How to enforce mainland civil judgments – Taiwan Focus

It is common practice around the world, and also in Taiwan, that to enforce a foreign final civil judgment that judgment would need to be recognised by a local court first before filing for enforcement. However, due to the special political circumstances in Taiwan, with respect to the recognition and enforcement of judgments made in China, Hong Kong and Macau, there are different sets of procedures, separated from ordinary foreign final civil judgments. Nevertheless, once the judgment is recognised, in general, it can be enforced in Taiwan.

The key piece of legislation here is Article 74, Paragraph 2 of Act Governing Relations between the People of the Taiwan Area and the Mainland Area: “where any ruling or judgment, or award recognised by a court's ruling as referred to in the preceding paragraph requires performance, it may serve as a writ of Enforcement”.

China

According to Article 74, Paragraph 1 of Act Governing Relations between the People of the Taiwan Area and the Mainland Area (Cross-Strait Act), the primary substantial criterion for a Taiwan court to decide whether to recognise a China final civil judgment is: such judgment must never be contrary to the public order or good morals of the Taiwan Area. Based on the principal of reciprocity, Taiwanese courts tend to recognise a China final civil judgment unless there is a fundamental violation of Taiwan imperative law, public order or good morals. Apart from the above, Article 68 of Enforcement Rules for the Act Governing Relations between Peoples of the Taiwan Area and the Mainland Area further provides some procedural requirements. A China final civil judgment shall be notarised in China first and be authenticated later by Straits Exchange Foundation before it can be recognised by a Taiwan court.

The prerequisite for the application of Article 74 of the Cross-Strait Act was fulfilled when China enacted laws including Provisions of Supreme People's Court on the People's Courts' Recognition of Civil Judgments of the Relevant Courts of the Taiwan Region in 1998 and its Supplement Provisions in 2009, providing Taiwan final judgment can be recognised and enforced in China.

Although it is not abnormal for Taiwan courts to recognise China final civil judgments, controversy still arises because Article 74, Paragraph 2 of the Cross-Strait Act did not clearly stipulate to what extent a China final civil judgment can be recognised – is it only enforceable or does it have the same effect as a Taiwan final judgment? The Taiwan Supreme Court had ruled in its 96-Tai-Shang-Zi-2531 civil judgment that a China final civil judgment can be enforced after recognition but does not have the same effect as a Taiwan final civil judgment. This will cause problems for creditors seeking enforcement in Taiwan as their Taiwanese debtors can file a lawsuit in Taiwan challenging the subject matter again. This Supreme Court civil judgment has been intensively criticised in Taiwan by scholars, but until Article 74 of the Cross-Strait Act is amended or the Taiwan Supreme Court changes its opinion, there is a risk for creditors enforcing a China final civil judgment in Taiwan. To ease this uncertainty, for a transaction between a China company and a Taiwan company, choosing Taiwan as the venue for dispute resolution may be a practical approach in the event that the Taiwanese company is expected to be named as defendant, for a Taiwan judgment can be enforced in Taiwan, without doubt, once it is final.

Hong Kong and Macau

Unlike the Cross-Strait Act, Article 42, Paragraph 1 of Laws and Regulations Regarding Hong Kong and Macau Affairs directly stipulates that “in determining the conditions for the validity, jurisdiction, and enforceability of civil judgments made in Hong Kong or Macau, Article 402 of the Code of Civil Procedure and Article 4-1 of the Compulsory Enforcement Law shall apply mutatis mutandis”. Accordingly, a final civil judgment made in Hong Kong or Macau shall be treated in the same way as a so-called foreign final civil judgment, i.e. those judgments made outside Taiwan (except China). Pursuant to Article 402, paragraph 1 of Taiwan Code of Civil Procedure final civil judgments made in Hong Kong or Macau will be automatically deemed to have the same effect as Taiwan final civil judgments, as long as the following negative requirements are not met: (1) the foreign court lacks jurisdiction pursuant to Taiwan laws; (2) a default judgment is rendered against the losing defendant, except in the case where the notice or summons of the initiation of action had been legally served in a reasonable time in the foreign country or had been served through judicial assistance provided under Taiwan laws; (3) the performance ordered by this judgment or its litigation procedure is contrary to Taiwan public policy or morals; and (4) there exists no mutual recognition between the foreign country and Taiwan. Filing for recognition under Article 4-1 of the Compulsory Enforcement Law is only for the procedural purpose of enforcement but not a requirement to ascertain the judgment's validity.

Enforcement

Once a Taiwan court recognises a final civil judgment made in China, Hong Kong or Macau, the party seeking for its execution can then submit its application for compulsory enforcement with a Taiwan court where its Taiwanese debtor locates or has assets.

During enforcement, a Taiwanese debtor might file petition against its creditor pursuant to Article 14 of the Compulsory Enforcement Law. As explained above, a judgment made in Hong Kong or Macau has the same effect as another foreign final civil judgment, so the petition can only be raised based on reasons that occur after the judgment is final pursuant to Article 14, Paragraph 1 of the Compulsory Enforcement Law; but for a judgment made in China, the Taiwanese debtor can file a petition based on the reasons that occur even before the recognition is ruled by the Taiwan court, which means the debtor may have to argue the subject matter all over again, pursuant to Article 14, Paragraph 2 of the Law. This inconsistency does cause problems and there is no legitimate legal reasoning in support of such differentiation.

Minimising risk

Generally speaking, Taiwanese courts tend to recognise and to enforce foreign final civil judgments out of international courtesy and reciprocity. However, due to historical and political reasons, Taiwan legislators enacted a different set of rules dealing with the recognition and enforcement of a China final civil judgment, which has created difficulties for a party seeking recognition and enforcement of a China final civil judgment in Taiwan. Given that relations between China and Taiwan have become closer since the Economic Cooperation Framework Agreement was concluded, cross-strait disputes are bound to increase. Businesses involved in cross-strait-transactions should take this issue into consideration when negotiating agreements and decide on a more appropriate venue for dispute resolution, by resorting to local professional advice, so that the legal risk can be minimised.

Martin C K Liu

Associate

Chen & Lin

Martin C K Liu joined Chen & Lin in January 2009. He excels in constitutional law, administrative law, constitutional litigation, administrative remedy, Securities and Exchange Act, Consumer Protection Act, tax disputes, insurance disputes, government procurement disputes, labour issues and disputes, cable television, teachers' appeal, state compensation and other general civil and criminal litigation.

Martin graduated from the Department of Law of National Taiwan University in 1997 and obtained the degree of Master of Law at National Chengchi University in 2005. He passed the Taiwan Bar Examination in 2001. Before joining Chen & Lin, he practiced with Concord International Law Firm and Yao-Nan Joint Law Firm. He also worked as an assistant to Justices of the Constitutional Court from 2005 to 2008 so he is quite familiar with the procedure of petition for the interpretation of the Constitution and the uniform interpretation of laws or orders.

Edward Y C Liu

Associate

Chen & Lin

Joining Chen & Lin in November 2008, Edward Y C Liu is an attorney specialising in corporate law, M&A, securities exchange law, litigation and general consulting. Edward graduated from National Taiwan University in 2002. In 2005, he passed the bar examination in Taiwan and worked as an intern associate in Baker & McKenzie, Taipei. During the period, Edward worked on litigation, M&A transactions and public offering filing procedures. After the internship, Edward pursued his studies in New York University School of Law, majoring in corporate law, where he obtained his master degree in 2008. In the same year, Edward passed the New York State Bar Examination.

After joining Chen & Lin, Edward has focused on dispute resolution, including litigation, arbitration and mediation