Business in modern days is becoming increasingly complicated due to business globalization, and the growth in cross-border transactions and trading of goods and services.[1]  Entrepreneurs doing business in today’s dynamic marketplace frequently face disputes arising out of the normal course of daily business affairs.[2]  With respect to the means for resolving business disputes, an option that generally comes up in everyone’s mind is filing a lawsuit in the court.[3]  However, racing to a courthouse in an individual jurisdiction is not the only option for settling business disputes because there are various alternative mechanisms for resolving disputes outside of court, including, but not limited to, arbitration.[4] 
 
Arbitration, in general, refers to a private adjudication process where the parties to disputes have their disputes heard and decided by a private and impartial arbitral tribunal rather than a court of law for a decision binding on the parties.[5]  As compared to litigation in a court setting, the arbitration process is generally perceived to have the relative advantages of allowing greater party autonomy, serving a flexible and expeditious process, reducing the time and cost incurred by litigation, maintaining confidentiality and privacy, preserving amicable relationships with business partners, and limited rights to appeal from arbitral decisions.[6]  Recent surveys and prior research suggest that arbitration has been a preferred method for settling business disputes.[7]  In Taiwan, arbitration is becoming a more and more common form of alternative dispute resolution (“ADR”) that is worth consideration of entrepreneurs facing business disputes when doing business in Taiwan.[8]
 
This Article addresses some considerations for entrepreneurs doing business in Taiwan to think over when considering arbitration as an option for settling business disputes.  After briefly introducing the arbitration regime in Taiwan, this Article covers the agreement to arbitrate, arbitral institutions in Taiwan, the appointment of arbitrators, estimated cost of arbitration, and arbitral awards before reaching to the conclusion part.  Considerations addressed herein include, but not limiting to, (1) the meaning of arbitration; (2) the advantages of arbitration as compared to litigation; (3) the source of law governing and applying to arbitration conducted in Taiwan; (4) whether the parties choosing arbitration to settle disputes have any freedom to formulate an arbitration process of their choice; (5) what kind of dispute may be taken to and resolved by arbitration; (6) a crucial step at the early stage of arbitration; (7) what will render an arbitration agreement invalid; (8) whether it is a requisite to put an arbitration agreement in writing; (9) whether the invalidity of the principal contract will void an arbitration clause contained therein; (10) whether a valid arbitration clause or agreement between the parties to disputes will prevent either of the parties from bringing a dispute to court; (11) whether ad hoc arbitration or institutional arbitration is an available option for the parties to disputes; (12) whether there is any arbitral institution in Taiwan; (13) the eligibility for appointment as an arbitrator; (14) whether the parties are free to appoint their arbitrators, designate the number of arbitrators or specify a method of appointing arbitrators; (15) what if the parties do not together appoint an arbitrator for themselves or specify a method of arbitrator appointment; (16) how much does arbitration cost as compared to litigation; (17) whether there is any time limit for rendering an arbitral award; (18) on what ground may one of the parties seek to set aside an arbitral award; (19) whether an arbitral award has any binding effect; (20) the enforcement of a Taiwan seated arbitral award in Taiwan; (21) whether an arbitral award made in Taiwan is enforceable outside Taiwan; and (22) how to enforce a Taiwan seated arbitral award outside Taiwan.
 
I.  The Arbitration Regime in Taiwan
 
A.  Source of Law and Arbitral Autonomy
 
The Arbitration Law[9] (influenced by[10] the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration,[11] with some modifications), together with the Rules on Arbitration Institution, Mediation Procedures and Fees,[12] as well as other laws, lay out the fundamental framework and general principles of the arbitration regime in Taiwan.[13]  In addition, the principle of party autonomy, with restrictions set forth by law, plays a significant role in arbitration.[14]  Under the principle of party autonomy (which is also embraced by the arbitration regime in Taiwan), the parties choosing to settle their disputes through arbitration enjoy broad freedom, subject to the limitations set forth by law, to construct an arbitration process of their choice,[15] including, but not limited to, deciding on the applicable law, the composition of the arbitral tribunal,[16] the language of arbitration,[17] the place of arbitration,[18] the arbitral proceedings (e.g., the commencement of the arbitration proceedings,[19] procedural rules governing the arbitration,[20] and the conduct of arbitration[21]), and the confidentiality of the arbitration proceedings.[22]  If there is no agreement between the parties on the procedural rules governing the arbitration, the arbitral tribunal will apply the procedural rules prescribed in the Arbitration Law.[23]  In the case that the Arbitration Law is silent on a procedural arbitration rule, if any, the arbitral tribunal may adopt, mutatis mutandis, the Code of Civil Procedure[24] or other proper procedural rules.[25]
 
