Newsletter
Key Points of the Commercial Case Adjudication Act
The Commercial Case Adjudication Act ("Act"), approved by the Legislative Yuan on December 17, 2019, represents a legal reform to resolve major commercial disputes promptly, properly, and professionally, and improve the consistency and predictability of judgments. The Judicial Yuan expects to enforce the Act in two years.
The Act comprises 81 articles, the key points of which are as follows:
1. Intellectual Property and Commercial Court has exclusive jurisdiction over commercial cases (Articles 2 to 5)
Intellectual Property and Commercial Court ("Commercial Court") comprises the Intellectual Property Tribunal and the Commercial Tribunal. There are two types of commercial cases: commercial litigation and commercial non-litigation. Both are exclusively within the purview of the Commercial Court. The scopes of commercial litigation and commercial non-litigation are as follows:
Commercial Litigation
(1)Disputes over civil rights and obligations arising between a company and its responsible person owing to the latter’s performance of duties in which the claim exceeds NT$100 million.
(2)Disputes over civil rights and obligations due to any of the activities listed below in which the claim exceeds NT$100 million:
A. Securities fraud, misrepresentations in financial reports or other relevant financial or business documents, nondelivery of the prospectus, misrepresentations in the prospectus, unlawful public tender offers for purchasing securities, market manipulation, short swing trading, insider trading, non-arm’s length transactions, and unlawful lending or provision of guaranties under the Securities and Exchange Act.
B. Market manipulation, insider trading, futures trading fraud, misrepresentations in the prospectus, and nondelivery of the prospectus under the Futures Trading Act.
C. Misrepresentations, fraud, any other act sufficient to mislead other persons, misrepresentations in the prospectus, and nondelivery of the prospectus under the Securities Investment Trust and Consulting Act.
D. Misrepresentations in and nondelivery of the prospectus or investment memorandum under the Clauses of the Real Estate Securitization Act.
E. Misrepresentations in and nondelivery of the prospectus or investment memorandum under the Financial Asset Securitization Act.
(3)Disputes over civil rights and obligations between the shareholders of a public company and the company and/or its responsible person when the shareholders exercise the shareholders’ rights; and lawsuits filed by a securities investors’ and futures traders’ protection institution to dismiss director(s) or supervisor(s) of a company in accordance with the Securities Investor and Futures Trader Protection Act.
(4)Disputes over the validity of a resolution from a meeting of shareholders or the board of directors of a public company.
(5)Disputes over the validity of a resolution from a meeting of shareholders or the board of directors of a nonpublic company with a capital of NT$500 million or more that has control over or is controlled by a public company.
(6)Civil disputes arising from a civil legal relationship with the claim amount over NT$100 million that are based on the Company Act, the Securities and Exchange Act, the Futures Trading Act, the Banking Act, the Business Mergers and Acquisitions Act, the Financial Institutions Merger Act, the Financial Holding Company Act, the Clauses of the Real Estate Securitization Act, the Financial Asset Securitization Act, the Trust Law, the Act Governing Bills Finance Business, or the Securities Investment Trust and Consulting Act, and the parties have agreed to the jurisdiction of the Commercial Court in writing.
(7)Other commercial litigation cases as specified by law or the Judicial Yuan to be subject to the jurisdiction of the Commercial Court.
Commercial Non-Litigation
(1)Determination of the purchase price of shares of public companies.
(2)Selection and dismissal of temporary administrators or inspectors of public companies in accordance with the Company Act.
(3)Other commercial non-litigation cases as specified by law or by the Judicial Yuan to be subject to the jurisdiction of the Commercial Court.
2. Adopting a two-level and two-instance system (Article 71)
The fact-finding trial in commercial cases is limited to the first instance. If a party is dissatisfied with the judgment rendered by the first-instance court, it may appeal to the Supreme Court.
3. Legal representation by attorney(s) is mandatory (Articles 6 to 12)
Legal representation by attorney(s) in court is mandatory.
4. Pretrial mediation is mandatory (Articles 20 to 32)
Pretrial mediation is mandatory and presided over by the judges of the Commercial Court. Mediators are those with the appropriate expertise. Mediation proceedings may begin with only the parties and one to three court-appointed mediators.
