Tue, Nov 07, 2000 page2

• Court backs US decision

  JUDICIAL RECOGNITION In a dispute between textile companies, the Taipei District Court ruled that an earlier judgment by American courts also applies in Taiwan

  • By Irene Lin / STAFF REPORTER
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  Judgments made by US courts are binding in Taiwan, the Taipei District Court determined yesterday, in spite of arguments that the US does not apply this recognition to Taiwan rulings.

  In its ruling on a dispute between Hyosung America Inc (曉星股份有限公司) and Taiwan-based Sumagh Textile Co Ltd (本盟紡織), the court decided that Taiwan shall accept judgments made in other countries as long as those countries -- whether they have diplomatic ties with Taiwan or not -- also recognize judgments made by Taiwan courts.

  In the case, where a Taiwan textile manufacturer and supplier was ordered by US courts to pay compensation of more than US$400,000 to an American textile merchant, the district court determined the judgments entered by the US courts are binding in Taiwan, as they are in the US.

  However, Sumagh said it will appeal the district court decision as it believes the judgments by the US courts are made on a partial basis and that Taiwan should not subject its citizens to whatever US courts say.

  The dispute arose between the Taiwan textile manufacturer and Orkid Tex Inc, a company engaged primarily in the purchase and sale of textile goods -- to which Hyosung is an assignee -- over the sale and purchase of textile fabric.

  As an assignee, Hyosung is responsible for reviewing purchase orders obtained by Orkid, and it arranged to open letters of credits for the supplier. In each transaction, Hyosung would charge Orkid a fixed fee for its services.

  Sometime between late 1992 and early 1993, Orkid had obtained a series of purchase orders for fabric with a content of 65 percent rayon and 35 percent wool. After Orkid and Sumagh exchanged several memoranda regarding the quality and blend, Sumagh agreed to provide the fabric in question.

  However, in September 1993, Hyosung and Orkid received a complaint from their customer which stated there was a problem with the content of the fabric, as it contained no more than 30 percent wool. The customer refused to pay Hyosung and Orkid for the fabric.

  Acting both on its own behalf and as the representative of Orkid's interests, Hyosung sued Sumagh for compensatory and punitive damages, alleging fraud. Sumagh, in its defense, argued that Orkid had been aware of and had accepted the content of the fabric.

  The US District Court for the Southern District of New York ruled in favor of the American plaintiffs in 1998 and its decision was later affirmed by the US Second Circuit Court of Appeals.

  Disputes arose over Taiwan's acceptance of foreign judgments when Hyosung filed a request to the Taipei District Court for enforcement of the money judgments made by the US courts.

  The American company claims the US and Taiwan, though without diplomatic ties, have "substantial" relations based on the Taiwan Relations Act (TRA). And since the US is obligated to recognize judgments by Taiwan courts as binding under the TRA, Taiwan should also accept judgments by US courts on a reciprocal basis, the company says.

  Nevertheless, Sumagh argued that because, in practice, the US does not recognize Taiwan's status as a state, it follows that US courts do not have to recognize as binding judgments made by Taiwan courts.

  Sumagh's lawyer said soon there could be numerous disputes on patent and copyrights among high-tech corporations from different countries.

  "The important thing is Taiwan's courts cannot always buy whatever the US courts say," the lawyer concluded.
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