TAIWAN

Tiffany Huang and Jady Kao

A. LEGISLATION AND RULES

A.1       Legislation

A.1.1    Background of Arbitration Law

The Commercial Arbitration Act in Taiwan was first promulgated on 20 January 1961. It was amended in 1982 and 1986. Subsequently, in 1998, with reference to the UNCITRAL Model Law 1985, the Commercial Arbitration Act was made over and renamed the Arbitration Law. Thereafter, the law was further amended in 2002, 2009, and 2015.

The Arbitration Law contains eight chapters (namely, “Arbitration Agreement”, “Constitution of Arbitral Tribunal”, “Arbitral Proceedings”, “Enforcement of Arbitral Awards”, “Revocation of Arbitral Awards”, “Settlement and Mediation”, “Foreign Awards”, and “Additional Provisions”), embodies the fundamental principles of international arbitration. According to article 1 of the Arbitration Law, arbitrable matters are not limited to commercial disputes. Parties may enter into an arbitration agreement to arbitrate any disputes that may be resolved by settlements. International arbitration in Taiwan continues to be governed by the Arbitration Law, to which no amendment has been made through the legislature since 2015.

On 23 November 2020, a draft proposal to the Arbitration Law was proposed by the Chinese Arbitration Association (CAA), the oldest and most active arbitration association in Taiwan that had run over for decades and assembled experts, calling on the legislature to comprehensively amend the Arbitration Law.

A.1.2    Draft proposal of the Arbitration Law

In order to mitigate the gaps between the local Arbitration Law and the international rules, the draft proposal proposed by CAA is structured by the UNCITRAL Model Law on International Commercial Arbitration (2006). We introduce the key revisions of the draft proposal as follows:

A.1.2.1 Re-structured by the UNCITRAL Model Law on International Commercial Arbitration (2006)

The draft proposal is structured by the UNCITRAL Model Law on International Commercial Arbitration 1985, amended in 2006, the most updated version of the UNCITRAL Model Law, to align with the international arbitration trends.

A.1.2.2 Admitting ad hoc arbitration

It has been a concern that the Taiwan court does not admit the ad hoc arbitration such that the ad hoc arbitration is not enforcible in Taiwan by interpreting article 37 of the Arbitration Law. In this regard, the draft proposal admits that the parties may choose ad hoc arbitration to resolve their disputes. According to article 2 of the draft proposal, institutional arbitration prevails where the parties had not specified ad hoc arbitration as the only mechanism in the arbitration agreement and provided that either of the parties had filed the dispute to the arbitral institution.

A.1.2.3 Arbitral matters including investment disputes

The draft proposal expands the scope of matters that may be resolved by arbitration. According to article 7 of the draft proposal, parties may enter into an arbitration agreement for the subject concerning (1) commercial disputes, (2) general disputes, and (3) investment disputes that may be resolved by settlements to be resolved by arbitration.

A.1.2.4 Offering the parties with more flexibility on arbitral proceedings

The draft proposal offers parties flexibility on arbitral proceedings. For example, parties are free to determine how documents to be delivered, the numbering of arbitrators, the specific qualifications of arbitrators, and multiple languages in use during the proceeding.

A.1.2.5 Granting the tribunal the authority to order interim measures and preliminary orders

The Arbitration Law does not stipulate the mechanism of interim measures and preliminary orders, and the parties may only rely on the court orders for civil security procedures before the arbitral award is concluded or enforced in the civil court. In tandem with the UNCITRAL Model Law, the draft proposal grants to the tribunal the authority to order interim measures and preliminary orders per application of either of the parties.

A.1.2.6 Adjust the definition of foreign arbitral awards

According to article 47 of the Arbitration Law, the foreign arbitral award is not enforcible until the court grants enforceability recognition. article 47 of the Arbitration Law defines the foreign arbitral awards as (1) the arbitral award issued out of the territory of Taiwan, or (2) the arbitral award issued in Taiwan under foreign arbitration rules.

The CAA is holding several public hearings to gather information from the dispute resolution experts and different interest groups. As the CAA is reputable and has expertise in administering international arbitration in Taiwan, it is envisaged that the legislature may take the draft proposal or its amendments into considerations for future legislative processes.

A.2       Institutions, rules and infrastructure

A.2.1    Institution

The CAA is the most prestigious arbitration institution in Taiwan providing for the administration of international arbitration, mediation, and other forms of alternative dispute resolution under its arbitral rules (i.e., the CAA Arbitration Rules, which was stipulated based on the Arbitration Law) or any other rules agreed upon by the parties. According to its statistics, the CAA handles about 170 domestic and international cases each year on average over the past 15 years.