B.  Arbitrability
 
Under the Arbitration Law, any present or future dispute “which may be settled in accordance with the law” is arbitrable,[26] including, but not limited to, commercial disputes.[27]  However, disputes that are of non-civil or non-commercial nature (e.g., criminal matters) or disputes which may not be settled in accordance with the law are excluded from the purview of arbitration.[28]
 
II.  Arbitration Agreement
 
A.  Agreement to Arbitrate
 
Except for a compulsory arbitration required by law,[29] a critical step at the early stage of arbitration is an agreement to arbitrate between the parties.[30]  Under the Arbitration Law, an arbitration agreement is invalid if the arbitration agreement was not “entered in respect of a legal relationship or a dispute thereto.”[31]  In addition, the Arbitration Law requires that an arbitration agreement between the parties must be in writing.[32]  Commentators note that an oral agreement to arbitrate reached between the parties “will be deemed void.”[33]  This written requirement is met when there are “[w]ritten documents, documentary instruments, correspondence, facsimiles, telegrams or any other similar types of communications between the parties evincing prima facie arbitration agreement,” which “shall be deemed to establish an arbitration agreement” between the parties[34] and does not require the parties to sign thereon.[35]  According to the legislature, “any other similar types of communications” refers to communications such as electronic documents with records in the written form, but excludes simply electronic communications, audiotapes or videotapes.[36]
 
An arbitration agreement may be in the form of either a stand-alone agreement or an arbitration clause inserted in a principal contract between the parties.[37]  If a dispute arises where there is no arbitration agreement between the parties, the parties may agree to submit their existing dispute to arbitration.[38]  On the other hand, as a reflection of party autonomy, the parties may agree in advance to settle their future disputes through arbitration by a pre-dispute arbitration agreement.[39] 
 
B.  The Doctrine of Separability
 
Where an arbitration clause is included in a principal contract between the parties, the validity of the arbitration clause, according to the Arbitration Law, does not depend on the validity of the remaining parts of the principal contract.[40]  Under the arbitration regime in Taiwan, the nullification, invalidation, revocation, rescission or termination of the principal contract will not thence render an arbitration clause inserted therein invalid.[41]  In other words, an arbitration clause is treated distinctly from the principal contract in which the arbitration clause is contained, allowing the arbitration clause to survive the invalidity of the principal contract.[42]
 
C.  Restraining from Commencing Litigation
 
A valid arbitration clause or agreement between the parties may, according to the Arbitration Law, restrain each of the parties from bringing the disputes before a court.[43]  If one party files an action bringing a dispute subject to a valid arbitration agreement to court, “the court may, upon application by the adverse party,” stay the action and court proceedings, “and order the plaintiff to submit to arbitration within a specified time,” provided that the adverse party has not responded on the merits of the case.[44]  The court will dismiss the plaintiff’s action if the plaintiff does not submit the dispute at issue to arbitration within the specified time as ordered.[45]  On the other hand, if the plaintiff has submitted to arbitration as ordered, the legal action brought by the plaintiff in court will “be deemed to have been withdrawn at the time an arbitral award is made.”[46]
 
In the event that one party brings a dispute to court while the parties previously agreed to settle their dispute either through litigation or arbitration, then, contrary to the case above, the adverse party should be bound by the choice of the plaintiff initiating the litigation because the agreement between the parties has granted either party an option to choose between arbitration and litigation.[47]  In this case, the court likely will not stay the action and court proceedings upon the adverse party’s application as the court will uphold the initiating party’s exercise of its option granted by the agreement between the parties.[48]
 
