In general, most disputes in Taiwan are resolved through the courts, and international arbitration is generally elected where disputes involve foreign elements, such as where one party is a non-Taiwanese entity, the performance or subject of the arbitration is outside of Taiwan, or where the governing law of the dispute is a foreign law.
Due to the COVID-19 pandemic, the Chinese Arbitration Association (CAA), the oldest and most prominent arbitral institution in Taiwan, has permitted arbitration proceedings to be conducted via videoconferencing if all parties involved agree to this.
Construction disputes account for most of the arbitration cases in Taiwan, followed by commercial and trade cases. There has also been a recent increase in medical and pharmaceutical disputes being referred to international arbitration. In general, due to the efficiency of arbitration compared to traditional litigation, and the possibility to select adjudicators with a technical background, parties often prefer arbitration as a dispute resolution mechanism for cases where the amount under dispute is significant, which are time-sensitive, or which require specialised/professional knowledge.
Compared with most other jurisdictions, Taiwan remained relatively unaffected by COVID-19 in 2020. This changed in the second quarter of 2021; however, at the time of writing, COVID-19 does not appear to have had any noticeable effect on the preference for using arbitration to resolve disputes.
Main Arbitral Institutions in Taiwan
The CAA administers most domestic and international arbitrations in Taiwan. Besides being able to administer arbitrations in both Chinese and English, the CAA’s panel of arbitrators consists of renowned foreign and domestic attorneys, engineers, professors and other professionals who are experienced in handling complex and cross-border disputes.
In addition to the CAA, parties also frequently refer their cross-border disputes to the International Chamber of Commerce. The Taiwan Arbitration Association, the Chinese Real Estate Arbitration Association, and the Chinese Construction Industry Arbitration Association are also alternatives for resolving construction disputes.
New Arbitral Institutions
According to the Arbitration Measures for Sports Disputes established in 2019, the Taiwan Society for Sport and Entertainment Law, the Taiwan Assessment and Evaluation Association, and other arbitral institutions were established in 2020 to handle disputes between athletes, coaches, and sports organisations.
There are no specific courts in Taiwan designated to hear disputes related to international arbitration or domestic arbitrations. Instead, cases involving such matters are referred to a court of jurisdiction. Based on the Code of Civil Procedure, the Arbitration Law provides that actions to set aside arbitral awards may be filed at the district court of the place of arbitration, and other special regulations that contain rules governing the jurisdiction over specific matters (eg, actions to enforce or set aside an arbitral award concerning commercial disputes, as defined under the Commercial Case Adjudication Act), shall be filed with the Intellectual Property and Commercial Court.
The Arbitration Law is the key legislation governing arbitrations, including international arbitrations that are subject to Taiwan laws.
The Arbitration Law, enacted in 1998, took specific references from the 1985 UNCITRAL Model Law and the arbitration laws of other major jurisdictions at that time. There are, however, still some significant differences between the Arbitration Law and the latest UNCITRAL Model Law, as explained below.
Since its reform in 1998, there have been no further significant changes to the Arbitration Law, despite certain provisions being amended in 2002, 2009 and 2015. To harmonise the Arbitration Law with recent trends in international arbitration, the CAA established a task force to propose further reform of the Arbitration Law, which mainly took reference from the UNCITRAL Model Law on International Commercial Arbitration amended in 2006 by the United Nations. It is not yet known whether the proposals will be adopted.
For an arbitration agreement to be valid and enforceable, it must be in writing, which includes written documents, correspondence, facsimiles, telegrams or any other similar types of communication between the parties evidencing their consensus to arbitrate any disputes. For example, Taiwanese courts have held that meeting minutes that contain parties’ agreement to arbitrate are valid and enforceable arbitration agreements.
Disputes that the parties may settle under Taiwanese law are arbitrable (Article 1 of the Arbitration Law). However, criminal offences or disputes concerning family law that are irreconcilable under Taiwanese laws are not arbitrable. In addition, although disputes concerning construction contracts entered into with government agencies under the Government Procurement Act are arbitrable due to the express permission under the Act, whether other disputes with government agencies are arbitrable, especially those that involve public interests, is controversial in practice.
Taiwan's courts will interpret the parties’ real intent to determine the validity and enforceability of arbitration agreements. This principle also applies to the determination of the governing law of the arbitration agreement. However, if the agreement is silent on the governing law of the arbitration agreement, the agreed governing law of the contract that contains the arbitration agreement would generally apply. If the contract is also silent on the governing law, then the courts in Taiwan will apply the conflict of law rules (ie, the Act Governing the Choice of Law in Civil Matters Involving Foreign Elements) to determine the governing law of the arbitration agreement.
Courts in Taiwan adopt a pro-arbitration attitude in interpreting arbitration agreements, which means that Taiwan's courts will enforce the arbitration agreement as long as the parties’ intention to arbitrate the dispute has been recorded in written form and the scope meets the arbitrability requirements.
The rule of separability is adopted in Article 3 of the Arbitration Law, which provides that the validity of an arbitration clause will be determined independently and separately from the rest of the contract in which it is contained. The validity of the arbitration clause will not be affected even if the subject contract is null, invalid, revoked, rescinded or terminated.