The court may impose a fine up to NT$300,000 if the parties, the legal representatives, and/or the attorneys are duly served, but fail to appear on the mediation date and give no justification.
In principle, mediation should be concluded within 60 days of the appointment of the mediator(s).
5. Trial procedural schedule (Articles 38 to 41)
The court should set up a trial procedural schedule with all parties, which includes:
(1)a list of the disputed issues concerning the facts and evidence;
(2)a timeline of interrogation of witnesses, expert witnesses, court evaluators, and the parties;
(3)dates of the end of the oral argument and the announcement of the judgment;
(4)a timeline for the parties' submissions; and
(5)other matters necessary for the litigation to proceed as planned.
6. Expert witnesses (Articles 47 to 52 and 78)
The parties may submit opinions by expert witness(es) with the permission of the court. When necessary, the court may ask expert witness(es) questions or instruct expert witnesses engaged by the parties to discuss the issues with each other or jointly issue an opinion.
If an expert witness commits falsehood while on oath regarding matters critical to the case during the proceedings, such expert witness may be sentenced to imprisonment for up to seven years.
7. Electronic documents and trial via videoconferencing (Articles 14 to 16 and 18)
Transmission of legal documents for commercial cases should be done through the designated electronic system.
The court may order to have the trial proceed via videoconferencing.
8. The party's inquiry procedure (Articles 43 to 45)
The Act introduces the party's inquiry procedure. The parties may, during the designated period or before the end of the preparatory procedure, list material issues that are related to the facts or evidence, and ask the opposing party to explain them.
If the party subject to the inquiry refuses to explain and gives no justification, the court may draw an inference against that party.
9. Commercial investigation officer (Article 17)
The Act introduces commercial investigation officers to assist judges in deciding commercial issues.
The report produced by the commercial investigation officers is for the judges’ reference only, and is not made public. However, specialized knowledge that the court acquires owing to the commercial investigation officers cannot be used as basis for the judgment unless the parties are given the opportunity to debate or state their opinions.
10.Confidentiality preservation order (Articles 55 to 59 and Articles 76 to 77)
Upon the application of a party and where certain criteria are met, the court may issue a confidentiality preservation order for the trade secrets of a party to the litigation or a third party.
The persons who are subject to the order should not use or disclose the trade secrets for purposes other than such litigation.
Those who violate the order may be sentenced to imprisonment for up to three years, criminal detention, and/or a fine up to NT$100,000.
11.Adoption of alternative dispute resolution mechanism (Article 61)
Where appropriate, the court may introduce the parties to the option of settlement, mediation, or arbitration. During a litigation proceeding, if the parties sign a written arbitration agreement or the agreement is recorded by the court transcripts, the court should, at its own motion or upon the application of a party, stay the proceeding and order the plaintiff to file for arbitration within a specific time.
12.Preservation of evidence (Article 60)
A motion for preservation of evidence should be made to the Commercial Court. In urgent cases, such motion may be made in the district court at the place either where the person to be examined is domiciled/resides or where the tangible evidence is located.
13. Provisional remedies proceeding (Articles 63 to 65)
In commercial cases, the Commercial Court has exclusive jurisdiction over motions for provisional attachment, provisional injunction, and injunction maintaining a temporary status quo.
Stronger grounds are required in petitions for injunction maintaining the temporary status quo. If the request and reason for such injunction order are not adequately explained, the court should dismiss the petition and forbid the petitioning party to provide guarantees to make up for its inadequate explanation.
The Intellectual Property Court Organization Act is renamed as the Intellectual Property and Commercial Court Organization Act. The Intellectual Property and Commercial Court is divided into the Intellectual Property Tribunal and the Commercial Tribunal, with the docket of each tribunal reflecting the judges’ areas of expertise.
Given the Act governs major commercial disputes and is a critical reform for resolution of future commercial disputes, Lee & Li will closely monitor its development and the decisions of the Commercial Court for relevant enterprises’ reference.
If you have any questions, please do not hesitate to contact our Civil Dispute Resolution Practice Group.