A close look at the emerging trends in litigation and alternative dispute resolution around Asia
Litigation in Taiwan is conducted in a three-tier structured court system. There are several district courts of first instance, at least one in nearly every county or city in Taiwan (including three district courts in the greater Taipei area).
Almost all disputes can be appealed to the High Courts as the court of second instance. However, with respect to High Court judgments at the second instance, only those regarding disputed amounts valued at not less than NT$1.65 million (US$56,000) can be appealed to the Supreme Court, which is the court of third instance.
A party can only appeal a judgment of the High Court on the grounds that such judgment is in contravention of laws and regulations, i.e., the applicable laws were not applied, or were erroneously applied. As per the rules promulgated by the Judicial Yuan (judicial branch of government), the courts at each instance are required to process cases according to certain timeframes: 16 months for the first instance; 24 months for the second instance; and 12 months for the third instance.
The interim measures available to a party from the Taiwan courts include:
(1) provisional attachment;
(2) provisional injunction; and
(3) injunction to maintain a temporary status quo.
A creditor may apply for a provisional attachment with regard to a monetary claim, or a claim exchangeable for monetary claims, to secure satisfaction through an enforcement proceeding. Provisional attachment is granted where the creditor fully demonstrates prima facie the impossibility or extreme difficulty that said creditor would have in satisfying the claim through future enforcement.
In the case of insufficiency in the preliminary demonstration of said impossibility or extreme difficulty, if the creditor has also indicated a willingness to provide a security, and if the court considers it appropriate, the court may assess an amount for the security to be provided by the creditor and issue a ruling for provisional attachment upon the creditor’s provision of such security.
The amount of the security assessed by the court is generally one-third of the amount or value of the claim sought as indicated by the creditor. However, the debtor may also place a counter-security in the amount as indicated in the ruling for the provisional attachment, to revoke or to be exempted from the provisional attachment order. If the creditor applies for provisional attachment, the debtor may petition the court to order the creditor to initiate litigation with respect to the creditor’s claim within a period of time as designated by the court. If the creditor fails to initiate such litigation, the court may revoke the ruling for the provisional attachment.
This system seeks to protect creditors while also preventing creditors from abusing the provisional attachment mechanism with immature claims so as to restrain others from freely disposing of their assets.
Another interim measure is the provisional injunction, which applies to the security for a “non-monetary claim”. For example, in a real estate ownership dispute, the creditor may apply for a provisional injunction enjoining the debtor from disposing the subject real estate before a judgment is issued, so as to ensure the creditor’s ability to regain ownership rather than receive money as alternative compensation in satisfaction of the creditor’s claim for ownership.
Finally, a creditor may also apply for an “injunction to maintain a temporary status quo”, with regard to the legal relationship in dispute. An injunction is frequently used in disputes among shareholders for the control of a company and in IP disputes. The very purpose of such an injunction is aimed to maintain the status quo so as to prevent some material harm or imminent danger.
The notable feature of an injunction is that the court may require a party to make a payment before a resolution in the case regarding the disputed legal relationship becomes final (e.g., in a labour dispute, the employee may demand that the employer pay the monthly wage during the court proceeding).
Another feature of an injunction is that the court will accord the parties an opportunity to be heard before issuing its ruling.
In the author’s practice experience, the court will sometimes request the counterparty (the party against which the injunction will be ordered) to submit a brief to present its argument before rendering an injunction. The court may also hold a hearing to achieve the same purpose. However, the court may also reject or grant the injunction directly upon receipt of the application, if the court deems it appropriate to do so.
There are different types of proceedings for disputes, depending only on the disputed amounts and the types of disputes, including small-claims proceedings (amount in dispute is no more than NT$100,000), summary proceedings (amount in dispute is no more than NT$500,000), or certain types of disputes (e.g., labour disputes where the employment period is no more than one year) and ordinary proceedings.
In small-claims proceedings and summary proceedings, the court may adopt a simplified approach as permitted by the Code of Civil Procedure (CCP), e.g., the court may, in principle, conclude the proceeding after one hearing has been held.
There is no typical class action under the CCP. However, multiple parties who have common interests may appoint one or more persons from among themselves to sue, or to be sued, on behalf of the multiple parties.
Notably, the party to such a case may participate without engaging an attorney on his or her behalf. However, at the third instance (the Supreme Court), the appellant is required to appoint an attorney as his/her advocate in the appeal from the judgment of a High Court, unless his/her statutory agent is qualified to act as an attorney.
Alternative dispute resolution
Mediation in court. Mediation in the court is not required unless the dispute belongs to certain types of disputes (e.g., real estate boundary disputes, rental of real property, traffic accidents, medical treatment, employment contracts, partnerships, and disputes arising from proprietary rights where the price or value of the object in dispute is less than NT$500,000), in which case the dispute will be subject to compulsory mediation by the court before litigation proceedings can be initiated.
A party may also voluntarily apply for mediation, and the application can interrupt the extinctive prescription (but the party will need to bring the dispute to the court within six months from the date of application). A successful mediation, in which the disputing parties reach a mutually accepted resolution, has the same effect as a final court judgment.
Mediation centre. There are several mediation centres or associations that provide mediation services in Taiwan. The Chinese Arbitration Association (CAA) established a medication centre in 2003 as a voluntary, non-binding and private ADR process. All of the mediators are experts in several fields and assist the disputing parties to reach amicable settlements. As per article 45 of the Arbitration Act, a mediation agreement has the same legal effect as an arbitral award.
Arbitration. The CAA provides arbitration services in Taiwan, and also in Hong Kong. Arbitral awards rendered by the CAA are enforceable in Taiwan courts, however, as Taiwan is not permitted to be a contracting member of the New York Convention, whether or not an arbitral award issued in Taiwan is enforceable is subject to the standards as set out in the applicable Arbitration Act of a relevant different jurisdiction.
However, as per the Arbitration Act, and in the spirit of the New York Convention, Taiwan courts usually enforce or recognize foreign arbitral awards. If a court of a different jurisdiction adopts the principle of reciprocity in determining whether or not it will recognize an arbitral award issued in Taiwan, Taiwan courts will typically recognize and enforce foreign arbitration awards. Arbitral awards from Hong Kong, Macau and China are, in principle, also enforceable in Taiwan as per the Act Governing Relations between the People of the Taiwan Area and the Mainland Area and the Laws and Regulations Regarding Hong Kong and Macau Affairs.
Professional courts: intellectual property and commercial disputes. The Judicial Yuan has long promoted the idea of “professional courts” in Taiwan. There are specific departments of the court that deal with particular types of cases, e.g., labour, construction and medicine. The Intellectual Property Court was established to resolve IP disputes. Recently, the Business Dispute Procedure Act was promulgated and the Judicial Yuan is expected to establish the IP and Business High Courts in the coming two years.
For business cases, only corporate/security cases can be brought to the IP and Business Court (for some disputes, the disputed amount must be not less than NT$100 million). The IP and Business Court is a two-tiered structured court system that will enhance the efficiency of court proceedings. A party in a business dispute must engage a qualified attorney to handle the litigation. A mechanism is added for expert witnesses in business court procedures. Finally, the court will recruit business investigators to assist the judges in deciding on various business issues in dispute.