Taiwan: International Arbitration (4th edition)

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This country-specific Q&A provides an overview of the legal framework and key issues surrounding international arbitration law in Taiwan.

This Q&A is part of the global guide to International Arbitration.

For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/international-arbitration-4th-edition/

  1. What legislation applies to arbitration in your country? Are there any mandatory laws?

    The Arbitration Law of ROC (“AL”) as last amended on December 2, 2015 is the key statute governing arbitration. Generally speaking, the AL allows arbitration to proceed pursuant to the parties’ agreement as long as certain mandatory rules are complied with as mentioned below:

    1. Arbitrator eligibility requirements: Please see Question 13 for details.
    2. Arbitrators shall be independent, impartial and maintain confidentiality in conducting the arbitration. (Article 15, Paragraph 1 of the AL)
    3. An arbitrator shall actively inform the parties in the event he or she must withdraw from the matter due to any circumstances that the law requires recusal. (Article 15, Paragraph 2 of the AL)
    4. A tribunal is to give the parties sufficient opportunity to present their case and conduct the necessary investigations regarding their arguments. (Article 23 of the AL)
    5. The deliberation of the award shall not be publicized. (Article 32, Paragraph 1 of the AL)
    6. The grounds and timing for setting aside an arbitral award; a court that is setting aside an award shall also cancel any enforcement orders associated with the award. (Articles 40, 41 and 42 of the AL)
  2. Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

    No. Taiwan is not a signatory to the New York Convention.

  3. What other arbitration-related treaties and conventions is your country a party to?

    Taiwan has entered into investment protection (or bilateral free trade) agreements with 31 countries, as well as a cross-strait investment protection and promotion agreement with China, all of which contain provisions on arbitration-related matters. Please see the website of the Department of Invest Services of the Ministry of Economic Affairs for details https://www.dois.moea.gov.tw/Home/relation1_1_3

  4. Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?

    The AL takes cues from the UNCITRAL Model Law as well as the arbitration laws of the UK, the US, Germany, Japan and France. There are still a number of differences between the AL and the UNCITRAL Model Law to note, however:

    1. The AL does not allow for arbitrations conducted by ad hoc arbitration institutions. As such, the legal status of ad hoc arbitration is unclear in Taiwan as of the date of this writing.
    2. Article 21 of the AL expressly sets a time limit for rendering the award, which is not found in the UNCITRAL Model Law.
    3. Article 17 of the UNCITRAL Model Law allows tribunals to enact interim awards and require the parties to provide a security amount. No equivalent provision exists in the AL.
  5. Are there any impending plans to reform the arbitration laws in your country?

    None as of this writing (October 9, 2019).

  6. What arbitral institutions (if any) exist in your country? When were their rules last amended? Are any amendments being considered?

    The most well-known arbitration institutions in Taiwan are the Chinese Arbitration Association, the Taiwan Arbitration Association, the Chinese Real Estate Arbitration Association, and the Chinese Construction Industry Arbitration Association.

    The Chinese Arbitration Association (the “Chinese Commercial Arbitration Association” prior to June 24, 1998) has its rules last amended on April 28, 2017.

    The Taiwan Arbitration Association (the “Taiwan Construction Arbitration Association”) has its rules last amended on December 6, 2002.

    The Chinese Real Estate Arbitration Association established its rules on November 22, 2002 and has yet to amend its rules since.

    The Chinese Construction Industry Arbitration Association established its rules on November 27, 2014 and has yet to amend its rules since.

  7. What are the validity requirements for an arbitration agreement under the laws of your country?

    According to the AL, a valid arbitration agreement shall meet the following conditions: (Articles 1 and 2)

    1. The arbitration agreement shall be in writing, but an arbitration agreement may be deemed to exist if it can be sufficiently discerned from the communications between the parties in the form of documents, security, letters, fax, telegram or other methods.
    2. The parties may stipulate to resolve through arbitration only disputes to which settlement is allowed under law.
    3. The arbitration agreement must be related to the particular legal relationship existing between the parties. An arbitration agreement has effect on the parties if it is stipulated for disputes arising from such particular legal relationship.
  8. Are arbitration clauses considered separable from the main contract?