Party-appointed arbitrators must meet the requirements outlined in the Arbitration Law, and where applicable, in the parties’ agreement.
Under the Arbitration Law, to act as an arbitrator, an individual must have done one of the following:
Blocks to Acting as an Arbitrator
The individual may not act as an arbitrator in domestic arbitration administered by a Taiwanese arbitral institution if the individual:
If an individual designated by a party to act as arbitrator does not meet the requirements agreed to by the parties in the arbitration agreement, such individual may be replaced upon challenge by the opposing party.
Where the arbitration agreement is silent on the process for the selection of arbitrators, each party will appoint an arbitrator and the party-appointed arbitrators will jointly designate the third arbitrator to be the president of the arbitral tribunal.
Where a third arbitrator cannot be designated, or where the parties have agreed to have a single arbitrator in their arbitration agreement but the parties are unable to agree upon an arbitrator, either party may ask the arbitral institution to appoint the arbitrator. Where the arbitral institution has not been agreed upon by the parties, the request may be made to the court (Article 9 of the Arbitration Law).
Where the arbitrator agreed on in the arbitration agreement is unable to serve as arbitrator and the parties are unable to agree on an alternative candidate, either party may ask the arbitral institution or the court to appoint the arbitrator (Article 13 of the Arbitration Law).
There is no default procedure in the Arbitration Law on the appointment of arbitrators in multi-party arbitrations where there are more than two opposing sides. However, in the case where there are two opposing sides to the arbitration, and the parties on one side of the arbitration are unable to agree on the appointment of the representative, the Arbitration Law provides that a majority vote will be used to decide on the appointment and, in the case of a deadlock, the appointment will be made by drawing lots.
In principle, a court may only intervene in the selection of arbitrators upon a party’s application when an arbitrator cannot be appointed (see4.2 Default Procedures), or where there is a request for the appointed arbitrator to be removed on a ground stated in 4.4 Challenge and Removal of Arbitrators.
Articles 15 and 16 of the Arbitration Law provide that a party may challenge the appointment of an arbitrator if the arbitrator does not meet the requirements agreed to by the parties or if there is any circumstance that raises any justifiable doubts as to the impartiality or independence of the arbitrator. Specifically, an arbitrator may be challenged or removed if they:
Arbitrators are required to be independent and impartial and to keep the confidentiality of the case in accordance with the Arbitration Law. In addition, an arbitrator is required to disclose matters that may give rise to the party being challenged, as noted in 4.4 Challenge and Removal of Arbitrators.
See 3.2 Arbitrability.
An arbitral tribunal is empowered to determine challenges to the arbitral tribunal’s jurisdiction. Jurisdictional challenges must be made before substantive arguments are made.
While the parties are not allowed to escalate the arbitral tribunal’s decision on the jurisdiction to a court during the arbitration proceeding, the parties may file a lawsuit to set aside the final arbitral award on the grounds that the arbitral tribunal lacked jurisdiction.
Courts in Taiwan will not intervene to address jurisdictional challenges while an arbitration is still proceeding. Courts will only review the jurisdictional challenges upon a party’s complaint to set aside the final award.
If an arbitral tribunal renders a ruling that it lacks jurisdiction to hear a case, the court will review such ruling per the plaintiff’s motion to set aside such arbitral ruling on the grounds that such ruling violates the parties’ arbitration agreement.
See 5.2 Challenges to Jurisdiction.
Courts in Taiwan will conduct a de novo review of the challenges to arbitrability and jurisdiction.
If a party breaches an arbitration agreement by initiating a legal action before a court in Taiwan, the court will suspend its proceeding, provided that the defendant objects to the jurisdiction before substantive arguments are made. If the defendant fails to raise its jurisdictional challenge to the courts in a timely way and responds to the plaintiff’s complaint on the merits, the court will proceed with the lawsuit and deny any subsequent jurisdictional objection.
While the Arbitration Law is silent on whether an arbitral tribunal may assume jurisdiction over individuals or entities that are neither party to an arbitration agreement nor signatories to the contract containing the arbitration agreement, in practice, an arbitral tribunal in Taiwan will not assume jurisdiction over such third party except where the third party falls in one of the two categories below.
The arbitral tribunal will assume jurisdiction over third parties that are successors to the arbitration agreement by way of inheritance, merger, etc.
Third Party’s Intervention in the Proceeding
If a third party, without any arbitration agreement with the parties to the arbitration proceeding, applies to join or intervene in an arbitration proceeding, the arbitral tribunal may grant such application if the original parties to the arbitration have no objection to such intervention in accordance with Article 19 of the Arbitration Law. According to a Taiwanese Supreme Court decision with Ref No 95-Tai-Shang-2277, the third party will, in principle, then be bound by the arbitral award. However, in practice, if any party to the arbitral proceeding objects to the intervention of such third party, or if the third party is unwilling to participate in the proceedings at the request of either party to the proceeding, the arbitral tribunal would not assume jurisdiction over such third party, and the arbitral award will not bind such third party.
