On June 20, 2024, the Civil Grand Chamber of the Supreme Court of Taiwan ruled that a legal entity may claim “an appropriate amount” of non-pecuniary damages under Article 195, Paragraph 1 of the Civil Code if its reputation or credit is infringed in a manner that significantly affects its corporate purpose or operations — even without proof of mental distress. This ruling represents a significant departure from the long-standing judicial view that, unlike natural persons, legal entities cannot experience emotional suffering and are therefore not entitled to compensation for non-pecuniary harm.

1. Previous Judicial View: Legal Entities Are Not Entitled to Claim Non-Pecuniary Damages

In Taiwan, Article 195, Paragraph 1 of the Civil Code provides that a person who unlawfully infringes upon another’s body, health, reputation, freedom, credit, privacy, chastity, or other personality interests in a material way shall be liable to pay an appropriate amount of compensation, even if the injury is non-pecuniary in nature. For many years, both academic commentary and judicial practice in Taiwan have consistently interpreted “non-pecuniary damage” under this provision as referring to mental distress. Since legal entities are incapable of experiencing emotional suffering, they have traditionally been considered ineligible to claim non-pecuniary damages under this article.

2. Latest Grand Chamber’s View: Legal Entities May Still Be Entitled to Claim Non-Pecuniary Damages

The Grand Chamber observed that certain personality rights listed in Article 195, Paragraph 1 of the Civil Code, such as life, body, health, freedom, and likeness, are inherently personal and typically exclusive to natural persons, making them difficult for legal entities to assert. However, reputation and credit are not exclusive to individuals, and legal entities may validly claim protection of these rights. The Grand Chamber further noted that as society evolves, the concept of “non-pecuniary damage” has broadened and should no longer be narrowly equated with “mental distress.” Accordingly, the traditional judicial view must be revised. It is no longer appropriate to categorically deny legal entities the right to claim monetary compensation for non-pecuniary harm resulting from infringements of their personality rights.

3. Requirements For Legal Entities to Claim Non-Pecuniary Damages for Harm to Reputation or Credit

To successfully claim non-pecuniary damages under Article 195, Paragraph 1 of the Civil Code, a legal entity must satisfy the following conditions:

(1) The legal entity’s reputation or credit must have been infringed by another party.
(2) The infringement must have had a significant impact on the legal entity’s operations or corporate purpose.
(3) The damage must be of a nature that cannot be quantified in precise monetary terms, thus constituting non-pecuniary damage.
(4) The legal entity bears the burden of establishing the existence of the damage.

4. Implications of the Grand Chamber’s Ruling

The purpose of the Grand Chamber system is to ensure the uniformity of legal interpretations. When the Grand Chamber hears a case and renders a ruling, such ruling is, in principle, binding only on the specific case referred by the submitting panel and does not automatically extend to other proceedings. However, pursuant to Article 51-2, Paragraph 1 of the Court Organization Act, a ruling of the Grand Chamber constitutes a “prior decision” for the Civil Chambers of the Supreme Court. That said, if any chamber wishes to adopt a different interpretation, it must recommence the referral process and submit the matter to the Grand Chamber for review. Given this, the ruling is in fact binding across the Supreme Court and, through the hierarchical court system, promotes consistent legal interpretation at all levels.

5. Our Observations

Looking ahead, if a company or legal entity becomes the target of malicious defamation through media outlets, social platforms, or other channels, resulting in substantial harm to its reputation or credit, it may seek damages under Article 195, Paragraph 1 of the Civil Code. In individual cases, however, it is crucial to assess whether the harm has materially affected the company’s operations or its corporate purpose, for example, the termination of key partnerships, a significant decline in brand trust, operational disruptions, or poor product sales. In litigation, strong evidentiary support will be essential to effectively assert and protect legal rights.