    Yes. Article 3 of the AL specifically states that for contracts containing an arbitration agreement, the validity of the arbitration agreement shall be determined independently from that of the remainder of the contract. Even if the contract is invalid, voided, rescinded or terminated, the validity of the arbitration agreement shall be unaffected.

  9. Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?

    While Article 9 of the AL as well as the arbitration rules for all of the four aforementioned arbitration institutions in Taiwan contain some rules involving multi-party arbitration, such as in the event there are more than two parties in a dispute where the parties do not have an agreement on arbitrator selection, the arbitrator(s) shall be chosen by a majority vote among the parties, neither the AL nor the institutional rules have yet established detailed language regarding the exact procedure to follow in the case of multi-party arbitration.

    With multi-party arbitration becoming a main trend in international commercial arbitration, and international bodies such as the ICC amending its rules in 2012 to include joinder of additional parties, claims between multiple parties, multiple contracts and consolidation of arbitrations, many Taiwan academics have called for the parties of multi-party contracts looking to agree on multi-party arbitration for dispute resolution to carefully consider how the arbitration agreement shall be drafted, or take careful note of how the rules of the intended arbitration institution have provided for multi-party mechanisms.

  10. In what instances can third parties or non-signatories be bound by an arbitration agreement?

    Under certain circumstances, a court may allow a third party that was not part of the arbitration agreement to become a claimant or respondent in an arbitration. Such third party could be a successor of a party, assignee of the main contract, debt assignee, person who assume the debt, guarantor, an insurance company under subrogation, or a third party beneficiary.

    In one High Court instance, the parties contracted to submit disputes before the ICC in the US, but there is a separate clause where the distributor (one party of the arbitration agreement) is to recognize that the property rights and interests associated with the trademarks and product names used for the products under the contract are all owned by the other party of the arbitration agreement as well as its affiliates. This caused the High Court to find that those affiliates are also bound by the arbitration agreement.

  11. How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?

    (1) The governing law over the arbitration agreement: If the parties have expressly agreed on the governing law for the arbitration agreement, their choice should in principle be followed and applied. However, if the parties agree to set the seat of arbitration within Taiwan but use foreign law for the arbitration agreement, and that the application of such foreign law would be contrary to the public order or morals of Taiwan, then Taiwan law may override the parties’ selection on governing law. If the parties have not agreed on the governing law for the arbitration agreement and a dispute arose over such governing law, Taiwan does not have a specific law on conflicts of law in arbitration agreements, so if foreign elements are involved, it should be based on the international private law rules on contracts at the place where the court is located; if the court is (or will be) in Taiwan, then the Act Governing the Choice of Law in Civil Matters Involving Foreign Elements apply, and the court will examine a wide variety of factors, such as the domicile of the parties, where the subject of the arbitration and other relevant assets are located, the location of the seat of arbitration, in determining the scope and effect of the arbitration agreement.

    (2) The governing law over the arbitration procedure: If the parties have agreed to the governing law for the arbitration procedure, it should again apply in principle. If the parties have not specifically stipulated a governing law for the arbitration procedure, then the rules of the arbitration institution chosen are usually applied in a proceeding to set aside an arbitral award.

    (3) The governing law over the arbitration award: Arbitration under law shall first and foremost apply the governing law that the parties have selected to determine the substantive legal relationship(s) in the dispute. If the parties did not specify a governing law even as they had agreed to submit disputes to arbitration, or otherwise authorize the arbitration institution to select the governing law, for an arbitration conducted by an arbitration institution, the tribunal shall apply the international private law of the place where the institution is located to determine the appropriate governing law for the arbitration, while in an ad hoc arbitration, the arbitrator shall apply the international private law of the place where the arbitration is taking place for better compliance with the parties’ intent in the arbitration agreement.

