International Arbitration 2020

Last Updated August 18, 2020

Taiwan

Law and Practice

Authors



LCS & Partners is an elite corporate law firm founded in 1998 and based in Taipei that provides a full range of legal services in every major corporate practice area. It has grown rapidly and regularly handles major and complex cases for top-tier domestic and international clients. It has about one hundred Taiwan and foreign-licensed attorneys, most of whom have received LLM, JD and/or SJD degrees from US law schools. It is a member of the World Services Group, which has more than 130 member firms in more than 115 countries and throughout the USA. LCS & Partners also specialises in international arbitration and cross-border dispute resolution; it provides a team of experienced attorneys, including former judges of the Taiwan High Court, as well as fellows of the Chartered Institute of Arbitrators and arbitrators of the Chinese Arbitration Association International Centre. Special thanks are given to Celine Cheng and Venson Hsu, both associates of LCS & Partners, for drafting this chapter.

Taiwan has increasingly engaged in the practice of international arbitration. Taiwan corporations with an international presence have opted for arbitration as their preferred dispute resolution mechanism especially when the dispute in question is with a foreign entity. On the other hand, Taiwanese corporations less engaged in international transactions continue to favour traditional litigation as their primary dispute resolution mechanism in Taiwan.

Amendment Proposal

The Chinese Arbitration Association, Taipei (CAA) has proposed an amendment to the Arbitration Law of ROC (the Arbitration Act) of 1998. Still at an early drafting stage, this proposal is intended to reflect the latest UNCITRAL Model Law on International Commercial Arbitration of 2006. 

COVID-19 Pandemic

The number of cases, and their amounts, arbitrated by the CAA in 2020 have actually increased when compared with the same period the year before. Additionally, the CAA has seen several disputes arising out of the COVID-19 pandemic being arbitrated, although the long-term impact of the pandemic is still unclear.

Construction companies in Taiwan are more likely to choose international arbitration over traditional litigation mechanism, due largely to the high dollar values in dispute and the technical complexity of the projects involved. Furthermore, according to the statistics of the CAA, companies in the fields of trade, service and finance also tend to prefer international arbitration as their main dispute resolution mechanism over others.

The Chinese Arbitration Association

Established in 1955, the CAA is the most notable arbitral institution in Taiwan. In addition to arbitration services, the CAA has pioneered the service of alternative dispute resolution in Taiwan. For example, the CAA launched the Mediation Center of the CAA in 2003, followed by other dispute resolution mechanisms such as the Dispute Review Board and Dispute Adjudication Board.

The International Arbitration Centre of the Chinese Arbitration Association

To serve the increasing demands of international arbitration in the Asia-Pacific region, the CAA launched a foreign branch of the CAA, the International Arbitration Centre (CAAI) in Hong Kong in 2018. CAAI is particularly tailored to arbitrations seated outside Taiwan as well as those arbitrations that will be conducted in both Mandarin Chinese and English.

Dual-Track System of Arbitration

Through the CAA-CAAI dual-track system, arbitrations seated in Taiwan are administered by the CAA under the Chinese Arbitration Association, Taipei Arbitration Rules of 2001 (CAA Arbitration Rules), whereas those seated outside Taiwan are administered by CAAI under the Arbitration Rules of the Chinese Arbitration Association, International of 2017 (CAAI Arbitration Rules).

Other Choices for Arbitration

In addition to the CAA, it is also a common practice for Taiwanese companies to choose other arbitration institutions – in Hong Kong, Singapore, or the USA for example – as the seat of arbitration or the governing law for arbitration.

The laws governing arbitration in Taiwan are the Arbitration Act, which aims to follow the UNCITRAL Model Law on International Commercial Arbitration of 1985, and the Regulation Governing Organisation, Mediation Procedures and Fees of Arbitration Institution of 1999.

The Arbitration Act adopts a unified regime for both national and international arbitrations. This means that all arbitrations governed by the Arbitration Act will adopt the same rules and the Arbitration Act itself does not propose a different set of rules applicable to international arbitrations. 

The Divergence from the UNCITRAL Model Law of 2006

The Arbitration Act differs itself from the Model Law of 2006 (the Model Law) with respect to the following few examples:

  • If an arbitration agreement does not expressly agree on the governing law of the dispute, Article 19 of the Arbitration Act provides that the Arbitration Act, Code of Civil Procedure, or other laws which the arbitral tribunal deems appropriate may be applicable; as such, the Arbitration Act does not refer to any conflict of law rules, in contrast to the Model Law.
  • Unlike the Model Law, the Arbitration Act contains no restriction on the period within which the arbitral tribunal may correct any error in an arbitral award, either at its own discretion or by the application of the parties to the arbitration in accordance with Article 35 of the Arbitration Act.
  • Though the Model Law seeks to expand the power of the arbitral tribunal to grant interim relief, the Arbitration Act itself only states that the arbitral tribunal may request assistance from a court in accordance with Article 28 of the Arbitration Act, there are no provisions contained in the Arbitration Act expressly empowering the arbitral tribunal to grant interim relief (see 6.1 Types of Relief and 6.2 Role of Courts).

Please refer to 1.2 Trends.

To enforce an arbitration agreement, the Arbitration Act requires it to be laid down in writing (Article 1(3) of the Arbitration Act). This written element includes, any written document, documentary instrument, correspondence, facsimile, telegram or any other similar types of communications between the parties that can prove the existence of a prima facie arbitration agreement (Article 1(4) of the Arbitration Act).

