Enforcement of bankruptcy adjudication by a Taiwan court

By Pang Tao, Merits & Tree Law Offices
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The Provisions of the Supreme People’s Court on Recognition and Enforcement of the Civil Judgments of Courts of the Taiwan Region provide that a party to a civil judgment of a court of Taiwan may apply to the mainland court for recognition and enforcement of the judgment made by a relevant court of Taiwan. The “civil judgments of courts of the Taiwan Region” in the provisions include the effective civil judgments, rulings, settlement transcripts, mediation transcripts and payment orders issued by courts in Taiwan, but do not specifically include the “adjudication in bankruptcy”.

In judicial practice, there is major disagreement among parties to a litigation on whether the adjudication in bankruptcy made by a court in Taiwan may be enforced by the mainland court. The author recently represented a client in a case involving application for recognizing the adjudication in bankruptcy made by a court of Taiwan on an investment contract dispute. The mainland court of first instance ruled in favour, and the case is under trial by the court of second instance. As the author observes, although no court has made an effective decision to recognize and enforce the adjudication in bankruptcy of a court of Taiwan, it is probable in the future.

This article describes three possible problems an applicant may encounter when applying for recognition and enforcement of adjudication in bankruptcy made by a court of Taiwan, and proposes corresponding solutions.

Pang Tao Partner  Merits & Tree Law Offices
Pang Tao
Partner
Merits & Tree Law Offices

Will the application be placed in docket only when a respondent is identified? In accordance with the provisions, the case involving application for recognition of civil judgment of a court of Taiwan will be heard by an intermediate (or special) mainland court at the place where the applicant is domiciled or habitually resides, the respondent is domiciled or habitually resides, or the property involved is located.

Unlike general civil judgments in which the plaintiff and defendant are identified, the adjudication in bankruptcy just describes the existence status of an insolvent company, and does not identify the parties concerned in most cases. If the applicant is an insolvent Taiwan company, it would be difficult to identify the respondent. In the author’s opinion, under this circumstance, the applicant may appropriately broaden its options and include the creditor and even potential creditors as the respondent, in response to the requirements of the provisions.

Does the statute of limitations apply? According to the provisions, the application for enforcement of the civil judgments of courts of Taiwan will be subject to a two-year statutory limitation, except the application for recognition of judgment on personal relationship. Provisions of applicable laws on suspension and termination of the limitation of action shall govern the above-mentioned application. The limitation of application will commence from the last day of the performance period provided in the legal document, or, from the effective date of the
legal document.

As stated, the “adjudication in bankruptcy” simply describes the existence status of an insolvent company, and generally does not contain the so-called “performance period”. Therefore, the mainland court normally expects submission of the application for enforcement within two years of the effective date of the adjudication. However, the author believes that the existence status of the insolvent company actually reflects the “personal relationship” of the company and is highly comparable to the personal relationship of a natural person. According to the provisions, the “adjudication in bankruptcy” should be exempted from the two-year statute of limitations.

Should the court hear the case in the principles of reciprocity? It is provided in the Enterprise Bankruptcy Law that where a legally effective judgment or ruling made on a bankruptcy case by a court of another country involves a debtor’s property within the territory of the People’s Republic of China, and the said court applies for or requests the court to recognize and enforce such judgment or ruling, the court shall, according to relevant international treaties that China has concluded or acceded to, or on the basis of the principle of reciprocity, conduct examination and, when believing that the said judgment or ruling does not violate the basic principles of the laws of China, jeopardize the sovereignty and security of the state or public interests, or undermine the legitimate rights and interests of the creditors within the territory of China, decide to recognize and enforce the judgment or ruling.

Some courts would pay high attention to the “principles of reciprocity” provided in the Enterprise Bankruptcy Law, and even tend to deem it the focus of dispute of the case. In their opinion, if a court of Taiwan does not have the precedent of recognizing or enforcing the adjudication in bankruptcy made by a mainland court, the mainland court should not recognize or enforce the adjudication in bankruptcy made by a court of Taiwan.

The author does not think this is well grounded. First, the above provision of the Enterprise Bankruptcy Law makes it clear that the law is applicable to the “legally effective judgment or ruling made on a bankruptcy case by a court of another country”, but fails to specify that it applies to the adjudication in bankruptcy made by a court in the Taiwan region, and there is no other law or regulation that contains such provision. Second, the circumstances of “non-recognition of the adjudication” as specified in the provisions do not include the circumstance of “non-reciprocity”. It is known that there are precedents where the court of Hong Kong recognizes the bankruptcy order issued by a court of Taiwan. Although Hong Kong and mainland China adopt different legal systems, these precedents may serve as a reference for the mainland court to some extent.

In 2015, according to the director of working group office of Hong Kong, Macau and Taiwan Affairs of the Supreme People’s Court, courts in the mainland would uniformly recognize and enforce the civil judgments made by the courts of Taiwan. The author believes the mainland courts should recognize and enforce the civil judgments made by the courts of Taiwan, except for the circumstances of “ruling against recognition” as provided in the provisions.

Pang Tao is a partner at Merits & Tree Law Offices

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