This content is from: Local Insights

Overhauled conflict of laws rules

Chun-yih Cheng

After more than 50 years' application, Taiwan's conflict of laws rules were overhauled in May 2010. The new rules were adopted to adapt to the social and economic changes and to be in line with international practices and trends. In order for the community to be familiar with the considerable changes, there was a one-year transition period, and the new rules are effective as of May 26 2011.

In addition to traditional civil matters, the new rules cover a broad range of commercial matters such as corporate, negotiable instruments, bills of lading, insurance, manufacturers' liabilities, competition and IP rights. The most distinct feature, however, is the adoption of the theory of most closely connected factors and the doctrine of characteristic performance.

In the past, for contractual obligations, the parties could agree on the applicable law of their contract. If the parties' intention are ambiguous, the law of their mutual home country, the law of the place of contracting, or the law of the place of performance will in turn apply. The new rules also admit the parties' autonomy to choose the applicable law themselves. If there is no express intention, the law with which the contract is most closely connected will apply. To determine the most closely-connected law, the new rules set forth that if there is characteristic performance of the contract, the law of the place where the party who bears such characteristic performance has his domicile will be the most closely connected law. As long as the contract is related to immovable property, the law of the place where the immovable property is located is the most closely-connected law for the purposes of the contract.

Since the new rules are more or less in line with international practices, foreign players should find themselves more comfortable when doing business in or with Taiwan.

Chun-yih Cheng

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