Teresa Huang and Jenny Chen[1]
I. Introduction of major changes to the Commercial Matter Adjudication Law
Since the occurrence of an incident involving commercial disputes has a significant impact on a company’s shareholders, creditors and the public investment market, the Judicial Yuan has sought to enhance the overall business environment and economic competitiveness of Taiwan by actively preparing the draft Commercial Matter Adjudication Law since February 2018 in order to establish a fast, appropriate and professional procedure for the adjudication of business matters. After clearing through three legislative readings at the Legislative Yuan on December 17, 2019, the Commercial Matter Adjudication Law was promulgated on January 15 this year (2020). Since this law is a new law and involves major changes to court organization, it has not gone into effect yet. It’s effective date will be separately set by the Judicial Yuan, depending on the readiness of relevant accommodating measures.[2] This article hereby summarizes major changes reflected by the Commercial Matter Adjudication Law, which consists of 81 articles in total, in the following table:
| 1. Establishment of the Commercial Court | In the future, the Intellectual Property and Commercial Court (hereinafter, the “Commercial Court”), which consists of the Intellectual Property Division and the Commercial Division, will be established. Commercial matters will fall within the exclusive jurisdiction of the Commercial Court. |
| 2. A two-level and two-instance system is adopted. | The first instance trial shall be a factual trial conducted by a panel of judges of the Commercial Court, while the legal trial procedure for the second instance trial concerning appeal shall be conducted by the Supreme Court. |
| 3. Specific stipulation of the scope of commercial matters | Commercial matters consist of commercial litigation matters and commercial non-litigation matters.
1. Commercial litigation matters: Important matters include (1) Matters involving disputes over civil rights and obligations asserted against the publicly offered company or the legal representative of the company by any shareholder of the company in the exercise of his/her shareholder’s rights in the capacity of a shareholder. (2) Matters involving disputes over the validity of any resolution adopted during a shareholders’ meeting or board meeting of a publicly offered company. (3) Matters involving disputes over the validity of any resolution adopted during a shareholders’ meeting or board meeting of a non-publicly offered company with a capital of NT$500 million or more and with a control and affiliation relationship with a publicly offered company. (4) Disputes between the legal representative of a company and the company over civil rights and obligations with the object of the action valued at NT$100 million or more. (5) Civil disputes arising from violation of specific financial laws and regulations with the object of the action valued at NT$100 million or more. (6) Civil disputes arising from the Company Act or specific financial laws and regulations with the object of the action valued at NT$100 million or more and with the written agreement between the parties to submit the disputes to the jurisdiction of the Commercial Court. 2. Commercial non-litigation matters: Important examples include matters involving the adjudication of the share acquisition price for a publicly offered company, the application of a publicly offered company to appoint a temporary manager or assign an inspector, and matters concerning their removal. |
| 4. Compulsory representation by lawyers | A party or a related party to a commercial matter shall appoint an attorney to act as a process agent for processes under this law. If a process agent is not retained and the failure to do so is not rectified within the required period, the court shall dismiss the complaint. Unless as otherwise stipulated, procedural acts shall be engaged by a process agent, and if the process agent is not present on a procedural date, such party shall be deemed to have failed to appear. Since an attorney’s fee is part of the litigation or procedural cost, there shall be a limit on the maximum amount. |
| 5. Procedure for submitting pleadings | In order to improve trial efficiency, in principle, pleadings should be transmitted by an electronic pleading transmission system, and in case of failure to make the submission as required, the submission will not be effective unless it is corrected pursuant to applicable requirements. Motions, complaints or appeals that have not been filed via the electronic pleading transmission system without correction within the required period shall be rejected by the court. |
| 6. Commercial investigators | Commercial investigators help judges make a determination of professional commercial issues involved in the cases, such as assistance with analyzing and summarizing evidence, issues and legal questions, provision of referential materials about professional fields or preparation of reports. Basically, the reports so prepared are not publicly disclosed. However, with respect to the special professional knowledge acquired by the court and provided by the commercial investigators, the parties or interested parties should be given opportunities to present their arguments or statements before such knowledge may be relied on as the basis of adjudication. |
| 7. Antecedent commercial mediation | Before a commercial complaint is filed, a mediation procedure shall be followed first and conducted by a judge of the Commercial Court. The judge may appoint one to three commercial mediators in consideration of the nature of the case and based on their academic knowledge and experience to mediate the disputes first. The mediation process is not open to the public and, unless otherwise agreed by the parties, shall be concluded within 60 days after the appointment of the commercial mediators. The parties, the legal representatives and process agents are obligated to be attend pursuant to law. If the mediation is successful, the parties may file a motion to refund part of the procedural cost. |
| 8. Trial plan | The court shall agree on a trial plan with both parties concerning a schedule for items such as a summary of issues, examination on relevant individuals or the parties’ offensive and defensive methods for specific matters. If the parties have an unjustified delay in proposing the offensive and defensive methods within the required period to the extent that the litigation procedure based on the trial plan is seriously hampered, the court may reject the provision of such delayed offensive and defensive methods. |
| 9. Inquiry system between parties | To enable the parties to collect relevant evidence at the pre-litigation stage, the parties may, during the period specified by the court or before the end of the preparatory procedure, enumerate necessary items relating to the facts or evidence to make inquiries with the other party and to request specific explanation. If the other party refuses to provide an explanation in response to inquiries about a matter of fact or evidence without justifiable reason, the court may consider the circumstances and uphold the assertions of the party making the inquiries or conclude the facts that should be substantiated by such evidence to be true. |
