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Key points to know when engaging in civil disputes in Taiwan

by Daniel Chen and Jeremy Olivier

Litigation in Taiwan can be costly and complex. Before filing a claim, potential foreign plaintiffs need to understand pre-filing steps such as attachment, demand letters, and payment orders as well as the formalities and evidentiary considerations involved after a decision to litigate has been made. Strategically, it is important to understand that filing a case and presenting one’s evidence is usually necessary before there is any possibility of settlement.

Attachment

An attachment order may be applied for before filing litigation to ensure that the defendant’s assets are not improperly transferred, hidden, or disposed of. In order to obtain an attachment order, the plaintiff must prove to the court that there is a strong likelihood that the defendant would engage in such behavior. They must also post a bond of one-third of the attachment claim.

Demand letter

In Taiwan, as elsewhere, a potential litigant may send the counterparty a demand letter. This letter states the legal claim(s), demands restitution or compensation, and lists out the consequences of noncompliance. This letter is generally drafted by an attorney and sent as a ‘legal attest letter’. When a legal attest letter is sent, the post office will retain a certified original copy of the letter and record the date and time of delivery to the recipient.

The demand letter in the form of a legal attest letter is a key item of evidence for future litigation in cases where the remedy sought is rescission of a contract and a refund of the payment.

Payment order

If the counterparty has not paid or refuses to pay an outstanding debt, a creditor may move to have the court issue a payment order. Once the counterparty receives this official document, she has 20 days to object. An objection does not need to state any grounds, and once it has been made, the creditor’s motion for a payment order will automatically become a civil complaint. However, if the recipient of a payment order does not lawfully raise an objection within 20 days, the creditor may file a motion with the court to enforce the payment order as a final judgment against the counterparty’s assets. The official fee for issuance of a payment order is NT$500. Payment orders can be a faster and cheaper way to enforce the plaintiff’s monetary claims against the debtor’s assets.

Civil action

If an amicable settlement does not appear to be a possibility, the aggrieved party can move forward with filing a civil complaint. Key issues for a foreign litigant to be aware of include:

1) Document authentication

A Power of Attorney designating a foreign litigant’s legal counsel is frequently required to be notarized and legalized (authenticated) before being submitted to the court. Civil litigation in Taiwan requires a specific POA for each proceeding. Since there can be multiple proceedings, we recommend notarizing and legalizing (authenticating) these documents as soon as possible.

2) Security bond

A defendant may move the court to order a foreign litigant who does not have a domicile, residence, or office in Taiwan to put up a bond of roughly 4% of the total claim unless the foreign litigant possesses sufficient assets in Taiwan to cover court costs. This bond may be paid in the form of cash, bank guarantee, or a cash equivalent. The purpose of the bond is to ensure that the defendant can recover the court fees it pays during the civil action (especially in appellate proceedings) from the foreign plaintiff if the defendant ultimately prevails in the final judgment.

3) Translation

As Chinese is the official language of the courts in Taiwan, all documentation, such as agreements, correspondence, reports, and any other documentary evidence in a foreign language must be translated into Chinese for the court’s review. Given that the first instance for a civil action in Taiwan can take six months to two years to conclude, include several hearings, and require submission of many documents from the plaintiff, this could entail a significant amount of work and time if the wrong translator or translation house is chosen.

4) Evidence preservation order and absence of discovery

Taiwan does not have a full-fledged system of discovery as is the case in the US. However, preservation orders can function as a basic discovery device. A party that believes that the counter party is likely to spoliate evidence may move the court for an evidence preservation order. The motion for preservation order may be made before the civil action. Motions for evidence preservation orders are not frequently granted. In the absence of an evidence preservation order, a party may choose not to produce evidence detrimental to its interests. As a result, a plaintiff in Taiwan litigation is often in the position of having to produce all the evidence necessary to prove his or her case while the defendant can win even if he or she produces very little evidence. It is therefore very important to review the plaintiff’s evidence in advance before deciding whether or not to file litigation.

Settlement

Settlement may be carried out through the courts, or through alternative dispute resolution such as mediation.

In the absence of discovery, a Taiwan defendant is unlikely to settle simply with receipt of a demand letter. Before deciding whether to settle a dispute, a local defendant would usually wait until the plaintiff produces its evidence to assess how much of a threat the plaintiff’s case poses to the defense. As a result, filing a civil action is usually necessary to create the proper conditions for a settlement. Settlement also becomes more likely after the judge discloses his or her preliminary evaluation of the evidence and arguments.

To learn more about civil litigation in Taiwan, please contact Christine Chen at cchen@winklerpartners.com and Daniel Chen at dchen@winklerpartners.com.

To inquire about legal translation services, please contact translation@winklerpartners.com.

 

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