Teresa Huang and Yuki Chiang[1]
In view of the growing trade exchanges between both sides of the Taiwan Strait and the increasing importance in cross-strait civil litigation and arbitration award cases, not only the substantive law involved in the cases is important but it is also vital to consider the enforcement of final court decisions and arbitration awards on both sides of the Taiwan Strait. Since a lot of adjudications recognizing court decisions and arbitration awards rendered in Mainland China have been accumulated in our judicial practice, this article seeks to begin the analysis from the procedure of enforcing the Mainland China civil decisions and arbitration awards in Taiwan as well as the recognition status in Taiwan of awards rendered by arbitration agencies in Mainland China in order to discuss common issues that specifically arise in the course of enforcement and to provide relevant suggestions.
1. The procedure for enforcing the Mainland China civil decisions and arbitration awards in Taiwan
An “automatic recognition system” is followed in Taiwan for foreign court decisions. To wit, except for the circumstances where no recognition shall be granted under Article 402, Paragraph 1 of the Taiwan Code of Civil Procedure, foreign court decisions are automatically recognized in effect. However, decisions and arbitration awards handed down in Mainland China are subject to a system of “recognition by way of adjudication.” To wit, as stipulated under Article 74 of the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, final civil decisions and arbitration awards rendered in Mainland China shall not be recognized in effect until they are recognized by a separate court ruling in Taiwan, and such ruling shall serve as the basis for compulsory enforcement (see the 96-Tai-shang-2531 Decision and the 97-Tai-Shang-2376 Decision of the Supreme Court) with the criteria for recognition trial provided as follows:
(1) They shall be final civil decisions or civil arbitration awards.
(2) They shall not violate the public order or good social morals of the Taiwan area.
(3) They shall be verified by an institution set up or designated by the Executive Yuan or by a civil body retained by the Executive Yuan (i.e., the Strait Exchange Foundation).
(4) A motion shall be filed with a court for a recognition ruling.
(5) The precondition is that a motion may be filed with a court in Mainland China for a ruling to recognize or enforce a final civil decision or civil arbitration award handed downed in the Taiwan Area.
Since the Provisions of the Supreme People’s Court on Recognition and Enforcement of the Civil Judgments of Courts of the Taiwan Region, and the Provisions of the Supreme People’s Court on Recognition and Enforcement of the Arbitral Awards of the Taiwan Region, which regulate the procedure for enforcing the Taiwan civil decisions and arbitration awards in Mainland China, have been enacted in Mainland China, courts in Taiwan have also rendered several rulings that recognize final civil decisions and arbitration awards rendered in Mainland China based on the principles of mutual respect and reciprocity of judicial power.
2. Recognition status in Taiwan of awards rendered by arbitration agencies in Mainland China
Judging from cases seeking a court ruling in Taiwan to recognize Mainland China arbitration awards, the arbitration agencies that render civil arbitration awards in Mainland China are mostly located in Beijing, Shanghai, Shenzhen, Guangzhou, Quanzhou, and Tianjin with dozens of arbitration awards recognized and with only sporadic arbitration awards whose recognition is denied. Since the recognition percentage is very high, awards rendered by arbitration agencies in Mainland China are highly recognized in Taiwan in our judicial practice under the principle of mutual respect of judicial power.
In addition, as per the observation of cases in which no recognition was granted, the reasons for non-recognition are that the procedures for rendering the arbitration awards violated the public order or good social morals of Taiwan (e.g., failure to make lawful service or obvious errors in the names of the parties in the awards) (see the 93-Zhong-Sheng-15 Civil Ruling of the Taipei District Court of Taiwan and the 107-Lu-Zhong-Shu-1 Civil Ruling of the New Taipei District Court of Taiwan). This shows that the credibility of arbitration agencies in Mainland China is basically recognized in judicial practice in Taiwan, and only issues such as procedural defects result in no recognition.
3. Common issues and suggestions concerning the enforcement of the Mainland China civil decisions and arbitration awards in Taiwan
According to the court rulings on the recognition of the Mainland China civil decisions and arbitration awards in the past, most discussions focused on “determination of the constitutive criteria” and “res judicata.” Common questions and suggestions are summarized below for reference:
(1) Determination of compliance with the public order and good social morals in the Taiwan Area
A Taiwan court usually considers if the procedure by which a Mainland China civil decision or arbitration award is rendered violates basic due process rights such as the “defendant’s right to be heard” or the “right to a fair trial” in the Taiwan Area when considering if the Mainland China civil decision or arbitration award complies with the public order or good social morals in the Taiwan Area (see 106-Tai-Jian-Kang-144 Ruling of the Supreme Court). Therefore, if the plaintiff has indeed submitted acknowledgement receipts for relevant documents, this proves that the defendant has been duly notified to respond to a complaint, and that it is the defendant that has given up the chance to attend the court hearing to mount a defense. Under such circumstances, most courts would recognize such civil decision or arbitration award (see the 101-Kang-18 Ruling of the Taichung Branch of the Taiwan High Court). Regarding the determination of “lawful service,” special attention should be paid to the following circumstances:
i If the recipient of service of process is a Taiwanese with unknown whereabouts, the service by constructive notice shall be made in “Taiwan”.
