Journal news
Seminar series Legal formalism v. Principle of good faith Possibility of derogating from the rules of the Hague Convention when serving foreign persons. Waiver of service clause
Russian Maritime Law Association (RUMLA)
Topic: Possibility of derogating from the rules of the Hague Convention when serving foreign persons. Waiver of service clause
On 22 September 2022, the Association scheduled a seminar in the series “Legal Formalism vs. Principle of Good Faith” on the topic “The possibility of non-appliance of the rules of the Hague Convention when notifying foreign persons”. However, due to heavy current events the planned seminar did not take place and it was decided to publish the materials prepared for the seminar in this issue of the journal.
Below are the materials which were the starting point for the perspective discussion.
1. Judicial Notice to Foreigners: Formalism of the Hague Convention v. Actual Knowledge of the Process
In 2001, the Russian Federation acceded to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters dated 15.11.1965 (hereinafter – the Hague Convention, the Convention), which regulates the procedure for the service of process abroad.
The main mean of the service under the Hague Convention is through the Central Authority of the State.
The Hague Convention provides for alternative means of service of judicial documents, including the possibility to send the documents by post (Art. 10(a)). However, the Russian Federation, when acceding to the Convention, made a reservation that service of process by the means set out in Article 10 would not be applied. Due to that limitation, there is only one way of serving procedural documents in Russia, through the Central Authority. In Russia, this authority is the Ministry of Justice. It is worth noting that Russia is not the only state which has made such a reservation. Germany, Austria, China, Japan and other countries have also made a reservation regarding non-appliance of Article 10 of the Hague Convention.
Having only one method of service of documents greatly complicates and slows down the resolution of disputes since it involves in this process the public authorities. Parties from different states need alternative ways to service judicial documents.
In foreign trade practice, contracts often include a waiver of service under the Hague Convention in favour of service by post or courier service (waiver of service clause).
Let’s assume that when a dispute arises, the parties do not notify each other according to the rules of the Hague Convention but pursuant to the contract terms. Then, at the stage of recognition and enforcement of the foreign judgment, the losing party argues on the improper service of process.
What should a Russian court do? Should the court state that there was no notification within the meaning of the Convention and not recognise the foreign judgment? Or should the court establish whether the party was actually aware of the proceedings from other sources?
In the case of an alternative notification provided for in the contract, attention is drawn to the contradictory behaviour of the party claiming lack of service. On the one hand, they accept the alternative service and is aware of the existence of a dispute; on the other hand, the request that the judgment against them shall not be enforced simply because the Hague Convention service procedure has not been formally complied with.
2. Judicial Practice: SCC RF v. Commercial Court of District
The Presidium of the Supreme Commercial Court of Russia (hereinafter – SCC RF) examined a case with circumstances similar to the problem described above.
The courts of the first and cassation instances enforced the English judgment since the defendant was aware of the proceedings. However, the Presidium of the SCC RF stated that service by post, although effective, was an improper notice since the rules of the Hague Convention were imperative (Resolution of the Presidium of the SCC RF dated 28 January 2014 No. 3366/2013).
The Supreme Court of Russia has not commented on this issue.
At the district court level, there are quite a lot of disputes related to the recognition of judgments rendered in CIS countries. The Hague Convention does not apply to such disputes, but the essence of the problem is similar, whether Russian courts shall recognise foreign judgments if one of the parties was aware of the proceedings but was not formally notified under the rules of the relevant international treaty.
As for now, the prevailing position is that if the parties were aware of the process and/or participated in the relevant correspondence, the judgment is enforceable in Russia (Resolution of the Commercial Court of Moscow District dated 17 August 2021 in case No. A40-51398/2021; Resolution of the Commercial Court of Moscow District dated 02 July 2021 in case No. A41-19579/2021).
3. Are the Rules of the Hague Convention on Service of Process Imperative?
Briefly, the legal problem is as follows.
On the one hand, when a State has made a reservation not to apply Article 10 of the Hague Convention, the Convention does not provide for the possibility of changing the rules on service.
On the other hand, this rule does not meet the term of an “imperative rule”. From the point of view of the Resolution of the Plenum of the Supreme Commercial Court of the Russian Federation No. 16 “On Freedom of Contract”, an imperative norm is one which protects particularly important legal interests, including interests of third parties and public interests (para 3).
Whose interests are protected by the rules on notification through a special authority? Obviously, the interests of the persons involved in the case. However, these persons are aware of the process from other sources and therefore the necessity for a procedure under the Hague Convention no longer exists. The question arises as to whether the contradictory behaviour of a person involved in a case should be protected by law.
The imperative nature of the Hague Convention may be justified through its Article 13, according to which the requested state may refuse to execute a request for service if it considers that execution of the request may prejudice its sovereignty or security. However, it is unclear how this rule protects state security if the parties may actually be notified by any other means.