Generally speaking, disputes that may be settled by the involved parties in accordance with the laws of Taiwan are arbitrable. As such, disputes concerning criminal law, family law, and inheritance-related matters, as well as certain government-related contracts are generally not arbitrable due to a lack of autonomy for the parties involved to settle such dispute under the laws of Taiwan.

Taiwanese courts generally defer to parties’ free will to enter into arbitration, provided that such an agreement satisfies the requirement set forth in 3.1 Enforceability. In the event one of the parties to an arbitration agreement commences a legal action contrary to the arbitration agreement, the court may, upon application by the adverse party, stay 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 without objection.

Article 3 of the Arbitration Act explicitly provides for the separability of arbitration agreements and states that the validity of an arbitration clause that forms part of a principal contract between the parties may be determined separately from the rest of the principal contract. As such – even in the event the subject contract is nullified, invalid, revoked, rescinded or terminated – the validity of the arbitration clause would not be affected.

The Arbitration Act in Taiwan provides some statutory requirements for the qualification of an arbitrator, this might be quite different from other jurisdictions. 

The Qualification to Become Arbitrators

Article 6 of the Arbitration Act explicitly provides that: “a person possessing legal or other professional knowledge or experience, a reputation for integrity and impartiality, and any of the following qualifications may act as an arbitrator:

  • service as a judge or public prosecutor;
  • practice for more than five years as a lawyer, accountant, architect, mechanic or in any other commerce-related profession;
  • act as an arbitrator of a domestic or foreign arbitration institution;
  • teaching as an assistant professor or higher post in a domestic or foreign college certified or recognised by the Ministry of Education; and
  • specialist in a particular field or profession and has practiced for more than five years.”

Registration Requirement for Arbitrators

Additionally, qualified individuals must also receive training and obtain a certificate before applying with an arbitration institution to be registered as an arbitrator pursuant to the Arbitration Act. However, this does not apply to qualified individuals acting as an arbitrator in ad hoc arbitration.

Parties' Autonomy to Select Arbitrators

In practice, parties sometimes set forth specific requirements, such as certain expertise or certain qualifications, in their arbitration clause/agreement for selecting their arbitrator(s). In addition, the Arbitration Act provides that, “[s]hould the qualifications be agreed among the parties, arbitrators that do not meet the qualifications may be removed by either party.”

As for the selection process, parties are free to determine the number of arbitrators as well as the method of their appointment in the arbitration clause/agreement. In the absence of any such determination by the parties, the default procedures for selecting the arbitrator(s) set forth under Article 9 of the Arbitration Act (see 4.2 Default Procedures) apply.

Arbitration of Sole Arbitrator

In the event of an arbitration conducted by sole arbitrator, especially an ad hoc proceeding, where parties fail to agree on a sole arbitrator, the appointment shall be made by the court upon the request of either party. On the other hand, if the arbitration is administered by an arbitration institution, the arbitrator shall be appointed by the arbitration institution accordingly (Article 9(3)(4) of the Arbitration Act).

Arbitration of Multiple Arbitrators

For arbitration conducted by multiple arbitrators, a party who has already appointed its own arbitrator may issue a written request to the other party to appoint its arbitrator. Upon a failure to appoint an arbitrator by the other party, the requesting party may apply to an arbitration institution or the court to make the appointment (Article 11(1) and Article 12(1) of the Arbitration Act). Additionally, where the arbitrator is to be appointed by an arbitration institution, either party may request the arbitration institution to appoint an arbitrator, the requesting party may apply to the court to make the appointment if an arbitration institution fails to appoint an arbitrator (Article 11(2) and Article 12(2) of the Arbitration Act).

Multi-Party Arbitrations

For multi-party arbitration, where there is more than one individual on either side of the arbitration, and they are unable to agree on the appointment of an arbitrator, the appointment shall be made by a majority vote among themselves. In the event of a tie, the appointment shall be made by drawing lots in accordance with Article 9(5) of the Arbitration Act.

A Taiwanese court generally does not have the right to intervene in the selection of arbitrators unless the appropriate party applied for the court’s intervention as described in 4.2 Default Procedures. As such, the limitation on the court’s power of intervention would be subject to the appropriate party’s application.

Generally, if the existence of any circumstances which raise any justifiable doubts as to the impartiality or independence of the arbitrator are shown, pursuant to Article 15(2) of the Arbitration Act, a party can request the arbitration tribunal to remove an arbitrator, those grounds include:

  • the existence of any of the causes requiring a judge to withdraw from a judicial proceeding in accordance with Article 32 of the Code of Civil Procedure;
  • the existence or history of an employment or agency relationship between the arbitrator and a party;
  • the existence or history of an employment or agency relationship between the arbitrator and an agent of a party or between the arbitrator and a key witness; and
  • the existence of any other circumstances which raise any justifiable doubts as to the impartiality or independence of the arbitrator.

In addition, when an arbitrator fails to meet the qualifications agreed between the parties, any party can request the arbitration tribunal to remove that specific arbitrator (Article 16 (1) of the Arbitration Act).

Arbitrators shall be independent, impartial and shall uphold the principle of confidentiality in conducting the arbitration as explicitly provided under Article 15(1) of the Arbitration Act.

