In this worldwide economy, it is not uncommon for a U.S. corporation to face litigation with foreign trade partners. An English customer might fail to pay for goods delivered to it in London; a German-built car could malfunction, causing an accident; a Russian competitor might import goods into the United States, infringing on a U.S. patent; a retail company might be sued for selling an allegedly defective rice cooker originally placed into the stream of commerce by its Japanese manufacturer. Indeed, in many instances you or your client may be dealing with a foreign-owned company or product without even being aware of it—many Chryslers from a few years back had Daimler engines built in Germany, and “American” companies from Trader Joe’s to Anheuser-Busch now have foreign parent corporations.
In the vast majority of cases, a U.S. plaintiff will prefer to bring suit in a U.S. court. Quite apart from questions regarding the application of law and the perceived (if not provable) friendliness of the domestic jury to the domestic litigant, the expenses of litigation will typically be significantly lower if the action is brought here. Many civil systems require that the loser pay all of the winner’s costs, which can be a significant consideration with a marginal or weak case, and risk allocation tools such as contingency fees are often not available under foreign legal systems. Most importantly, perhaps, very few foreign jurisdictions have anything close to the broad discovery procedures that are customary in U.S. litigation; instead, they require that the plaintiff have most or all the necessary evidence up front. These factors, combined with the general willingness of some U.S. courts to reach out to foreign jurisdictions, make the U.S. a preferred forum for plaintiffs from around the globe.
In any lawsuit, the plaintiff is required to effect proper “service of original process” against all defendants. This means, simply, that our courts require that a copy of the complaint stating the claims asserted, together with a summons calling the defendant to appear to answer these claims, be served by specific means upon the defendant, so that the court may be sure that the defendant has been made aware of the claims against it and of the need to answer those charges in order to avoid a default judgment. See Hanna v. Plumer, 380 U.S. 460, 463 (1965); Nichols v. Surgitool, Inc., 419 F. Supp. 58, 63 (W.D.N.Y. 1976). Constructive notice is not enough: The goal is to ensure actual knowledge of the lawsuit. Although ineffective service of original process is a defense that may be waived, the failure to effect proper service may result in dismissal of the action. If the statute of limitations has run in the meantime, such a dismissal may be a permanent blow. See Thach v. Tiger Corp., 609 F.3d 955 (8th Cir. 2010).
Rule 4 of the Federal Rules of Civil Procedure describes the acceptable means of effective service of process in the United States District Courts. The requirements vary depending on whether the service is on an individual, a corporation, or a government entity, and on whether service is effected within or outside the . Specifically as to a foreign corporation or individual, the Rule generally provides for service “by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents.” Fed. R. Civ. P. 4(f)(1). Exceptions are made for minors, incompetent persons, or a person who has formally waived service; the Rule also recognizes that some federal statutes make other provisions for service. The Rule also allows for service “by other means not prohibited by international agreement, as the court orders.” Fed. R. Civ. P. 4(f)(3) (emphasis added). Rule 4(f)(2) addresses service on foreign individuals or corporations where there is no internationally agreed means, or if an international agreement allows but does not specify other means.
The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents (commonly referred to as the “Hague Convention”) is an international treaty formulated in 1964, ratified in the United States in 1967, and proclaimed by President Johnson in 1969. Its purpose was to establish a process whereby documents being served abroad might be served in a simpler and timely manner, to ensure that defendants sued in foreign jurisdictions would receive actual and timely notice of suit, and to facilitate proof of service abroad. Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698 (1988). There are currently 63 signatories to the Hague Convention, although not all signatory states have agreed to all methods of service addressed by the Convention. A current list of the signatory states and information as to any reservations, declarations, or notifications is available on the website of the Hague Conference on Private International Law.
Although Rule 4 speaks of alternative forms of service, the Hague Convention does not. Article 1 of the Convention states that it applies to all civil or commercial matters in which there is occasion to transmit a judicial or extrajudicial document for service abroad. By virtue of the Supremacy Clause of the United States Constitution, compliance with Convention should by all rights be mandatory in state, as well as federal, litigation. Volkswagenwerk, 486 at 699.
Each signatory state has designated a “Central Authority” to accept incoming requests (on forms specified by the Hague Convention) for service. Upon receipt of a request from an applicant, the Central Authority arranges for service in a manner permitted within that state, which may be either by a method provided by the local law in its own domestic actions or by a particular method requested by the applicant, provided that the method is compatible with the local law. The Central Authority may require that the document be written in, or translated to, the official language of the state addressed. (If there is a defect in the request, the Central Authority is required to promptly inform the applicant of any defects.) Once service is effected, the Central Authority returns a certificate of service to the requesting party, which may then be filed in the court. If the document cannot be served, the Central Authority must provide a certificate setting out the reasons preventing service. So long as the request for service complies with the terms of the Hague Convention, the state addressed may not refuse to effect service unless it deems that compliance with the request would infringe on its sovereignty or security. It is specifically provided that the state addressed may not refuse to comply based solely on the ground that it claims exclusive jurisdiction over the subject matter of the action, or that its internal law would not permit the action on which the application is based.