  12. Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?

    As mentioned, Article 1, Paragraph 2 of the AL provides that only disputes that may be resolved through settlement can be resolved through arbitration. Examples of disputes that may not be submitted to arbitration include domestic violence/family matters, criminal matters, competition law violations, and patent & trademark validity matters.

  13. In your country, are there any restrictions in the appointment of arbitrators?

    The arbitrator must be a natural person and meets any one of the following criteria: (i) Have served as a judge, magistrate or prosecutor; (ii) have experience as a lawyer, accountant, architect, technician or other commerce-related profession for at least 5 years; (iii) have served as an arbitrator in a dispute under a domestic or foreign arbitration institution; (iv) have served as an assistant professor or higher for more than five years at a domestic or foreign college, university or vocational school recognized by the Ministry of Education; or (v) possesses expertise or know-how in a specialized field and provided service in that field for at least 5 years. In addition, an arbitrator must not have faced any of the following circumstances: (i) convicted of corruption or dereliction of duty; (ii) convicted of any other offense and sentenced to one year of imprisonment or greater; (iii) stripped of public rights and the penalty has not yet expired; (iv) declared bankruptcy and has yet to recover his/her property rights; or (v) became subject to guardianship or assistantship and the order has not yet been cancelled. A candidate arbitrator meeting the above positive and negative rules shall undergo and pass training before applying to an arbitration institution to become an arbitrator. (Articles 5, 7 and 8 of the AL).

  14. Are there any default requirements as to the selection of a tribunal?

    Yes, the AL’s default rule is for each party to select an arbitrator, then have the two arbitrators chosen by the parties to select a third arbitrator as the president, and the tribunal will notify the parties of the result in writing. (Article 9 of the AL)

    For matters that the Taiwan Code of Civil Procedure has defined as applicable for simplified procedures, the parties may, upon mutual agreement, jointly request the arbitration institution to select a sole arbitrator, and the arbitration will be conducted by the chosen arbitrator according to the simplified procedure of the arbitration institution. (Article 36 of the AL)

  15. Can the local courts intervene in the selection of arbitrators? If so, how?

    A party may petition a court (or the court may step in on its own accord) to intervene in the selection of an arbitrator upon the occurrence of any of the following circumstances:

    1. The chosen arbitrators fail to jointly nominate a president within 30 days; (Article 9, Paragraph 2 of the AL)
    2. The arbitration agreement provides for a sole arbitrator, and the parties fail to come to a consensus 30 days after either party has received a written request from the other party to select the arbitrator; (Article 9, Paragraph 3 of the AL)
    3. After a party has selected an arbitrator and has notified the other party to do the same within 14 days, the other party fails to do so; (Article 12, Paragraph 1 of the AL)
    4. Where the arbitration agreement has specified for the arbitration institution to select the arbitrator(s) and the arbitration institution fails to timely do so despite written requests from the parties; (Article 12, Paragraph 3 of the AL)
    5. The arbitrator chosen in the arbitration agreement has passed away or cannot adjudicate the arbitration for other reasons, or otherwise refuses to or delays in performing the duties of an arbitrator, and the parties fail to agree on selecting a replacement arbitrator; (Article 13, Paragraph 1 of the AL)
    6. The arbitrator chosen by the arbitration institution or the court has passed away or cannot adjudicate the arbitration for other reasons, or otherwise refuses to or delays in performing the duties of an arbitrator; or (Article 13, Paragraph 4 of the AL)
    7. The president has passed away or cannot adjudicate the arbitration for other reasons, or otherwise refuses to or delays in performing the duties of an arbitrator; (Article 13, Paragraph 5 of the AL)
  16. Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge?