The Duty to Disclose Potential Conflicts of Interest

An arbitrator has the duty to disclose, to the parties, any grounds that may give rise to a party’s removal of that arbitrator, as set forth in 4.4 Challenge and Removal of Arbitrators.

Please refer to 3.2 Arbitrability.

The Arbitration Act recognises the principle of competence-competence. Accordingly, an arbitral tribunal may rule on its own jurisdiction, including on any objections with respect to the existence or validity of the arbitration agreement. A challenge to the jurisdiction of the arbitral tribunal must be raised no later than the submission of the statement of defence on the merits. The arbitral tribunal may rule on a challenge to its jurisdiction as a preliminary question or in its award on the merits.

Upon application by any party to the arbitration proceeding, Taiwanese courts may review and address issues of jurisdiction only in the context of setting aside the arbitration proceeding. Taiwanese courts generally respect the jurisdiction of an arbitral tribunal and may, therefore, be reluctant to intervene. Taiwanese courts will also review negative rulings on jurisdiction by arbitral tribunals upon application by a party to the arbitration proceeding.

A challenge to the arbitral tribunal’s decision on its own jurisdiction may only be raised before Taiwanese courts after an award has been rendered by the arbitral tribunal, as Taiwanese courts can only address issues of jurisdiction in setting aside proceeding.

Taiwanese courts have the power and authority to undertake a de novo review of the relevant arbitration agreement in determining the issue of jurisdiction on their own regardless of the rulings made by the arbitral tribunal concerning the issue of its jurisdiction.

In the event that one of the parties to an arbitration agreement commences a legal action contrary to that arbitration agreement, the court may, upon application by the opposing party, stay the legal action and order the plaintiff to submit to arbitration within a specified time. Note, however, that if the defendant proceeds to respond to the legal action in court without raising any objection to the jurisdiction of the court, then the court will hear the case and deny the defendant’s subsequent application to claim a lack of jurisdiction (Article 4 (1) of the Arbitration Act). 

The Arbitration Act in Taiwan is silent on whether an arbitral tribunal may assume jurisdiction over individuals or entities that are not party to the arbitral agreement. In practice, however, a third party that is neither a party to an arbitration agreement nor a signatory to the contract containing the arbitration agreement may only be bound to the arbitration clause under exceptional circumstances including legal succession by means of inheritance, by operation of law, or by accession to the contract; legal assignee of a contract bound by an arbitration clause concluded by the assignor; or insolvency administrators bound by the arbitration clause concluded by the insolvent company.

Third-Party Intervention

Nevertheless, a Supreme Court case (95 tai-shang-zi No 2277, rendered in 2006) explicitly permits a third party that is legally interested in an action between two parties to join the arbitration proceeding pursuant to Article 19 of the Arbitration Act and Article 58 of the Code of Civil Procedure.

By joining the arbitration, the third party will then be bound by the arbitral award and may not dispute the correctness of the award made, except where that third party was denied a means of attack or defence either due to the progress of the arbitration at the time of participation or by an act of any party to the arbitration, or where a party to the arbitration has wilfully or through gross negligence failed to employ certain means of attack or defence unknown to the third party. In addition, the Arbitration Act and the Code of Civil Procedure do not distinguish between foreign or domestic third parties in third party intervention. 

The Arbitration Act and the CAA Arbitration Rules are silent with respect to the power to award preliminary or interim relief of an arbitral tribunal.

CAAI Arbitration Rules for Interim Relief

The CAAI Arbitration Rules, which are only applicable for international arbitration conducted by the CAAI seated outside Taiwan, provide interim relief in a manner similar to the UNCITRAL Model Law. The arbitral tribunal may grant interim relief in an order or another form at any time before issuing the final award and such relief shall be binding on the parties when granted.

The types of interim relief that may be granted include, without limitation, those that require a party to:

  • maintain or restore the status quo pending determination of the dispute;
  • take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process;
  • provide means of preserving assets out of which a subsequent award may be satisfied; or
  • preserve evidence that may be relevant and material to the determination of the dispute.

As mentioned above, it is not clear that whether an arbitral tribunal seated in Taiwan has the right to grant preliminary or interim relief in arbitration proceedings since the Arbitration Act and CAA Arbitration Rules are silent on this matter (see 6.1 Types of Relief). As such, any application of preliminary or interim relief falls within the power of courts. Pursuant to Article 368(1) of the Code of Civil Procedure, where it is likely that evidence may be destroyed or its use in court may be difficult, or with the consent of the opposing party, the party may petition the court for preservation of such evidence; where necessary, the party who has legal interests in ascertaining the status quo of a matter or object may petition for expert testimony, inspection or preservation of documentary evidence. This serves the fundamental rules for preliminary or interim relief in Taiwan. In addition, if a foreign-seated arbitration is in need of preliminary or interim relief in Taiwan, the parties may apply for such relief by following the above-mentioned court proceeding. There are no previous court cases that have specifically granted the enforcement of preliminary or interim relief made by foreign-seated arbitration.

Emergency Arbitrators

The Arbitration Act is silent on the use of emergency arbitrators and the interim measures are governed by the courts as mentioned above.

