Managing and resolving disputes in Taiwan

By Albert Kao, Chen Wen-Chih and Hung Pang-Heng, Formosa Transnational

When doing business in Taiwan, it is more important to take preventive measures than to deal with disputes after a conflict occurs. Specifically, when concluding a contract related to business development, the important factors below should be considered.

Matters that may result in disputes and anticipated legal risks. From a preventive perspective, by looking into the probability of the other party fulfilling the contract and the issues that have occurred in similar transactions before concluding the contract, the legal team may anticipate potential disputes in advance and incorporate mitigation responses into the contract. Therefore, although a dispute is unlikely, such clauses can avoid a conflict from arising and the ramification of the damage caused by the confusion that might appear in the future.

Albert Kao, Formosa Transnational
Albert Kao
Formosa Transnational

For example, before 2020, none would have expected a global pandemic, the impact of a US-China trade war, and their shock on global supply chains. The force majeure clause, which previously existed only as a template for contracts, has become more likely to be applied in the current world situation, with more detailed provisions and practical requirements.

Furthermore, in case of a dispute, it is necessary to verify the completeness, appropriateness and feasibility of the contract terms in advance, from the standpoint of resolving the dispute, such as what substantive legal standards (governing laws) the court or arbitrator will use to judge the dispute, what contract terms are necessary to satisfy those standards, and what evidence is necessary to establish the facts. Seeking advice from experts with experience in dispute resolution is an important point for risk and dispute management.

Think ahead about how to deal with disputes and include them in the contract. For example, in the event of a breach of contract, if the contract does not clearly states the adjustment of the rights and obligations of both parties, it is necessary to check whether the conflicts come with mandatory provisions, and whether they should be resolved in accordance with the default rules of applicable law (e.g., the Taiwan Civil Code). Therefore it is necessary to understand the contents of the contracts thoroughly in advance.

Even if there is no breach of contract, (e.g., a deadlock between the shareholders of a joint venture), how is it possible to make progress and solve the dispute? Some important points to note regarding dispute resolution clauses are:

Chen Wen-Chih, Formosa Transnational
Chen Wen-Chih
Formosa Transnational

Deciding the governing law of the contract. If the contract involves parties or businesses outside of Taiwan, there may be foreign elements involved in interpreting the contract terms, or in case of disputes arising from contract performance. The issue of governing law arises as to which jurisdiction’s laws should be applied. To the extent permitted by Taiwan law, the parties may agree on the governing law.

On the other hand, when selecting the governing law, it is necessary to pay attention to the consequences of the rights and obligations between the parties arising from applying different laws, especially if the rights and obligations between the parties are not precisely agreed on by the contract, and the parties use the default rules of the governing law. For example, compared to Japanese law, Taiwanese law is relatively lacking in the protection of the agent’s status or rights in agency relationship.

In general, terms in contract clauses, especially legal terms, should adopt the terms used in the legal systems of the governing law to reduce the risk of different interpretations. For the same reason, it is advisable to match the language of the governing law with the language of the contract.

Choosing the means of dispute resolution and jurisdiction. It is necessary to understand in advance the characteristics, merits and demerits of each procedure – such as litigation, arbitration, and mediation – in Taiwan and make an appropriate selection. In this case, parties should assume the possible disputes, including which party is more likely to use the dispute resolution method, and ensure a dispute resolution method that is advantageous to the company, although it’s not necessarily convenient.

For example, in general, arbitration is more favourable to the plaintiff than a lawsuit in a Taiwanese court. There are several reasons for this. Arbitration can only be established by the plaintiff’s application. To encourage the use of arbitration, arbitrators tend to make judgments favourable to the plaintiff. For example, even if the plaintiff’s claims and evidence are not particularly strong from the perspective of civil litigation, arbitrators may partially accept the plaintiff’s claims.

Secondly, the plaintiff is generally responsible for proving the facts that they are claiming, but when judging the probative force and value of the evidence, the arbitrator has fewer demanding requirements than a judge, making it relatively difficult for the plaintiff to prevail in court.

In addition, when choosing a forum for resolving disputes, if the governing law is a foreign law it is possible for Taiwanese courts to apply foreign law to make a judgment, but it would be best to avoid this since the judgment can be affected by the judge’s understanding of foreign law, and obtaining proof of foreign law can be cumbersome.

Considering the effectiveness of enforcement. When applying for enforcement in a foreign jurisdiction based on a final decision of a Taiwanese court, or an award of a Taiwanese arbitration institution (or applying enforcement from a foreign jurisdiction to Taiwan), always consider the possibility of approval of a judgment or arbitral award, as well as the approval procedure.

For example, due to a lack of diplomatic relations, legal documents served to foreign parties by Taiwanese courts may not be recognised as legitimate by foreign courts. Therefore, Taiwanese court rulings, particularly those made in absentia, may not be approved for enforcement. However, in principle, arbitration rulings made in Taiwan and foreign countries can be recognised by each other’s courts, even though Taiwan is not a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

When considering the above-mentioned precautionary measures, businesses should seek advice from lawyers and other specialists who are familiar with Taiwanese law and the relevant business, experts with not only experience in transactions but also in dispute resolution.


Contracts often include clauses such as “amendments to contract clauses must be in writing” and “non-exercise of contractual rights shall not be construed as a waiver of rights”. However, it is still possible that a long time performance contradicts to the contract clauses will be interpreted as an implied agreement. Therefore, management of contract performance is important to prevent disputes.

In addition, the purpose and interpretation of the contract terms often become ambiguous due to the passage of time, or changes in the person in charge. It is advised to preserve the important negotiation documents before the contract is concluded as material for contract interpretation in case a dispute arises after concluding a contract.


Hung Pang-Heng, Formosa Transnational
Hung Pang-Heng
Formosa Transnational

Even if there is no legal department or person in charge of legal affairs in the company, it is necessary to appoint a full-time in-house person in charge of the dispute case to handle a wide range of matters such as conducting internal investigations, reporting to management, and communicating with external lawyers. In addition, there are often disagreements between the legal and sales departments, so it is necessary to have a position that can gain the trust of management and integrate different positions within the company.

Conducting interviews with relevant parties and forensic investigations legally and efficiently, as advised by experts such as lawyers or investigators, is essential to confirming the facts and collecting evidence that can be used for trials.

In addition to dealing with a conflict, it is necessary to deploy countermeasures against reputational damage, implement a media strategy (whether to appoint a public relation agency or not), and implement measures to prevent a recurrence. For listed companies, special attention must be paid to compliance, such as disclosure obligations.

It is important to fully understand the situation and position of the other party in the dispute, and consider the most effective method to deploy beyond the dispute resolution clauses in the contract.

For example, some companies put more emphasis on personal feelings than interests, while others are reluctant to seek a settlement through reconciliation for fear of liability for concessions. It is also worth considering the opinions of lawyers and corporate advisers, or conducting mediation through a referral who originally connected the businesses.


After spending time and effort, as well as considerable expense, to resolve a dispute, it is common to become complacent and neglect to consider measures for preventing the dispute from recurring. This can render the high expenses incurred to resolve the dispute pointless. It is essential to carefully investigate the underlying causes of the dispute, and the circumstances leading up to it, and to submit concrete measures for preventing its recurrence to the management team for acceptance.

Additionally, to strengthen compliance and prevent future disputes, it would be effective to organise the details and strategies for avoiding conflicts that have already occurred within the company, and to provide in-house training for those responsible for related operations.

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13/F, 136 Jen Ai Road, Sec. 3, Taipei

Tel: +886 2 2755 7366

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