| 10. Discovery involving trade secrets | In case a party files a motion with the court to compel the other party or a third party to produce documents, objects to be inspected or materials required for the inspection, if the holder refuses by asserting that such documents or objects are trade secrets, the grounds for the refusal shall be specified. In order to determine the merits of the above-mentioned defense, the court should give the party an opportunity to be heard and, if necessary, order the holder to produce evidence in camera. |
| 11. Expert witnesses | A party may, with the permission of the court, declare that professional opinions will be provided by expert witnesses. An expert witness is required to sign a written oath and actively disclose matters that may affect the impartiality and objectivity of the statement. Expert witnesses shall respond in writing to questions raised in written submissions of the other party, and the responses shall constitute a part of their professional opinions. If it is deemed necessary by the court, the expert witnesses of the parties may be ordered to discuss the issues or other necessary matters and to jointly issue their professional opinions in writing. |
| 12. Confidentiality preservation orders | The court may, upon request and clarification by a party or a third party, issue a confidentiality preservation order to related parties to the litigation on the trade secrets held by such party or the third party. The individuals subject to a confidentiality preservation order shall not use the trade secrets for purposes other than the implementation of the litigation or disclose the trade secrets to any parties not subject to the confidentiality preservation order. |
II. Notice for coping with the Commercial Matter Adjudication Law
According to the brief introduction in the above table and in view of the need for speedy, proper and professional adjudication of major commercial disputes, there are several new trial mechanisms in the Commercial Matter Adjudication Law which are not found in the Code of Civil Procedure. To accommodate the official launch of this law, the following points of notice are hereby provided in this article:
1. An enterprise may assess the provisions concerning jurisdiction in a contract, depending on the nature of the transaction
The Commercial Matter Adjudication Law provides that in case of any civil dispute under the Company Act or specific financial laws and regulations, if the object of the action is valued at NT$100 million or more, the parties may agree in writing to submit to the jurisdiction of the Commercial Court (Article 2, Paragraph 2, Subparagraph 6 of the law.) In order to increase the opportunity to apply the specialized court system, it is recommended that enterprises review the nature of the transactions involved in existing contracts and contracts to be entered into to decide if it is necessary to agree to the jurisdiction of the Commercial Court after there is more clarity from the Judicial Yuan about information such as the locations of the Commercial Court and its branches. If necessary, professional lawyers may be consulted to assess relevant legal risks.
2. Since compulsory representation by lawyers is required under the Commercial Matter Adjudication Law, enterprises should pay more attention to the participation of professional legal personnel in the course of commercial matters in order to stay prepared in advance for commercial disputes.
Since the Commercial Matter Adjudication Law requires compulsory representation by lawyers, a party or interested party shall retain a lawyer to be a process agent, who will handle the procedures stipulated under this law, including the filing of complaint, mediation, relevant procedural acts and appearance on procedural dates. If a process agent is not retained, not only a procedural act is not effective but also the complaint that is filed will be dismissed in the worse-case scenario. Based on the foregoing, the current mechanisms for handling commercial matters stress the importance of professional and speedy handling. Such trend should be considered earlier for general commercial matters such as the planning stage for commercial matters, so that if professional legal practitioners can be involved as early as possible, not only potential commercial disputes can be avoided but also this will help enterprises better promote the progression of court trial if a matter is heard by the Commercial Court in the future thanks to their in-depth understanding of the commercial matter at issue.
3. Enterprises should pay more attention to the commercial mediation procedure and the first instance trial procedure
In order to resolve commercial disputes quickly and appropriately, the Commercial Matter Adjudication Law specifically provides that mediation should be conducted prior to the filing of a complaint on commercial matters. To facilitate the success of mediation, the parties with decision-making authority, legal representatives and process agents are required to participate in the mediation proceedings in person. Therefore, in contrast to past practices where it was quite often that an enterprise only asked its lawyers or even employees to attend mediation proceedings, enterprises and their legal representatives should pay more attention to the mediation procedure and prudently formulate their mediation strategy and explore feasible mediation arrangements.
It should be noted that the adoption of the two-level and two-instance trial system in the Commercial Matter Adjudication Law seeks to resolve commercial disputes as soon as possible. Therefore, since the factual trial is only conducted by the first instance court where a conclusive legal battle is fought, enterprises should make sufficient use of the trial mechanisms provided by this law, collect favorable evidence as much as possible and present to the court. Even if the case moves to the stage of second-instance legal trial, this is still helpful for winning the most favorable final decision.
III. Conclusions
According to the illustration in this article, it is foreseeable that the implementation of the Commercial Matter Adjudication Law will change the patterns for an enterprise’s handling of major commercial disputes in the future. The authors will pay close attention to the subsequent implementation of the law, including the effective date, the formulation of ancillary regulations, the establishment of the Commercial Court, and related accommodating measures, and will provide relevant information and recommendations for the reference of enterprises.
[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.
[2] Until the date of this article (July 3, 2020), the Judicial Yuan had not announced the effective date.