The Arbitration Law does not explicitly allow arbitral tribunals to render preliminary or interim reliefs. As such, parties are required to apply to a court for an order in accordance with the Code of Civil Procedure.
As stated in 6.1 Types of Relief, preliminary or interim reliefs can only be granted by courts in Taiwan, regardless of whether the petition for such reliefs is made prior to or during an arbitration proceeding.
Theoretically, the court is not restricted from granting interim relief to a petitioner who is or will be a party to an arbitration proceeding whose seat of arbitration is outside of Taiwan, as long as the assets or party to be subject to the interim relief is within the territory of Taiwan. However, it is rare to see interim relief ordered by a Taiwanese court in aid of foreign-seated arbitrations.
The main types of preliminary or interim relief orders that Taiwanese courts may grant are:
For a provisional attachment, the petitioner must demonstrate that it would be difficult to satisfy a monetary award through compulsory execution without the provisional measure. For a preliminary injunction, especially for a status quo order, the petitioner must show the imminent harm or irreparable damage it may suffer to justify the granting of such preliminary injunction.
While the emergency arbitrator mechanism has been discussed as part of the proposed reform to the Arbitration Law, the current Arbitration Law does not provide for such a mechanism. Under the current legal scheme, petitioners may seek an emergency order from the court, which may be granted for a period of up to seven days before the court reviews the merits of the petition of a preliminary injunction.
When a court grants a provisional measure, the court may order the petitioner to provide security as a condition precedent to such provisional measure. For example, the court would typically order that upon the petitioner’s provision of a particular security, the respondent will take or refrain from taking a particular action.
The Arbitration Law contains provisions on the procedures applicable to arbitrations in Taiwan; however, in principle, the procedures explicitly agreed upon by the parties to an arbitration will govern the arbitration proceedings, unless they violate the mandatory rules under the Arbitration Law. In the absence of an explicit agreement by the parties on the procedures, the default assumption is that the parties have consented to applying the procedural rules of the arbitral institution selected to administer the arbitration. If the parties have not agreed on the procedures, whether explicitly or implicitly, then the procedures stipulated in the Arbitration Law will govern, and for matters that are not addressed in the Arbitration Law, the arbitral tribunal may refer to the Code of Civil Procedure or any other appropriate regulation.
The Limited Procedural Steps Specified in the Arbitration Law
The Arbitration Law requires the following procedural steps.
The Parties’ Chosen Rules
The Arbitration Law does not provide detailed steps for conducting arbitration in Taiwan. As a result, the parties’ chosen rules of the selected arbitral institution may provide more guidance as to the required steps. It should be noted that failure to comply with the mandatory procedural rules in the Arbitration Law or the parties’ agreed-upon rules, may provide grounds to set aside the rendered award.
Arbitrators must handle each case independently and impartially. They are bound to confidentiality and are required to handle the arbitration proceedings in an efficient manner. Specifically, the obligations of arbitrators include the following.
Duty to disclose
The arbitrator must inform the parties of anything that may give rise to reasonable doubt of the arbitrator’s ability to independently and impartially handle the case, which are the matters stated in Section 4.4 Challenge and Removal of Arbitrators (Article 15(2) of Arbitration Law).
Obligation of confidentiality
The arbitrator may not disclose any information regarding the proceedings of the arbitration as well as the deliberations among the tribunal members (Articles 15(1), 23(2) and 32(1) of the Arbitration Law).
Duty to conclude arbitration within the statutory time limit
Unless otherwise agreed to by the parties, the arbitral tribunal must submit the award within nine months of the tribunal being formed (see 7.2 Procedural Steps).
Duty to ensure due process
The arbitrators must ensure that the parties are given sufficient opportunity to present their cases (Article 23(1) of the Arbitration Law); conduct necessary investigation into the parties’ claims, including examination of witnesses or expert witnesses (Articles 23(1) and 26 of the Arbitration Law); and apply appropriate procedures according to the matters of the case (Article 19 of the Arbitration Law).
Authority of Arbitral Tribunals
The authority given to arbitral tribunals by the Arbitration Law includes the authority to:
There are no qualifications or other requirements for acting as a legal representative of a party to an arbitration, eg, individuals without a licence to practise law in Taiwan may still represent a party in arbitration.
The Arbitration Law is silent on the collection and submission of evidence during the arbitration procedure. The arbitral tribunal should first apply the rules agreed upon by the parties on the taking of evidence, which would implicitly include the agreed arbitration rules promulgated by the arbitral institution selected to administer the arbitration, if any.
In the absence of the parties’ agreement on the taking of evidence, the arbitral tribunal may apply the rules set forth in the Code of Civil Procedure or other rules the tribunal deems appropriate (Article 19 of the Arbitration Law). Although this means the arbitral tribunal may potentially have a wide range of discretion to determine how evidence is collected, in practice, arbitrators presiding over Taiwan-seated arbitrations generally defer to the Code of Civil Procedure for the guiding principles in determining the collection and submission of evidence.
