The Supreme Court of California heard arguments last week in an ongoing case surrounding the validity of international process service and a $414 million arbitral award.
In the contract, Rockefeller Technology Investments argued, Changzhou SinoType Technology Co. Ltd. agreed to informal methods of service. Under the agreement, that would mean service by mail as completed in this instance would be valid. When the Chinese company had failed to show for arbitration after being served via mail, Rockfeller Technology Investments had been granted a default judgment which was then confirmed by the California courts.
When Changzhou SinoType Technology appealed, claiming they were not properly served, the California appeals court agreed with them in June 2018 and reversed the verdict. The court cited the rules of service under the Hague Convention, noting that China does not accept or recognize service by mail.
To save on the costs associated with international process service, many international contracts include clauses to permit alternate methods of service outside of Letters Rogatory or treaties. Mail, FedEx and email are all common alternatives introduced in these contracts. Whether or not these clauses are able to be upheld is another issue, one that the ruling in this case would help decide for future contracts. If the verdict is reversed due to improper service despite the clause, then companies would have to take this into careful consideration before entering into business with overseas partners.
Traditionally, without such clauses, companies looking to pursue a judgment would need to effectuate service of process through formal channels such as the Hague Service Convention and Letters Rogatory. These types of service are known for their extended timelines and costs, which are often necessary in order to ensure foreign courts will carry out the judgment. Despite the challenges that can arise with these types of service, doing them correctly is critical to being able to enforce judgments. Otherwise, as in this instance, companies and individuals may appeal.
To read the appeal court’s decision click here.
