On September 7, 2021, Dr. Winnie Jo-Mei Ma participated in a webinar hosted by international law firm Clifford Chance to discuss issues related to the seat of arbitration, and exchange opinions with panelists on the suitability of major Asian countries as the seat. Dr. Ma spoke of Taiwan's strengths and introduced the CAA Draft Amendment to Taiwan's Arbitration Law.
A. The differences between the “venue” and “seat” of arbitration, and the importance of the seat
The venue of arbitration is the location where arbitral hearings and proceedings take place. It has little legal significance and minor impact on the outcome of the arbitration. For parties, the ease of travel and cost of accommodation are the primary considerations when choosing the venue. On the other hand, the seat of arbitration has profound impact on the arbitration. The law of the seat of arbitration, together with the rules of the arbitral institution chosen by the parties, form the procedural framework of the arbitration and determine the arbitral tribunal's powers and obligations. In other words, the law of the seat of arbitration, by governing the procedure of the arbitration, regulates the supportive and supervisory powers of the courts of the seat.
Choosing a familiar country as the seat of arbitration can provide “home advantage” for either party, as it may already be accustomed to the local laws and have built connections in the local community. Thus, business entities fiercely bargain over the choice of the seat of arbitration. The panelists provided two strategies in this regard. First, “trade” the choice of seat of arbitration for better contractual terms. By doing so, both parties gain grounds and can be a win-win situation. Second, designate the seat of arbitration in a neutral country and assign home country as venue, so as to overcome language barrier (however, drafting such an arbitration agreement demands extra care).
B. Taiwan can be a suitable seat
Parties choosing to arbitrate in Taiwan will benefit from Taiwan's democratic system, language proficiency in Chinese and English, and a civil law system deeply influenced by Germany, Japan and France. Although Taiwan is not a signatory to the New York Convention, its legislative and judicial practices already conform to the spirit of the New York Convention and the Model Law, together with a proactive approach to reciprocity and comity. With regard to China-related disputes, arbitral awards rendered in Taiwan are recognized and enforced in China in accordance with Provisions of the Supreme People's Court on Recognition and Enforcement of the Arbitral Awards of the Taiwan Region 2015.
C. Amendments to Modernize and Internationalize Taiwan's Arbitration Law
In order to enhance Taiwan's internationalization of arbitration, CAA has proposed a Draft Amendment to Taiwan's Arbitration Law for the competent authority. Features of the Draft Amendment include:
(1) continuous promotion of amicable relationship between parties (by retaining current provisions which enable the parties to appoint the same person to act as both arbitrator and mediator);
(2) high-level assimilation with the Model Law through modified adoption of almost the entirety of the Model Law provisions (such as including the grounds for setting aside awards, as well as extending interim measures and preliminary orders to emergency arbitrators);
(3) trace-to-the-source approach to the law applicable to the arbitration agreement, specifying that the law of the seat of arbitration will apply by default in the absence of parties' agreement on choice of law;
(4) departure from Taiwan's Code of Civil Procedure (by providing for service requirements that are more comparable to those of the Model Law, while providing arbitral tribunals and institution with greater discretion).
Adopting the Model Law for arbitrations in Taiwan will be an interesting fusion of Taiwan's civil law tradition and the Model Law's common law orientation. In any event, Taiwan may be a suitable and viable seat particularly in the following circumstances:
(1) Taiwan is a likely place for enforcing the award.
(2) The arbitration involves Taiwanese party, law or language.
(3) The arbitration involves a Chinese and a non-Chinese party.
(4) The parties' priorities are swift dispute resolution at lower costs.
2021/10/7