On November 13th of 2015, Taiwan’s Legislative Yuan passed a bill of the Amendment to Article 47(2) of the Arbitration Law (“the Law”). Statutorily, foreign arbitral awards will be both binding and enforceable in Taiwan since the passage of this amendment.

With regards to international collaboration on arbitral awards recognition, The United Nations Commission on International Trade Law (“UNCITRAL”) governs the Convention on the Recognition and Enforcement of Foreign Arbitral Award, or the New York Arbitration Convention (“the Convention”). While about 150 countries are signatories to the Convention, Taiwan is not a contracting member. Nevertheless, based on international reciprocity, Taiwan unilaterally legislated its Arbitration Law of 1982 to incorporate the Convention’s system respect to recognition of foreign arbitral awards.

Pursuant to Article 3 of the Convention, “[e]ach contracting state shall recognize arbitral awards as binding and enforce them.” Accordingly, issues determined in foreign arbitration of one of the contracting states would not be raised or substantially reviewed again in a judicial court of another member jurisdiction, as required by the doctrine of res judicata. In other words, an already recognized foreign arbitral award shall be both binding and enforceable.

Interestingly, the Law’s statutory wording for the effect of recognition seems to be different from that in the Convention. The pre-amendment Article 47(2) of the Law required that “[a] foreign arbitral award, after a petition for recognition has been granted by the court, shall be enforceable.” While enforceability of a foreign arbitral award is confirmed by the Law, whether or the extent to which the binding effect of a foreign award exists was however left as a loophole, or by interpretation was deemed ambiguous. Contrary to a foreign arbitral award, the binding effect of a domestic award being the same as a court’s judgement is readily stipulated in  Article 37 of the Law.

The post-amendment Article 47(2) of the Arbitration Law now reads “[a] foreign arbitral award, after a petition for recognition has been granted by the court, be binding on the parties and have the same force as a final judgment of a court and may serve as a writ of execution.” The binding effect of a foreign arbitral award is therefore statutorily stipulated in the Law.

One thing to note is that, although a recognized award’s binding effect is now statutorily provided after this amendment, recognition is not granted unconditionally. As required in Article 49 of the Law, upon receiving a petition for recognition, the court is obligated to dismiss the petition when finding either that the recognition or enforcement of the foreign arbitral award is against the public order or good morality of Taiwan or that the dispute involved is not arbitrable pursuant to the laws of Taiwan. Additionally, the court may, with discretion, dismiss the petition for recognition in the event where a foreign country or the laws governing the foreign arbitral award do not reciprocally grant recognitions to Taiwan’s awards.

Although Taiwan has been one of the top 20 international trade economies for decades, it is not a signatory to the Convention. Taiwan can only formulate its laws to use the recognition mechanism of the Convention. Nevertheless, in practice, the binding effect of a foreign arbitral award had been subject to questioning. After the amendment where the binding effect is statutorily provided, it can be expected to bring Taiwan’s system even more in alignment with the Convention’s contracting states.