III.  Arbitral Institutions in Taiwan
 
In addition to the agreement to arbitrate, the parties may opt for institutional arbitration or ad hoc arbitration.  An ad hoc arbitration generally means, according to the European Convention on International Commercial Arbitration of 1961,[49] “settlement by arbitrators appointed for each case”[50] or an arbitration proceeding not administered by or involving any established arbitration organization.[51]  On the other hand, an institutional arbitration usually refers to an arbitration proceeding administered by or involving an established arbitration organization.[52]  In Taiwan, there are several established arbitral institutions available for the consideration of those who opt for institutional arbitration, including, but not limited to, the Chinese Arbitration Association, Taipei (the “CAA”),[53] the Taiwan Arbitration Association,[54] the Chinese Construction Industry Arbitration Association,[55] and the Chinese Real Estate Arbitration Association.[56]  Among all arbitral institutions in Taiwan, the CAA is the leading one with the longest history.[57]  Moreover, the Judicial Yuan has set up an online searching platform for looking up ADR institutions or organizations in Taiwan, including arbitral institutions.[58]
 
IV.  Appointment of Arbitrators
 
Under the Arbitration Law, only a natural person is eligible for appointment as an arbitrator, regardless of whether the parties opt for ad hoc arbitration or institutional arbitration.[59]  An agreement between the parties on appointing a non-natural person “which is not an arbitration institution” (e.g., “a corporate entity or any other organization”) as an arbitrator will be deemed as “no arbitrator was appointed.”[60]
 
Subject to the provisions of the Arbitration Law, the parties are free to appoint their arbitrators, designate the number of arbitrators or specify a method of appointment of arbitrators.[61]  If the parties do not together appoint an arbitrator for themselves or specify a method of arbitrator appointment, “each party shall appoint an arbitrator for itself.”[62]  Next, these party-appointed arbitrators shall jointly appoint the third arbitrator, who is also the chair of the arbitral tribunal.[63]  In the event that the party-appointed arbitrators do not come up with an agreement on the appointment of the arbitral tribunal chair within thirty (30) days of their appointment, any of the parties may apply to a court seeking the appointment of the arbitral tribunal chair.[64]  Any of the parties may also apply for a court-appointed arbitrator if the parties have agreed that an arbitration administered by a sole arbitrator but fail to have consensus on the appointment of the arbitrator within thirty (30) days upon the receipt of a written request to appoint by a requesting party.[65]  In the case that the parties have opted for institutional arbitration, the appointment of the abovementioned arbitrator (either the arbitral tribunal chair or the sole arbitrator) shall be appointed by the arbitration institution chosen by the parties.[66]
 
V.  Estimated Cost
 
Arbitration fees vary from one case to another, depending on the type of the subject matter in dispute (property disputes[67] or non-property disputes[68]), and may escalate according to the amount or price of the subject matter.[69]  Furthermore, a fee of six hundred (600) New Taiwan Dollars (“NTD”) for application forms and information is required for a property dispute referred to arbitration.[70]  For general reference only, the followings provide estimated arbitration fee schedules in comparison with civil court costs (filing fees) schedules in Taiwan.  All figures in the following tables are denominated in NTD and do not include tax or other miscellaneous charges.
 
A.  Property Disputes
 

Amount or Price of the Subject Matter	Arbitration[71]	Civil Court Costs (three instances in total)[72]
60,000 or less	3,000	4,000
60,001 ~ 100,000	3,000 ~ 4,600	4,000
100,001 ~ 600,000	4,600 ~ 24,600	4,440 ~ 26,000
60,0001 ~ 1,000,000	24,600 ~ 36,600	26,440 ~ 43,600
1,000,001 ~ 1,200,000	36,600 ~ 42,600	43,995 ~ 51,520
1,200,001 ~ 2,400,000	42,600 ~ 66,600	51,915 ~ 99,040
2,400,001 ~ 4,800,000	66,600 ~ 102,600	99,435 ~ 194,080
4,800,001 ~ 9,600,000	102,600 ~ 150,600	194,475 ~ 384,160
9,600,001 ~ 10,000,000	150,600 ~ 152,600	384,555 ~ 400,000
10,000,001 ~ 100,000,000	152,600 ~ 602,600	400,352 ~ 3,568,000
100,000,001 ~ 1,000,000,000	602,600 ~ 5,102,600	3,568,307 ~ 31,288,000
1,000,000,001 or more	5,102,600 + (amount exceeding 9,600,000) x 0.5%	31,288,264 + (NTD 60 for each NTD 10,000 on the portion over 1,000 million) + an additional five tenths of the court cost

 
B.  Non-Property disputes
 

Arbitration Fees[73]	Civil Court Costs (three instances in total)[74]
9,000	12,000