    Yes, the parties may request recusal under the following circumstances: The arbitrator lacks the qualifications requested by the parties, the same circumstances for the recusal of a judge under the Code of Civil Procedure also exists for the arbitrator, the arbitrator has had or is currently having an employment or agency relationship with the part(ies)’ representatives or key witnesses, or any other circumstance that would cause the parties to believe the arbitrator cannot independently and impartially perform his or her duties. A party cannot ask for its own nominee arbitrator to be recused unless the circumstances giving rise to the recusal happen or become known to the party after the selection was made. (Article 16 of the AL)

    When requesting recusal, for a sole arbitrator, the party shall submit the request to the court. For all other circumstances, the party shall submit a written request to the tribunal within 14 days after becoming aware of the relevant facts, and the tribunal shall decide within 10 days. If the tribunal has not yet been established, the timing on the party’s request shall start to toll after the establishment of the tribunal. A party may petition a court to decide if it wishes to contest the tribunal’s decision, but it may not appeal the court’s decision thereafter.

  17. What legal requirements are there in your country for the recognition and enforcement of an award? Is there a requirement that the award be reasoned, i.e. substantiated and motivated?

    Enforcement of domestic awards
    Domestic awards are binding on the parties as a final court decision would have; there is no need to have a court recognize a domestic award. An award may be compulsorily enforced after a court has ruled such pursuant to a petition, but the court proceeding may be skipped if any of the following conditions are met and if the parties have already stipulated in writing that the award may be compulsorily enforced without a court decision to do so: (1) The subject matter concerns a payment of a specific amount of money or other objects or negotiable securities as a substitute; or (2) the subject matter concerns the turnover of a particular movable asset(s). (Article 37, Paragraphs 1 and 2 of the AL)

    The court may reject a petition to enforce a domestic award if: (1) The award is unrelated to the dispute that is the subject of the arbitration agreement or otherwise exceeds the scope of the arbitration agreement, but if the award can remain intact if the improper parts are excised, the remaining award may still be enforced; (2) the tribunal rendered the award without providing proper reasoning, unless the tribunal has amended this defect later on; or (3) the award orders a party to engage in act(s) that are prohibited under law. (Article 38 of the AL)

    Enforcement of foreign awards
    The AL provides that a party must submit a petition to a court requesting to recognize a foreign award before it may be binding on the parties as a final court decision and subsequently enforced. Article 48 further lists the documents that need to be provided in the recognition action: (1) an original or an authenticated copy of the award, (2) an original or an authenticated copy of the arbitration agreement, and (3) the full text of the foreign arbitration law or the rules of the foreign/international arbitration institution underlying the foreign award. A foreign award that a party seeks the recognition of must not contain any of the grounds under Articles 49 and 50 of the AL (see Question 33 below).

  18. What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?

    Per Article 50 of the AL, when bringing a petition to recognize a foreign award, the petitioner party must list the other party as a respondent, and the respondent party may oppose the petition by asking the court within 20 days of its receipt of the notice of the action to dismiss the petitioner’s request for recognition. Hence, these proceedings are not conducted ex parte in Taiwan.

    Generally, it takes about one and a half years for the court to make a decision, but the actual time may vary on a case-by-case basis. Once it is recognized, an enforcement order may be obtained in about two weeks.

  19. Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?

    Question 31, only foreign awards have a recognition component. The grounds for refusal of the recognition of a foreign arbitral award are provided in articles 49 and 50 of the AL:

    1. If the recognition or enforcement of the foreign award is against the public order or morals of Taiwan, or if the dispute is not a matter that may be resolved through arbitration. In addition, if the law of the country where the award is rendered or the country whose arbitration law is applied has refused to recognize a Taiwan arbitration award, then the court may refuse to recognize the foreign award. (Article 49 of the AL)
    2. The respondent may cite any of the following in requesting the court to not recognize the foreign award within 20 days of its receipt of the notice: (Article 50 of the AL)
    3. The arbitration agreement is not binding because the party lacks capacity to act under the chosen applicable law;
    4. The arbitration agreement is invalid under the chosen applicable law or the law of the jurisdiction where the award was rendered if no chosen governing law is present;
    5. Any party that has failed to receive proper notice with respect to the selection of arbitrators or the arbitration procedure, or any other circumstances that are sufficient to deem the arbitration as failing to follow proper procedure;
    6. The award is unrelated or exceeds the scope of the arbitration agreement, unless the offending parts may be excised and the remaining award may still stand;
    7. The composition of the tribunal or the arbitral procedure conflicts with the agreement between the parties, or the law where the arbitration was conducted if there was no agreement between the parties; or
    8. The award does not bind the parties or has been revoked or suspended by an authority with jurisdiction.
  20. Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?

    As mentioned in Question 31, a court may refuse to enforce any award which orders a party to engage in an act that is prohibited by law.

  21. Can arbitration awards be appealed or challenged in local courts? What are the grounds and procedure?

    While a party may not directly appeal the decision of the tribunal in the award, a party dissatisfied with the result may request a court to set aside the award under Article 40 of the AL on grounds of any of the following circumstances:

    1. If the circumstances for refusing enforcement under Article 38 of the AL existed;
    2. The arbitration agreement has not been constituted, was invalid or has not entered into effect/became invalid at the time the tribunal concluded its hearings;
    3. The tribunal failed to allow a party the opportunity to present its arguments, or a party has not been properly represented during the arbitration procedure;
    4. The constitution of the tribunal or the arbitration procedure was in violation of the arbitration agreement or the law to the extent that the result is affected;
    5. The arbitrator(s) violated the AL on notification duties and has demonstrated clear bias or continued to stay on the tribunal despite a party having petitioned for recusal, unless the recusal petition itself was rejected by the court;
    6. The arbitrator(s) has committed a criminal offense in failing to perform his/her duties in the arbitration;
    7. The parties or their representatives have committed a criminal offense in relation to the arbitration;
    8. The evidence or the translated contents of evidence that the award was based on have been forged, altered or contain other falsities; or
    9. A civil, criminal or administrative decision that was used as the basis for the award has been subsequently overturned by a final court or administrative decision.

    For (6) through (8), the person(s) must be convicted of the offense, or the criminal procedure cannot start or continue for reasons other than insufficient evidence.
    For (5) through (9), the circumstance must be sufficient to have had an impact on the award.

    Article 41 of the AL provides that for an action to set aside an award, the district court where the award was rendered has jurisdiction. The petition must be submitted within 30 days of service or receipt of the award. If any of the circumstances under (6) through (9) above is present, and the action to set aside the award was not timely brought for reasons not attributable to the petitioner, the 30-day period starts tolling from the day the petitioner became aware of such circumstances to set aside the award. However, no petition to set aside an award will be accepted if the award was rendered more than 5 years ago.

  22. Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?

    As the above AL provision on setting aside the award is mandatory, it cannot be contracted around, thus parties cannot waive any right of challenging the award in the arbitration agreement beforehand.

  23. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

    There is no language on this issue in the AL, and no such cases have been observed in practice.

  24. In what instances can third parties or non-signatories be bound by an award? To what extent might a third party challenge the recognition of an award?

    Article 37 of the AL provides that under the compulsory enforcement rules, an award may bind the following: any successor of a party after the arbitration proceeding has commenced and any one who has possession of the contested object for a party or its successor; or any entity (or its successor after the commencement of the arbitration proceeding) who is entering into an arbitration proceeding on behalf of another and any one who has possession of the contested object for said entity or its successor.

    As for a third party looking to set aside an award, the AL is silent on the issue. If the tribunal has agreed to apply the Taiwan Code of Civil Procedure with respect to a third party intervening in an arbitration, then the Code of Civil Procedure rules on intervention applies to such third party, thereby giving it a right in principle to seek whatever relief a third party intervener is entitled to. However, there has been no such case in practice.

  25. Is emergency arbitrator relief available in your country? Is this frequently used?

    No such system exists.