Production of Documents
In practice, discovery (as used in the Anglo-American legal system) is unlikely to be applicable in Taiwan as there is no equivalent provision under the Code of Civil Procedure. However, if a party believes that certain documentary evidence is held by the opposing party, it may request the arbitral tribunal to order the opposing party to present such evidence and it would be at the arbitral tribunal’s discretion whether to grant such an order. As mentioned above, the arbitral tribunal may apply the Code of Civil Procedure to determine whether to grant such request. If so granted by the arbitral tribunal, it would need to take into account whether the requested document is specific enough, whether it is relevant and material to the outcome of the case, and why the opposing party is obliged to produce such document (Article 19 of the Arbitration Law and Articles 342 and 343 of the Code of Civil Procedure). If the party subject to the order fails to produce the document mandated in the order without reasonable justification, the arbitral tribunal may further file an application to the court for an order for the production of such document (Article 28(1) of the Arbitration Law) and even make an adverse inference against the party that is in non-compliance with the order (Article 19 of the Arbitration Law and Article 345 of the Code of Civil Procedure).
Summoning of Witnesses
In practice, an arbitral tribunal in Taiwan may summon witnesses at the hearing on its own initiative or at the parties’ request so that witness statements can be presented and heard, and the witnesses can be examined and cross-examined by the parties and the arbitral tribunal at the hearing. While written witness statements are not required, the arbitral tribunal in Taiwan may allow the parties to submit the same in advance. When necessary, the arbitral tribunal may seek the court’s assistance to compel a witness to be present at the hearing (Article 26 of the Arbitration Law).
There are no clear rules regarding the privilege of documents under the Arbitration Law or the Code of Civil Procedure. As a result, it would be at the arbitral tribunal’s discretion whether certain documents can be withheld from production under the principle of privilege.
It should also be noted that when a foreign or international arbitral institution’s arbitration rules are applicable in the subject case, eg, the parties have agreed to conduct the arbitration in Taiwan per the arbitration rules of the International Chamber of Commerce, the arbitral tribunal may be more willing to use the IBA Rules on the Taking of Evidence as guidance with respect to the submission of evidence.
The Arbitration Law is silent on the detailed rules of evidence that the arbitrators should follow and does not require the arbitrators to strictly follow the rules of evidence set forth under the Code of Civil Procedures. For international arbitration seated in Taiwan that is conducted in accordance with the arbitration rules of foreign arbitral institutions, the arbitral tribunal tends to apply the IBA Rules on the Taking of Evidence as guidance.
Summoning of Witnesses
According to Article 26 of the Arbitration Law, an arbitral tribunal may summon witnesses and expert witnesses for examination at the hearing, but it has no authority to compel their presence. If a witness or expert witness fails to make an appearance without reasonable justification, the arbitral tribunal may seek assistance from the court to subpoena the witness.
Production of Documents
Although the Arbitration Law is silent on whether an arbitral tribunal has the authority to order a party to produce documents that it holds in its possession, in practice, an arbitral tribunal may still do so at the request of the other party (Taipei District Court Decision No 104-Chong-Sheng-Zi-7). If the party subject to the arbitral tribunal’s order fails to produce the requested documents, the arbitral tribunal may apply to the court for a court order for the production of the document (Article 28 of the Arbitration Law). In this regard, if the arbitral tribunal wishes to seek the court’s assistance in granting an order to compel document production by the party, the tribunal, in practice, would generally apply the standards relating to the production of documents under the Code of Civil Procedure to determine whether the requested document production should be granted, since the court will eventually apply the Code of Civil Procedure to determine whether such an order should be granted.
The Arbitration Law does not make a distinction between a party and a non-party in terms of summoning witnesses or ordering the production of documents.
Confidentiality Obligation during Arbitration Proceedings
The Arbitration Law specifies that the arbitration process will remain confidential unless agreed otherwise by the parties involved. The general assumption is that every person involved in arbitration is bound by confidentiality; however, there are still disputes on the content and scope of information subject to confidentiality under the Arbitration Law. The Arbitration Law only strictly prohibits disclosing information in the deliberation process and requires that arbitrators are bound by confidentiality. As the Arbitration Law does not explicitly include further regulations, it would be advisable for the parties to form their own agreements on confidentiality to the extent possible.
Potential Disclosure during Court Proceedings
Information disclosed in arbitration proceedings may be disclosed in subsequent court proceedings initiated by either party, to protect or in pursuit of their legal rights. In principle, Taiwan's court proceedings and court decisions are made publicly; therefore, the information disclosed in arbitration proceedings could potentially be disclosed to or be made available to third parties, unless the relevant laws governing the dispute provide otherwise or the court permits that certain information regarding the arbitration proceedings be kept confidential (eg, be redacted from the court decision) upon a party’s application.
Arbitral tribunals are required to render an arbitral award within six months of the constitution of the arbitral tribunal, subject to a one-time extension of three months. However, in practice, a further extension is permissible upon the parties’ agreement (Article 21(1) of the Arbitration Law).
Items Required to Be Addressed
For an arbitral award to be enforceable, it must include the following information (Article 33(2) of the Arbitration Law):
The arbitral award must be signed by the arbitrators who participated in the deliberations. If an arbitrator refuses or is not able to sign the arbitral award, the reason should be noted in the award (Article 33(3) of the Arbitration Law).