The Arbitration Act and the Regulation Governing Organisation, Mediation Procedures and Fees of Arbitration Institution of 1999 are silent on whether Taiwanese courts or arbitral tribunals are allowed to order security for costs. Furthermore, the party who initiates the arbitration shall pay for the arbitration fees upon application for such arbitration. The arbitration institution may not hear the case if no arbitration fee has been made, pursuant to Article 25 of the Regulation Governing Organisation, Mediation Procedures and Fees of Arbitration Institution of 1999 (for the final allocation of arbitration fees to be determined in an arbitral awarded, see 10.3 Recovering Interest and Legal Costs). As such, arbitral tribunals tend not to order security for costs in practice.

The Arbitration Act provides freedom for the contracting parties to decide on the procedure of the arbitration. In the absence of such an agreement, the arbitral tribunal will have the power to conduct the proceedings in accordance with the Code of Civil Procedure or in any manner that it deems appropriate, this may include arbitral institutional rules (Article 19(1) of the Arbitration Act).

In practice, the majority of arbitrations seated in Taiwan are governed by the rules of the CAA, which will invariably provide for the initial procedural steps of the arbitration to be followed by more detailed procedural guidance from the arbitral tribunal. However, the Arbitration Act provides for some fundamental procedural steps in the absence of any arbitration agreement as to how the arbitration is to be conducted.

The Commencement of Arbitration

A party shall provide written notification to the respondent party as to when the dispute is to be submitted to arbitration. Unless otherwise agreed by the parties, the arbitral proceedings for a dispute shall commence on the date specified on the written notice of arbitration received by the respondent party (Article 18 of the Arbitration Act).

The Seat of Arbitration

Unless agreed by the parties, the seat of arbitration shall be determined by the arbitral tribunal (Article 20 of the Arbitration Act).

The Time Limit for Arbitration

The arbitral tribunal shall render an arbitral award within six months after the commencement of the arbitration. However, the arbitral tribunal shall have the discretion to extend that period for an additional three months if the circumstances so require (Article 21(1) of the Arbitration Act).

Failure to Render an Arbitral Award Within the Time Limit

If an arbitral award has not been rendered by the arbitral tribunal within the above-mentioned time period, either party may, unless compelled to arbitrate, refer the dispute to a court or proceed with a previously initiated legal action. The arbitral proceedings shall be deemed terminated thereafter (Article 21(3) of the Arbitration Act). However, it is still in the parties’ power to extend that period.

In addition to the qualification of arbitrators as prescribed under the Arbitration Act (see 4.5 Arbitrator Requirements), the arbitrator has the duty to ensure that each party has a full opportunity to present its case and the arbitral tribunal shall conduct the necessary investigations of the claims by the parties (Article 23(1) of the Arbitration Act). In addition, the Arbitration Act authorises an arbitral tribunal to:

  • rule on a challenge to an arbitrator's appointment (Article 17 of the Arbitration Act);
  • rule on the tribunal's own jurisdiction (Article22 of the Arbitration Act);
  • rule on the procedure of the arbitration in the absence of an agreement between the parties (Article 19 of the Arbitration Act); and
  • render an arbitral award (Article 33(1) of the Arbitration Act).

Either party may, in writing, appoint a representative to appear before the arbitral tribunal to make statements for and on its behalf in accordance with Article 24 of the Arbitration Act. There are no particular restrictions on parties appointing foreign law firms or foreign-qualified lawyers to act as their legal representatives in an international arbitration proceeding. Taiwan-qualified lawyers may, however, be required to engage in a domestically focused arbitration since pure Taiwan-related legal matters may only be pursued by Taiwan-licensed lawyer in accordance with the Attorney Act. 

As indicated in 7.1 Governing Rules, parties are free to agree on the proceedings of arbitration governing their particular dispute which would also contain rules governing the collection and submission of evidence. Although the arbitral tribunal has the discretion to determine the rules applicable in the absence of the parties’ prior agreement, the general approach to the collection and submission of evidence, both at the pleading stage and at the hearing in Taiwan, would be based on the Arbitration Act in conjunction with the Code of Civil Procedure for both domestic and international arbitrations in Taiwan.

Discovery

It is worth noting, however, that Taiwan is not a common law jurisdiction. As such, common law discovery procedures are generally not followed either in domestic or international arbitrations.

The Arbitration Act coupled with the Code of Civil Procedure generally apply to the rules of evidence for both domestic and international arbitration seated in Taiwan, although some international arbitrations may adopt the IBA Rules on the Taking of Evidence in International Arbitration.

The arbitral tribunal is authorised under the Arbitration Act to summon witnesses or expert witnesses to appear for questioning at the hearing but may not compel any witness to enter any undertaking. In the event a witness fails to appear without sufficient reason, the arbitral tribunal may further apply for a court order compelling that witness to appear (Article 26 of the Arbitration Act).

In addition, the Arbitration Act does not distinguish between parties and non-parties in particular.

The Arbitration Act prescribes confidentiality obligations on the parties to arbitral proceedings unless the parties have agreed otherwise (Article 23(2) of the Arbitration Act). As such, information in the arbitral proceeding shall be kept confidential and may not be disclosed. This obligation generally extends to subsequent proceedings.

The Legal Requirements for an Arbitral Award

Articles 33(2)-(3) of the Arbitration Act require an arbitral award to contain the following items:

  • names and residence or domicile of the individual parties (for a party that is a corporate entity or another type of organisation or institution, then its name(s), administrative office(s), principal office(s)or business office(s) address;
  • names and domiciles or residences of the statutory agents or representatives, if any, of the parties;
  • names, nationalities and residences or domiciles of the interpreters, if any;
  • the main text of the decision;
  • the relevant facts and reasons for the arbitral award, unless the parties have agreed that no reasons shall be stated; and
  • the date and place of the arbitral award.

