Home   Sitemap   Contact Us
 
   
 
No. 45 - The Era of the “Intellectual Property and Commercial Court” Key Points of the Commercial Matter Adjudication Act 2020.05.04

 

Chien Yeh Law Offices|E-News|No. 45

The Era of the “Intellectual Property and Commercial Court” Key Points of the Commercial Matter Adjudication Act

Author: Hui-Yi CHENG, Attorney at Law

 

In Taiwan, whenever there are cases of battles over major ownership and managerial control or financial frauds, not only are the rights and interests of shareholders or creditors affected, there will also be implications for the open market. Due to the complexity of such cases covering both civil and criminal procedures, the responsibilities and liabilities may remain unsettled after years of lengthy trial procedure upon entering into the court. One example is the battle over the managerial control and ownership of SOGO, which created quite an uproar at the time. The litigation procedure for this case has lasted for nearly two decades and is yet to be settled. Hence, a National Affairs Conference on Judicial Reform was held by the Presidential Office in 2017, and experts and scholars proposed that, with reference to experiences from other countries, major commercial cases should be submitted to a specific court for special trial procedure. This could improve the commercial environment as well as strengthen the competitive advantage of our nation. As a result, the “Commercial Matter Adjudication Act” was passed by the Legislative Yuan on December 17, 2019, and the “Intellectual Property Court Organization Act” was amended at the same time. The Judicial Yuan intends for these acts to become effective within two years. The key points of the legislation are summarized as below to provide a preliminary familiarity and understanding of the Commercial Matter Adjudication Act, so that early preparation may be made accordingly.

 

I. Amendments to Regulations and Organization of the Court

The Commercial Matter Adjudication Act (hereinafter referred to as the “Act”) is the law for a special procedure under the Civil Procedure Law, and being different from the general civil litigation cases, is based upon the system of “two levels and two instances”. The future Commercial Court and the current Intellectual Property Court will be combined and together constitute the “Intellectual Property and Commercial Court,” where qualified judges shall preside. Moreover, the Intellectual Property and Commercial Court shall only adjudicate  “civil” commercial matters of significance. Criminal matters will continue to be adjudicated by the general courts under the system of “three levels and three instances”. In the event that an ancillary civil action that is considered as a contentious commercial case under the Act has been brought along with the criminal proceeding, unless the criminal court decides on the case, the case shall be transferred to the Intellectual Property and Commercial Court.

 

II. Scope of Commercial Cases

 (1) Contentious Commercial Cases:

According to Paragraph 2 of Article 2 of the Act, the scope of the contentious commercial cases is listed as follows:

Subparagraph

Content

Explanation

1

Dispute in connection with civil rights and obligation between the company and its responsible person due to the business conduct of such responsible person, with the value or amount of the claim over NT$100 million.

 

This mainly applies to cases where the company is claiming compensation from its responsible person due to violation of the laws by such responsible person, or cases where the responsible person claims to have been unlawfully dismissed and thus initiating a civil lawsuit against the company.

2

Dispute in connection with civil rights and obligation arising from or out of financial statement fraud, false prospectuses, market manipulation, insider trading, short-swing trading and securities frauds under the Securities and Exchange Act, Futures Trading Act, Securities Investment Trust and Consulting Act, Clauses of the Real Estate Securitization Act and Financial Asset Securitization Act, with the value or amount of the claim over NT$100 million.

This is the most common type of compensation sought by the Securities and Futures Investors Protection Center on behalf of investors. In the future, cases where the value or amount of the claim is over NT$100 million will be adjudicated by the Intellectual Property and Commercial Court.

 

3

Dispute in connection with civil rights and obligations between shareholders of public company and the company and/or the company’s responsible person arising from shareholders exercising their shareholders rights, as well as cases wherethe Securities and Futures Investors Protection Center files with the court for ruling of dismissing the company’s director(s) or supervisor(s) from their post.

It is common for shareholders exercising their shareholders right in accordance with the law to inspect accounting books, submit proposals, nominate candidates for directors and supervisors, prohibit the board of directors to execute unlawful resolutions and request for distribution of surplus earnings. 

4

Disputes related to the effectiveness of resolutions passed by shareholders or directors of a public company.

1. The most common cases concerning disputes related to the effectiveness of resolutions passed by shareholders or directors include confirming invalidity of resolutions of shareholders meeting or board of director’s meeting, or to revoke the shareholders meeting resolutions.

