How Can Arbitration Awards from Taiwan Be Recognized Internationally?
November 30, 2022 by Digital Editor
By Jin Lin
There are typically two ways to know whether an arbitral award of one state will be recognized and enforced internationally. The first is that the state signed the New York Convention. The second is that the state is listed by the UNCITRAL Secretariat as a UNCITRAL Model Law jurisdiction.
Recently, numerous international businesses have begun investing in Taiwan’s offshore wind industry. With approval from the Taiwanese government, these international companies are constructing offshore wind farms. This entails finding a contractor to provide the turbine base and marine engineering. When these multinational companies enter into contracts with Taiwanese contractors, arbitration clauses are included as a standard dispute resolution mechanism. However, these arbitration clauses often assign Singapore as the seat of the arbitration. Taiwan could, however, be an appropriate seat of arbitration for multinational companies, even though Taiwan is a non-New York Convention signatory state. Taiwan’s arbitration awards can be recognized and enforced under the New York Convention and could be enforced by other states under bilateral and multilateral agreements.
The New York Convention recognizes arbitration awards made in non-signing states
In Clientron Corp. v. Devon IT, Inc., the Eastern District of Pennsylvania court held that arbitration awards made in non-contracting states to the New York Convention cannot be recognized by other signatories. In this case, the arbitration awards from Taiwan, a non-New York Convention contracting state, were rejected and therefore not recognized or enforced.
However, the New York Convention could be interpreted differently. Under Article 1 of the New York Convention, a signatory state is required to generally recognize the arbitration awards of any other state, regardless of whether that other state is also a signatory Once a state signs, it is obligated to recognize the arbitration awards made in other states, even if the arbitration award is made by a non-signatory state, unless the decision has an explicit justification specified in the New York Convention for not doing so. While many states would like to retain a certain degree of control, the first paragraph of Article 1(3) of the New York Convention allows signatories to make a “Principle of Reciprocity” at the time of signing. That is, signatories can choose to recognize arbitration awards only made in “other signatories” or without any restriction. Therefore, one could conclude that if a signatory state does not exclude the recognition of arbitration awards from non-signatories under the New York Convention, otherwise in accordance with Article 1 of the New York Convention, the arbitration awards made in non-signatory states should be recognized. In fact, the Chinese Arbitration Association in Taipei has shared the same perspective.
Enforceability across states
An arbitral award from one state may be enforced in other states that are not signatories to the New York Convention in accordance with bilateral or multilateral agreements. According to Article VII.1 of the New York Convention, an arbitral award of non-New York Convention signatories may be recognized in accordance with bilateral or multilateral agreements. In other words, the New York Convention is not the only way for domestic arbitration awards to be recognized and enforced internationally. For example, in accordance with paragraph 3 and paragraph 13 of Article 9.16 of the Taiwan-Singapore FTA, if the parties consent to the seat of the arbitration being in Taiwan, then arbitration awards from Taiwan could be recognized by Singapore.This demonstrates that arbitration awards from Taiwan could be recognized and enforced internationally under bilateral or multilateral agreements.
Taiwan as an appropriate seat of arbitration
According to the 2018 International Arbitration Survey: The Evolution of International Arbitration, “General reputation and recognition of the institution” was the most important reason for the preference for certain institutions. This means that the enforceability of arbitration awards internationally was the most crucial issue. However, in the 2021 International Arbitration Survey: Adapting Arbitration to a Changing World, “Greater support for arbitration by local courts and judiciary” is the most important reason for preference for certain institutions. According to the 2021 survey, it was based on “unhindered access to arbitration promoted by local courts, neutrality and impartiality of the local judiciary, and an enforcement track record.”
If the arbitration system in Taiwan could be fair, objective, and a court could support the enforcement of the arbitration award, Taiwan could be an appropriate seat of arbitration. Although Taiwan is not classified as a UNCITRAL Model Law state, the Taiwan High Court has recognized that the Arbitration Act in Taiwan is modeled on the New Convention since 2014. Because arbitration in Taiwan has begun to conform to international standards, other states may find that Taiwan has become a friendly arbitration jurisdiction more broadly.Taiwan can and should be considered an appropriate choice for multinational corporations as a seat of arbitration.
Jin Lin is an LL.M. Digital Advisor for the Georgetown Journal of International Law. Before Georgetown, he worked at Liang & Partner Offices in the litigation Department in Taiwan. Prior to this experience, he graduated from National Chengchi University. His interests include construction, energy law, and international arbitration.