The original copy of the award shall be signed by the arbitrator(s) who deliberated on the award. If an arbitrator refuses to or cannot sign the award for any reason, the arbitrator(s) who do sign the award shall state the reason for the missing signature(s).

Time Limits on the Delivery of an Arbitral Award

In addition, pursuant to Article 21(1) of the Arbitration Act, the arbitral tribunal shall render an arbitral award within six months after the commencement of the arbitration with the discretion to extend this period for an additional three months if circumstances so require. It is also quite common for parties to agree on the extension of the arbitration period in writing in complicated cases. 

The Arbitration Act does not explicitly limit the types of remedy that an arbitral tribunal may award. It may be worth noting that, if expressly authorised to do so by the parties, the arbitral tribunal may apply the rules of equity to determine the arbitral award in accordance with Article 31 of the Arbitration Act.

In practice, however, it is inevitable that arbitral tribunals take into consideration the recognition and enforcement of arbitral awards granted in Taiwan, since these awards may be challenged (see 12.2 Enforcement Procedure). For instance, Taiwanese courts do not allow punitive damages as a matter of public policy unless expressly provided under applicable laws such as the Consumer Protection Act. As such, an arbitral award granting punitive damages for a contractual breach or tort action will not be enforced in Taiwanese courts.

The Regulation Governing Organisation, Mediation Procedures and Fees of Arbitration Institution of 1999 generally applies to matters relating to costs in arbitral proceedings in Taiwan. The CAA and the CAAI, however, often adopt the principle that costs follow the event in arbitration under the Code of Civil Procedure for arbitration. This means that the successful party may be entitled to an order for legal costs (that excludes attorneys' fees) against the unsuccessful party. As for the interest, the Arbitration Act does not expressly provide for claims for interest. The rate of interest recoverable will depend on the substantive law of the dispute.

Appeal an Arbitral Award

Pursuant to Article 37 of the Arbitration Act, an arbitral award shall be deemed a final and conclusive judgment that is binding on the parties involved. Therefore, the arbitral award may not be appealed to the arbitral tribunal as a matter of law.

To Set Aside an Arbitral Award

Notwithstanding the foregoing, parties to the arbitration still have the right, under exhaustive circumstances, to file a request for setting aside the arbitral award at the District Court with jurisdiction over the arbitration pursuant to Article 41(1) of the Arbitration Act.

The filing may be made if:

  • the arbitration agreement is nullified, invalid, has yet to come into effect or has become invalid prior to the conclusion of the arbitral proceedings;
  • 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 that severance will not affect the remainder of the award;
  • the reasons for the arbitral award were not stated, as required, unless the omission was corrected by the arbitral tribunal;
  • the arbitral award directs a party to act contrary to the law;
  • the arbitral tribunal fails to give any party an opportunity to present its case prior to the conclusion of the arbitral proceedings, or if any party is not lawfully represented in the arbitral proceedings;
  • the composition of the arbitral tribunal or the arbitral proceedings is contrary to the arbitration agreement or the law;
  • an arbitrator fails to fulfil the duty of disclosure prescribed by the Arbitration Act and appears to be partial or has been requested to withdraw but continues to participate, provided that the request for withdrawal has not been dismissed by the court;
  • an arbitrator violates any duty in the entrusted arbitration and such violation carries criminal liability;
  • a party or any representative has committed a criminal offence in relation to the arbitration;
  • any evidence or the content of any translation upon which the arbitration award relies, has been forged or fraudulently altered or contains any other misrepresentations; or
  • a judgment of a criminal or civil matter, or an administrative ruling upon which the arbitration award relies, has been reversed or materially altered by a subsequent judgment or administrative ruling.

Note that the courts tend to review this type of filing rather narrowly, so the granting of the relief sought is not often seen.

Time Limit to Set Aside an Arbitral Award

In addition, pursuant to Article 41(2) of the Arbitration Act, an application to set aside an arbitral award shall be submitted to the court within the thirty-day statutory period after the arbitral award has been issued or delivered unless sufficient reasons can be provided to explain such delay due to no fault of the applicant to the satisfaction of the court. Nevertheless, applications to set aside an arbitral award shall be barred after five years from the date on which the arbitral award was issued.

The Arbitration Act is silent on the parties’ rights to extend or exclude the scope of appeal or challenge and there is also no case law on this issue. However, it is generally believed that the grounds for setting aside an award are exhaustive to ensure limited judicial review. As such, parties cannot agree to exclude or expand the scope of appeal or challenge.

Taiwanese courts do not review the merits of an arbitration and errors of law or of fact do not qualify as grounds for setting aside an arbitral award in Taiwan.

Arbitral awards rendered in Taiwan have been recognised and enforced by foreign courts. While Taiwan is currently not a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), countries such as Australia, Germany, Spain and Sweden, that did not declare “reciprocal reservations” when signing the New York Convention can recognise and enforce arbitral awards rendered in Taiwan. In addition, the Supreme People’s Court of Mainland China announced the Regulation Relating to Recognition and Enforcement of Arbitral Awards Rendered in Taiwan in 2015, which has in effect largely strengthened the validity and enforceability of arbitral awards rendered in Taiwan.

