The Supreme Court rendered the 106-Tai-Shang-836 Civil Decision of March 30, 2017 (hereinafter, the “Decision”), holding that if a complaint is filed to set aside an arbitration award on ground that “the arbitration procedure violates legal requirements,” the legal requirements so violated shall be limited to compulsory or prohibitive provisions and shall not include discretionary provisions.
According to the facts underlying this Decision, the parties had referred their contractual disputes to arbitration with the arbitration award at issue subsequently rendered. The Plaintiff asserted that the arbitration award at issue should be bound by the issue preclusion of a previous arbitration case. However, an arbitration award that ran counter to the previous arbitration case was rendered. Therefore, the Plaintiff asserted that the arbitration procedure was obviously unlawful on such basis and filed a complaint to set aside the arbitration award at issue. After the original trial court ruled against the Plaintiff, the Plaintiff filed this appeal out of dissatisfaction.
According to the Decision, a court may only conduct formal review to determine if the original arbitration award has any material defect due to any circumstance under Article 40, Paragraph 1 of the Arbitration Law. As for whether the legal opinion in the original arbitration award is appropriate or whether its substantive contents are lawful or appropriate, this falls within the arbitration authority of the arbitrators and are not reviewable by the court. Under Article 40, Paragraph 1, Subparagraph 4 of the Arbitration Law, if the composition of the arbitration tribunal or the arbitration procedure violates the arbitration agreement or legal requirements, a party may file a complaint against the other party to set aside the arbitration award. However, the remedy stipulated in this subparagraph is limited to an arbitration award with procedural flaws. The so-called arbitration procedure refers to any arbitration procedural behavior other than the composition of the tribunal and does not include flaws of the arbitration award per se. The legal requirements so violated should be limited to compulsory or prohibitive requirements and do not include discretionary requirements. Therefore, whether the substantive contents of an arbitration award are lawful or appropriate is certainly not governed by such provisions.
It was further pointed out that issue preclusion, which is based on the principle of good faith and fairness protection for the parties in litigation and is evolved into a civil litigation theory, is not a legal requirement. The arbitration award has specifically indicated the reasons why issue preclusion was not adopted. Therefore, the appropriateness of its legal opinion is not reviewable by the court, and the Plaintiff’s appeal was rejected.