Introduction and brief review on the highlights of the Judicial Yuan’s initial draft of the Commercial Case Adjudication Law (Taiwan)

Jhen-Yi Chen

I. Features and important provisions of the draft Commercial Case Adjudication Law

The initial draft of the draft Commercial Case Adjudication Law (hereinafter, the “Law”) released by the Judicial Yuan on March 29, 2019 has seven major features:

1. Establishment of a professional court: The Commercial Court will be set up with a two-level and two-instance system. The first instance is trial at bar by three judges, where professionally trained judges are selected to serve as judges in the Commercial Court (which is expected to consist of 9 judges) to work with professional facilitators such as commercial investigators and commercial mediators.

2. Mandatory representation by lawyers: Since commercial incidents are technical and professional, the procedural acts required under the Law should be represented by lawyers or qualified lawyers. To safeguard the rights and interests of the parties or interested parties and to ensure the smooth progression of a litigation or non-litigation procedure, the parties or interested parties are compelled to retain lawyers to be their procedural attorneys. However, if the parties, interested parties or their legal representatives are qualified lawyers, they should be deemed to have professional capability to deal with commercial matters.  Therefore, it is not necessary to compel them to retain lawyers to be their procedural attorneys.

3. Use of technologies: The parties shall use an online system to transmit briefs, and when the court deems appropriate, a hearing may be conducted, upon application or ex officio, via audio and video transmission equipment to facilitate the trial participation of the parties.

4. Preliminary procedure for mediation: A commercial matter under the Law shall be mediated first with the court appointing individuals with relevant expertise to serve as the mediators. The mediation procedure shall be concluded within 60 days upon the appointment of the commercial mediators to elevate the professionalism and credibility of the mediation solutions proposed by the mediators, to respect the autonomy among businessmen, and to help them resolve disputes independently.

5. Inquiry system between the parties: To provide the parties with opportunities to collect relevant information before trial in order to properly decide the subsequent submission of facts and evidence, expedite trial and reduce the trial burden of the court, it is specifically stipulated that a party may enumerate essential matters for its inquiries or explanation request to the other party in order to assess litigation strategies and expedite trial.

6. Introduction of expert witnesses: Except for the professional system under the Code of Civil Procedure such as appraisers, professional members and legal experts to enhance trial, an expert witness system is adopted in reference to the legal regimes of the UK and the US so as to address the inadequacy of the current appraisal system and to safeguard the right of proof of the parties by respecting their procedural autonomy. By doing so, the parties may produce expert witnesses, subject to the court’s approval, to provide their professional opinions and enhance the trial of matters of fact. The parties may produce expert witnesses to provide their professional opinions and may further examine the expert witnesses of the other party, or the court may notify the expert witnesses to appear to state their opinions to enhance the professionalism of the trial of matters of fact.

7. Protective order: If any document, object to be inspected or material required for expert testimonies is submitted during the proceeding involves any trade secret, the holder may apply to the court to issue a protective order to balance the discovery of facts and the preservation of trade secrets. This Law imposes a criminal penalty on violators of a protective order (such offense is actionable only upon complaint) with imprisonment of up to three years, detention, and/or a fine of up to NT$100,000.

II. Categories of “major commercial cases” governed by this Law:

1. Disputes between a corporate representative and a company over civil rights and obligations as a result of business execution with the litigation object valued at no less than NT$100 million.

2. Lawsuits in which disputes over civil rights and obligations arising from violations of the Securities and Exchange Law, Futures Trading Law, Securities Investment and Trust Law such as securities fraud, falsehood in financial reports or prospectuses with the litigation object valued at no less than NT$100 million.

3. Matters involving disputes over civil rights and obligations between shareholders of a publicly offered company and the company when they exercise their shareholders’ rights as well as matters involving a complaint filed with the court by the Securities and Futures Investors Protection Center to remove a company’s directors or supervisors.

4. Cases involving disputes over the validity of the shareholders’ meeting or board meeting of a publicly offered company.

5. Matters involving disputes over the validity of the shareholders’ meeting or board meeting of a non-publicly offered company with an authorized capital of at least NT$500 million which has an affiliation or control relationship with a publicly offered company.

6. Civil cases which fall within the jurisdiction of the Commercial Court pursuant to a written agreement between the parties, and which involve disputes over civil law relations under the Company Law, the Securities and Exchange Law, the Futures Trading Law, the Corporate Mergers and Acquisitions Law, the Financial Institutions Merger Law and the Trust Law with the litigation object valued at no less than NT$100 million.

7. Cases involving the adjudicated share purchase prices of publicly offered companies, appointment of provisional administrators, assignment of inspectors and their removal.

8. Other commercial litigation or non-litigation cases stipulated by law or falling within the jurisdiction of the Commercial Court pursuant to the Judicial Yuan’s designation.