As indicated in 11.1 Grounds for Appeal, an arbitral award shall be final and conclusive and shall be binding on the parties and have the same force as a final judgment of a court in accordance with Article 37(1) of the Arbitration Act.

Enforcement Order

To enforce the arbitral award, however, a party to the arbitration must file an application to the court to obtain an order for such enforcement unless the parties have already agreed to enforce the arbitral award concerning certain subject matters set forth under Article 37(1) of the Arbitration Act without a court order.

Grounds for Not Enforcing an Arbitral Award

The court will reject an application for enforcement of an arbitral award pursuant to Article 38 of the Arbitration Act under exhaustive circumstances where:

  • 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 from the award and the severance will not affect the remainder of the award;
  • the reasons for the arbitral award were not stated, as required, unless the omission was corrected by the arbitral tribunal; or
  • the arbitral award directs a party to act contrary to the law.

Enforcement of Foreign Arbitral Award

As a general matter, Taiwanese courts recognise a foreign arbitral award when the country where the arbitral award is made, or the laws governing the arbitral award, also recognises arbitral awards made in Taiwan, unless the recognition or enforcement of that arbitral award is contrary to public order or the good morals of Taiwan or the subject dispute is not arbitrable under the laws of Taiwan.

In addition, pursuant to Article 50 of the Arbitration Act, upon the request of the respondent to the arbitral award, the court may not recognise a foreign arbitral award in the following situation: 

  • 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;
  • the arbitration agreement is null and void according to the law chosen to govern said agreement or, in the absence of a choice of law, the law of the country where the arbitral award was made;
  • a party is not given proper notice, whether of the appointment of an arbitrator or of any other matter required in the arbitral proceedings, or any other situations which give rise to lack of due process;
  • 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 not affect the remainder of the arbitral award;
  • the composition of the arbitral tribunal or the arbitration procedure contravenes the arbitration agreement or, in the absence of an arbitration agreement, the law of the place of the arbitration; or
  • the arbitral award is not yet binding upon the parties or has been suspended or revoked by a competent court.

Enforcement of Arbitral Award rendered in Hong Kong, Macao and Mainland China

In particular, Taiwan has largely recognised and enforced arbitral awards rendered in Mainland China, Hong Kong and Macao through the Act Governing Relations Between the People of Taiwan Area and the Mainland Area and the Laws and Regulations Regarding Hong Kong and Macao Affairs in recent years.

State Immunity

The Arbitration Act does not explicitly recognise state immunity as a valid ground for resisting recognition or enforcement of an arbitral award, whether domestic or foreign. However, according to Article 5(4) of the Act Governing the Privileges and Immunities of Foreign Institutions and their Personnel in Taiwan, a foreign institution may be immune from civil, criminal and administrative jurisdiction. Nevertheless, a dispute arising out of commercial action is excluded from the scope of state immunity. As such, it is unlikely that a state could successfully raise a defence of sovereign immunity at the enforcement stage of an arbitral award.

In general, Taiwanese courts tend to recognise and enforce arbitral awards unless there are clear and convincing grounds for setting aside an arbitral award, as set forth in 12.2 Enforcement Procedure, pursuant to the Arbitration Act.

Taiwanese courts are generally reluctant to grant an application to refuse enforcement of foreign arbitral awards based on public policy grounds, which refers to domestic public policy.

The Arbitration Act itself is silent on class-action arbitration or group arbitration in Taiwan. There have also been no class-actions or group arbitrations to date in the CAA or the CAAI.

Ethical Codes for Arbitrator

In addition to the qualifications of an arbitrator set forth in the Arbitration Act, as described in 4.1 Limits on Selection, the ethical codes of arbitrational institution such as the CAA Code of Ethics for Arbitrators applies to arbitrations administered by CAA. 

Ethical Codes for Attorneys

As for counsel conducting arbitral proceedings in Taiwan, all counsel are subject to respective ethical codes applicable to legal professionals within their jurisdiction, even though the Arbitration Act does not separately provide for ethical regulations to be complied with. Counsel licensed to practise law within Taiwan, for example, will need to comply with the Attorney Regulation Act and the Attorney Ethical Codes in Taiwan.

The issue of third-party funding has been the subject of much debate in Taiwan recently. Although the Arbitration Act is silent on this issue, leading scholars have commented that allowing third-party funding is likely to increase the numbers of cases being arbitrated in Taiwan.

The Arbitration Act itself is silent on the consolidation of arbitration. However, pursuant to the CAAI Arbitration Rules, which is only applicable for international arbitration conducted by the CAAI seated outside Taiwan, upon a party’s request, the arbitral tribunal may decide to consolidate two or more arbitrations pending under the same rules into a single arbitration, when proper and appropriate, if:

  • the parties have agreed to the consolidation;
  • the claims in the arbitrations are made under the same arbitration agreement; or
  • the claims in the arbitrations are made under multiple but compatible arbitration agreements between the same or related parties, which involve common questions of law or fact, and the remedy or relief claimed arises out of the same transaction or series of transactions.

There are no previous cases in which Taiwanese courts have granted consolidation to arbitrations. 

Please refer to 5.7 Third Parties.

