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  • Interpretation
  • No.386
  • Date
  • 1995/09/29
  • Issue
    • Are the Central Government Construction Bonds Issuing Regulations constitutional in stipulating that reporting of loss to prevent cashing by the bearer is not allowed for any loss of bond certificates?
  • Holding
    •        The first part of Section 8 of the Central Government Construction Bond Issuing Regulations states that: “Reporting of loss to prevent cashing by the bearer is not allowed for any bond certificates which are lost, stolen or missing.” Thus, Sections 720(1), 725 and 727 of the Civil Code shall not be applicable. This prevents legal owners of government bearer bonds from protecting their rights and interests under the relevant provisions in the Civil Code governing bearer securities in the event that their bond certificates are lost, stolen or missing. In the absence of any alternative and reasonable remedies, this is contrary to the intention of safeguarding the people’s rights and interests as stated in Articles 15 and 16 of the Constitution. Hence, with effect from the date of publication of this interpretation, the above stated provision shall no longer apply to any government bearer bonds issued under the above regulations.   
      
  • Reasoning
    •        In order to raise funds for major national construction projects, central government construction government bearer bonds are issued by means of issuing bond certificates. The National Treasury’s obligation to pay the owners of the bond certificates is in principle no different from the obligation, as stated on the securities, to pay the owners of bearer securities issued by natural persons or public/private corporations. The law protects the owners of bearer securities from any unjustified loss arising from lost, stolen or missing securities certificates by providing various safeguards and remedies [See Sections 720(1), 725 and 727 of the Civil Code]. This had long been established as a framework of institutional safeguards for bearer securities, maintaining fairness without affecting the rights and interests of bona fide third parties or imposing any further burdens on the issuers. However, the amendments to the first part of Section 8 of the Central Government Construction Bond Issuing Regulations published on July 29, 1999, which state that: “Reporting of loss to prevent cashing by the bearer is not allowed for any bond certificates which are lost, stolen or missing” (Thus, Sections 720(1), 725 and 727 of the Civil Code shall not be applicable.) not only prohibit the reporting of loss to prevent cashing by the bearer but also specifically exclude the substantial and procedural rights enjoyed by the government bond obligees under the Civil Code. The original legislative intent was to realize the financial target by enhancing the circularity of such government bonds while respecting the freedom of contract. The National Treasury was well aware that owners of bearer securities had no right of action and that it would be exonerated from liability upon payment even if it had notification that the certificates were lost, stolen or missing. Nevertheless, it still imposed restrictions on the proper obligees applying to court to declare invalid the lost, stolen or missing bond certificates in accordance with the procedure for publicizing public notice for assertion of claim. This resulted in legal owners of government bearer bonds bond certificates issued under the above stated regulations being unable to apply for protection of their rights and interests provided in the Civil Code. No alternative and reasonable remedies were provided. This is contrary to Article 15 of the Constitution, which safeguards the people’s property rights, and Article 16 of the Constitution, which provides that persons whose rights and interests are infringed shall be able to apply for remedies in accordance with legally stipulated procedures. Hence, with effect from the date of publication of this interpretation, the above stated provision shall no longer apply to any government bearer bonds issued under the above regulations.      
      
    • *Translated by Professor Wen-Yeu Wang.
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