  26. Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?

    Article 36 of the AL calls to Article 427 of the Civil Code with respect to simplified court procedures for matters relating to proprietary rights where the amount in controversy is under NT$500,000. If the parties of the arbitration agree and request a simplified procedure from the arbitration institution, the arbitration institution would select a sole arbitrator, who will conduct the arbitration pursuant to the institution’s rules on simplified arbitration. Some examples of simplified procedures include Articles 50 and 51 of the Chinese Arbitration Association rules, which require an arbitrator to render an award in three months, and the award only need to present a summary of the facts and its reasoning unless the parties decide to forgo such descriptions altogether. The Chinese Arbitration Association may also, according to Article 45 of its rules, advise the parties to apply simplified procedures based on the nature of the dispute and the value in controversy. However, as the arbitration institutions do not readily provide their case-related data to the public, it is unclear whether such simplified procedures are commonly used in practice.

  27. Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?

    The Executive Yuan has published “Rules on the Organization of Arbitration Institutions, the Mediation Procedure and the Associated Costs” arising from Article 54 of the AL to require more transparency from arbitration institutions. This requires all Taiwan arbitration institutions to provide a list of their arbitrators and sets a uniform fee standard (and percentage as arbitrator compensation) for arbitration institutions. Arbitration institutions generally provide a FAQ section on their websites to introduce how arbitrations will be conducted by the institution. In addition, the Chinese Arbitration Association and the Taiwan Arbitration Association also publishes some awards that they have rendered on their websites.

  28. Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?

    Although diversity is not being actively promoted, based on the arbitrators that the arbitration institutions in Taiwan have disclosed on their websites, there are arbitrators of different sexes, ages and nationalities for the parties to select from each industry sector.

  29. Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?

    No Taiwan court over the past 5 years has set aside an award that was already enforced in another jurisdiction or vice versa.

  30. Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?

    Per Transparency International’s Corruption Perception Index, Taiwan is ranked 31 globally. So the corruption of courts or arbitration institutions is not in actual practice a regularly raised complaint.

    For legal standards, there is an Anti-Corruption Act in Taiwan, which imposes a set of rules regarding corruption by public officials. Under Article 4, public officials will be found to be guilty of corruption and face criminal liabilities for: (i) unlawful possession or misappropriation of public facilities or assets, (ii) acquisition of property through the use of undue influence, extortion, or forced seizure or collection of property (iii) false reporting of quantities or prices, taking kickbacks or other bribes while handling public projects or procurement, (iv) the use of public transportation to carry contraband or goods for tax evasion, (v) request, expect or taking bribes or unjust benefits for acts that are in breach of his/her official duties.

  31. Have there been any recent court decisions in your country considering the definition and application of “public policy” in the context of enforcing or setting aside an arbitral award?

    As seen in the above responses to questions where “the violation of public order or morals” is mentioned, the concept of public policy is a fundamental deep-rooted concept of Taiwan law; no legal act, governmental policy, court decision or arbitral award may be enforced if it would be in violation of public order or morals. The term itself has been defined by the courts as the nation’s concept and understanding of general public benefits and morals that serve as the foundation of culture and social interaction in Taiwan. Whether an award would be deemed as in violation of public order or morals is dependent on whether the results of enforcement would be in conflict with such concepts and understandings of Taiwan society.

  32. Have there been any recent court decisions in your country considering the judgment of the Court of Justice of the European Union in Slovak Republic v Achmea BV (Case C-284/16) with respect to intra-European Union bilateral investment treaties or the Energy Charter Treaty? Are there any pending decisions?

    There are no relevant decisions on this matter.

  33. Have there are been any recent decisions in your country considering the General Court of the European Union’s decision Micula & ors (Joined Cases T-624/15, T-694/15 and T-694.15), ECLI:EU:T:2019:423, dated 18 June 2019? Are there any pending decisions?

    No. There are no relevant decisions on this matter.