appoint a third arbitrator.
An arbitrator who is related by kinship to a disputant or an agent of a disputant, or who now acts or has previously acted as an employee or agent of a disputant, must notify the disputants. Within 14 days of learning of cause for recusal, a disputant may request recusal by the arbitrator in question, and the arbitration tribunal will have to rule on the request within ten days.
2.4 Arbitration procedures
Where the disputants have entered into an arbitration agreement and one party breaches the agreement by bypassing arbitration and filing litigation with a court, upon a motion by the other disputant the court must suspend litigation proceedings and order the plaintiff to refer the matter for arbitration. The above does not apply, however, if the defendant does not object to the lawsuit, and opts instead to present oral arguments in defense against the court litigation.
Those filing for arbitration must pay arbitration costs, to be determined in accordance with the regulations of the arbitration association to which the case is referred. If an attorney is retained, a Power of Attorney must be produced. Unless otherwise agreed by the parties upon the arbitration procedures, the provisions of Taiwan's Arbitration Act shall apply. Matters not provided therein may be handled in accordance with the Code of Civil Procedure or any other procedures that the arbitration tribunal deems appropriate. The courts in principle will not intervene during the course of arbitration proceedings, and will completely respect the arbitration tribunal's handling of the case. The arbitral tribunal, if necessary, may request assistance from a court or other agencies for processing the arbitration. The arbitration tribunal must not base its reasoning on equitable principles unless the disputants expressly agree to it.
An arbitration decision must be produced within six months from the beginning of the proceeding. Where necessary, this deadline may be extended by three months. If the arbitration tribunal fails to produce a decision by the aforementioned deadline, either disputant may commence an action or file a motion to resume litigation. Once a disputant has commenced an action or filed a motion to resume litigation, the arbitration proceeding is deemed terminated.
A motion for provisional attachment or provisional injunction may be filed with a court either before a matter is referred to arbitration, or during the course of an arbitration proceeding.
2.5 Enforcement of arbitration decisions
An arbitration decision is binding upon the disputants as if it were a final and unappealable court judgment. After an arbitration decision has been handed down, a disputant may file a motion in court for compulsory enforcement.
2.6 Voidance of arbitration decisions
After an arbitration decision is handed down, under special circumstances a disputant may file suit against the other party seeking voidance of the arbitration decision. The party filing such a suit may only cite procedural flaws in the arbitration process as its grounds for action (e.g. the arbitration agreement was either not established or invalid; the arbitration decision was unrelated to the subject of the arbitration agreement or overstepped the bounds of the arbitration agreement; the composition or procedures of the arbitration tribunal violated the arbitration agreement or the law; etc). A disputant may not file a lawsuit seeking voidance of the arbitration decision if its dispute has to do with factual matters (e.g. whether the reasons for the decision were correct, whether the decision was contradictory, etc).
2.7 Recognition and enforcement of foreign arbitration decisions
Any arbitration decision made outside Taiwan, or made in Taiwan in accordance with foreign laws, is treated as a foreign arbitration decision. After motion has been filed with a court to recognize the decision, it may be treated as an enforceable instrument.
A party filing motion with a court for recognition of a foreign arbitration decision must submit: (1) the original arbitration decision or a certified duplicate thereof; (2) the original arbitration agreement or a certified duplicate thereof; and (3) the full text of the foreign legal provisions upon which the foreign arbitration decision was based (e.g. foreign arbitration legislation, the arbitration rules of a foreign arbitration organization, the rules of an international arbitration organization, etc). Chinese translations of the aforementioned documentation must also be submitted to the court.
When a disputant files a motion in court seeking recognition of a foreign arbitration decision, the court must issue a decision dismissing the motion if any one of the following circumstances exists: (1) recognition or enforcement of the arbitration decision would be run counter to public order or good morals in Taiwan; or (2) the matter dealt with in the arbitration decision cannot under Taiwanese law be resolved through arbitration.
Conclusion
In addition to the two avenues of dispute resolution described above, after a dispute in Taiwan has gone to civil litigation it can still be resolved through settlement if the court sees settlement as a viable option. Where litigation is resolved through settlement, the litigation settlement is binding as if it were a final and unappealable court judgment, and a disputant may use the settlement accord to file a motion in court for compulsory enforcement. In addition, there are various types of cases that must go through compulsory mediation (such as labor-management disputes) proceedings before litigation proceedings may be instituted. Other dispute resolution regimes in Taiwan include mediation committees under various township and city (municipal district) governments, a dispute resolution committee under the Public Construction Commission of the Executive Yuan, the Copyright Examination and Mediation Committee, and labor-management dispute mediation committees under each of Taiwan's county governments. Any resolution reached through mediation or conciliation typically requires ratification by a court. Once ratified, such a resolution is binding as if it were a final and unappealable court judgment.
This memorandum is intended only as a general discussion of these issues. It should not be regarded or relied on as a legal opinion. Because of the generality of this memorandum, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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Appendix I
Statute Governing Assistance to Foreign Courts
Article 1 Unless otherwise provided in applicable treaties or laws, the court shall abide by this statute when requested by foreign courts to provide assistance in the civil or criminal cases.
Article 2 The court may provide assistance in the civil or criminal cases upon the request of the foreign court provided that it shall not be in violation of the laws and regulations of the R.O.C.
Article 3 The request by the foreign court shall be made in writing and delivered via diplomatic agencies.
Article 4 The country of the court requesting assistance shall make a representation that it will provide the same assistance to the court of R.O.C. if the latter faces the same or similar situation.
Article 5 Where a court is requested to deliver documents in connection with any civil or criminal litigation, it shall process it in accordance with the provisions governing the delivery of such documents in the Code of Civil Procedure or Code of Criminal Procedure.
The request letter for delivery of documents shall specify the name, the nationality and the address of the domicile, residence, office or place of business of the receiver.
Article 6 Where a court is requested to investigate the evidence for a civil or criminal litigation, the court shall, according the purpose of the request, conduct appropriate proceedings in accordance with the provisions governing the investigation of evidence in the Code of Civil Procedure or Code of Criminal Procedure.
The request letter for the investigation of evidence shall specify the names of the parties, the category of evidence to be investigated, the name, nationality, domicile, residence, office or place of business of the person and the matters to be investigated. For criminal cases, a summary of the case shall be attached.
Article 7 Where the request letter and relevant documents are made in foreign languages, a Chinese translation shall be attached, on which it shall be indicated that the translation is in conformity with the original.
Article 8 The delivery or investigation expenses for civil cases shall be collected pursuant to the laws and regulations governing fees collection of R.O.C. For criminal cases, the same shall be calculated based on the actual expenses incurred by the court conducting the proceeding and shall be reimbursed by the country of the requesting court.
Article 9 This statute will come into force from the date of promulgation.
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