Taiwan
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. The respondent is prohibited from dealing with its assets identified in the freezing order until a specified time (for example, a further hearing, judgment or payment) or further order of the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. The Court typically also requires the applicant to lodge security (please refer to the response to question 5).
3. Briefly what is the relevant legal test?
(i) The applicant has a good arguable case in the underlying substantive claim or prospective claim; and
(ii) the applicant must demonstrate that there are good reasons to believe that the applicant’s claim may not be enforced or will be difficult to enforce if in case that the Court were to rule in favor of the applicant in the main lawsuit (for example, the respondent has unjustifiably dissipated its assets; there is evidence indicating that the respondent is trying to hide its assets).
In the application, the applicant can also state that its willingness to lodge security in order to compensate the respondent in damages for wrongful seizure if the applicant’s claim is ultimately unsuccessful (please also refer to the response to question 5). It is the common practice in Taiwan that the applicant states its willingness to lodge security in its application.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
Phase 1: The applicant makes an application for the freezing order from the Court. The application must include the following items:
(i) the facts, legal basis, and the amount of the applicant’s claim or prospective claim;
(ii) the basis on which the relevant test is met.
Phase 2: After the applicant successfully obtains the freezing order, the applicant can apply to the Taiwanese tax authority to investigate the income and assets owned by the respondent. After income or assets are identified, the applicant applies for compulsory enforcement proceedings (please refer to the response to question 12).
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes. As per the response to question 3, it is common practice in Taiwan for the applicant to state its willingness to lodge security in its application. If the Court grants the application for the freezing order, the Court typically will order the applicant to lodge security to the Taiwanese District Court Public Lodgement Office. In turn, the respondent typically lodges a counter-security to prevent its bank accounts or assets from being seized/attached. The amount of the security is generally 1/3 of the claimed amount, while the amount of counter-security would be equivalent to the entire claimed amount awarded by the Court.
6. Can it be sought against third parties?
Yes. A third party which is not a party to the freezing order (for example, a financial institution holding the respondent’s assets) can be restricted from disposal of the seized/attached assets in the compulsory enforcement proceedings (please refer to the response to question 12).
7. What assets are covered by a freezing (or equivalent) order?
The freezing order covers only the amount to be seized/attached. In the compulsory enforcement proceedings, any tangible or intangible assets provided they are not perishable can be seized/attached by the Taiwanese District Court Civil Execution Department.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to commencing the claim (although the Court will order the applicant to file its claim by a Court-imposed deadline upon the request of the respondent) or following judgment to facilitate enforcement.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. The order will generally provide that the respondent may deal with their assets:
(i) above the amount asserted in the applicant’s petition; or
(ii) for ordinary living expenses.
12. What happens after a freezing (or equivalent) order is granted?
The applicant can apply to the Taiwanese tax authority to investigate the income and assets owned by the respondent. The Taiwanese tax authority will list out the income or assets upon which the tax authority levied taxes from respondent in the preceding year (the “Income and Assets List”). Thereafter, the applicant applies for compulsory enforcement proceedings at the Taiwanese District Court Civil Execution Department to enforce the freezing order by seizing/attaching the respondent’s bank accounts and other assets owned by the respondent in accordance with the Income and Assets List.
13. Who pays the costs of the application for a freezing (or equivalent) order?
The applicant’s costs will be borne by the respondent if the freezing order is granted by the Court. For attorney fees, each party pays its own attorney fees incurred in any proceedings.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
After the applicant successfully applies for compulsory enforcement of the freezing order (referred to herein as a Compulsory Enforcement Order), the Compulsory Enforcement Order will prohibit a third party (usually the financial institution holding the respondent’s bank account or assets) from transferring the money from the bank accounts or the assets to the respondent and/or any other party.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent or third party who breaches a freezing order commits the criminal offence of Impairment of Creditor’s Rights. Penalties include imprisonment for no more than two years and a penalty of no more than NTD 15,000 (approx. USD$460).
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
In some cases, yes. In Taiwan, the freezing order must be executed by a special division of the Court known as the Enforcement Court. In certain cases, the Enforcement Court may designate a third party to be the custodian of the real or movable property that is the subject of the freezing order and in this scenario, the custodian owes a duty of care to the applicant/debtor.
In case of a freezing order against the debtor’s funds deposited with a bank, the Court notifies the freezing order to said bank as a third party. Under this circumstance, the bank must comply with the Court’s freezing order not to transfer the fund without the Court’s approval. We have not seen any Court decisions against a bank for failure to comply with a Court freezing order.
17. Can a freezing (or equivalent) order be enforced abroad?
No. To the best of our knowledge, other jurisdictions typically do not recognize freezing orders issued by Taiwanese Courts.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
No, because a freezing order is not considered a final and unappealable judgment/verdict under Taiwanese law.
Contacts
Delphine Chen Senior Partner Formosa Transnational Taiwan, Republic of China delphine.chen@taiwanlaw.com www.taiwanlaw.com Jeffrey Long Associate Formosa Transnational Taiwan, Republic of China jeffrey.long@taiwanlaw.com www.taiwanlaw.com
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