The problem described is also connected with the discussion on the rules of exclusive jurisdiction. On the one hand, the relevant rules are not subject to modification by agreement of the parties. On the other hand, if a person had an opportunity to assert a violation of jurisdiction in the first instance but did not do so, their contradictory behaviour is not protected.
In the Resolution of the Presidium of the Supreme Commercial Court of Russia dated 23 April 2012 No. 1649/13 in the case “TRANSCAPITALBANK”, the Court pointed out that the actions of the defendant indicated recognition of the court competence through implicative actions. This, in its turn, corresponds to the concept of competent court in international and national law understanding and results loss of the right to object (estoppel) to the court competence to consider the dispute. This position was upheld in Resolution of the Judicial Chamber on Economic Disputes of the Supreme Court of Russia dated 13 April 2015 No. 306-ES15- 14024.
Sample waiver of service clause
| Waiver of Service Clause | Оговорка об отказе от применения установленной процедуры вручения документов |
| The Parties hereby agree to provide notice and service of process, including lawsuits and pre-trial claims, to each other by delivery, via post, from hand to hand, or through e-mail. The Party that received the documents in the manner set out in the Agreement shall be deemed as duly served. | Настоящим стороны соглашаются уведомлять друг друга и вручать процессуальные документы, включая исковые заявления и досудебные претензии, с помощью курьерской доставки, а также посредством почты, личного вручения и электронной почты. Сторона, которая получила документы в установленном настоящим Соглашением порядке, считается получившей их надлежащим образом. |
| The Parties hereby waive the procedure for service of the above documents provided for in the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters dated 15 November 1965 or in any other law applicable to the Agreement. | Настоящим стороны отказываются от применения процедуры вручения вышеуказанных документов, которая предусмотрена Гаагской конвенцией о вручении за границей судебных и внесудебных документов по гражданским или торговым делам от 15 ноября 1965 г. или любым иным законом, применимым к Соглашению. |
| The Parties shall give notice and serve process to each other in accordance with the address, e-mail, or other details specified in clause __ of the Agreement. The Parties shall notify each other of any changes in their address, e-mail, or other details necessary for the service of the above documents in the manner set out in the Agreement. The Party that fails to provide such details and thereby fails to be served with the above documents shall bear the according risks even if such details could have been found in the other sources. | Уведомление Сторон и вручение процессуальных документов осуществляется Сторонами в соответствии с адресом, электронной почтой или иными сведениями, указанными в п. __ Соглашения. Стороны обязуются сообщать друг другу актуальные сведения об изменении своего адреса, электронной почты или иных сведений, необходимых для передачи вышеуказанных документов в установленном настоящим Соглашением порядке. Риск несообщения таких сведений и неполучения вследствие этого вышеуказанных документов несет Сторона, не сообщившая актуальные сведения, даже если такие сведения могли быть получены из других источников. |
| The Parties rely on that their rights are observed if the above documents are served in the manner set out in the Agreement. The Parties rely on that the receipt of the documents by one party in the manner set out in the Agreement gives the other Party grounds to rely on the validity of the service of process performed. | Стороны исходят из того, что их права считаются соблюдёнными в случае направления вышеуказанных документов в установленном настоящим Соглашением порядке. Стороны исходят из того, что получение одной стороной документов в установленном настоящим Соглашением порядке даёт другой Стороне основание полагаться на действительность сделанного извещения. |
Review of the U.S. court practice on alternative procedural notice1
If we allow an alternative service of process clause to be included in a contract, the question arises as to how it should be worded.
The U.S. judgement in the case against the Chinese party may serve as a point of reference. In acceding to the Hague Convention, China, like Russia, made a reservation non-appliance of Article 10 of the Convention. In Rockefeller Tech. Inv. (Asia) VII v. Changzhou Sinotype Tech. Co.2, a dispute between a U.S. and a Chinese company, the U.S. Supreme Court held that if a contract specifies the manner in which service of judicial documents is to be effected on the parties, such an agreement constitutes a waiver of the formal mean of service in favour of the agreed mode of notification. It is important that the Court indicated that the parties shall specifically “waive” of the Hague Convention by providing for a specific method of service of judicial document. Otherwise, there is a risk that a party will treat the agreement as an option, i.e., allowing several options for service of judicial documents, including service through the Central Authority. The Court held that an agreement providing for an alternative method of service of judicial documents in arbitration was an appropriate waiver of the Hague Convention.
In the U.S. practice, there have been cases where courts have held that the Hague Convention does not apply to disputes between two parties from different states (including states which made a reservation regarding non-appliance of Article 10 of the Convention) when service of process documents are sent to a “local agent” (in practice, a local subsidiary or parent company of a party of a dispute) since no documents are actually sent to another country. For example, in Volkswagenwerk Aktiengesellschaft v. Schlunk - 486 U. S. 694, 108 S. Ct. 2104 (1988)3 the Court held that since service of documents could be effected within the U.S., the Hague Convention was not applicable within the meaning of its Article 1: “The present Convention shall apply in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad.”
Notes