Considering that Taiwan is not a New York Convention country, the arbitral awards seated in Taiwan may be challenged from time to time during the recognition and enforcement in other countries. Also, in order to enhance its competitiveness over other institutions for international arbitration, CAA established the first foreign branch in Hong Kong in 2018, named the CAA International Arbitration Centre (CAAI), to administer arbitrations to be seated outside Taiwan. Since 2018, the CAAI has been since administered some of the arbitration cases with connection to Taiwan elements.

The CAAI adopted its own arbitration rules, namely the CAAI Arbitration Rules[1]. The two distinct sets of rules and administration embody that the CAA for arbitrations seated in Taiwan and the CAAI outside of Taiwan aims to provide the parties with more flexibilities while keeping CAA’s reputation on dispute resolution in the Mandarin-speaking world.

B. CASES

In the year 2020, there were two major arbitration cases administered by the CAA. Both related to the public-private partnership between the government and the private entities, which has been a developing model of increasing importance in Taiwan since the millennium. The two arbitration cases include the development disputes around the Dapeng Bay and the one for the Fudafudak Coast (also known as the Meiliwan Cost). They were all long-running disputes that attracted much attention, and it has thus been encouraging news that the CAA tribunal finally made the awards to settle these disputes.

B.1       Dapeng Bay Company v. Dapeng Bay National Scenic Area Administration (2020)

A development and operation contract (“Contract”) was entered into by and between the Dapeng Bay National Scenic Area Administration (“Administration”) and the Dapeng Bay Company (“Company”) on 30 November 2004. In the Contract, the parties had agreed that the Company should be entitled to lease, set up leisure facilities, and operate the Dapeng Bay, one of the national scenic areas with great lakeshore views in southern Taiwan, in consideration of the royalties to be paid by the Company. The contractual term is until 2058.

Yet in 2019, the Company claimed that the Administration, as the land administrator of the Dapeng Bay, did not comply with the contractual obligations set forth under the Contract. For example, the Administration did not set up the sewage system in the Dapenbay, and the Administration did not ban the fishing rafts that have been unlawfully navigating within the Dapenbay. The Company claimed that the Administration’s non-compliance with the Contract causes the Company to be unable to operate the Dapeng Bay and for which the Administration should compensate.

The Company terminated the Contract on 13 March 2019 and filed an arbitration to the CAA, in which the claims including (a) to confirm that the Contract had been no longer binding to the parties since 13 March 2019, (b) the Administration should return the performance bond and the deposit of approximately USD 13 million to the Company, (c) the Administration should compensate the Company in the amount of approximately USD 85 million as compensation for not being able to keep operating the Dapeng Bay.

The arbitration tribunal made its award on 23 April 2020, ordering that (a) the Contract was terminated on 13 March 2019 and the Company has the right to terminate because of the Administration’s non-compliance with the Contract, (b) the Administration should return the performance bond and the deposit to the Company, but the Company should share 20% of the whole responsibility, as such the Administration should return approximately USD 10.5 million to the Company (i.e., 80% of the approximately USD 13 million performance bond and the deposit). As for the claim (c), the tribunal dismissed it after considering that there was no casualty between the Administration’s breach of the Contract and the Company’s failure of the operation.

B.2       Meiliwan Resort Co., Ltd. v. Taitung County Government (2020)

A BOT contract (“Contract”) was entered into by and between the Taitung County Government (“Taitung Government”) and the Meiliwan Resort Co., Ltd (“Company”) on 14 December 2004. In the Contract, the parties had agreed that the Company should be entitled to develop the Fudafudak Coast in Taitung County, including building and operating the resort hotel under the BOT for a contractual term of 50 years.

Surrounded by a number of disputes and protests for environmental issues, the Company started to construct the resort hotel. The resort hotel was supposed to operate in 2007; however, it was not able to do so because its approval of environmental impact assessment (“EIA Approval”) was revoked by the Administrative High Court, and the Supreme Court retained the revocation in 2016. As the Company considered it hard to acquire another EIA Approval for the same area, and the operation seemed impossible, the Company filed an arbitration to CAA, in which the Company mainly claimed for termination of the Contract and the Taitung Government should compensate the Company for approximately USD 43 million as the compensation for not abling to keep operating the Fudafudak Coast beach area.

The arbitration tribunal made its award on 24 October 2020, ordering that the Company has the right to terminate the Contract due to a force majure event prescribed in the Contract, and the Company has discretion in determining how to operate the Fudafudak Coast so that the Company should bear the operation responsibility and risk on its own. Therefore, the Taitung Government is not liable to compensate the Company for its failure of the operation, but the Taitung Government is obligated to buy back the building of the resort hotel at the cost of approximately USD 22 million as the building is agreed to be transferred.

[1] http://www.caai-arbitration.org/Rules.aspx