The Arbitration Law does not limit the types of remedies that may be awarded by an arbitral tribunal. However, arbitral tribunals would generally refrain from rendering an award that orders a party to take action that is not permissible under the laws of Taiwan or that is against public order or good morals, as such an award would not be recognised and would not be enforceable by the court (see 11.1 Grounds for Appeal, and 12.2 Enforcement Procedure).
With that said, punitive damages may not be awarded unless otherwise explicitly provided for under the law or in the parties’ contract.
Rectification can be awarded as long as the action required to be taken as rectification is specified.
It is worth noting that a vaguely worded award may be unenforceable in practice.
See 6. Preliminary and Interim Relief.
The Arbitration Law does not provide relevant rules on how the legal costs should be allocated among the parties. However, in practice, arbitral tribunals usually follow the principle that costs follow the event, unless otherwise agreed by the parties, and may be bound by the rules of practice of the arbitral institution administering the arbitration. For arbitration cases administered by the CAA, in the absence of agreement between the parties, the prevailing party in arbitration would be entitled to claim arbitration costs; however, attorneys’ fees will not be included in such costs, which means attorneys’ fees cannot be recovered.
In the absence of an agreement between the parties regarding the applicable interest rate, the interest awardable would be calculated according to the statutory interest rate, which is 5% for civil claims as of the date of writing. The amount of interest and the ratio of costs to be borne by the non-prevailing party should be indicated in the main text of the award.
An arbitral award is final and binding on the parties, and has the same effect as a final court decision (Article 37(1) of the Arbitration Law). As such, arbitral awards are not appealed.
However, a party may file an action with the court to set aside an arbitral award in accordance with Article 40 of the Arbitration Law, which provides an exhaustive list of circumstances where parties may seek to set aside an arbitral award:
1) the arbitral award concerns a dispute that exceeds the scope of the arbitration agreement, unless the offending portion of the award may be severed without affecting the remainder of the award;
2) the reasons for the arbitral award were not stated, as required;
3) the arbitral award directs a party to act contrary to the law;
4) the arbitration agreement is nullified, invalid or has yet to come into effect or has become invalid prior to the conclusion of the arbitration proceedings;
5) the arbitral tribunal fails to give a party an opportunity to present its case prior to the conclusion of the arbitration proceedings, or if a party is not lawfully represented in the arbitration proceedings;
6) the composition of the arbitral tribunal or the arbitration proceedings is in violation of the arbitration agreement or the law;
7) an arbitrator fails to fulfil the duty of disclosure prescribed in the Arbitration Law and appears to be obviously partial or continues to serve as an arbitrator even after being requested to withdraw, provided that the request for withdrawal has not been dismissed by the court;
8) an arbitrator violates any duty with respect to the arbitration during the arbitration proceeding that constitutes criminal liability;
9) a party or any representative has committed a criminal offence in relation to the arbitration;
10) if any evidence or content of any translation upon which the arbitration award relies has been forged, fraudulently altered or contains any other misrepresentations; and
11) if 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.
The foregoing items eight to ten are limited to instances where a final conviction has been rendered, or the criminal proceeding is unable to be commenced or to continue for reasons other than insufficient evidence.
Applicants requesting the court to set aside an arbitral award based on a violation of the arbitration agreement under item six and based on the circumstances listed in items seven to 11 are also required to demonstrate that the existence of such circumstances affected the result of the arbitral award.
Article 40 of the Arbitration Law does not entitle the court to review the merits of the disputes; rather the purpose of Article 40 is to give recourse to a party where the arbitration proceedings were not duly conducted. As such, Article 40 of the Arbitration Law would not be considered as an appeal.
If a party wishes to set aside an arbitral award, it should file the action within 30 days upon receipt of the arbitral award (Article 41 of the Arbitration Law).
While the Arbitration Law is silent on this issue, the parties cannot agree in practice to exclude or expand the scope of the circumstances that parties may seek to use to set aside the arbitral award.
The arbitral tribunal’s findings and interpretation of the law are not subject to further review by the courts. In other words, the courts are limited to reviewing the procedures of the arbitration and cannot conduct a de novo review of the merits of the case (Supreme Court Decision No 100-Tai-Shang-Zi-671).
Taiwan is not a signatory of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”).
Taiwan has signed the Treaty of Friendship, Commerce and Navigation with the United States of America.
Although Taiwan is not a member of the New York Convention, the arbitral awards made in Taiwan can still be recognised and enforced in other jurisdictions. For example, China’s Supreme People’s Court issued the Regulations on Recognition and Enforcement of Arbitral Awards rendered in Taiwan on 29 June 2015, which provides that Taiwanese arbitral awards may be recognised and enforced in Mainland China unless certain exceptional circumstances occurred during the arbitration proceeding, such as that the appealing party was not duly notified to participate in the arbitration proceeding. Also, Taiwan's courts rarely refuse to recognise foreign arbitral awards on the ground of the absence of reciprocity (see 12.2 Enforcement Procedure) or that Taiwan is not a signatory of the New York Convention.
