Japanese Government Finally Declares Objection to Service by Mail under the Hague Service Convention

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[co-author: Kenta Ikebe]

On December 21, 2018, Japan objected to service by direct mail under Hague Service Convention Article 10(a), which is welcome news for Japanese parties subject to foreign litigation, but creates a hurdle for U.S. plaintiffs seeking to haul Japanese parties into U.S. courts.

TAKEAWAYS

  • Following the Supreme Court’s Water Splash decision, it had become more likely that service of process made directly to defendants in Japan by mail would be allowed. However, Japan’s declaration has annulled such an option for service.
  • In lawsuits against Japanese defendants, the plaintiff and defendant may enter into negotiations where the plaintiff tries to avoid service under the Hague Service Convention and the defendant extracts favorable concessions from the plaintiff in exchange for voluntarily accepting the service of process.
  • In contract negotiations, a U.S. party may request the Japanese counterparty to designate a U.S. agent for service of process in the event of litigation resulting from the contract, and a Japanese party should assess the implications of such an agreement.

The Hague Service Convention

The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, or “Hague Service Convention,” is a multilateral treaty adopted by member countries of Hague Conference on Private International Law on November 15, 1965, in The Hague, Netherlands, which established unified rules on, among other things, cross-border service of process. So far, 74 countries have ratified the Convention.

The Convention provides a structure of service of process through the “Central Authority” of each signatory country. Pursuant to Article 2 of the Convention, each country designates its Central Authority as the administrative entity to receive documents for service upon its domestic subjects under the Convention coming from parties in other countries who have also ratified the Hague Service Convention, and to perform the service functions pursuant to the Convention. Under Article 5, a person, such as the plaintiff, the plaintiff’s attorney, or a judicial officer of the court where the litigation is pending who is competent to serve the documents, transmits the documents to the Central Authority of the country where the defendant is located, and the Central Authority itself serves or arranges to have the document served by another appropriate agency to the defendant.

A common channel for service of process between countries which have no treaties or agreements like the Hague Service Convention would be through diplomatic channels. Such channels take a relatively long time since they normally involve agencies such as the Ministry of Foreign Affairs of both countries to transmit the documents. Compared to diplomatic channels, service through Central Authority under the Convention is considered as a substantially simplified method.

However, even service through the Central Authority under the Hague Service Convention can require an extended amount of time. Service through a Central Authority generally takes between two to six months depending on the destination country as well as the progress of preparation of the documents and other circumstances.

When service is conducted through the Central Authority, the Central Authority may require the documents to be served to be written in, or translated into, an official language of the destination country under an option provided by Article 5 of the Hague Service Convention. Many countries do require such a translation, including Japan.

Direct Service by Mail under the Hague Service Convention
Instead of enduring the unpredictable wait time and increased costs for serving through the Central Authority, parties who bring suit against a foreign defendant often try to effect direct service by mail. To do so, the plaintiff of the pending lawsuit directly sends the pleadings to the defendant abroad by mail or express delivery service (such as FedEx, DHL or UPS). While plaintiffs generally prefer service by mail as mentioned above, defendants’ wish is a prohibition of service by mail. This is because if service by mail is not allowed, defendants have more time to prepare for litigation. Alternatively, they could negotiate with plaintiffs who are reluctant to go through service procedure under Hague Service Convention so as to extract favorable concessions from plaintiff in exchange for agreement to skip the process.

With respect to direct service by mail, Article 10 (a) of the Convention states “Provided the State of destination does not object, the present Convention shall not interfere with ... the freedom to send judicial documents, by postal channels, directly to persons abroad” (emphasis added). In other words, the Convention does prohibit sending “judicial documents” if the destination country objects.

As was in dispute in Water Splash discussed below, in theory, there are two ways to interpret this article:

(A) “Send[ing]” judicial documents does not include service of process. The Convention prescribes service through Central Authority as the primary method and thus service of process by other method is not allowed under the Convention. Article 10(a) provides for sending documents other than service of process and is irrelevant to service of process. Whether or not the destination country has objected under the article, service of process by mail is prohibited under the Convention.

(B) “Send[ing]” judicial documents does include service of process. Pursuant to this article, if the destination country does not object, service of process by mail is allowed to the defendant in that country besides service through Central Authority, but if the destination country objects, service of process by mail is prohibited.

In either position, service of process by mail is always prohibited if the destination country objects under the article.

Japanese Government’s Original Position on Article 10(a)
Japan did not issue an objection to Article 10(a) at any time between signing the Hague Service Convention on March 12, 1970, until December 21, 2018. However, this did not necessarily mean that Japan approved of service of process by mail to defendants in Japan in litigation pending abroad. At the HCCH special commission in April 1989, the Japanese Government submitted a comment stating that it “has not declared that it objects to the sending of judicial documents, by postal channels, directly to persons abroad. In this connection, Japan has made it clear that no objection to the use of postal channels for sending judicial documents to persons in Japan does not necessarily imply that the sending by such a method is considered valid service in Japan; it merely indicates that Japan does not consider it as infringement of its sovereign power.

This comment was far from straightforward but is similar to interpretation (A) mentioned above, in that it denies correlation between whether a country made an objection under Article 10(a) and the validity of service of process made by direct mail to that country. Nonetheless, because it was true that the Japanese Government did not object to service under Article 10(a), it was not clear whether service of process by mail to defendants in Japan would be approved in lawsuits outside Japan.