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Trends and Developments


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LCS & Partners is an elite corporate law firm founded in 1998 and based in Taipei that provides a full range of legal services in every major corporate practice area. It has grown rapidly and regularly handles major and complex cases for top-tier domestic and international clients. It has about one hundred Taiwan and foreign-licensed attorneys, most of whom have received LLM, JD and/or SJD degrees from US law schools. It is a member of the World Services Group, which has more than 130 member firms in more than 115 countries and throughout the USA. LCS & Partners also specialises in international arbitration and cross-border dispute resolution; it provides a team of experienced attorneys, including former judges of the Taiwan High Court, as well as fellows of the Chartered Institute of Arbitrators and arbitrators of the Chinese Arbitration Association International Centre. Special thanks are given to Celine Cheng and Venson Hsu, both associates of LCS & Partners, for drafting this chapter.

In the last 20 years, Taiwan has increasingly engaged in the practice of international arbitration. Today, more than a hundred cases are administered by the Chinese Arbitration Association (CAA) each year. Both local and foreign counsel have represented their clients for arbitrations seated in Taiwan. Also, the Chartered Institute of Arbitrators launched its Taiwan Chapter in 2019. In addition, various law schools offer international arbitration seminars, and Taiwanese law students actively take part in international moot courts, such as the Willem C. Vis International Commercial Arbitration Moot, each year.

Recognition and Enforcement of Arbitral Awards between Taiwan and Foreign Jurisdictions

Since the enactment of the Arbitration Act in 1998, Taiwan’ judiciary has demonstrated significant deference to foreign arbitral awards. The Supreme Court has constantly upheld arbitral awards rendered in a foreign country as long as that country does not explicitly refuse to acknowledge the validity of Taiwan-rendered arbitral awards. For this reason, judicial intervention is rare during arbitral proceedings, and arbitral tribunals generally enjoy a wide range of discretion in adjudication.

Although Taiwan is not a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention), foreign courts have continued to recognise arbitral awards rendered in Taiwan. For example, the Karlsruhe Court of Appeal in Germany, in 2006, enforced an arbitral award rendered in Taipei, Taiwan, as a result of a contractual dispute arising out of an exclusive agent agreement. In the decision, the court emphasised that the New York Convention does not prevent Germany from recognising and enforcing such an award when the award’s certified copy satisfies the German law.

In 2007, the Intermediate People’s Court of Xiamen, China, recognised and enforced a CAA arbitral award rendered by the CAA. The court ruled that such a recognition is consistent with Article 9 of the Provisions Concerning People’s Courts Recognising Civil Judgments in Taiwan.

In 2016, the Kobe District Court of Japan enforced a CAA arbitral award that settled a refund dispute between a Taiwanese manufacturer and a Japanese manufacturer. The court upheld the award and expressly noted that it did not find any reasons for the subject matter of the arbitral award not being arbitrable under Japanese law, nor did it find the arbitral award to be in violation of public policy of Japan.

In addition, in 2015, the Supreme People’s Court of China made an institutional change by issuing the Regulation Relating to Recognition and Enforcement of Arbitral Awards Rendered in Taiwan as the governing rule for recognising and enforcing arbitral awards rendered in Taiwan. Since then, enforcing arbitral awards between Taiwan and China has increasingly become a two-way street.

Institutional Reforms in Support of Arbitration in Taiwan

Several institutional reforms explain foreign countries' increasing recognition of Taiwan-rendered awards. On the one hand, the CAA launched the Chinese Arbitration Association International Centre (CAAI) in 2018. Based in Hong Kong, the CAAI has adopted a set of arbitration rules that reflect the significance of the UNCITRAL Model Law of 2006. For example, Article 26 authorises an arbitral tribunal to issue an interim measure, and Article 28 incorporates the idea of consolidation.

On the other hand, Taiwan’s highest judicial institution, the Judicial Yuan of Taiwan, has been actively promoting the alternative dispute resolution (ADR) system within the jurisdiction. In particular, arbitration has been strongly favoured by the Judicial Yuan of Taiwan given that it is based on the mutual consent of contracting parties and is conducted in a professional setting. Recent statistics show that complicated and technical cases involving construction and finance have increasingly been settled by domestic or international arbitration.

Forward-Looking Infrastructure Development Programme May Boost the Use of Arbitration in Taiwan

Taiwan’s legislature passed the Special Act on the Forward-Looking Infrastructure Programme (Programme) on 5 July 2017 for the purpose of improving infrastructure, stimulating domestic demand and encouraging investment from the private sector over the next thirty years. Pursuant to the Special Act, the government has budgeted TWD420 billion for infrastructure in Taiwan. The Programme focuses on eight categories of infrastructure including railways, water environments, green energy and digital infrastructure. Since it is common for contractors/developers in these infrastructure programmes to agree to use arbitration to solve their contractual disputes, any dispute arising out of the Programme may potentially facilitate the future development of arbitration in Taiwan.

Arbitration in Construction Disputes and Government Procurement

For construction disputes over government procurement projects, pursuant to Article 85-1 of the Government Procurement Act, the government may not object to a request for arbitration filed by the supplier of construction services in the event of an unsuccessful mediation attributable to the government’s rejection of the mediation measures. The Government Procurement Act further shows a tendency to use arbitration in government procurement projects by the legislative body and may very well encourage the adoption of arbitration as a means of dispute resolution in government related construction projects.

