Does Taiwan’s Commercial Court Pass the Bar?


A new court trying commercial cases, intended to streamline the litigation process and improve the accuracy of rulings, has so far borne little fruit.

Judicial reform was one of Tsai Ing-wen’s campaign promises when she first ran for President seven years ago. After her election, when the idea of establishing a specialized commercial court to handle increasingly complex cases was proposed by legal experts in 2017, it was received favorably by the government.

Aimed at solving many lingering deficiencies of Taiwan’s judiciary, the Commercial Case Adjudication Act was passed by the Legislative Yuan in December 2019 and implemented in 2021. The law introduced a new set of adjudication procedures separating major commercial disputes from general civil cases by adding a specialized commercial section to the existing Intellectual Property Court. It renamed the reformed institution the Intellectual Property and Commercial Court (IPC Court).

Taiwan’s judicial system has often been criticized for its inefficient proceedings, inconsistent outcomes, and inexperienced judges, says Chen Yi-wen, a partner at Lee & Li Attorneys at Law. “Enterprises and corporations have long expressed a preference for answers that are predictable and timely over ‘perfect” answers,’” she says. “The Commercial Case Adjudication Act and the commercial court are the response to these calls for change.”

One year after implementation of the Act, the new IPC Court made its first judgment on the merits of a case. On August 18, 2022, the Court ruled partially in favor of the Securities and Futures Investors Protection Center (SFIPC), which was representing 285 investors in an insider trading case involving the acquisition of Siliconware Precision Industries Co. by Advanced Semiconductor Engineering.

In a press release, the SFIPC applauded the Commercial Court for the “great significance” of the ruling to Taiwan’s judicial system, praising the decision’s independence from previous related Criminal Court rulings and the swiftness of the trial proceedings.

According to the Act, cases categorized as commercial are subject to the exclusive jurisdiction of the IPC Court, located in Banqiao, New Taipei City. In these cases, hiring a lawyer is mandatory. The Commercial Court sits at the level of the High Court and serves as the only instance for trial of the facts – a decision on whether the facts of the case have been proven. Factual findings can’t be challenged afterward, meaning that if a case is later appealed to the Supreme Court, only the application of the law and not the facts will be reviewed.

Mechanisms unavailable in ordinary civil cases are also permissible in Commercial Court proceedings, such as inquiries to the opposing party, testimony by expert witnesses, confidentiality preservation orders, and assistance to judges by commercial investigators.

These features distinguish the commercial adjudication system from ordinary civil procedures and aim to achieve swiftness, efficiency, and predictability in the adjudication of major commercial disputes. For example, allowing expert witnesses to participate more actively in cases enables IPC Court judges to better understand technical aspects of the case.

“In the past, when expert witnesses had contrasting points of view on certain issues, there were no platforms for them to exchange opinions in court,” says David Tsai, a partner at Lexcel Partners and executive director of the Taipei Bar Association. “Now, the new system allows for the judge to require experts to come up with a joint report after discussion, highlighting what they agree and disagree upon. This benefits judges when they are trying to reach a conclusion.”

The IPC Court aims to rectify longstanding complaints of Taiwan’s judicial system, including inefficient proceedings, inconsistent outcomes, and inexperienced judges.

New challenging chapter

Despite the government’s ambitions to establish a professional and practical commercial court that is well-trusted and utilized by the public, challenges quickly emerged. Shortly after the IPC Court began operating, local media reported that a shortage of cases had left commercial judges with little work.

Official statistics show that a total of only 20 litigation cases were filed with the IPC Court from July 2021 through September 2022. These cases were shared by the Court’s seven judges, a stark contrast to the heavy workload faced by other judges in the court system. Because of this unbalanced distribution of cases, the Judicial Yuan downsized the number of commercial court judges from seven to four in September 2022.

Ji Pei-ching, a partner at Lee, Tsai & Partners, notes that one factor in the IPC Court’s dearth of new cases could be that the bar for acceptance is too high. The Act stipulates that besides certain types of cases relating to public companies, only cases with claim amounts exceeding NT$100 million (approximately US$3 million) are considered commercial cases. The Judicial Yuan lowered the bar to NT$30 million in May. But the impact of this change remains to be seen.