In U.S. litigation, for example, there is no published decision where the court held that Japan officially objected to service of process by mail from a U.S. plaintiff based on the Japanese Government’s comment above. Rather, one court held that such a comment did not expressly negate the validity of service by mail. Nicholson v. Yamaha Motor Co., 80 Md. App. 695 (1989). On the other hand, another court held “it is extremely unlikely that Japan’s failure to object to article 10, subdivision (a) was intended to authorize the use of registered mail as an effective mode of service of process, particularly in light of the fact that Japan specifically objected to the much more formal modes of service by Japanese officials which were available in article 10, subdivisions (b) and (c),” and referred to interpretation (A) mentioned above as a probable legal basis of Japan’s position. Suzuki Motor Co. v. Superior Court, 200 Cal. App. 3d 1476, 1481 (1988). It remained unclear whether service of process by mail to defendant in Japan in a U.S. lawsuit would be considered effective or not.

Because the Japanese Government’s position was unclear and courts could take the interpretation (A) mentioned above, there was a risk in serving process directly by mail on defendants in Japan, and thus many careful plaintiffs tended to use service through the Japanese Central Authority under the Hague Service Convention. In this regard, the Japanese Government’s above comment put the brakes on direct service of process by mail to Japanese defendants, even in U.S. litigation, until the U.S. Supreme Court decided Water Splash.

Service by Mail Since Water Splash
In Water Splash, Inc. v. Menon, 137 S. Ct. 1504 (2017), a U.S. company sued its former employee in Texas state court. The defendant was residing in Canada, and the plaintiff served process by public mail service, private mail service, and email. Because the former employee did not respond, the Texas court entered a default judgment in favor of the plaintiff. The former employee filed a lawsuit arguing that the judgment was void for lack of proper service and the parties disputed over whether the Hague Service Convention prohibits service of process by mail.

The U.S. Supreme Court followed interpretation (B) mentioned above, i.e., “send[ing]” judicial documents includes service of process. However, it also held that Article 10(a) does not affirmatively authorize international mail service. Article 10(a) merely provides that the Convention shall not interfere with the freedom to use postal channels if the state of destination does not object to their use. The court held that the authorization for mail service must come from the law of the forum (federal or state) and conditions for that authorization must be satisfied in order to effectively serve process on defendants outside the United States.

It has now become clear that in future U.S. litigation, as long as requirements under the law of the forum for international service are met, the only issue for serving process on foreign defendants by mail is whether the destination country has objected to its use under Article 10(a). If the destination country has not objected, then service by mail will be allowed.

Japanese Government Finally Objects to Service by Mail under Article 10(a)
Since Water Splash, especially in U.S. litigation, Japanese defendants have been concerned that they could be served process by direct mail, since Japan had not issued an objection under Article 10(a). However, on December 21, 2018, the Japanese Government finally declared an objection, clarifying that service of process by direct mail to defendants in Japan will be prohibited in future litigation in signatory countries to the Hague Service Convention.

As of the date of this client alert, however, neither the Ministry of Foreign Affairs of Japan nor Japanese Government has released an official announcement about the declaration, and there are no plans to do so. Therefore, many, including Japanese companies and lawyers, are still unaware of the declaration.

Consequences of Japan’s Declaration
Japan’s objection has made it impermissible to serve process by direct mail on defendants in Japan in lawsuits pending in signatory countries to the Hague Service Convention, and in principle, service through the Japanese Central Authority has become the only way to serve. Even if a U.S. plaintiff who is not aware of the objection attempts to serve process directly by mail on a defendant in Japan, the defendant can reject the service and argue that the service is invalid, referring to the declaration.

Also, since service by mail is no longer permissible, a Japanese defendant may use this to their advantage to gain procedural advantages in a U.S. lawsuit. For example, a U.S. plaintiff and Japanese defendant may enter into negotiations where the plaintiff tries to avoid service through the Hague Service Convention by asking the defendant to voluntarily accept service through other means, in exchange for the defendant gaining favorable concessions from the plaintiff, such as an extended amount of time to respond to the complaint.

U.S. and Japanese entities who are negotiating contracts should also keep the Hague Service Convention in mind. If the parties agree that any lawsuit under the agreement be brought in a U.S. court (or if they do not include a choice of forum provision in their contract), the parties may consider designating agents for service of process in the U.S. in the event of a lawsuit arising out of the contract. If the Japanese company designates a U.S. agent for service of process, the U.S. counterparty will not have to go through the Japanese Central Authority to effect service, as the Japanese company will be present in the United States through its agent, and the Hague Service Convention will not apply. If the Japanese company refuses to designate a U.S. agent for service of process, or the parties fail to include such a provision in their contract, then in the event of litigation in the United States, the U.S. party will have to serve the Japanese counterparty through the Japanese Central Authority, which will require a full Japanese translation of the summons and complaint. Thus, in order to negotiate these subjects properly when a dispute seems a mere theoretical possibility in the distant future, both parties should understand the meaning and consequences of this Japanese Government’s declaration of objection to direct service by mail under the Convention Article 10(a).

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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