The Taipei High Administrative Court rendered the 106-Su-1300 Decision of December 27, 2018 (hereinafter, the “Decision”), holding that in case of any doubt as to the application scope of an interested party to a public servant when the interested party to a public servant is being defined, a strict and restrictive interpretation should be rendered; and, therefore, directors stipulated under Article 3, Subparagraph 4 of the Law on the Recusal of Public Servants Due to Conflicts of Interest before amendment should not include independent directors.
According to the facts underlying this Decision, the Defendant held that when Individual A, who is not a party to this lawsuit, served as a lawmaker, he was a public servant stipulated under Article 2, Paragraph 1, Subparagraph 5 of the Law on the Recusal of Public Servants Due to Conflicts of Interest (hereinafter, the “Law”) and served as an independent director of the Plaintiff. During the tenure of Individual A as an independent director of the company, the Plaintiff was awarded a contract on a total of 12 procurement projects by an agency supervised by Individual A. This violated Article 9 of the Law. Since it was considered that the Plaintiff was not aware of relevant laws and regulations, the original disposition was rendered to impose a fine reduced on a discretionary basis by two thirds in accordance with Article 15 of the Law and the proviso of Article 8 and Paragraph 3 of Article 18 of the Administrative Penalty Law. Dissatisfied, the Plaintiff brought an administrative action pursuant to applicable procedures.
According to the Decision, the public servants regulated under the Law refer to the personnel stipulated under Article 2, Paragraph 1 of the Law on Property Declaration by Public Servants. Therefore, the scope of application is very broad. Moreover, the Law further includes interested parties to public servants (compare Article 3 of the Law) with an expanded the dimension of deterrence. Since violators are easily subject to large fines, the impact is significant, the scope of related parties to public servants should certainly be clearly defined. Therefore, when an interested party to a public servant is being defined, if the scope of application becomes questionable, a strict and restrictive interpretation should be preferably rendered to reduce negative consequences in order to prevent excessive impact from jeopardizing public interest. Since administrative penalties are administrative sanctions that invade benefits, they should be subject to strict legal clarity requirements. The Law was not amended and promulgated until June 13, 2018, which is 12 years after the installment of independent directors was added to the Securities and Exchange Law of January 2006. Article 3, Subparagraph 4 of the Law additionally included “independent directors” in the scope of related parties to public servants. Such additional provision in the amendments also echoes the requirement that the “directors” stipulated under Article 3, Subparagraph 4 of the Law effective at the time of the act do not include “independent directors.” Otherwise, it would not be necessary to amend the law by adding “independent directors” on top of the existing provisions concerning the “directors.”
Therefore, the “directors” under Article 3, Subparagraph 4 of the Law effective at the time of the act should not include “independent directors.” Although Individual A was an “independent director” of the Plaintiff during the above period, the Plaintiff was not a related party to a public servant. Hence, the Plaintiff’s winning a procurement contract from Aerospace Industrial Development Corporation, which was an agency under Individual A’s supervision, did not violate Article 9 of the same law, and the decision on administrative appeal and the original disposition were set aside on such basis.