As the Arbitration Law distinguishes between foreign arbitral awards and domestic arbitral awards, the enforcement procedures are explained separately below.
Enforcement of Domestic Arbitral Awards
Although arbitral awards have the same effect as final court decisions, the parties must file an application to the court to obtain an enforcement order before the arbitral award can be compulsorily enforced. However, the following two types of arbitral awards can be compulsorily enforced without a prior court enforcement order if the parties have so agreed in writing: 1) arbitral awards concerning monetary relief or fungible goods or securities; and 2) arbitral awards concerning delivery of a specified moveable property (eg cars, trucks).
The court will deny an application to enforce an arbitral award if any of the following circumstances exists (Article 38 of the Arbitration Law):
Enforcement of Foreign Arbitral Awards
It should be noted that, under Article 47 of the Arbitration Law, arbitral awards rendered outside of Taiwan and those rendered in Taiwan but in accordance with foreign laws are both deemed foreign arbitral awards. In addition, in practice, the aforesaid “foreign law” includes the arbitration rules of foreign jurisdictions, foreign arbitral institutions, and international arbitral institutions (Taipei District Court Decision No 108-Chong-Su-Zi-3; Taiwan High Court Decision No 109-Chong-Shang-Zi-81).
A foreign arbitral award is required to be recognised by a court in Taiwan before it attains the same effect as a final court decision and can be enforced in Taiwan (Article 47(2) of the Arbitration Law).
The court may dismiss an application for recognition of a foreign arbitral award where any one of the following circumstances (Articles 49 and 50 of the Arbitration Law) exists:
In addition, the court has discretion to dismiss an application for recognition under the principle of reciprocity, ie, the country where the arbitral award is made or whose laws govern the arbitral award does not recognise domestic arbitral awards decided in Taiwan (Article 49(2) of the Arbitration Law). However, Taiwan's courts may recognise and enforce foreign arbitral awards even in the absence of reciprocity (see Taiwan High Court No 106-Fei-Kang-Zi-79). In practice, unless clear evidence is submitted to demonstrate that Taiwanese arbitral awards have been and will still be rejected for recognition by the applicable foreign jurisdiction, Taiwan's courts usually refrain from using reciprocity as a ground to not recognise a foreign arbitral award.
Impact on the Recognition Proceeding by Action to Set Aside an Arbitral Award
If a party applies to the court to set aside an arbitral award before the closure of the recognition proceeding or the completion of compulsory enforcement, the court may order to stay the recognition proceeding or the enforcement proceeding upon the party’s application, provided that the party provides proper security. In addition, if an arbitral award has been set aside by a final decision by a competent court, the court in Taiwan will dismiss the application for recognition or revoke its recognition order, if it has already been granted (Article 51 of the Arbitration Law).
The Arbitration Law is silent on whether foreign states are immune from the Taiwanese court’s jurisdiction over the enforcement of arbitration, and there is no court decision on this issue.
Taiwan's courts take a pro-arbitration attitude towards the recognition and enforcement of arbitral awards.
As stated in 12.2 Enforcement Procedure, only under exceptional circumstances may a court reject the recognition and enforcement of an arbitral award. According to current practices, the court is very cautious in applying local public policy as a ground to refuse to enforce an arbitral award, regardless of whether it is rendered domestically or offshore. As a result, most arbitral awards are recognised and enforced in Taiwan.
The Arbitration Law is silent on class-action arbitration and group arbitration. However, Regulations Governing the Class-Action Arbitration or Litigation Handled by Securities and Futures Investors Protection Center permits class-action disputes to be handled via arbitration. To date, the Securities and Futures Investors Protection Center has not initiated any class action arbitrations, nor has the CAA administered such arbitrations.
The Attorney Ethics Rules still apply to counsel representing clients in arbitration. As an example, Article 14 of the Attorney Ethics Rules prohibits an attorney from lobbying arbitrators or otherwise expressly or implicitly causing the parties to believe that the attorney has relations or powers to exert improper influence over judges or arbitrators.
The Regulation Governing Organisation, Mediation Procedures and Fees of Arbitration provides that the arbitral institutions established pursuant to the Arbitration Law must establish arbitrators’ ethical rules. Accordingly, these arbitrators’ ethical codes must include the following:
The CAA has, accordingly, promulgated its Code of Ethics for Arbitrators that arbitrators must follow.
There are currently no laws regarding third-party funding of arbitration proceedings, despite some scholars advocating to amend the law to include this mechanism.
The Arbitration Law is silent on consolidation. Apart from international arbitral institutions, the arbitration rules of the major domestic arbitral institutions (eg, the CAA) governing arbitrations seated in Taiwan lack rules on this issue as well.
Third Parties Bound by the Arbitration Agreement
See 5.7 Third Parties.