 
C.  Accompanied Claims
 
If a civil action arising from a non-proprietary right is brought together with a proprietary claim, the court costs for the non-proprietary right and the court costs for the proprietary claim are calculated separately.[75]  Similarly, in the event that the subject matter of arbitration involves a non-property dispute accompanies a proprietary claim, the arbitration fee for the proprietary claim in dispute is calculated separately from the arbitration fee for the non-property dispute.[76] 
 
VI.  Arbitral Awards
 
A.  Time Limit to Decide
 
Under the Arbitration Law, an arbitral tribunal should render an arbitral award within six (6) months since the commencement of the arbitration.[77]  The arbitral tribunal may, if necessary, extend this six-month period for an additional period of three (3) months.[78]  In the event that the arbitral tribunal does not render an arbitral award within the specified time, each of the parties may, except for a compulsory arbitration required by law,[79] bring the dispute to the court or motion to resume litigation.[80]
 
B.  Arbitration Fee
 
An arbitral award shall state and allocate the arbitration fee,[81] allowing the prevailing party in arbitration to recover its arbitration costs.[82]  In the event that an arbitral tribunal does not decide on the allocation of the arbitration fee in an arbitral award, “either party [to the arbitration] may apply with the arbitral tribunal for a decision.”[83]  Commentators note that attorney fees, if any, are generally not included in an arbitral award except the parties expressly agree in their arbitration agreement that an arbitral award may include attorney fees.[84]
 
C.  Revocation
 
In general, the parties to arbitration seated in Taiwan have no option to appeal an arbitral award to an appellate arbitral tribunal.  However, each of the parties may apply to a court to set aside an arbitral award based on any of the following grounds: (1) “[t]he arbitral award concerns a dispute not contemplated by the terms of the arbitration agreement, or exceeds the scope of the arbitration agreement, unless the offending portion of the award may be severed and the severance will not affect the remainder of the award;”[85] (2) “[t]he reasons for the arbitral award were not stated, as required, unless the omission was corrected by the arbitral tribunal;”[86] (3) “[t]he arbitral award directs a party to act contrary to the law;”[87] (4) “[t]he arbitration agreement is nullified, invalid or has yet to come into effect or has become invalid prior to the conclusion of the arbitral proceedings;”[88] (5) “[t]he arbitral tribunal fails to give any party an opportunity to present its case prior to the conclusion of the arbitral proceedings, or if any party is not lawfully represented in the arbitral proceedings;”[89] (6) “[t]he composition of the arbitral tribunal or the arbitral proceedings is contrary to the arbitration agreement or the law;”[90] (7) “[a]n arbitrator fails to fulfill the duty of disclosure prescribed in [the Arbitration Law] and appears to be partial or has been requested to withdraw but continues to participate, provided that the request for withdrawal has not been dismissed by the court;”[91] (8) “[a]n arbitrator violates any duty in the entrusted arbitration and such violation carries criminal liability;”[92] (9) “[a] party or any representative has committed a criminal offense in relation to the arbitration;”[93] (10) “[i]f any evidence or content of any translation upon which the arbitration award relies, has been forged or fraudulently altered or contains any other misrepresentations;”[94] and (11) “[i]f a judgment of a criminal or civil matter, or an administrative ruling upon which the arbitration award relies, has been reversed or materially altered by a subsequent judgment or administrative ruling.”[95]  It should be noted that the grounds listed as items (8), (9), (10) and (11) above are limited to instances where “[a] final conviction has been rendered,” or “the criminal proceeding may not be commenced or continue[d] for reasons other than insufficient evidence.”[96]  Moreover, the grounds listed as item (6), involving “circumstances contravening the arbitration agreement,” and also items (7), (8), (9), (10) and (11) above are limited “to the extent sufficient to affect the arbitral award.”[97]
 