2.The capital over NT$500 million as defined herein is based upon its paid-in capital at the time the lawsuit is filed. The relationship between the non-public company and the public company shall be determined as delineated in Chapter VI-I (Affiliated Enterprises) of the Company Act.

5

Disputes related to the effectiveness of resolutions passed by shareholders or directors of a non-public company, with capital over NT$500 million, which is in control of or under the control of a public company.

6

Civil matter in connection with civil legal relationship under the Company Act, Securities and Exchange Act, Futures Trading Act, Banking Act, Business Mergers and Acquisitions Act, Financial Institutions Merger Act, Financial Holding Company Act,Clauses of the Real Estate Securitization Act, Financial Asset Securitization Act, Trust Law, Act Governing Bills Finance Business, and Securities Investment Trust and Consulting Act, with the value or amount of claim over NT$100 million, where the parties have agreed in writing to submit to the Intellectual Property and Commercial Court.

For matters as listed in the left column, the parties may agree in writing to submit the matter to the jurisdiction of the Intellectual Property and Commercial Court.

7

Contentious commercial cases that are under the jurisdiction of the Intellectual Property and Commercial Court pursuant to other applicable laws or as designated by the Judicial Yuan.

This Subparagraph retains a flexible scope for the application to contentious commercial cases.

 

(2) Non-Contentious Commercial Cases:

        According to Paragraph 3 of Article 2 of the Act, the scope of the non-contentious commercial cases is listed as follows:

Subparagraph

Content

Explanation

1

The cases related to ruling of purchase price of shares of public company.

This mainly concerns the rights of minority shareholders, as well as battle over ownership and managerial control, which may have significant impact on the order of market trade, such as applying to the court for price ruling pursuant to Article 187 of the Company Act or Article 12 of the Business Mergers and Acquisitions Act.

2

Cases related to petitions for appointment of a temporary manager or inspector according to the Company Act by a public company, or the dismissal of such persons.

The appointment of temporary manager or inspector as referred to herein means the petition to the court for appointment of temporary manager and inspector in accordance with Articles 208-1 and 245 of the Company Act. The dismissal as referred to herein means the dismissal of the aforementioned temporary manager or inspector. As for the appointment or dismissal of inspector during the process of corporate restructuring or liquidation, such cases shall be proceeded in the general courts in accordance with the applicable restructuring or liquidation procedures and are not included in the scope herein.

3

Non-contentious commercial that are under the jurisdiction of the Intellectual Property and Commercial Court pursuant to other applicable laws or as designated by the Judicial Yuan.

This Subparagraph retains a flexible scope for the application to non-contentious commercial cases.

 

III. Mandatory Legal Representation by Attorney and Mandatory Mediation Procedure

Since professionalism and speed is of particular importance in the adjudication of commercial cases, the Act requires the parties as well as other related parties to appoint attorneys as representative for the proceedings. Under the requirement of mandatory legal representation by attorney, attorney fees become a part of the costs of litigation or proceeding. The specific fee standards will be decided by the Judicial Yuan in the future. Thus, in addition to the litigation expenses, the losing party shall also need to bear the attorney’s fees.

Furthermore, prior to entering into the adjudication process, the contentious commercial case shall first be submitted for a mediation proceeding administered by the Intellectual Property and Commercial Court. The mediation proceeding shall be closed to the public and should be personally attended by the parties thereto as well as their attorneys. The presiding judge will select and appoint one to three mediation committee members for preliminary mediation proceeding. In principle, the mediation proceeding shall end within sixty days after the selection and appointment of such mediation committee members. If the mediation fails, any persuasion made by the committee members or judge, or unfavorable statement or concession made by any party during the mediation proceeding shall not be used as basis for the ruling of the case in litigation.

 

IV. Expert Witnesses

In order to supplement the current appraisal system, under which only the court may apply for appraisal and the appraisers may not attend to the court for explanation, and to address the dilemma faced by the court of differing appraisal results from several different appraisals, the “expert witness” is introduced by the Act. Expert witnesses refer to those who can help the court to understand or confirm the facts, evidence, or rules of thumb with their expertise, skills, experience, training, or education in finance, accounting, corporate governance, science, technology, or other professional fields. When applying for expert witness, the party should specify the name, educational and professional background, and field of work of such expert witness, as well as the facts to be verified by and matters to be examined by the expert witness. After the court’s permission, the expert witness may provide expert opinion.