Third Parties Bound by the Award
Article 37(3) of the Arbitration Law provides that under the compulsory enforcement rules, an award may bind the following:
Taiwan’s arbitration law was enacted on 20 January 1961 and named the “Business Arbitration Regulations”. On 24 June 1998, the Business Arbitration Regulations underwent a significant overhaul, including a change to the current name of “Arbitration Law”. One of the main focuses of the 1998 amendments was to expand the scope of arbitration so that all matters that can be settled by the parties can be resolved by arbitration, and to enhance the parties’ autonomy in arbitration, ie, permitting the application of the parties’ chosen rules of procedure, while limiting the court’s role to assisting the arbitration proceedings, rather than having a supervisory function. The government’s promotion of arbitration as a dispute resolution method, including the court’s positive attitude regarding arbitration and enforcement of arbitral awards, has resulted in a significant increase in arbitration cases.
Another key focus of the 1998 amendments was to enhance the internationalisation of the Arbitration Law, and the legislators therefore took note of the UNCITRAL Model Law on International Commercial Arbitration, published by the United Nations Commission on International Trade Law in 1985, while maintaining domestic characteristics.
As the UNCITRAL Model Law was amended in 2006, proposals have been made to amend the Arbitration Law to make it more in line with the international convention. The following paragraphs will first outline recent developments in international arbitration in Taiwan, followed by a brief introduction to the proposed reform of the Arbitration Law that has been discussed extensively in the arbitration industry.
Recent Developments in Arbitration in Taiwan
Steady growth of international arbitration in the past five years
The Chinese Arbitration Association (CAA) is the leading arbitration institution in Taiwan and has the longest history. Local parties considering arbitration prioritise the CAA as the arbitration institution of choice; thus, the CAA’s statistics on the types and number of arbitrations administered in Taiwan is a strong indicator of the arbitration environment in Taiwan.
According to data collected by the CAA, comparing the cases administered by the CAA between 2016 and 2020 and between 2011 and 2015, there was 45% growth in international arbitration, ie, arbitration cases with foreign elements, despite the total number of cases the CAA had in the same periods basically having maintained the same level.
Greater diversity of industries applying arbitration
Since the 1990s, construction industry disputes have dominated the arbitration cases administered in Taiwan (including construction projects in the private sector or directed by the government). As part of the Taiwanese government’s encouragement of arbitration, construction agreement templates for government procurements provide that disputes are to be resolved by arbitration. Moreover, since construction disputes require efficient resolution, along with adjudicators with specialised knowledge of the technicalities of the construction industry, arbitration as a method of dispute has been widely embraced by the industry. According to the CAA’s statistics, in the past ten years, 49% of arbitration cases in Taiwan have been construction-related.
Given that the government of Taiwan has continued its efforts to advance more large-scale public construction plans in recent years, including offshore wind power, other green energy infrastructures, railway projects, digital infrastructure, etc, it is reasonably expected that arbitration in construction-related disputes will likely continue its steady growth.
In recent years, there has been an increase in the industries that elect to use arbitration as a dispute resolution mechanism, signalling a general acceptance and confidence in the arbitration system. According to the CAA’s statistics on the types of arbitration administered over the last five years, there has been an increase in arbitration cases involving the financial and service industries. In the past two years, there has also been an increase in arbitration cases in the pharmaceutical industry.
Moreover, in 2019, Taiwan established the Arbitration Measures for Sports Disputes to handle disputes among national sports groups and their athletes, coaches, and other local sports groups. Specialised sports arbitration institutions were established in 2020 and sports-related arbitrations will likely follow in the future.
Most arbitral awards are performed by the parties
Even though it is not mandated, arbitral awards may be reported to the court when rendered, and some of the arbitral tribunals will do so. According to data compiled by Taiwan’s Judicial Yuan, of cases in courts of the first instance from 2015 to 2019, if taking the number of reported arbitral awards as base, less than 27% of all arbitral awards resulted in a request to the court for compulsory execution. In other words, in most cases, parties either voluntarily carried out the award or searched for alternative methods to settle their disputes.
Greater court support for arbitral awards
Between 2015 and 2019, 94% of the cases where a party sought a court order to set aside a final arbitral award, this was denied by the court of first instance. This relatively low set-aside rate indicates that Taiwan's courts generally give proper deference to arbitral awards, and by extension, the general credibility of arbitration as a dispute resolution mechanism.
Moreover, foreign arbitral awards – including arbitral awards rendered in places outside of Taiwan or rendered in Taiwan, but in accordance with the arbitration rules of foreign countries or foreign arbitral institutions – require the court’s recognition before they can be enforced in Taiwan. Between 2015 and 2019, more than 85% of foreign arbitral awards presented for recognition in Taiwan were recognised by courts of the first instance, which again shows that Taiwan's courts generally take a pro-arbitration attitude.
