Arbitration in Taiwan

Chen & Lin Attorneys-at-Law
Shu-Wei Lo and Edward Liu
[email protected]; [email protected]

We are living in a world where national boundaries no longer matter as much as before because modern technologies have changed the way people communicate. This movement facilitates international commerce all across the world including China. As a result, disputes between entities of different jurisdictions inevitably arise. In China, disputes involving Taiwanese companies make up a significant proportion as Taiwanese companies have been doing business in the country for decades. Therefore, how to quickly and practically settle such disputes and to enforce rights is a matter requiring attention. It may first occur to you that filing a lawsuit in Taiwan could be a good choice, because that's where the counterparty has assets. Nevertheless, according to the internal guidelines of the Taiwan court, if a case is allowed to appeal to the third instance, a case may take more than three years before the judgment becomes final and binding. For parties pursuing a fast, cost-efficient, impartial and enforceable resolution, an agreement to arbitrate in Taiwan could be the answer.

Taiwan Arbitration Law, previously named “Commercial Arbitration Act”, was enacted in 1961. With 50 years of experience, the arbitration practice in Taiwan is well-established, and numerous domestic and international disputes have been settled through arbitration. Take the Chinese Arbitration Association, Taipei (CAA) for example: in the past decade, approximately 6.17% of its cases involved foreign parties. One of the most important cases it heard was the dispute between the Taipei City Government and SA Matra Transport regarding the construction of the Mass Rapid Transit in Taipei. The arbitral tribunal made a final award finding the Taipei City Government liable to SA Matra Transport for the damages.

There were four arbitration institutions established pursuant to the Taiwan Arbitration Law, namely the CAA, the Taiwan Construction Arbitration Association, the Chinese Construction Industry Arbitration Association and the Chinese Labour Dispute Arbitration Association, each focusing on different specialised areas. Such associations maintain extensive lists of skilled and experienced arbitrators with detailed profiles to allow the parties to appoint suitable arbitrators for their case. Arbitration is more advantageous to potential parties than litigation because the dispute is resolved by experts in the field, rather than by judges who usually lack the industry knowledge.

In addition to the expertise of Taiwan arbitration associations and the arbitrators, other major benefits of arbitration in Taiwan are speed and cost-efficiency. Under Article 21 of the Taiwan Arbitration Law, the arbitral tribunal shall render an award within six months of commencement of the arbitration, and it may extend an additional three months if the circumstances so require. Compared to litigation, which may take years, arbitration is undoubtedly a time-saving alternative to obtain a final and enforceable decision. Regarding the cost of arbitration in Taiwan, according to the Rules on Arbitration Institution, Mediation Procedures and Fees, the arbitration fee is progressively calculated, with a basic charge of NTD 3,000 and any additional rates range from 0.5% to 4% based on the value of the subject matter, which include remunerations for the arbitrators. Unlike arbitrators from other arbitration associations that may charge by the hour, which makes a cost assessment difficult, users of Taiwan arbitration can precisely calculate the fixed arbitration fees from the very beginning. This allows parties to better control and to adequately evaluate possible risk exposures.

Under the Taiwan Arbitration Law, parties may agree on the language to be used in arbitral proceedings and interpreters can be arranged if necessary. For better service, the CAA is now equipped with an advanced simultaneous language interpretation system. When arbitration progresses, although the arbitral tribunal may not have the same power as the court, under Article 28 of the Taiwan Arbitration Law, “the arbitral tribunal, if necessary, may request assistance from a court or other agencies in the arbitral proceedings. A court being requested may exercise its investigative powers in the same manner and to the same extent as permitted in a litigation proceeding”. Through assistance from the court, the discovery of facts may be conducted by the authority in case the party who has the disclosure obligation fails to cooperate.

Last but not the least, Taiwanese arbitral awards can be and have been recognised and enforced in the People's Republic of China pursuant to the Supreme People's Court the Provisions on the People's Court's Recognition of the Verdicts on Civil Cases Made by Courts of Taiwan Province (最高人民法院关于人民法院认可台湾地区有关法院民事判决的规定). This means a Taiwanese arbitral award can resolve disputes and realise a party's claim against another.

With the economic ties between Taiwan and China becoming closer than ever, more disputes are expected to arise across the strait. Considering the cost, time efficiency and expertise of the Taiwan arbitration system, an agreement to resort to the CAA or other Taiwanese arbitration associations will be a better and practical choice for dispute resolution.