The expert witness shall render his/her expert opinion in writing and shall sign the same affidavit as the appraiser and provide the opinion to the party for submission to the court.  Thus, the expert witnesses may be penalized for perjury if any of the content is found to be untrue. To ensure the impartiality and neutrality of expert witnesses, the following information related to the expert witness should also be disclosed when issuing the expert opinion: 1. Academic and professional backgrounds, area of expertise, and previous experience in other cases; 2. Whether there is division of work or collaboration with the parties, relevant parties or representatives (of the proceeding) in the preparation or rendering of the expert opinion or relevant information; 3. Whether there is any remuneration or financial sponsorship (and the value or amount thereto) from any parties, relevant parties or representatives (of the proceeding) for the preparation or rendering of the expert opinion or relevant information; and 4. Identities of other individuals who provides remuneration or financial sponsorship (and the value or amount thereto).

During the proceeding thereafter, the court will allow the opposing party to raise questions with regard to the expert opinion of the expert witness. The expert witness shall answer the questions and may even be notified by the court to attend the court session to provide his/her expert opinion or answer the questions in person. In the event both parties engage their own expert witnesses and there is discrepancy in the expert opinions provided, the court may, if necessary, order the expert witnesses of both parties to discuss the issues at dispute or other critical matters and provide their joint expert opinion in writing within specified period. Such expert opinion shall set out the content of parts where the expert witnesses have reached agreement and parts where they are in disagreement, as well as provide a summary specifying the reasons for such disagreement. Also, the court shall give both parties an opportunity to debate about the joint opinion prior to the ruling. In other words, under the Act, the parties can seek their own expert witnesses whose opinions are favorable to them and further identify the issues to be focused through debate between the opposing expert witnesses. In the event of material disagreement on the expert opinions, the court will only need to send the joint expert opinion by the expert witnesses from both sides for appraisal. This solves the dilemma of the court being unable to decide between several different appraisals and will lighten the court’s burden to a degree.

 

V. Other Important Complementary Measures

The litigation proceedings of the cases under this Act often involve trade secrets of the parties or other third parties. In order to prevent disclosure of the trade secrets when submitted to the court, the court may issue an order of confidentiality upon application whereby such trade secret shall only be used by the holder for the litigation only. In addition, in order to provide the parties with diverse dispute resolution mechanism, the parties may enter into an arbitration agreement in writing during the proceeding, and the court shall then rule to halt the proceeding accordingly and order the plaintiff to submit the case for arbitration within a specified time period. If the plaintiff does not submit the case for arbitration in time, the court shall dismiss the plaintiff’s claim. Finally, given the system of “two levels and two instances” under the Act, appeals under this Act would be the jurisdiction of the Supreme Court. However, for cases that are already ongoing prior to the Act coming into force, such cases shall be concluded in accordance with the original legal proceeding.

 

VI. Conclusion: Will the Long-Running Court Trials Come to an End?

The passage of the Act drastically changed the current trial system for commercial disputes of significance, as well as introducing new mechanisms such as “two levels and two instances,” expert witness, mandatory legal representation by attorney and mandatory mediation procedure to resolve the disputes. Although these new dispute resolution mechanisms deserve praise, still, criminal proceedings arising from commercial cases of significance are not subject to the jurisdiction of the Intellectual Property and Commercial Court under the Act. In the event that there are both criminal and civil proceedings ongoing for the same commercial dispute, it awaits further observation to see whether the dispute can, in conformity with the spirit of the Act, be adjudicated and resolved in an expeditious manner. For business owners, the business world is like a battlefield that is constantly changing and unpredictable. The enactment of the Act will bring more variables to the resolution of commercial disputes of significance. Whether to fight or reconcile, business owners should not only evaluate the risks, but also seek legal assistance from attorneys and expert witnesses for evaluation. Making the best use of the Act will help business owners manage risks and achieve the most favorable results.

 

  

12345678910
 
 
 
Home About Us Services Professionals CHIEN YEH Updates CHIEN YEH E-News Sitemap
Copyright © 2014 CHIEN YEH LAW OFFICES. All Rights Reserved.
ADD: 62F, Taipei 101 Tower, 7 Xin Yi Rd., Sec. 5, Taipei 110, Taiwan TEL: +886-2-8101-1973 FAX: +886-2-8101-1972
ADD:21F-1, 201 Wenxin Rd., Sec. 2, Taichung 40758, Taiwan TEL: +886-4-2251-1973  FAX: +886-4-2252-1974
ADD: 4F Steel Building 1-8-2 Marunouchi, Chiyoda-ku, Tokyo-to 100-0005, Japan TEL: 03-6870-7157 FAX: 03-6870-7901 Website designed by EZTrust