Arbitral tribunalsbecome more willing to apply procedures commonly used in international arbitration
There are few provisions in the current Arbitration Law regarding the steps to be taken in arbitration procedure, as compared to the arbitration rules of international arbitral institutions. For instance, the Arbitration Law is silent on case-management conferences and the making of procedural timetables. Instead, Article 19 of the Arbitration Law stipulates that, if the parties involved cannot agree on an arbitration procedure and the Arbitration Law is silent on such procedures, the arbitral tribunal may apply the rules in the Code of Civil Procedure, or other procedural rules that it deems appropriate. In the past, arbitral tribunals in arbitrations seated in Taiwan usually applied to the Code of Civil Procedure. However, with the increase in arbitration cases administered under the rules of international arbitral institutions, like the International Chamber of Commerce, there has been an increase in arbitral tribunals implementing procedures commonly used in international arbitration to arbitrations seated in Taiwan, such as holding a case-management conference in the early stages of arbitration and making timetables outlining each step in the proceeding, eg, when the parties should submit pleadings and evidence and hearing sessions. This practice trend provides more predictability and efficiency to the arbitration process.
Virtual hearings could become a norm
Due to the outbreak of the COVID-19 pandemic in Taiwan in 2021, the courts and the CAA began permitting virtual hearings held online by video-conference. It is likely that virtual hearings may become a widely accepted method to conduct arbitration hearings in the near future.
Proposed Reform of the Arbitration Law
The Arbitration Law has not been significantly modified since the 1998 amendments, aside from minor article-specific edits in 2002, 2009 and 2015. Given that international arbitration methods have undergone significant changes, including the UNCITRAL Model Law being amended in 2006, the CAA gathered scholars, experts and legal firms (including our own) to discuss and propose a draft amendment to the Arbitration Law (“Draft Amendment”) so Taiwan can catch up with international arbitration standards. Below is a summary of the Draft Amendment.
The Draft Amendment expands the scope of arbitration. The current Arbitration Law limits use of arbitration to “disputes that can legally be resolved through settlement”, which raises the question of whether disputes between administrative agencies can be settled with arbitration. The Draft Amendment expands the scope of arbitration so that civil and business disputes within administrative agencies can be resolved through arbitration.
The Draft Amendment also includes investment disputes between foreign investors and Taiwanese administrative agencies within the scope of disputes that are arbitrable, provided that arbitration is set forth as the dispute resolution method in the treaties between the Taiwanese government and the investor’s country of residence, or in the agreements between the Taiwanese government and the investor.
While Article 22 of the current Arbitration Law stipulates that “objections to the jurisdiction of the arbitral tribunal shall be determined by the arbitral tribunal”, the scope of an arbitral tribunal’s authority to determine jurisdictional challenges is not explicitly stated. Practically, it is generally viewed that arbitral tribunals may review issues such as the validity of an arbitration agreement. Thus, the Draft Amendment confirms the competence-competence principle, stipulating that “the arbitral tribunal may determine whether an arbitration agreement is valid, whether it is enforceable, and other challenges to the arbitral tribunal’s jurisdiction.”
Under the current Arbitration Law, if a party wishes to challenge the jurisdiction of the arbitral tribunal after the arbitral tribunal has determined that it has jurisdiction over the case, the party can only challenge such ruling after the final arbitral award is rendered, by an action to set aside the award before the court. The Draft Amendment references Article 16(3) of the UNCITRAL Model Law in stipulating that, if the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may challenge the arbitral tribunal’s ruling by requesting a competent court to decide within 30 days of the party’s receipt of such ruling. In other words, a party would have the right to immediately challenge the arbitral tribunal’s jurisdiction before a court without waiting for the final arbitral award to be rendered.
Preliminary orders or interim measures
Many international arbitration rules allow arbitral tribunals to grant preliminary orders or interim measures along with a requirement that parties give appropriate security. The Arbitration Law currently does not have such a mechanism; therefore, parties would still need to apply to the courts for preliminary orders or interim measures. The Draft Amendment references Chapter IV of the UNCITRAL Model Law by adding clauses allowing parties to ask the arbitral tribunals and adjunct arbitrators to grant preliminary orders or interim measures and, when necessary, the party may be ordered to provide appropriate security. The arbitral tribunal’s preliminary orders or interim measures would be binding on the parties and would be recognised and enforced by the courts.
Internationalisation of the hearing process
In addition to the power to grant preliminary orders or interim measures, the Draft Amendment further expands the function and authority of arbitral tribunals, as in the following examples.
Strengthening the scope of party autonomy
The Draft Amendment strengthens the parties’ autonomy in deciding the arbitration process, as illustrated here.
Seat of arbitration
The Arbitration Law distinguishes between domestic arbitral awards and foreign arbitral awards and each applies different regulations. In essence, a domestic final arbitral award would have the same effect as a final court decision and thus can be enforced, while a foreign arbitral award first requires recognition by the court to have such an effect. According to the current Arbitration Law, arbitral awards “rendered outside of Taiwan” or “rendered in Taiwan in accordance with arbitration rules of foreign countries, foreign arbitration institutions, or international arbitration institutions” are all considered foreign arbitral awards. Such a distinction is not in line with the current arbitration rules governing international arbitration in major countries. The Draft Amendment proposes to use the seat of arbitration as the distinction to decide whether an arbitral award is a domestic award or a foreign arbitral award.
Even though the Draft Amendment for the Arbitration Law is still in its early stages, if the Draft Amendment is passed into law, it will make large-scale adjustments to the arbitration system, bringing it more in line with international standards. The development of Taiwan’s arbitration system in the future will be worth observing.