“The problem boils down to one fundamental factor – the public’s lack of trust in this new institution,” says Mike Lu, a partner at Lexcel Partners and previous chairperson of the Corporate Governance Committee of the Taipei Bar Association. “If you want the number of cases to increase, you have to gain people’s trust in the system.”

Lu notes that potential litigants are wary that commercial cases can be heard by only two levels in the court system rather than the three – district court, high court, and supreme court – allowed for other civil cases. Lee & Li’s Chen shares the same sentiment, pointing out that the effect of the restrictions on trial proceedings is immediate and clear.

It “means all factual arguments and evidence must be submitted to and can be heard only by the commercial court,” she says. “If the commercial court makes any mistakes in fact-finding, there are no remedies. Given that commercial cases either feature significant claim amounts or involve material corporate matters, our clients tend to expect more in terms of the legal soundness of judgments. However, we do not see mechanisms to ensure the IPC Court operates perfectly in trial of the facts.”

Chen notes that while trial at a single level could mean an expeditious proceeding, it also creates the seemingly illogical situation in which a case with a NT$2 million claim is entitled to a trial at three levels (including two trials of the facts), but a case with a NT$200 million claim is allowed only two trials – and just one dealing with the facts.

Ji of Lee, Tsai & Partners says that plaintiffs in favor of what is called three instances might choose to lower their claim to sidestep the commercial court when filing a lawsuit – and then later raise the claim amount as the case unfolds.

It remains to be seen whether the two-instance design will achieve the goal of enabling commercial cases to be processed faster and more effectively. Observers note that in labor law cases, courts are explicitly obligated to conclude the first instance trial within a certain period.

“Judges have intangible pressure to make a decision sooner in labor cases, but from a legal point of view, there is no such requirement for commercial cases,” says Tsai of Lexcel Partners.

Tsai is doubtful that the problem of lengthy proceedings, for which Taiwan’s judiciary has long been criticized, can be solved by the IPC Court. “When a case involves both civil and criminal matters and is going through civil and criminal proceedings at the same time, there’s a tradition that civil court judges won’t make a judgment before the criminal court hands down a decision,” he says.

This approach is understandable, Tsai says, given the abundance of evidence typically presented in criminal courts and the rigorous standard with which criminal judges investigate facts and apply the law.

“Civil courts simply do not compare,” he says. “If you are a civil court judge, you wouldn’t want to arrive at a conclusion different than your criminal court counterparts.” He notes that this situation might also occur in a commercial case.

Even if the IPC Court concludes cases more quickly than other courts, it is unclear whether commercial cases are actually finalized sooner when potential appeals to the Supreme Court are taken into consideration.

Another objective of the IPC Court – the predictability of court decisions – is also called into question when the Supreme Court still serves as the final decision-maker. Even if the IPC Court manages to make persistent, impressive, or pioneering holdings, its rulings could still be overruled by the Supreme Court.

In addition, Chen of Lee & Li says foreign companies and contracts governed by foreign laws rarely fall within the purview of the IPC Court, unlike commercial courts in other countries.

“To attract more foreign investment and commercial transactions, the Taiwanese judicial system should be more liberal and familiarize itself with foreign laws and international commercial practices,” she suggests. “This shift might not be on the agenda for the commercial court right now, but we hope our legislation and courts will move in that direction.”

Asked what could be done to fix some of the problems facing the new adjudication system, experts interviewed expressed a preference for ending the Court’s exclusive jurisdiction of commercial cases. Tsai of Lexcel and Ji of Lee, Tsai & Partners both propose that district courts and high courts take on commercial cases that currently go only to the IPC Court.

“Judges from other courts have told me that they can also do the job,” says Tsai. “Return to three instances, let go of the exclusive jurisdiction of the commercial court and set up specialized commercial courts in each district court, high court, and the Supreme Court. This way, the purpose of the Act can still be fulfilled, and may even work more effectively.”

Chen of Lee & Li suggests that the easiest way to fix flaws at the legislative level might be changing the exclusive jurisdiction to consensual jurisdiction, under which the IPC Court would accept only cases that both parties have agreed to in writing. “After some years, when the expertise of the commercial court is widely recognized, the current system could be reinstated,” she says.