THE ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN TAIWAN
Taiwan is not a contracting state to the 1958 New York Convention. There is no obligation for Taiwan to recognize foreign arbitral awards as binding and allow enforcement of these awards locally. It is therefore interesting to see how the enforcement of foreign awards are dealt with in this country.
Local law governing the recognition of foreign arbitral awards in Taiwan
Chapter 7 on Foreign Arbitral Awards under the R.O.C. Arbitration Act (as amended on 10 July 2002) lays down the rules concerning the enforcement of foreign awards in Taiwan. According to the R.O.C. Arbitration Act, foreign awards may be accepted for enforcement where there is judicial approval following an application to the local courts for the recognition of such an award (Article 47 of the Arbitration Act).
As a general rule, the Taiwan courts during the review of an application made for the recognition of a foreign award will not consider the merits of the case but simply deal with the procedural aspects of the application.
The Taiwan courts are inclined to give approval for the recognition of foreign awards unless one of the following three grounds for rejection (under the Arbitration Act) has arisen: (i) Rejection by the court through its own discretionary powers; (ii) Rejection through lack of mutual reciprocity; and (iii) Rejection on grounds of procedure raised by the Respondent.
Rejection by the court through its own discretionary powers
This happens when the court moves on to reject the application for recognition after concluding that (i) the recognition or enforcement of a foreign award in Taiwan will be contrary to the public order or good morals of this country (under Article 49(1)(1) of the Arbitration Act); or that (ii) the nature of the dispute is “not an arbitrable one” (i.e. not capable of settlement under arbitration) under the laws of Taiwan (under Article 49(1)(2) of the Arbitration Act).
By far, Taiwan legislation or case law has not provided any definition on what contravenes “public order” or “good morals”. It has, however, been widely accepted that “public order” refers to “the preservation of a disciplined social state that gives rise to some benefit to the society” whereas “good morals would mean “conduct that conforms to the general standard of morality in the society”.
As for the question of what is arbitrable or not, there are no local laws or reported cases providing a definition. It is however generally accepted that disputes concerning social order, public policy, criminal activity, bankruptcy and the granting of intellectual property rights are issues that cannot be of an “arbitrable nature” in Taiwan.
Rejection through lack of mutual reciprocity
Under the principle of reciprocity, an applicant (when challenged by a respondent in court) must be able to show recognition of a Taiwan arbitral award by a foreign court before the Taiwan courts are willing to recognize an award emanating from that same foreign country. On the same token, if a foreign court had previously refused to recognize a Taiwan arbitral award, then any application made in the present instance for an arbitral award coming from that same foreign country would most definitely be rejected by the Taiwan courts in a “tit-for-tat” manner.
This hard and fast rule came under significant change about 10 years ago in the landmark case of Taiwan Supreme Court Civil Appeals Case No. 335 of 1986 where the court held that the principle of reciprocity did not necessarily require the presence of any cases indicating the recognition of a Taiwan award by a foreign court prior to any application made before the Taiwan courts to recognize the validity of an award made by a tribunal sitting in that same foreign country;
The cases following the abovementioned confirms a trend in the willingness by the Taiwan Courts in general to exercise “international goodwill” when dealing with issues regarding reciprocity.
Rejection on grounds of procedure raised by the Respondent
This avenue provides the Respondent with a way to challenge the application by arguing against procedural defects in the foreign award. Under Article 50 of the Arbitration Act, a Respondent may apply for the dismissal of an application made to recognize a foreign award in Taiwan within a twenty day period starting from the date of his receipt of the notice of the application received from the courts. Where so, the Respondent will prevail if he is successful in showing one of the following grounds to the court:
- That the arbitration agreement should be revoked on grounds of incapacity of one of the parties to the agreement, in accordance with the governing law of the agreement.
- That the arbitration agreement should be null and void according to the governing law of the arbitration agreement or, in the absence of any such law, then under the law of the country where the award was made.
- That the Respondent had not been given proper notice whether of the appointment of an arbitrator or of any other matter required in the arbitral proceedings, or any other situations which give rise to lack of due process.
- That the arbitral award is not relevant to the subject matter of the dispute covered by the arbitral agreement or exceeds the scope of the arbitration agreement, unless the offending portion can be severed from and not affect the remainder of the arbitral award.
- That composition of the tribunal or the arbitration procedure itself contravenes the arbitration agreement or, where there is no agreement in place, the law of the venue of the arbitration.
- That the arbitral award should not be binding or has already been suspended or revoked by a competent court.
Apparently, the provisions under Article 50 of the R.O.C. Arbitration Act mirrors Article V of the 1958 New York Convention and the substantial parts of Article 34 of the UNCITRAL Model Law.
Reciprocity remains still the most common area of problem immediately faced by foreign applicants seeking to enforce their arbitral awards in Taiwan. There is however a growing trend for the local courts to view reciprocity with a more liberal approach and maintain respect for comity. As long as reciprocity is kept out of the way, foreign applicants can take comfort that the Taiwan courts are generally willing to give recognition to their awards. This is of course, unless there are additional problems with public policy and procedure.
IF YOU HAVE A FOREIGN JUDGMENT OR AWARD and you are contemplating application procedures in Taiwan or simply wish to discuss this with somebody, please contact the writer of this Article who is always willing to listen and help.