III. Legislative backgrounds[1]

In view of the requirement that the adjudication of commercial disputes should be speedy, appropriate, professional, consistent and predictable, the second panel of the 2017 National Conference on Judicial Reform, which had explored the issue of whether a professional court should be set up, adopted a resolution to establish the Commercial Court.  The Judicial Yuan not only sent personnel to the US, Japan, the Netherlands and Denmark to inspect the establishment status of professional commercial courts and relevant systems but also organized several relevant consultation meetings to gather opinions from all walks of life.  After the Committee on the Research and Formulation of the Commercial Case, Adjudication Law was established on July 11, 2018, scholars well versed in commercial law, financial law and civil procedural law, lawyers, all levels of judges and representatives from competent administrative agencies were retained to serve as members.  Deliberations have been made in intensive meetings conducted after Jul 26, 2018 with the completion of the initial draft of the draft Commercial Case Adjudication Law, which consists of a total of 81 articles, in March 2019.

IV. Legislative process[2]

For the sake of comprehensiveness in the provisions of the draft, the Judicial Yuan solicited the opinions of all walks of life by conducting public hearings in northern, central and southern Taiwan before conducting committee meetings to discuss the recommendations from all walks of life.  The conclusions were submitted to the Judicial Yuan for deliberation and will be submitted to the Legislative Yuan for deliberation after being adopted by the Judicial Yuan.  After this Law is successfully made, a commercial case adjudication procedure will be established to rapidly, properly and professionally resolve major civil and commercial disputes so that the judicial resolution mechanisms of commercial cases in Taiwan will enter a new era.

V. Brief legislative comment.

During the press conference on the completion of the draft, Secretary General Tai-lang Lu of the Judicial Yuan stated, when interviewed, that this is a bill that “strives to stimulate economic development.”  This Law seeks to address the issue of time-consuming trial of civil cases so that remedies in commercial civil cases can be obtained quickly to reflect the nature of timeliness, speed and benefit maximization of commercial cases.   With respect to this legislation, the author has summarized past comments made by all walks of life on this Law, which are focused on the following areas:

1. This Law, which excludes commercial criminal cases, may give rise to contradictions of adjudication: Cases to which this Law applies are only limited to commercial civil lawsuits and non-litigation cases. There are critics who view that there may be potential contradictions of adjudication if the same case is divided and heard by different civil and criminal courts. In past practices, the approach of criminal cases with incidental civil procedure not only brings trial convenience to the parties but also consolidates the findings of civil and criminal courts, and civil courts also award damages or find facts in civil cases mostly by considering if the criminal court has rendered a guilty decision to avoid contradiction in adjudication rendered by civil and criminal courts.

To protect the trial level interest of the parties in criminal cases, the Judicial Yuan excludes commercial criminal cases from this Law after considering the trial level interest of the parties to a trial and the legal value such as the consistency of adjudication, litigation economy, and dispute resolution once and for all.  Since criminal cases should be tried more prudently by the court and stricter evidentiary rule should apply, the author believes that in view of the accommodating measures to apply this Law as a new civil procedural law and in order to reduce its interference with trial under other existing procedural laws, it is reasonable not to include criminal cases in the scope of this Law.

2. No disclosure of reports prepared by commercial investigators: The legislative reasons for Article 17 of the Law indicate that reports prepared by commercial investigators are only for the reference of judges, and since they are of consultative nature, they are not disclosed. However, if the court seeks to adopt as the basis of adjudication any special knowledge obtained from commercial investigators, the parties or related parties should be given opportunities to provide their arguments or state their opinions in order to safeguard the right of the parties or interested parties to attend a trial and to avoid surprising adjudication.

Before the release of the initial draft, there were critics who held that[3] although commercial investigators will be set up just like the technical examination officers in the intellectual property litigation system, still the nature of a technical examination officer, who is neither a witness, nor an appraiser, nor an assistant to a judge, much less an expert witness, but fulfills a decisive function in the decision on an intellectual property trial, is never clarified.  To clarify litigation relations, technical examination officers may provide their explanation or raise questions based on their expertise concerning factual and legal matters to the parties, or put their questions directly to witnesses or appraisers, or state their opinions to the judges about the cases.  Technical examination officers are not examined, the disclosure of their opinions is not required, and the parties cannot challenge their opinions, much less debating against themTechnical examination officers are almost “enemies” to the parties to all intellectual property lawsuits.  If the Commercial Court sets up commercial investigators like the technical examination officers in the intellectual property litigation system, this will be a nightmare to the handling of commercial disputes.

In the initial draft of this Law concerning “when the court seeks to rely on any special professional knowledge obtained from commercial investigators as the basis of adjudication, the parties should be provided with opportunities to provide their arguments or state their opinions,” the Judicial Yuan has responded in the initial draft to the drawback in setting up commercial investigators mentioned in the above comments.  The author believes that it is indeed necessary to set up commercial investigators with professional knowledge to assist the judges with the trial of cases, given the professional nature, complexity of facts and voluminous evidence of commercial cases.