D.  Enforcement in Taiwan
 
An arbitral award rendered by an arbitral tribunal, according to the Arbitration Law, has the same force and effect as a final judgment rendered by a court and is binding on the parties.[98]  The enforcement of an arbitral award in Taiwan generally requires an enforcement order granted by a competent court upon application by a concerned party.[99]  Nevertheless, a court shall reject an application for enforcement of an arbitral award in some limited circumstances, including (1) “[t]he arbitral award concerns a dispute not contemplated by the terms of the arbitration agreement, or exceeds the scope of the arbitration agreement, unless the offending portion of the award may be severed and the severance will not affect the remainder of the award;” (2) “[t]he reasons for the arbitral award were not stated, as required, unless the omission was corrected by the arbitral tribunal;” and (3) “[t]he arbitral award directs a party to act contrary to the law.”[100]  On the other hand, an arbitral award may be enforced without a court enforcement order if the parties have agreed to that in writing, and the subject matter of the arbitral award concerns either of the followings: (1) “[p]ayment of a specified sum of money or certain amount of fungible things or valuable securities;” or (2) “[d]elivery of a specified movable property.”[101] 
 
E.  Enforcement Outside Taiwan
 
A Taiwan seated arbitral award is enforceable in a state or jurisdiction other than Taiwan if there is an international or domestic instrument providing a legal basis for recognizing and enforcing a foreign arbitral award in that particular state or jurisdiction.  Among a few international instruments facilitating the use of arbitration on an international scale, (1) the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the “New York Convention”)[102] and (2) the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (also known as the “Washington Convention”)[103] are two well-known treaties, which have been signed, ratified or acceded to by various states (each, a “Contracting State”), that provide legal bases for the enforcement of foreign arbitral awards.[104]  Under the New York Convention, a Contracting State shall “recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the [New York Convention].”[105]  Similarly, the Washington Convention requires that “[e]ach Contracting State shall recognize an award rendered pursuant to [the Washington] Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State.”[106]  However, a Taiwan seated arbitral award is “not entitled to presumptive recognition and enforcement in [a Contracting State] pursuant to the [New York] Convention”[107] or the Washington Convention because Taiwan is not a Contracting State to the New York Convention[108] or the Washington Convention.[109]
 
Taiwan is not a Contracting State to the New York Convention or the Washington Convention does not thus render a Taiwan seated arbitral award per se unenforceable in anywhere else other than Taiwan.[110]  An arbitral award made in Taiwan will be recognized and enforced in a state or jurisdiction outside Taiwan if there as long as an international or domestic instrument providing grounds for the recognition and enforcement of a Taiwan seated arbitral award in that particular state or jurisdiction.[111]  An aforementioned international or domestic instrument may be, for instance, (1) the domestic laws of that particular state or jurisdiction,[112] (2) an international or regional treaty that has been ratified by that particular state or jurisdiction, (3) a multilateral agreement where Taiwan and that particular state or jurisdiction are signatories to that agreement, or (4) a bilateral agreement between Taiwan and that particular state or jurisdiction.[113]
 
VII.  Conclusion
 
In a fierce business competition era where disputes likely arise in almost every aspect of business affairs, arbitration provides a swifter way of resolving business disputes without resorting to litigation.[114]  Furthermore, as noted by Benjamin Franklin, “an Ounce of Prevention is worth a Pound of Cure.”[115]  A pre-dispute arbitration agreement offers business partners a time-efficient, cost-effective, confidentiality-preserving, relationship-maintaining, flexible, and convenient option with party autonomy allowing the parties to formulate a dispute resolution process beforehand for any future business dispute which may arise among themselves.[116]  Under the arbitration regime in Taiwan, entrepreneurs adopting arbitration as their chosen method of dispute resolution may, subject to the restrictions contained in applicable laws, design an arbitration setting that suits their preference, including, but not limited to, choosing the applicable law, the composition of the arbitral tribunal,[117] the language of arbitration,[118] the place of arbitration,[119] the arbitral proceedings (e.g., the commencement of the arbitration proceedings,[120] procedural rules governing the arbitration,[121] and the conduct of arbitration[122]), and the confidentiality of the arbitration proceedings.[123]  Given the foregoing, arbitration is an attractive option[124] that is worth consideration of entrepreneurs doing business in Taiwan for settling any business dispute that they may come across in every encounter.
 
 

This Article, including the information contained herein, has been prepared only for educational and general information purposes to contribute to the understanding of arbitration as an option for settling business disputes in Taiwan.  This Article does not constitute and is not offered as individual legal advice, legal opinion or any other professional advice on any subject matters covered herein.  Please obtain specific legal advice before acting on any information covered herein.  While the author makes every attempt to ensure that the information contained herein is accurate, the author disclaims any liability for any omissions or errors that may be contained in this Article.