The Impossibility of Serving Russian Defendants
March 6, 2023
The Hague Service Convention is a blessing and a curse. By obligating each country that has joined to designate a Central Authority for effectuating service of process on defendants within its territory, the Convention provides a means of service that respects foreign sovereignty, complies with federal rules, and helps ensure the enforceability of resulting judgments. But the Convention also limits the alternative means of service that plaintiffs can use, and foreign Central Authorities sometimes take longer to make service than U.S. plaintiffs and judges would like.
In cases involving Chinese defendants, judges faced with delays in service by China’s Central Authority have sometimes authorized alternative means, such as service by email or service on U.S. counsel, though both are problematic. Although the cases are still split, federal courts increasingly seem to recognize that service by email is not a permissible alternative under the Hague Service Convention. The best option in such cases may be simply to wait for the Central Authority to perform its obligation.
But what if a country’s Central Authority simply refuses to execute requests for service? That is the case with Russia, which has refused to execute U.S. service requests since 2003. In a recent decision, Kadmon Corp. v. Limited Liability Company Oncon, the District Court for the Southern District of New York (Judge Lewis Liman) correctly held that no alternative means of service could be authorized under FRCP 4(f)(3). As Ted Folkman has explained, the State Department could fix this problem by declaring Russia in material breach of the Convention and suspending the United States’ obligations with respect to Russia. But until that happens, plaintiffs’ options are limited.
How the Hague Service Convention Works
The Hague Service Convention is a treaty joined by 80 countries including the United States. Unless the defendant’s address is unknown, it applies in all cases where there is occasion to transmit documents for service in one of those other countries. The U.S. Supreme Court has held that when the Convention applies, compliance with its provisions is mandatory, and it preempts any inconsistent methods of service in federal or state law.
The principal means of service in Convention countries is through their Central Authorities. Article 2 requires each country to designate a Central Authority to receive and execute requests for service from other countries. Once service is completed the Central Authority is supposed to return a certificate of service to the applicant.
The Convention permits other means of service, but only with the consent of the receiving country. Article 8 permits the use of diplomatic and consular agents for service, but only if the receiving country does not object. Article 10 permits the use of postal channels or judicial officers in the receiving country, but again subject to the receiving country’s right to object. Article 11 allows two countries to agree to additional means of service, and Article 19 allows a receiving country to authorize additional means of service in its own law.
As I have previously explained, the Convention’s structure, which makes alternative means available only with the consent of the receiving country, indicates that methods of service not mentioned in the Convention are prohibited. Thus, if a country has objected to all the alternatives in Articles 8 and 10 (information on objections is available here) and has not agreed to or authorized additional means, its Central Authority will be the only option.
Kadmon Corp. v. Limited Liability Company Oncon
In Kadmon Corp. v. Limited Liability Company Oncon, the plaintiff, a U.S. biopharmaceutical company, licensed to the Russian defendant a technology for discovering human monoclonal antibodies. The parties’ agreements chose New York law to govern and provided for the exclusive jurisdiction of New York courts. But these agreements did not designate an agent for serving process on the Russian defendant in the United States.
After the defendant allegedly breached the parties’ agreements, the plaintiff filed a complaint. It sent the complaint to the defendant by email and DHL courier, along with a request for waiver of service. But plaintiff was unable to effectuate formal service. It retained a private company to make service under the Convention, but Russia has refused to execute U.S. service requests since 2003. In fact, according to the court, plaintiff could not even get its request to Russia’s Central Authority “because, as of September 2022, all courier service companies that would deliver the request for service to the Central Authority, the Ministry of Justice of the Russian Federation, have ceased operations in Russia.”
Instead, the plaintiff asked the district court to order alternative means of service under FRCP 4(f)(3). Specifically, the plaintiff asked the court to recognize its transmission of the complaint by email or by DHL as effective service, or to recognize the “informal service” that the private process server was able to make on a person in Russia who was authorized to receive it.
Rule 4(f)(3) allows a court to order “other means [of service] not prohibited by international agreement.” Thus, the critical question was whether the Hague Service Convention prohibits these other means. Service by DHL courier was plainly prohibited because, as other courts have also held, international couriers constitute “postal channels” and Russia has objected to this means of service under Article 10. With respect to service by email, the court followed last year’s leading decision in Smart Study, holding that the Convention does not permit service by email because it does not specifically authorize such service.
That left the “informal service” performed in Russia on the defendant’s agent. Plaintiff invoked a provision in Article 5 stating that “the document may always be served by delivery to an addressee who accepts it voluntarily.” But in context, as Judge Liman correctly noted, this phrase clearly refers to delivery by the receiving state’s Central Authority rather than by a private process server.
The court acknowledged that its logic led to a result “that may be considered untenable”:
Service of process in Russia may be effected only by the Central Authority under Article 5, but Russia has declined to cooperate with the United States and, in any event, as of September 2022, all courier service companies that would deliver the request for service to the Central Authority, the Ministry of Justice of the Russian Federation, have ceased operations in Russia.
But as the court correctly noted: “that is where the law leads.”
What Can Be Done?
Faced with such an impossible situation, what can be done? Three possibilities deserve mention.
First, in this case, the parties’ agreements did not appoint an agent for service of process on the defendant in the United States. With the benefit of hindsight, this was a huge mistake. As the Supreme Court has held, if service can be completed within the United States, the Hague Service Convention does not apply. International agreements today routinely include choice-of-law and choice-of-forum clauses. Clauses appointing domestic agents for service of process should become just as routine, not just for parties in Russia but for all parties outside the United States.
Second, Article 15, paragraph 2 allows a court to enter a default judgment if service was transmitted by a means permitted by the Convention, at least six months have elapsed, and no certificate has been received even though every reasonable effort has been made to obtain one. This possibility is available only if a country has made a declaration to that effect under the Convention, but the United States has done so. The problem, however, is that under U.S. law a default judgment is still not permitted unless the defendant has been served. Article 15, paragraph 2 removes the prohibition on default judgments found in Article 15, paragraph 1. But it does not create an exception to the Convention’s other limits on service, and so does not allow a U.S. judge to order service by other means under FRCP 4(f)(3).
Third, as Ted Folkman has insightfully argued, Russia is clearly in breach of its obligations with respect to the United States under the Hague Service Convention. Under Article 60(2)(b) of the Vienna Convention on the Law of Treaties, the United States is entitled to suspend the treaty with respect to Russia. With the treaty suspended, courts in the United States would be free to order service under Rule 4(f)(3) by any means they think appropriate. Such a move might even motivate Russia to come back into compliance with the Convention to regain control of service within its territory. Certainly, this is something the State Department should consider.
Legally, Judge Liman’s decision in Kadmon Corp. is absolutely correct. FRCP 4(f)(3) allows a court to order alternative means only if they are not prohibited by international agreement. So long as the Hague Service Convention remains in force between Russia and the United States, the only means of service permitted is through Russia’s Central Authority, which currently refuses to execute U.S. requests.