Promoting Arbitration as an Effective Dispute Resolution Mechanism for Cross-Border Trade/Investment by Foreign Organisations in Taiwan

Major international organisations, such as the European Chamber of Commerce and the American Institute in Taiwan, have also been promoting arbitration as an efficient, cost-saving mechanism to resolve disputes, especially for cross-border trade/investment companies and investor-state disputes. The European Chamber of Commerce in Taiwan, for instance, has been hosting conferences and seminars to promote the learning and use of international arbitration and to emphasise the substantial cost savings for both Taiwanese companies conducting overseas’ investment and foreign companies operating in Taiwan.

With these various promotions, arbitration has been receiving more recognition from businesses in Taiwan; with the widespread adoption of arbitration around the world for international disputes between corporations, coupled with a trend for recognition of arbitral awards in Taiwan in recent years, we are hopeful that more and more Taiwan businesses and government bodies will consider resolving their disputes via arbitration in the near future.

Pending Proposals to Amend the Arbitration Act

Perhaps the most significant development in Taiwan’s international arbitration community in recent years is a pending proposal to amend the Arbitration Act of 1998. This article will highlight several noteworthy points in the CAA’s proposal that seek to strengthen the institutional framework in support of the development of international arbitration.

Enforcing ad hoc arbitral awards

The proposal is looking at resolving the Supreme Court’s inconsistent judgments when deciding the effects of domestic ad hoc arbitral awards. While Taiwan does permit ad hoc arbitration, courts have, from time to time, refused to enforce domestic arbitral awards rendered in the absence of institutional supervision. To resolve this issue, the intended proposal clarifies that ad hoc arbitration has the same legal effect as institutional arbitration.

Expanding the scope of arbitrability

The CAA seeks to expand the scope of arbitrability in the amendment. Unlike the current jurisprudence, where only issues arising under private disputes are arbitrable, the proposal intends to apply arbitration to disputes in connection with public entities In so doing, the scope of arbitrability is also likely to extend to investor-state disputes arising under investment agreements between Taiwan and other sovereign States.

Aligning the Arbitration Act's conflict of interest rules with international practice

The proposal suggests removing the enumerated list under the Arbitration Act that governs the arbitrators’ duty to disclose information relating to conflicts of interest. In so doing, the proposal is intended to align the Arbitration Act with international laws/regulations such as the IBA Guidelines on Conflicts of Interest in International Arbitration.

Limiting grounds for appeal

The proposal will seek to amend and further limit the “grounds for appeal” (ie, to set aside the proceeding) to the exhaustive list under the Model Law of 2006 for a disputing party to set aside an arbitral award. This will further increase the validity of an arbitral reward and enhance popular confidence in arbitration.

Strengthening arbitral tribunals

Perhaps most notably, the proposed amendment will largely strengthen the authority of an arbitral tribunal. Significant changes will likely include the power to issue interim measures or preliminary orders, the introduction of emergency arbitration, and the arbitral tribunal’s authority to determine the choice of procedural rules. Once written into the amended Arbitration Act, Taiwan’s courts will act on the tribunal’s orders accordingly.

Conclusion

Taiwan’s success in preventing the spread of the COVID-19 pandemic and its contribution to international public health have greatly improved Taiwan’s international visibility. In the meantime, while the pending proposal is still at an early stage and is not guaranteed to be incorporated into the Arbitration Act, it nevertheless demonstrates Taiwan’s efforts in creating a modern regime of international arbitration. This proposal will determine whether Taiwan’s arbitration can conform more to international trends and standards and so provide international arbitration users and participants with more easily available and predictable arbitration mechanisms. It represents a great opportunity to enhance Taiwan's position in international arbitration and to attract more international arbitration users.

LCS & Partners

5F, No 8, Sec. 5
Sinyi Rd
Taipei City 110
Taiwan

+886 2 2729 8000

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inquiry@lcs.com.tw www.lcs.com.tw/en
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Law and Practice

Authors



LCS & Partners is an elite corporate law firm founded in 1998 and based in Taipei that provides a full range of legal services in every major corporate practice area. It has grown rapidly and regularly handles major and complex cases for top-tier domestic and international clients. It has about one hundred Taiwan and foreign-licensed attorneys, most of whom have received LLM, JD and/or SJD degrees from US law schools. It is a member of the World Services Group, which has more than 130 member firms in more than 115 countries and throughout the USA. LCS & Partners also specialises in international arbitration and cross-border dispute resolution; it provides a team of experienced attorneys, including former judges of the Taiwan High Court, as well as fellows of the Chartered Institute of Arbitrators and arbitrators of the Chinese Arbitration Association International Centre. Special thanks are given to Celine Cheng and Venson Hsu, both associates of LCS & Partners, for drafting this chapter.

Trends and Development

Authors



LCS & Partners is an elite corporate law firm founded in 1998 and based in Taipei that provides a full range of legal services in every major corporate practice area. It has grown rapidly and regularly handles major and complex cases for top-tier domestic and international clients. It has about one hundred Taiwan and foreign-licensed attorneys, most of whom have received LLM, JD and/or SJD degrees from US law schools. It is a member of the World Services Group, which has more than 130 member firms in more than 115 countries and throughout the USA. LCS & Partners also specialises in international arbitration and cross-border dispute resolution; it provides a team of experienced attorneys, including former judges of the Taiwan High Court, as well as fellows of the Chartered Institute of Arbitrators and arbitrators of the Chinese Arbitration Association International Centre. Special thanks are given to Celine Cheng and Venson Hsu, both associates of LCS & Partners, for drafting this chapter.

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