3. Deviation from the international trend to promote mechanisms for out-of-court dispute resolution: Out-of-court dispute resolution mechanisms, which have become prevalent in recent years to address cross-border international disputes or disputes involving foreign parties, include arbitration, mediation, dispute adjudication board (DAB), dispute resolution board (DRB), emergency arbitration and third-party funding for arbitration (TPF). Chief Justice Sundaresh Menon in Singapore made a recommendation in 2013, and after the constitutional amendment in 2014, retired judges (including retired justices) may continue their trial services, and the chief justice may designate foreign nationals to serve as judges.  The Singapore International Commercial Court (SICC),[4] which has a panel of international judges, was established in Singapore, while a draft was also released on April 18, 2018 to introduce an international commercial court system.[5]

Regardless of the commercial court system introduced in Singapore or in Germany, the main purpose is to attract parties in major international commercial cases to agree to choose a court in such country to be the competent court for dispute resolution.  Therefore, cases heard in the commercial courts in Singapore and Germany are not limited to commercial cases related to the location of the competent court.  Such practice not only can enhance the familiarity of commercial organizations in the place where the court is located with international dispute resolution mechanisms and commercial terms to promote alignment of local enterprises with international commercial systems but also can attract parties in major international commercial cases to agree to choose a neutral third-country court to hear disputed cases.  Singapore has also become a stronghold for handling international commercial disputes as a result.  The Singapore Arbitration Association ranked the third among international arbitration associations, only next to the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA).

Conversely, the legislative objectives of the 81 articles of the initial draft of this Law as disclosed do not include the trial of cases involving international commercial disputes in the scope of this Law.  Therefore, this calls into question if it is necessary to set up a commercial court independently for cases which were previously heard by ordinary civil courts.  In addition, the Commercial Court to be established is only expected to have nine judges.  In view of the complexity of commercial cases and the collegiate system of three judges, it seems that the objective of speedy trial under the Law cannot be achieved, either.

Appendix: Major Outline of the Provisions of the Initial Draft of the Draft Commercial Case Adjudication Law

Chapter I: General Provisions (§1-§19)

1. Scope of commercial Cases (§2)

2. Mandatory representation by lawyers (§6)

3. Use of electronic submission system for complaints (§14)

4. Distant trial (§18)

Chapter II: Commercial Mediation Procedure (§20-§32)

1. Mandatory mediation (§20)

2. Mediation by appropriate commercial mediators appointed by judges (§23 and §24)

3. The mediation procedure is not open to the public and the mediators shall observe confidentiality (§25 and §30).

4. The parties and their attorneys are obligated to appear and should submit important facts, evidence and proposed dispute resolution solutions (§21, §22 and §26).

5. The mediation procedure shall be concluded in 60 days after the mediators are appointed (§28).

6. If a mediation is successful, application may be filed to refund three fourths of the application fee (§32).

Chapter III: Commercial Litigation and Preservation Procedure (§33-§65)

1. A trial will be conducted by a collegiate panel of three judges (§36).

2. The court shall negotiate a trial plan with the both parties (§39 and §40).

3. Party inquiry system – the parties may inquire of the other party about the essential matters for which facts or evidence is enumerated during pre-trial stages (§43 and §44).

4. The parties may produce expert witnesses to provide professional opinions (§47 and §50).

5. If necessary, the court may ask expert witnesses to jointly issue a professional opinion in writing, and expert witnesses may also question other expert witnesses or appraisers during a hearing (§51 and §52).

6. The parties may apply to the court to compel the other party or any third party to produce documents, objects to be inspected or materials required for expert testimonies (§53 and §54).

7. A protective order system is adopted (§55-§59).

8. The litigation procedure may be suspended halfway through for referral to arbitration; and if an arbitral award is rendered or if a lawsuit is settled, the application may be filed to refund three-fourths of the adjudication fee (§61).

9. The degree of elucidation for an application for a temporary state disposition is strengthened (§64).

10. In case the ruling on a temporary state disposition finds the original application inappropriate from the very start or cancels the application if the counterparty seeking compensation cannot substantiate the number of damages, the amount of the damages shall be presumed pursuant to law(§65).§65).

Chapter IV: Commercial Non-litigation Procedure (§66-§70

1. A commercial non-litigation case shall be adjudicated by a collegiate system, and the commercial mediation procedure shall apply(§66).§66).

2. Procedural items for specific commercial non-litigation cases(§67-§70).§67-§70)

Chapter V: Appeal, Interlocutory Appeal and Retrial Procedure§71-§75§71-§75)

1. An appeal or interlocutory appeal against an adjudication rendered by the Commercial Court may be filed with the Supreme Court; and if the Commercial Court adjudicates a non-commercial case by mistake, the Supreme Court shall not reverse the adjudication for a lack of jurisdiction (§71 and §72).§71 and §72).

2. Relevant provisions of the Code of Civil Procedure shall govern or apply mutatis mutandis to the appeal or interlocutory appeal or retrial procedure for a commercial case (§73-§75).§73-§75).

Chapter VI: Supplemental Provisions (§76-§81)§76-§81)

1. Criminal penal provisions relating to this Law (§76-§78).§76-§78)

2. Other applicable provisions, formulation of the enforcement rules and the effective date (§79-§81).§79-§81).

[1] Press release for the press conference on the completion of the draft Commercial Case Adjudication Law of the Judicial Yuan

[2] Information platform for tracking judicial reform progress

[3] Fu-tien Li, On the Establishment of the Commercial Court, Review on the Commercial Court as Promised

[4] Singapore International Commercial Court:

[5] German International Commercial Court: