How to Get Around The Hague Convention: the Rockefeller Roadmap

McManis Faulkner
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McManis Faulkner

While California was busy sheltering in place from the coronavirus pandemic in early April, the California Supreme Court dropped a legal bombshell with its unanimous decision in Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology Co., Ltd., holding where parties to a contract with a provision to arbitrate in California also agree to a specified manner of service, “that agreement supplants statutory service requirements and constitutes a waiver of formal service in favor of the agreed-upon method of notification.” 

The Rockefeller decision has far-reaching implications for service of process and the larger question, whether parties may contract for legal service around the Hague Service Convention.  By rejecting the analysis of the Court of Appeal, the California Supreme Court took a significant step in advancing the ability of California litigants to contract around treaty protocols, which will inevitably lower the cost of arbitration, streamline service of process, and mitigate enforcement risks relating to the execution of agreements with international parties.

Background

Rockefeller and SinoType signed a memorandum of Understanding (MOU) to form a new company.  Per the MOU, notice to a party was to be by Federal Express or other overnight mail, at the addresses provided in the MOU.  The parties also agreed to submit to jurisdiction in California, to serve process in the same manner as any other notice, and to arbitrate any disputes.  After the relationship of the parties deteriorated, Rockefeller initiated an arbitration against SinoType for breach of the agreement. SinoType did not participate in the arbitration, and an award was entered in Rockefeller’s favor.

Rockefeller subsequently filed a petition to confirm the arbitration award.  In accordance with the MOU, Rockefeller served SinoType with a summons and petition by Federal Express at SinoType’s headquarters in China.  The award was eventually confirmed following a hearing at which SinoType did not appear.

Over a year after the award was confirmed, SinoType moved to set aside the judgment, arguing that Rockefeller had not validly served it with the summons and petition under the Hague Convention.  The trial court denied the motion, but on appeal, the Court of Appeal reversed, finding that the summons and petition to confirm were not served in accordance with the Hague Service Convention.  The appellate court determined that private persons may not agree to alternative service methods—such as mail service—if their nation has objected to them.

The Supreme Court’s Decision

In reversing the appellate court, the Court began its analysis by framing the issue: did China’s objection to the Hague Service Convention prevent its citizens from entering private agreements regarding formal service of process?

To answer that question, the Court started by explaining that formal service of process advances two necessary objectives: (1) obtaining personal jurisdiction over the defendant, and (2) providing notification of court proceedings enabling a party to appear and defend itself.

Because the MOU expressly governed the manner by which the parties were to provide notice, and specified a manner of service consistent with how notice was to be given, the Court concluded the parties had formed a permissible agreement for an “alternative form of notification” and thus had waived formal service of process under California law.

Put simply, the Court concluded the agreement of the parties satisfied both functions advanced by formal service of process, and therefore the Hague Service Convention did not apply.

Impact of the Decision

According to the Court, this decision will “promote certainty and give effect to the parties’ express intentions.”  In addition, and similar to decisions by courts in other jurisdictions upholding the rights of parties to “contract” around the Hague Convention, the Rockefeller case should discourage “gamesmanship” by preventing parties from agreeing to methods of service, but then later repudiating those agreements when trying to defeat contract claims.  The decision should also serve to promote California’s policies favoring arbitration “as a speedy and inexpensive means of settling disputes.” 

The decision in Rockefeller provides a roadmap for future courts where issues of private agreements regarding personal jurisdiction, service, and notice arise in civil actions generally, not just arbitrations.  The case may also support contractual waivers of other procedural requirements such as burdens of proof, or rules of evidence. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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