Despite constant pressure from China to erode Taiwan’s international standing, the US has always seen the value of furthering its ties with Taiwan, a small but vibrant democracy in Asia.
In 1946, the US and Republic of China signed the Taiwan Treaty of Friendship, Commerce and Navigation to formalize cooperation between the two. And in more recent years, relations between the two have deepened substantially. In October 2012, Taiwan was included in the US’ visa waiver program, which allows Taiwanese passport holders to remain in the US for up to 90 days without a visa.
To date, only 38 countries enjoy this privilege, most of which are developed nations and longtime partners of the US. Then, last year, the White House decided to support Taiwan’s joining of the International Civil Aviation Organization, and the decision was backed by the US Congress.
On the economic front, according to the Office of the US Trade Representative, Taiwan is currently the US’ 12th-largest trading partner. Last year, two-way trade between them was valued at about US$64 billion in total.
These are reliable indicators that the US-Taiwan relationship is warming, right?
However, on Aug. 8, the US District Court for the Eastern District of Pennsylvania quietly handed down a judgement that rode roughshod over the US government’s policy on Taiwan and any goodwill from the friendship-building activities above.
In a judgement seemingly worded to provoke, the district court refused to recognize an arbitral decision made by a Taiwanese arbitration association because Taiwan did not sign an international convention on recognition of arbitral awards.
This rationale runs directly counter to the US Supreme Court’s call to end “the longstanding judicial hostility to arbitration agreements.”
Furthermore, the convention cited by the district court, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, was conceived to promote arbitration around the world; its spirit is inclusive, not exclusive.
And whatever happened to the Treaty of Friendship, Commerce and Navigation? It, according to several US federal district court precedents, should be a valid basis for the US to recognize Taiwanese arbitral awards.
There are altogether 50 territories, including Taiwan, that have not yet signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. If US courts refuse to recognize arbitral awards from those countries, the consequences might be that US arbitral awards would be denied in kind. This kind of tit-for-tat would put international commerce on a slippery slope.
Foreign companies, especially those from nations that have not signed the convention, might be chilled by the US’ attitude toward arbitration. Likewise, US companies, concerned about their rights in an international commercial dispute, would be wary of doing business abroad.
What the federal district court has done in one single stroke is marginalize one of the most dynamic democracies in Asia. Taiwan could not sign the convention because it was not a member of the UN.
To this day, Taiwan is still not a UN member, and that is because of China’s intervention, not because it has chosen to remain aloof. Furthermore, Taiwan, as a responsible member of the international community, understands arbitration is a more expeditious alternative to litigation, and has revised its Arbitration Act to include the same criteria for recognizing foreign arbitral awards as in the convention at issue.
Its embrace of international comity should be applauded, not disparaged. To imply that an arbitration award from Taiwan cannot be enforced in the US owing to non-UN membership is equivalent to shutting Taiwan out of the international community. The court’s practice of exclusion is damaging to the reputation of Taiwanese arbitration, detrimental to US-Taiwan relations and, above all, unfair.
Thanks to the judgement, arbitration in Taiwan is now a joke worldwide. Parties that previously found the professionalism and efficiency of Taiwanese arbitration appealing would likely take their dispute elsewhere now.
The court’s diminishment of Taiwan has already stirred strong reaction in the nation. Many indignant Taiwanese have taken to the blogosphere to vent their feelings. There are also voices in the US online community questioning the soundness of the court’s judgement.
Taiwan is a staunch ally of the US in the Pacific, but the recent federal district court judgement has served a smart slap in the face of Taiwan and is trying its loyalty.
Chien-Fei Li is a recent Harvard Law graduate and Soochow University School of Law adjunct lecturer. Wei-Jen Chen is a recent Harvard Law graduate and an SJD student at the National Taiwan University School of Law.
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