When contemplating service under the Hague Convention, it is important to note that the procedures for different countries vary widely and, when faced with a defendant who can be found in multiple foreign countries, it is critical to consider these differences when deciding where to serve the defendant. Certain countries, such as Israel and Germany, take a much more formalistic approach to service under the Hague Convention than others, such as France. These formal distinctions can make a significant difference. For example, Article 10(a) of the Hague Convention specifically permits “sending” judicial documents by mail unless the signatory country has objected to such service; some U.S. courts have interpreted this to include service of process. It may well be possible to effect service process in a non-objecting country such as France via a letter sent via registered mail, whereas service in neighboring Germany (which has objected) would require service through the Central Authority.
What, then, of Rule 4(f)(3): Is it a mere nullity? Clearly, it is not. As has been demonstrated in a number of recent cases, compliance with Convention is mandatory only in those cases to which it applies. The first, and most obvious, exception is a case in which the defendant’s country is not a signatory state. See In re TFT-LCD (Flat Panel) Antitrust Litig., 270 F.R.D. 535 (N.D. 2010). In this case, Taiwan was not a signatory; service was allowed through its U.S. counsel. And in Volkswagenwerk, the U.S. Supreme Court held that where the law of the forum (in that case, Illinois) recognized the corporation’s U.S. subsidiary as its involuntary agent for service of process in this country, the Hague Convention did not apply. Volkswagenwerk, 694 at 707–08. In 2003, the Russian Federation “unilaterally suspended all judicial cooperation with the United States in civil and commercial matters.” Nuance Comm’cns Inc. v. Abbyy Software House, 626 F.3d 1222, 1238 (Fed. Cir. 2010) (quoting U.S. Bureau of Consular Affairs circular). Accordingly, a number of courts have approved alternative service methods, even without a prior (and most likely pointless) attempt to serve through the Hague Convention. Nuance Comm’cns, 626 F.3d at 1239; In re LDK Solar Sec. Litig., 2008 WL 2415186, at *2 (N.D. June 12, 2008); In re Potash Antitrust Litig., 667 F. Supp. 2d 907, 931 (N.D. 2009); Arista Records LLC v. Media Servs. LLC, 2008 WL 563470 at *1–2 (S.D.N.Y. Feb. 25, 2008).
Most recently, cases have arisen in which the alleged wrong has been committed through the Internet, and the whereabouts of the wrongdoer are unknown. The court in Chanel, Inc. v. Zhixian, 2010 WL 1740695 (S.D. Fla. Apr. 29, 2010), approved service by e-mail, but only after the plaintiff had made exhaustive attempts to locate the defendant at all known physical addresses and phone numbers and established to the court’s satisfaction that the defendant had used false information in the registrations for his domain names. The same plaintiff obtained similar approval for service on a different defendant from another court in Chanel, Inc. v. Zhibing, 2010 WL 1009981 (W.D. Tenn. Mar. 17, 2010).
It must be emphasized that, in all cases, service pursuant to Rule 4(f)(3) requires court approval, in advance of the service. The plaintiff will have the burden of demonstrating to the court that the Hague Convention does not apply, that the proposed service is not prohibited by local law or international agreement, and that the proposed method of service is sufficient to provide actual notice of the pendency of the action.
Parties considering a lawsuit against a foreign entity should consider other, possibly less costly remedies first. Some statutes provide for an in rem action which, although offering more limited remedies than a more traditional lawsuit, can prove more cost effective for the client. For example, for parties with domain disputes, the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d), provides for an in rem action that allows plaintiffs to obtain many domain names through U.S. courts without formal service of process, providing they are willing to forego damages. As noted above, courts have generally become much more willing to consider alternative forms of service in Internet cases generally, and particularly where the defendant has clearly made efforts to remain anonymous.
Service of process on foreign nationals, while complex, is certainly feasible with diligence and a little patience. Of course, having won the battle and served process does not make enforcement of any U.S. judgment abroad easier, so when considering the above, it is useful to consider whether, having successfully persuaded a U.S. court that service has been effected, you’ll be able to enforce a judgment against assets in the United States or abroad. In some instances, particularly where the foreign entity has few or no assets in the United States, successfully collecting on a judgment may present a far bigger problem than winning in a U.S. court.