This guy *still* can’t serve for you in China.  Even if a contract says so. (Chengsbroethers, via Wikimedia Commons.)

An interesting case popped up on my newsfeed this afternoon (hat tip to Hwan Kim, writing for Sheppard Mullins’ Construction and Infrastructure Law Blog): Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., handed down by the Second District, California Court of Appeals.  The parties, one an American company, the other Chinese, had agreed in their contract that in the event of a dispute they would accept service by FedEx.

Oops.

You already know how this is going to go.  A dispute arises, the Yanks use FedEx to send process to the Chinese defendant, the Chinese don’t answer, the Yanks get a default, hilarity ensues.

Except there’s nothing funny about it.  Right now, the Chinese Central Authority is taking well over a year to serve defendants pursuant to a Hague Service Convention request.  But you can’t just use FedEx because it’s quick & expedient and the package absolutely, positively needs to get there overnight needs to get there in fewer than three weeks.  The Court of Appeals got it right; using FedEx was manifestly wrong given China’s objection to Article 10(a).  And if you dig even deeper, that’s because a Chinese party lacks the capacity to accept process that isn’t served by a Chinese court official.

What the drafting attorneys didn’t realize is that you simply can’t do it by mail– the Hague Service Convention controls, and the “postal channels” option is only allowable where the destination country doesn’t object.  More likely, the Chinese company’s lawyers knew exactly what was going on, and the U.S. party’s attorneys were unfamiliar with the Chinese government’s declarations to the Convention (they object!).

To be blunt…

No, Article 10 doesn’t give you an out in China.

Two thoughts come to mind— two easy methods which I’ve addressed before, multiple times, and which would have prevented this fiasco and saved everybody a whole lot of heartache– except the Chinese defendant:

1.  Designate an agent for service.

Addressed initially in Five Essential Things… and later, elaborated on in the aptly titled Five Essential Things– Elaborated, Part 1: Service Agent.

Had the contract directed service to the Chinese party’s counsel or other appointed representative in the United States, there’s no occasion to transmit the documents abroad, so the Convention would not apply.  Those are the magic words straight out of Article 1.*  It’s perfectly legal; in fact, it’s the whole bleepin’ point to registered agents.  And it’s easy, too.  Look no further than Dover, Delaware, where you can’t throw a rock without hitting a registered agent of one sort or another.

Sure, this may be a challenge, depending on the foreign party (a challenge getting them to agree, that is).  But it would avoid the jurisprudential problems that the Rockefeller Tech agreement ran into.

2.  Contractually agree to waive service.

Addressed in “Waive” vs. “Accept” service… massive difference, addressed in Serving Overseas: The Carrot and Stick of Waiver.

There really is a massive difference between the two ideas– and in federal court, defendants are required to waive, even if they’re overseas.**  Again, if the offshore defendant waives, then there’s no occasion to transmit the documents abroad; magic words again, Hague inapplicable.

Sure, you’ll probably have to duke it out over the refusal to waive, and thus will probably have to serve anyway, but at least it’s better than flying blind.

In short, don’t throw that “we agree to accept service by FedEx” clause into a contract when you can’t reasonably predict that it’ll be enforced.


* As the Rockefeller Technology court points out,”(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.”  Pretty straightforward, and the heart of the seminal case in Hague Service Convention doctrine, Volkswagenwerk Aktiengesellschaft v. Schlunk.

** Rule 4(d)(1):  “An individual, corporation, or association that is subject to service under Rule 4(e), (f), or (h) has a duty to avoid unnecessary expenses of serving the summons.”  Lest ye rely on 4(d)(2) to refute that idea, recognize that 4(d)(2) is about mandatory fee shifting, which only applies to domestics.  The tricky detail of 4(d)(1) is that it specifically mentions 4(f), which only applies to service abroad.