In reference to Article 149 and Article 152 of the Taiwan Code of Civil Procedure and Article 92, Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, it is recognized in the judicial practice of Taiwan that if “the whereabouts of the recipient of the service of process are unknown,” (for example, no data available for query to locate the specific address of the defendant and there is no known residence), a Mainland China court may make the service by constructive notice. However, it should be noted that if the recipient of the service is a “Taiwanese,” the court in Taiwan believes that such constructive notice shall be made in Taiwan for the service to be lawful (see 99-Fei-Kang-182 Ruling of the Taiwan High Court).
ii It is not appropriate to adopt electronic service.
Article 87 of the Civil Procedure Law of the People’s Republic of China and Article 153-1 of the Taiwan Code of Civil Procedure both indicate that litigation documents may be served by telecommunications, telefax or other technological device, which is generally referred to as “electronic service.” A search of practical court decisions in Taiwan indicated that currently there is no powerful opinion on whether “electronic service” complies with the public order or good social morals in Taiwan. However, it was specifically indicated in Taiwan’s judicial practice that to consider if electronic service is to be used, not only the parties should state their opinions but also the court may still freely decide if electronic service will be used (see the 98-Shang-234 Civil Decision of the Kaohsiung Branch of the Taiwan High Court). In addition, Articles 7 and 8 of the Regulations for Transmission of Civil Litigation Documents by Telefax or Other Technological Device provide that the electronic service requires the sender to use a specific format for the transmission, and the recipient is also required to act in a certain way upon receipt for the service to be lawful. This shows that the attitude towards electronic service in Taiwan’s judicial practice is still conservative. Therefore, it is suggested that electronic service should preferably be avoided in litigation or arbitration in Mainland China to avoid any impact on the probability of recognition by the Taiwan courts.
(2) Since a Mainland China decision or arbitration award has no res judicata, the risk of further litigation should be heeded
The Supreme Court in Taiwan believes that in view of the special relations between both sides of the Taiwan Strait, lawmakers use a non-litigation procedure to deal with the recognition of final civil decisions and arbitration awards rendered in Mainland China. This shows that such procedure is a special mechanism created to accommodate the differences between the civil procedures and arbitration systems on both sides of the Taiwan Strait. Therefore, to safeguard the legal system in Taiwan and to consider the rights and interests of the parties, even for final civil decisions or arbitration awards rendered in Mainland China and recognized by court rulings in Taiwan, they are merely enforceable but do not have the same re judicata effects as final court decision in Taiwan (See 104-Tai-Shang-33 Civil Decision of the Supreme Court). The purpose of the judicial practice in Taiwan is to preserve the authority of the courts in Taiwan to consider the entire oral arguments and the results of evidence investigation at their discretion on their own and make different determinations and to be free from the constraints of court decisions rendered in Mainland China (see 97-Tai-Shang-2376 Civil Decision of the Supreme Court). By the same token, take civil debt disputes for example. Even if a final civil decision or arbitration award rendered in Mainland China has been recognized by a court in Taiwan, the debtor may still file a separate lawsuit with the Taiwan court in accordance with the Compulsory Enforcement Act of Taiwan by citing reasons which take place before the rendition of such civil decision or arbitration award to object to the enforcement of the debt. Special attention should be paid to this aspect due to the risk of further litigation.
When handling cross-border commercial disputes, companies typically pay more attention to the legal basis they can rely on in the substantive law aspect. However, since they sometimes overlook certain litigation procedural requirements, the functions of victorious decisions or favorable arbitration awards they have secured after significant painstaking efforts are not fulfilled at the stage of compulsory enforcement. Therefore, this article specifically highlights the procedures that should be followed and relevant matters that should be noted when enforcement of a Mainland China civil decision or arbitration award is sought in Taiwan to serve as a reference for enterprises when they come across similar issues in order to avoid the risk of unenforceability in the future.
[1] The authors are lawyers at Lee, Tsai & Partners. However, the contents of this article merely reflect personal opinions and do not represent the position of this law firm.